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:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the
[ ] Definitive Proxy Statement Commission Only (as permitted by
[ ] Definitive Additional Materials Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
NETWORK PERIPHERALS 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)(4) and 0-11.
(1) Title of each class of securities to which transactions applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing party:
(4) Date filed:
<PAGE>
NETWORK PERIPHERALS INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
April 25, 2000
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Network Peripherals Inc., a Delaware corporation (the "Company"), will be held
on Tuesday, April 25, 2000 at 11:00 a.m., local time, at Marriott Hotel, 46100
Landing Parkway, Fremont, California, for the following purposes:
1. To elect two Class III directors of the Company to serve for the
ensuing three-year term and until their successors are duly
elected.
2. To approve an amendment to the Company's Restated Certificate of
Incorporation to increase the number of authorized shares of the
Company's Common Stock from 20,000,000 shares to 60,000,000
shares.
3. To approve an amendment to the Company's 1997 Stock Plan to
increase the number of shares of Common Stock reserved for
issuance thereunder by 1,000,000 shares.
4. To ratify the appointment of PricewaterhouseCoopers LLP as
independent accountants for the Company for the fiscal year ending
December 31, 2000.
5. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on March 10, 2000
are entitled to notice of and to vote at the meeting and any adjournment
thereof.
All stockholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are urged to mark,
sign, date and return the enclosed proxy card as promptly as possible in the
postage-paid, return envelope enclosed for that purpose. Any stockholder
attending the meeting may vote in person even if he or she has returned a proxy.
Sincerely,
Wilson Cheung
Secretary
Fremont, California
March 14, 2000
- --------------------------------------------------------------------------------
IMPORTANT: WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING,
YOU ARE REQUESTED TO COMPLETE AND PROMPTLY RETURN THE
ENCLOSED PROXY IN THE ENVELOPE PROVIDED.
- --------------------------------------------------------------------------------
<PAGE>
NETWORK PERIPHERALS INC.
--------------
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
INFORMATION CONCERNING SOLICITATION AND VOTING
General
The enclosed Proxy is solicited on behalf of Network Peripherals Inc.
(the "Company") for use at the Annual Meeting of Stockholders to be held on
Tuesday, April 25, 2000 at 11:00 a.m., local time, or at any adjournment
thereof, for the purposes set forth herein and in the accompanying Notice of
Annual Meeting of Stockholders. The Annual Meeting will be held at Marriott
Hotel, 46100 Landing Parkway, Fremont, California. The Company's principal
executive office is located at 2859 Bayview Drive, Fremont, California 94538.
These proxy solicitation materials were mailed on or about March 24,
2000, together with the Company's 1999 Annual Report to Stockholders, to all
stockholders entitled to vote at the meeting.
Record Date and Principal Stockholders
Stockholders of record at the close of business on March 10, 2000 (the
"Record Date") are entitled to notice of and to vote at the meeting. On the
Record Date, 15,804,197 shares of the Company's Common Stock were issued and
outstanding. For information regarding security ownership by management and
certain other holders of the Company's Common Stock, see "OTHER INFORMATION -
Share Ownership by Principal Stockholders and Management."
Revocability of Proxies
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before its use by delivering to the Company a
written notice of revocation or a duly executed proxy bearing a later date or by
attending the meeting and voting in person.
Voting and Solicitation
Every stockholder voting in the election of directors is entitled to
one vote for each share held. Stockholders are not entitled to cumulate votes
for the election of directors or for any other purpose.
The cost of soliciting proxies will be borne by the Company. The
Company may reimburse brokerage firms and other persons representing beneficial
owners of shares for their reasonable expenses in forwarding solicitation
material to such beneficial owners. Certain of the Company's directors, officers
and regular employees, without additional compensation, may also solicit
proxies, personally or by telephone, letter, telegram, facsimile transmission or
other means of electronic communication.
Quorum; Abstentions; Broker Non-Votes
The required quorum for the transaction of business at the Annual
Meeting is the presence in person or by proxy of a majority of the shares of
Common Stock outstanding on the Record Date. Shares that are voted "FOR,"
"AGAINST" or "WITHHELD" from a matter are treated as being present at the
meeting for purposes of establishing a quorum, but only shares voted "FOR" or
"AGAINST" are treated as shares "representing and voting" at the Annual Meeting
(the "Votes Cast") with respect to such matter. Accordingly, abstentions and
broker non-votes will be counted for purposes of determining the number of Votes
with respect to a proposal.
2
<PAGE>
Deadline for Receipt of Stockholder Proposals
Proposals of stockholders of the Company which are intended to be
presented by such stockholders at next year's Annual Meeting must be received by
the Company no later than December 1, 2000, and must otherwise comply with the
requirements of Rule 14a-8 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), in order that they may be included in the proxy statement
and form of proxy relating to that meeting.
PROPOSAL 1
ELECTION OF DIRECTORS
Nominees
The Board of Directors fixes, from time to time, the number of
directors authorized by the Company's By-Laws. The Board of Directors has
currently set the number of directors at six. The Company's By-Laws provides
that the directors shall be divided into three classes, with the classes of
directors serving for staggered, three-year terms. The two Class III directors
to be elected at the Annual Meeting are to hold office until the Annual Meeting
to be held in 2002 and until their successors have been elected and qualified.
Unless otherwise instructed, the proxy holders will vote the proxies received by
them for the Company's two nominees named below, both of who are presently
directors of the Company. In the event that any nominee of the Company is unable
or declines to serve as a director at the time of the Annual Meeting, the
proxies will be voted for any nominee who shall be designated by the present
Board of Directors to fill the vacancy. In the event that additional persons are
nominated for election as directors, the proxy holders intend to vote all
proxies received by them in such a manner as will assure the election of the
nominees listed below, and, in such event, the specific nominees to be voted for
will be determined by the proxy holders.
<TABLE>
The following table sets forth the name and age of the nominee, and
each director of the Company whose term of office continues after the Annual
Meeting, the principal occupation of each during the past five years, and the
period during which each has served as a director of the Company:
Nominees for Election as Class III Director Serving for a Three-Year Term
Expiring in 2003:
<CAPTION>
Principal Occupation Director
Name During the Past Five Years Age Since
- ---- -------------------------- --- -----
<S> <C> <C> <C>
Glenn Penisten Mr. Penisten has served as the Chairman of the Board of 68 1996
Directors of NPI since June 1996. From 1985 to present,
he has been a partner of Alpha Partners, a venture
capital firm. He has served as Chief Executive Officer
for several leading technology companies including;
Superconductor Technologies, Inc., from May 1987 to June
1988; American Microsystems, Inc., from July 1976 to
December 1984, and Data Transmission Co., from February
1972 to April 1976. Mr. Penisten has also held director
level positions at Dataproducts Corporation, Sanders
Associates and Gould, Inc. He served as a corporate
officer at Texas Instruments, Inc., and chairman of the
American Electronics Association. Mr. Penisten currently
serves as director for IKOS Systems, Bell Microproducts,
Pinnacle Systems, and Superconductor Technologies, Inc.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Principal Occupation Director
Name During the Past Five Years Age Since
- ---- -------------------------- --- -----
<S> <C> <C> <C>
Charles Hart Mr. Hart has served as a director of NPI since November 61 1996
1996. From February 1999 to present, he has been the Chief
Executive Officer of SANetworks, Inc., a manufacturer of
networking interface cards and switches. Previously in
1998, he served as the Chief Executive Officer and a
director of Micronics Computers Inc., a supplier of
advanced system boards for high-performance personal
computers. From April 1997 through February 1998, he served
as the Executive Vice President, Business Development, for
NPI. From August 1995 to May 1997, he was a founding board
member of InsWeb Corporation, an internet technology
company providing a vertically integrated marketplace for
the insurance industry on the World Wide Web. From July
1992 through July 1995, he was President and Chief
Executive Officer of Semaphore Communications Corporation.
Previously, he held positions of President and Chief
Executive Officer with Phaser Systems, Etak, Inc. and
Nestar Systems, Inc.
</TABLE>
<TABLE>
Incumbent Directors Not Standing for Re-election at the 2000 Annual Meeting:
<CAPTION>
Principal Occupation Director
Name During the Past Five Years Age Since
- ---- -------------------------- --- -----
<S> <C> <C> <C>
William F. Rosenberger Mr. Rosenberger has served as the President, Chief 50 1998
Executive Officer and a director of NPI since July 1998.
From January 1996 to June 1998, he was President and
Chief Executive Officer of NetAccess, Inc., a wide area
networking equipment manufacturer. From October 1995 to
December 1995, he was Vice President of Sales and
Business Development for NetVision Corporation, an
Ethernet switching company. From March 1993 to June 1995,
he was General Manager of ACSYS, Inc., a networking
equipment manufacturer. Prior to March 1993, Mr.
Rosenberger was President and Chief Executive Officer of
Netronix, Inc., a networking hardware designer and
manufacturer.
Steve Bell Mr. Bell has served as a director of NPI since July 1998. 45 1998
From March 1998 to the present, he has served as
President and Chief Executive Officer of SVNL of Agilent
(formerly Silicon Valley Networking Laboratory, Inc.), a
provider of networking testing services. From November
1999 to the present, he has served as General Manager of
Agilent Technologies West Coast, a networking lab
business. From September 1993 to present, he has been
founder and President of Bell Consulting, Inc., a
networking industry consultancy. Mr. Bell has also held
marketing and engineering management positions at AT&T
Bell Labs, Western Digital, National Semiconductor and
Hughes LAN Systems.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Principal Occupation Director
Name During the Past Five Years Age Since
- ---- -------------------------- --- -----
<S> <C> <C> <C>
Michael Gardner Mr. Gardner has served as a director of NPI since May 55 1998
1998. From July 1999 to the present, he has been Senior
Vice President, Operations of Blue Pumpkin Software, a
software company. From February 1998 to April 1999, he
served as Senior Vice President for Sybase, Inc., an
information management software company. From November 1996
to February 1998, he was Chief Operating Officer for ACT
Networks, a wide-area network access products manufacturer.
From May 1995 to November 1996, he was President of
Whittaker Communications (formerly Hughes LAN Systems), a
networking company. From April 1993 to April 1995, Mr.
Gardner was Senior Vice President of Worldwide Sales for UB
Networks, a supplier of networking systems.
</TABLE>
There are no family relationships among any directors or officers of
the Company.
Compliance with Section 16(a) of the Exchange Act
During 1999, Mr. Joseph Botta, the Company's executive officer, was
delinquent in filing Form 3.
Vote Required and Board of Directors Recommendation
Directors are elected by a plurality of votes cast. THE BOARD OF
DIRECTORS RECOMMEND THAT THE STOCKHOLDERS VOTE "FOR" THE ELECTION OF THE NAMED
NOMINEES.
Board of Directors Meetings and Committees
The Board of Directors of the Company held a total of six meetings
during 1999. No action was taken by written consent. No current director
participated in fewer than 75% of all such meetings and actions by the Board of
Directors, if any, and the committees, upon which such directors served, at the
time they were directors of the Company.
The Board of Directors has an Audit Committee and a Compensation
Committee. It does not have a Nominating Committee or a committee performing the
functions of a Nominating Committee. The functions of a Nominating Committee are
performed by the Board of Directors as a whole.
The Audit Committee of the Board of Directors recommends the engagement
of the Company's independent accountants, reviews and approves the scope of an
annual audit and other services performed by the independent accountants, and
reviews and evaluates the Company's accounting principles and its systems of
internal accounting controls. Mr. Penisten and Mr. Gardner are members of the
Audit Committee. The Audit Committee had four meetings in 1999.
The Compensation Committee of the Board of Directors reviews and
approves the compensation policies applicable to the Company's executive
officers, and reviews and approves grants of stock options pursuant to the
Company's stock option plans. Mr. Hart and Mr. Bell are members of the
Compensation Committee. No meeting of the Compensation Committee was held in
1999.
5
<PAGE>
Compensation of Directors
Directors who are not employees of the Company (an "Outside Director")
are entitled to receive a director fee of $3,750 per fiscal quarter so long as
they remain directors of the Company. Directors do not receive any additional or
special remuneration for their services on any of the committees established by
the Board of Directors.
An Outside Director is eligible to participate in the Company's 1994
Outside Directors Stock Option Plan (the "Outside Directors Plan"). The Outside
Directors Plan, as amended, provides for the automatic granting of nonstatutory
stock options to Outside Directors of the Company. Each new Outside Director
will be granted an option to purchase 15,000 shares of the Company's Common
Stock on the date of election. Each continuing Outside Director will be granted
an option to purchase 5,000 shares of Common Stock on the date of each annual
meeting of stockholders.
During 1999, the Company granted an option to purchase 5,000 shares of
Common Stock from the Outside Directors Plan to each Outside Director, including
Mr. Bell, Mr. Hart and Mr. Gardner. Mr. Gardner was also granted an option to
purchase 5,500 shares from the 1997 Stock Plan for his consulting services
rendered to the Company in 1999. No stock options were granted to Mr.
Rosenberger and Mr. Penisten in 1999.
6
<PAGE>
OTHER INFORMATION
Share Ownership by Principal Stockholders and Management
The following table sets forth the beneficial ownership of the
Company's Common Stock as of March 10, 2000 by: (a) each director; (b) each of
the executive officers named in the Summary Compensation Table ("Named
Officers"); (c) all directors and executive officers as a group; and (d) each
person known to the Company who beneficially owns 5% or more of the outstanding
shares of its Common Stock. The number and percentage of shares beneficially
owned is determined under rules of the Securities and Exchange Commission
("SEC"), and the information is not necessarily indicative of beneficial
ownership for any other purpose. Under such rules, beneficial ownership includes
any shares as to which the individual has sole or shared voting power or
investment power and also any shares which the individual has the right to
acquire within 60 days after March 10, 2000 through the exercise of any stock
option or other right. To the Company's knowledge, the persons named in the
following table have sole voting and investment power with respect to all shares
of Common Stock shown as beneficially owned by them, subject to community
property laws where applicable and the information contained in the footnotes to
this table. A total of 15,804,197 shares of the Company's Common Stock were
issued and outstanding as of March 10, 2000.
Shares Beneficially Owned
Name of Beneficial Owner Number Percent
- ------------------------ ------ -------
Seneca Ventures (1) ............................... 1,016,000 6.1%
68 Wheatley Road
Brookville, New York 11545
Glenn Penisten (2) ................................ 446,925 2.7%
William F. Rosenberger (3) ........................ 212,166 1.3%
Robert Zecha (4) .................................. 70,000 *
Steve Bell (4) .................................... 2,917 *
James Sullivan (4) ................................ 72,999 *
Charles Hart (4) .................................. 20,832 *
Wilson Cheung (5) ................................. 39,737 *
Michael Gardner (4) ............................... 16,332 *
Jerry McDowell (4) ................................ 49,050 *
All directors and executive officers as a group (6) 930,958 5.6%
* Represents less than 1%.
(1) Based on information contained in the Schedule 13G filed on October 8, 1999
by the above entity and other members of a group of which that entity is a
part, including Woodland Venture Fund, Woodland Partners, Barry Rubenstein,
Marilyn Rubenstein and Woodland Services Corp.
(2) Includes 426,667 shares issuable upon exercise of outstanding stock
options, which were exercisable at the Record Date or within 60 days
thereafter.
(3) Includes 209,166 shares issuable upon exercise of outstanding stock
options, which were exercisable at the Record Date or within 60 days
thereafter.
(4) Represents the number of shares issuable upon exercise of outstanding stock
options, which were exercisable at the Record Date or within 60 days
thereafter.
(5) Includes 39,687 shares issuable upon exercise of outstanding stock options,
which were exercisable at the Record Date or within 60 days thereafter.
(6) Includes 907,650 shares issuable upon exercise of outstanding stock
options, which were exercisable at the Record Date or within 60 days
thereafter.
7
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
Summary of Cash and Certain Other Compensation
<TABLE>
The following table sets forth certain information concerning the
compensation of our Chief Executive officer, and the four other most highly
compensated executive officers whose salary and bonus for the year ended
December 31, 1999 exceeded $100,000 (collectively "Named Officers").
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term Compensation
Annual Compensation Awards
Name and ------------------- Securities Underlying
Principal Position Year Salary Bonus(1) Options (1)
------------------ ---- ------ -------- -----------
<S> <C> <C> <C> <C>
William F. Rosenberger 1999 $250,000 $ 75,000 --
President and CEO ... 1998 $125,000 $ 50,000(2) 500,000
James Sullivan ........ 1999 $246,086(3) -- 15,000
VP of Sales ......... 1998 $253,574(3) -- 60,000
1997 $ 80,567(3) -- 100,000(4)
Jerry McDowell ........ 1999 $180,000 -- --
VP of Marketing ..... 1998 $ 27,346 -- 150,000
Robert Zecha .......... 1999 $152,884 $ 62,500 10,000
VP of Research & .... 1998 $167,875 -- 20,000
Development
Wilson Cheung ......... 1999 $131,669 $ 13,200 95,000(5)
VP of Finance and CFO 1998 $ 93,433 $ 23,925(6) 10,000
<FN>
(1) From time to time, the Compensation Committee reviews the performance of
an executive officer and may award cash bonuses and/or stock options to an
officer.
(2) Bonus paid to Mr. Rosenberger in 1998 was pursuant to "sign-on" provisions
in the employment contract.
(3) Included in Mr. Sullivan's salaries are commissions of $96,086, $103,574
and $15,664 in 1999, 1998 and 1997, respectively.
(4) Option to purchase 50,000 shares was granted to Mr. Sullivan on October
31, 1997, replacing option to purchase 50,000 shares granted on July 7,
1997.
(5) Option to purchase 65,000 shares was granted to Mr. Cheung in 1999 based
on his appointment to the executive office.
(6) Bonus paid to Mr. Cheung in 1998 was based on performance relating to the
period prior to his appointment to the executive office.
</FN>
</TABLE>
8
<PAGE>
Option Grants in Last Fiscal Year
<TABLE>
The following table sets forth details regarding stock options granted
to the Named Officers in 1999. The Company granted no stock appreciation rights
in 1999. In addition, in accordance with SEC rules, the table shows the
hypothetical gains or "option spreads" that would exist for the respective
options. These gains are based on assumed rates of annual compound stock price
appreciation of 5% and 10% from the date the options were granted over the full
option term. The actual value, if any, an executive may realize will depend on
the spread between the market price and the exercise price on the date the
option is exercised.
<CAPTION>
Individual Grants
--------------------------------------------------- Potential Realizable Value
Number of Percent of at Assumed Annual Rates of
Securities Total Options Exercise Stock Price Appreciation for
Underlying Granted to or Base Option Term (1)
Options Employees in Price Expiration ----------------------------
Name Granted Fiscal Year Per Share Date 5% ($) 10% ($)
---- -------- ----------- --------- ---- ------ -------
<S> <C> <C> <C> <C> <C> <C>
William F. Rosenberger -- -- -- -- -- --
James Sullivan 15,000 2.18% $ 14.37 4/29/09 $135,605 $343,651
Jerry McDowell -- -- -- -- -- --
Robert Zecha 10,000 1.45% $ 23.87 10/25/09 $150,149 $380,506
Wilson Cheung 30,000 4.36% $ 14.37 4/29/09 $271,211 $687,301
Wilson Cheung 65,000 9.44% $ 4.31 1/13/09 $176,287 $446,746
<FN>
(1) The potential gain is calculated based on the fair market value of the
Company's Common Stock on the date of grant, which is equal to the closing
price reported on the Nasdaq National Market. These amounts only represent
certain assumed rates of appreciation as established by the SEC. Actual
gains, if any, on stock option exercises are dependent upon the future
performance of the Company and overall stock market conditions. There can
be no assurance that the amounts reflected in this table or the associated
rates of appreciation will be achieved.
</FN>
</TABLE>
Aggregated Option Exercises and Fiscal Year End Option Values
<TABLE>
The following table sets forth certain information concerning options
exercised by the Named Officers during 1999, including the aggregate value of
gains on the date of exercise. In addition, this table includes the number of
shares covered by both exercisable and unexercisable stock options as of
year-end. Also reported are the values for "in-the-money" options, which
represent the positive spread between the exercise price of any such existing
stock options and the year-end price of the Company's Common Stock.
<CAPTION>
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-the-Money Options at
Acquired Options at Fiscal Year End Fiscal Year End (1)
On Value --------------------------- -------------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William F. Rosenberger -- -- 187,500 312,500 $8,085,937 $13,476,562
James Sullivan -- -- 62,082 62,918 $2,707,782 $ 2,578,468
Jerry McDowell 7,200 $231,980 36,550 106,250 $1,631,044 $ 4,741,406
Robert Zecha 5,000 $161,178 71,665 73,335 $3,059,303 $ 2,932,885
Wilson Cheung 5,000 $190,927 8,956 106,044 $ 380,877 $ 4,254,123
<FN>
(1) Market value of underlying securities, based on the closing price of the
Company's Common Stock, as reported by the Nasdaq National Market System,
on December 31, 1999 of $47.25, minus the exercise price.
</FN>
</TABLE>
9
<PAGE>
Employment Agreements and Change in Control Arrangements
Management Salary Continuation Agreements
During 1999, the Company entered into a Salary Continuation Agreement
with Joseph Botta. The agreement provides that in the event the executive is
terminated, including "constructive termination" by demotion, relocation or
reduction of the salary of the individual, beginning 30 days prior to public
announcement and ending one year after the "change in control" of the Company,
the executive would be entitled to continued salary and bonus payments for a
period of one year. The executive would also be entitled to continued medical
coverage by the Company during the period of salary continuation, unless the
executive is covered by another employer's group health plan. In addition, the
Salary Continuation Agreement provides for the acceleration of all options to
purchase shares of the Company's Common Stock granted to that executive prior to
the "change of control."
The 1997 Stock Plan provides that the Board of Directors may, in its
sole discretion, accelerate the vesting and the ability to exercise options held
by executive officers in the event of a change of control of the Company.
Compensation Committee Interlocks and Insider Participation in Compensation
Decisions
During 1999, no members of the Compensation Committee were officers or
employees of the Company or any of its subsidiaries.
10
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE
COMPENSATION
The Compensation Committee of the Board of Directors is comprised of
non-employee directors. The Compensation Committee is responsible for setting
and administering policies governing compensation of executive officers. The
Compensation Committee reviews the performance and compensation levels for
executive officers, sets salary and bonus levels and makes option grants under
the Company's 1997 Option Plan.
Compensation Policies
The goals of the Company's executive officer compensation policies are
to attract, retain and reward executive officers who contribute to the Company's
success, to align executive officer compensation with the Company's performance
and to motivate executive officers to achieve the Company's business objectives.
The Company uses salary, bonuses and stock options to achieve these goals. The
Compensation Committee reviews various available data, including compensation
surveys, to enable the Compensation Committee to compare the Company's
compensation package with that of other high technology companies of similar
size and growth rates in the Company's geographic area.
Compensation Components
Salaries are set for each executive officer with reference to a range
of salaries for comparable positions among high technology companies of similar
size, growth rate and location. Annual salary adjustments take into account
achievements of individual executive officers during the prior fiscal year as
measured against key Company-wide objectives set each year by the Board of
Directors, as well as the executive officers' performance of their individual
responsibilities. Each Compensation Committee member weighs objective and
subjective performance factors and a consensus is obtained through discussion.
The Compensation Committee also considered relative levels of responsibility
among executive officers in attempting to reach equitable and appropriate
projected compensation levels.
Cash incentive compensation is provided through participation in the
Company's executive bonus plan. The Compensation Committee determines the amount
of an individual's bonus based on subjective judgment of the Company's financial
performance and the achievement of established goals. Performance bonuses of
$75,000, $62,000 and $13,200 were paid to William Rosenberger, Robert Zecha and
Wilson Cheung, respectively, in 1999.
The Compensation Committee strongly believes that equity ownership by
executive officers provides incentives to build stockholder value and aligns the
interests of executive officers with the stockholders. The size of an initial
option grant to an executive officer has generally been determined with
reference to comparable equity compensation offered by high technology companies
of similar size for similar positions, the responsibilities and expected future
contributions of the executive officer, as well as recruitment considerations.
In determining the size of subsequent grants, the Compensation Committee has
considered the individual executive officer's performance during the previous
fiscal year, the expected contributions during the coming year, the amount of
options already held and the level of recent grants. Stock options granted to
executive officers during 1999 were based upon available data concerning option
grants to executive officers of companies of similar size, growth and location
and a review of recent grants. The Compensation Committee believes that future
subsequent option grants, with vesting schedules of up to four years, will
provide strong incentives for executive officers to remain with the Company.
Chief Executive Officer Compensation
The Compensation of the Chief Executive Officer is based upon the same
criteria outlined above for the other executive officers of the Company. While
the Chief Executive Officer makes recommendations about
11
<PAGE>
the compensation levels, goals and performance of the other executive officers,
he does not participate in the discussions regarding his compensation or
performance.
Qualifying Compensation
The Compensation Committee has considered the potential impact of
Section 162(m) of the Internal Revenue Code ("Section 162(m)") adopted under the
Federal Revenue Reconciliation Act of 1993. Section 162(m) disallows a tax
deduction for any publicly held corporation for certain executive officers'
compensation exceeding $1 million per person in any taxable year unless it is
"performance based" within the meaning of Section 162(m). Since to date the cash
compensation plus restricted stock vesting of each of the Company's executive
officers has been below the $1 million threshold and since the Committee
believes that any options granted under the Company's option plan will meet the
requirement of being performance-based under the provisions of Section 162(m),
the Committee believes that Section 162(m) will not reduce the tax deduction
available to the Company for fiscal year 1999 or prior years. The Company's
policy is, to the extent reasonable, to qualify its executive officers'
compensation for deductibility under the applicable tax laws.
12
<PAGE>
STOCK PERFORMANCE GRAPH
The graph below compares the cumulative total return on the Company's
Common Stock since the initial public offering in June 1994 to the CRSP Total
Return Index for the Nasdaq Stock Market (U.S. companies), an indicator of broad
market performance, and the CRSP Total Return Index for the Nasdaq Computer
Manufacturer Stocks (SIC 357), an indicator of the market performance of this
sector. The stock price performance shown on the graph below is not necessarily
indicative of future price performance.
[OBJECT OMITTED]
[The following descriptive data is supplied in accordance with Rule 304(d) of
Regulation S-T]
6/94 12/94 12/95 12/96 12/97 12/98 12/99
---- ----- ----- ----- ----- ----- -----
NPI $100 $436 $188 $284 $116 $ 72 $ 756
Nasdaq Stock Market (U.S.) $100 $107 $151 $186 $228 $321 $ 584
Nasdaq Comp. Mfg. $100 $140 $220 $295 $357 $773 $1,631
The graph assumes $100 invested on June 28, 1994 in the Company's
Common Stock and in each index listed above, and reinvestment of dividends.
Dividends have never been declared on the Company's Common Stock. Data points
are as of the last business day of the respective month starting December 1994.
13
<PAGE>
Summary of the 1997 Stock Plan, as Amended
The purpose of the 1997 Stock Plan (the "1997 Plan") is to advance the
interests of the Company and its stockholders by providing an incentive to
attract, retain and reward the Company's employees, directors and consultants
and by motivating such persons to contribute to the Company's growth and
profitability. A maximum of 2,500,000 of the authorized but unissued or
reacquired shares of Common Stock of the Company may be issued under the 1997
Plan. The Board of Directors or a duly appointed committee of the Board
administers the 1997 Plan. Subject to the provisions of the 1997 Plan, the Board
determines the persons to whom awards are to be granted and all other terms and
conditions of the awards. Awards may be granted under the 1997 Plan to employees
(including officers), directors and consultants of the Company. The exercise
price of each incentive stock option granted under the 1997 Plan may not be less
than the fair market value of a share of the Company's Common Stock on the date
of grant, while the exercise price of a nonstatutory stock option may not be
less than 85% of such fair market value. Options granted under the 1997 Plan
will become vested and exercisable at such times or upon such events and subject
to such terms, conditions, performance criteria or restrictions as specified by
the Board. If a Change in Control occurs, as defined by the 1997 Plan, the Board
may provide that any unexercisable or unvested portion of the outstanding awards
will become immediately exercisable and vested in full as of a date determined
by the Board and/or may arrange with the surviving, acquiring or successor
corporation or parent corporation thereof to either assume the Company's rights
and obligations under the outstanding awards or substitute substantially
equivalent awards for such corporation's stock. The 1997 Plan will continue in
effect until the earlier of its termination by the Board or the date on which
all shares available for issuance under the 1997 Plan have been issued and all
restrictions on such shares under the terms of the 1997 Plan and the agreements
evidencing awards granted under the 1997 Plan have lapsed. The Board may
terminate or amend the 1997 Plan at any time.
Summary of the 1999 Stock Plan
The purpose of the 1999 Stock Plan (the "1999 Plan") is to advance the
interests of the Company and its stockholders by providing an incentive to
attract, retain and reward the Company's eligible employees and consultants and
by motivating such persons to contribute to the Company's growth and
profitability. A maximum of 500,000 of the authorized but unissued or reacquired
shares of Common Stock of the Company may be issued under the 1999 Plan. The
Board of Directors or a duly appointed committee of the Board administers the
1999 Plan. Subject to the provisions of the 1999 Plan, the Board determines the
persons to whom awards are to be granted and all other terms and conditions of
the awards. An award, which may be a nonstatutory stock option or a restricted
stock, may be granted under the 1999 Plan to eligible employees, excluding all
officers and directors, and consultants of the Company. The exercise price of a
nonstatutory stock option granted under the 1999 Plan may not be less than 85%
of such fair market value. Options granted under the 1999 Plan will become
vested and exercisable at such times or upon such events and subject to such
terms, conditions, performance criteria or restrictions as specified by the
Board. If a Change in Control occurs, as defined by the 1999 Plan, the Board may
provide that any unexercisable or unvested portion of the outstanding awards
will become immediately exercisable and vested in full as of a date determined
by the Board and/or may arrange with the surviving, acquiring or successor
corporation or parent corporation thereof to either assume the Company's rights
and obligations under the outstanding awards or substitute substantially
equivalent awards for such corporation's stock. The 1999 Plan will continue in
effect until the earlier of its termination by the Board or the date on which
all shares available for issuance under the 1999 Plan have been issued and all
restrictions on such shares under the terms of the 1999 Plan and the agreements
evidencing awards granted under the 1999 Plan have lapsed. The Board may
terminate or amend the 1999 Plan at any time.
14
<PAGE>
PROPOSAL 2
APPROVAL OF AMENDMENT TO RESTATED CERTIFICATE OF
INCORPORATION TO INCREASE THE AUTHORIZED COMMON STOCK OF
THE COMPANY
On [________], the Board of Directors authorized an amendment to the
Company's Restated Certificate of Incorporation to increase the number of
authorized shares of Common Stock from 20,000,000 to 60,000,000. The Company's
Restated Certificate of Incorporation currently authorizes the issuance by the
Company of up to 20,000,000 shares of Common Stock and 2,000,000 shares of
Preferred Stock, $0.001 par value per share (the "Preferred Shares"). As of
January 31, 2000, there were approximately 12,787,700 shares of Common Stock
issued and outstanding, approximately [________] shares of Common Stock reserved
for issuance under various stock plans of the Company and approximately
[________] shares of Common Stock remaining available for future issuance. No
Preferred Shares are issued or outstanding. There are no preemptive rights with
respect to the Company's Common Stock. The Board of Directors believes that the
proposed increase is desirable so that, as the need may arise, the Company will
have more flexibility to issue shares of Common Stock in connection with future
opportunities for expanding the business through investments or acquisitions,
possible future stock dividends or stock splits, and for other general corporate
purposes. Recently, the market price of the Company's Common Stock has been at
historically high levels. Should the market price continue to increase, the
Company will consider a stock split in the form of a stock dividend, subject to
the Amended and Restated Certificate of Incorporation being amended to create a
sufficient amount of authorized shares. Other than the foregoing, the Company
has no specified use planned for the additional shares being proposed for
authorization under this amendment. Authorized but unissued shares of the
Company's Common Stock may be issued at such times, for such purposes and for
such consideration as the Board of Directors may determine to be appropriate
without further authority from the Company's stockholders, except as otherwise
required by applicable law or Nasdaq Stock Market policies. The increase in
authorized Common Stock will not have any immediate effect on the rights of
existing stockholders. To the extent that the additional authorized shares are
issued in the future, they will decrease the existing stockholders' percentage
equity ownership; depending upon the price at which they are issued, they could
be either dilutive or nondilutive to the existing stockholders. The increase in
the authorized number of shares of Common Stock and the subsequent issuance of
such shares could have the effect of delaying or preventing a change in control
of the Company without further action by the stockholders. Shares of authorized
and unissued Common Stock could (within the limits imposed by applicable law) be
issued in one or more transactions which would make a change in control of the
Company more difficult, and therefore less likely. Any such issuance of
additional stock could have the effect of diluting the earnings per share and
book value per share of outstanding shares of Common Stock, and such additional
shares could be used to dilute the stock ownership or voting rights of a person
seeking to obtain control of the Company. The proposal to increase the
authorized Common Stock of the Company is not in response to any offer,
solicitation on proposal to merge, combine or otherwise acquire control by a
third party.
Vote Required and Board of Directors Recommendation
The affirmative vote of a majority of all outstanding shares of Common
Stock of the Company is required for approval of this proposal. Abstentions and
broker non-votes will each have the same effect as a negative vote on this
proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE PROPOSAL
TO AMEND THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION TO INCREASE THE
NUMBER OF AUTHORIZED SHARES OF THE COMPANY'S COMMON STOCK FROM 20,000,000 SHARES
TO 60,000,000 SHARES.
15
<PAGE>
PROPOSAL 3
APPROVAL OF AMENDMENT OF 1997 STOCK PLAN
As of January 31, 2000, only 142,400 shares remained available for
future option grants under the Company's 1997 Stock Plan (the "1997 Plan"),
which amount the Board of Directors believes to be insufficient to satisfy the
Company's anticipated equity incentive objectives. Accordingly, in March 2000,
the Board of Directors approved, subject to stockholder approval, the
reservation of an additional 1,000,000 shares for issuance under the 1997 Plan.
The Internal Revenue Code of 1986, as amended (the "Code") limits the amount of
compensation paid to a corporation's chief executive officer and four other most
highly compensated officers which may be deductible as an expense for federal
income tax purposes. The stockholders are now being asked to approve the
increase from 2,500,000 to 3,500,000 in the maximum aggregate number of shares
that may be issued under the 1997 Plan. The Board of Directors believes that
approval of these amendments is in the best interests of the Company and its
stockholders because the availability of an adequate stock option program is an
important factor in attracting, motivating and retaining qualified officers,
employees and consultants essential to the success of the Company and in
aligning their long-term interests with those of the stockholders.
Description of the 1997 Plan
The following summary of the 1997 Plan, as amended, is qualified in its
entirety by the specific language of the 1997 Plan, a copy of which is available
to any stockholder upon request.
General
The 1997 Plan provides for the grant of incentive stock options within
the meaning of section 422 of the Code and nonstatutory stock options. As of
January 31, 2000, options to purchase 123,400 shares of Common Stock granted
pursuant to the 1997 Plan had been exercised, options to purchase an aggregate
of 2,234,200 shares were outstanding, and 142,400 shares of Common Stock
remained available for future grants under the 1997 Plan, provided that the
stockholders approve the increase in the number of shares authorized under the
1997 Plan approved by the Board of Directors in March 2000. In addition to the
1997 Plan, the Company maintains the Network Peripherals Inc. 1994 Outside
Directors Stock Option Plan (the "1994 Plan") and the Network Peripherals Inc.
1999 Stock Plan (the "1999 Plan"). Under the 1994 Plan, an aggregate of 150,000
shares of the Company's Common Stock may be issued. The 1994 Plan provides for
the grant of nonstatutory stock options to non-employee directors of the
Company. As of January 31, 2000, options to purchase 10,400 shares of Common
Stock granted pursuant to the 1994 Plan had been exercised, options to purchase
an aggregate of 49,600 were outstanding, and 90,000 shares of Common Stock
remained available for future grants under the 1994 Plan. Under the 1999 Plan an
aggregate of 500,000 shares of the Company's Common Stock may be issued. The
1999 Plan provides for the grant of nonstatutory stock options to employees and
consultants of the Company (excluding officers and directors of the Company). As
of January 31, 2000, no options to purchase shares of Common Stock granted
pursuant to the 1999 Plan had been exercised, options to purchase an aggregate
of 8,900 were outstanding, and 491,100 shares of Common Stock remained available
for future grants under the 1999 Plan.
Shares Subject to Plan
The Board of Directors has amended the 1997 Plan, subject to
stockholder approval, to increase by 1,000,000 the maximum number of authorized
but unissued or reacquired shares of the Company's Common Stock issuable
thereunder to an aggregate of 3,500,000. In the event of any stock dividend,
stock split, reverse stock split, recapitalization, combination,
reclassification, or similar change in the capital structure of the Company,
appropriate adjustments will be made to the shares subject to the 1997 Plan, to
the Grant Limit and to outstanding options. To the extent any outstanding option
under the 1997 Plan expires or terminates prior to exercise in full or if shares
issued upon exercise of an option are repurchased by the Company, the shares of
16
<PAGE>
Common Stock for which such option is not exercised or the repurchased shares
are returned to the 1997 Plan and become available for future grant.
Administration
The 1997 Plan is administered by the Board of Directors or a duly
appointed committee of the Board of Directors (hereinafter referred to as the
"Board"). With respect to the participation of individuals whose transactions in
the Company's equity securities are subject to Section 16 of the Securities
Exchange Act of 1934 (the "Exchange Act"), the 1997 Plan must be administered in
compliance with the requirements, if any, of Rule 16b-3 under the Exchange Act.
Subject to the provisions of the 1997 Plan, the Board determines the persons to
whom options are to be granted, the number of shares to be covered by each
option, whether an option is to be an incentive stock option or a nonstatutory
stock option, the terms of exercisability of each option and the vesting of the
shares acquired, including the effect thereon of an optionee's termination of
service, the exercise price and type of consideration to be paid to the Company
upon exercise of an option, the duration of each option, and all other terms and
conditions of the options. Subject to certain limitations, the 1997 Plan
provides for indemnification by the Company of any director, officer or employee
against all reasonable expenses, including attorneys' fees, incurred in
connection with any legal action arising from such person's action or failure to
act in administering the 1997 Plan. The Board will interpret the 1997 Plan and
options granted thereunder, and all determinations of the Board will be final
and binding on all persons having an interest in the 1997 Plan or any option.
Eligibility
All employees, consultants and directors of the Company are eligible to
participate in the 1997 Plan. In addition, options may be granted to prospective
employees, consultants and directors in connection with written offers of
employment or engagement. However, any such options may not become exercisable
prior to such individual's commencement of service. As of January 31, 2000, the
Company had approximately 150 employees, including six executive officers, five
directors and approximately [___] consultants. Any person eligible under the
1997 Plan may be granted a nonstatutory option. However, only employees may be
granted incentive stock options. Subject to stockholder approval, no employee
may be granted, in any fiscal year, options under the 1997 Plan for more than
500,000 shares of the Company's Common Stock.
Terms and Conditions of Options
Each option granted under the 1997 Plan is evidenced by a written
agreement between the Company and the optionee specifying the number of shares
subject to the option and the other terms and conditions of the option,
consistent with the requirements of the 1997 Plan. The exercise price per share
must equal at least the fair market value of a share of the Company's Common
Stock on the date of grant of an incentive stock option and at least 85% of the
fair market value of a share of the Common Stock on the date of grant of a
nonstatutory stock option. The exercise price of any incentive stock option
granted to a person who at the time of grant owns stock possessing 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 (a "Ten Percent Stockholder")
must be at least 110% of the fair market value of a share of the Company's
Common Stock on the date of grant. On March 13, 2000, the closing price of a
share of the Company's Common Stock was $60.00, as reported on the Nasdaq
National Market. Generally, the exercise price may be paid in cash, by check, or
in cash equivalent, by tender of shares of the Company's Common Stock owned by
the optionee having a fair market value not less than the exercise price, by the
assignment of the proceeds of a sale or loan with respect to some or all of the
shares of Common Stock being acquired upon the exercise of the option, by means
of a promissory note, by any other lawful consideration approved by the Board or
by any combination of these. The Board may restrict the forms of payment
permitted in connection with any option grant. Options granted under the 1997
Plan will become exercisable and vested at such times and subject to such
conditions as specified by the Board. Generally, options granted under the 1997
Plan are exercisable on and after the date of grant, subject to the Company's
right to reacquire at the optionee's exercise price any unvested shares held by
the optionee upon termination of employment or service with the Company or if
the optionee attempts to transfer any unvested shares. Shares
17
<PAGE>
subject to options generally vest in installments subject to the optionee's
continued employment or service. The maximum term of incentive stock options
granted under the 1997 Plan is ten years, except that an incentive stock option
granted to a Ten Percent Stockholder may not have a term longer than five years.
Consistent with the Code, the 1997 Plan does not limit the term of nonstatutory
stock options granted under the 1997 Plan. Stock options are nontransferable by
the optionee other than by will or by the laws of descent and distribution, and
are exercisable during the optionee's lifetime only by the optionee.
Transfer of Control
The 1997 Plan provides that in the event of (i) a sale or exchange by
the stockholders of more than 50% of the Company's voting stock, (ii) a merger
or consolidation to which the Company is a party, (iii) the sale, exchange or
transfer of all or substantially all of the assets of the Company, or (iv) a
liquidation or dissolution of the Company, wherein the stockholders of the
Company immediately before any such event do not retain direct or indirect
beneficial ownership of more than 50% of the total combined voting power of the
voting stock of the Company, its successor, or the corporation to which the
assets of the Company were transferred (a "Transfer of Control"), the Board may
provide that any unexercised or unvested portion of the outstanding options may
be immediately exercisable and vested in full as of a date determined by the
Board and/or may arrange with the surviving, continuing, purchasing or successor
corporation or parent corporation thereof (the "Acquiring Corporation") to
assume or substitute substantially equivalent new options for the options
outstanding under the 1997 Plan. To the extent that the options outstanding
under the 1997 Plan are not assumed, replaced, or exercised prior to such event,
they will terminate.
Termination or Amendment
The 1997 Plan currently provides that, unless sooner terminated, no
incentive stock options may be granted under the 1997 Plan after February 18,
2007. The Board may terminate or amend the 1997 Plan at any time, but, without
stockholder approval, the Board may not amend the 1997 Plan to increase the
total number of shares of Common Stock reserved for issuance thereunder, change
the class of persons eligible to receive incentive stock options, or expand the
class of persons eligible to receive nonstatutory stock options. No amendment or
termination of the Plan may adversely affect an outstanding option without the
consent of the optionee, unless the amendment is required to preserve the
option's status as an incentive stock option or is necessary to comply with any
applicable law or regulation.
Summary of Federal Income Tax Consequences of the 1997 Plan
The following summary is intended only as a general guide as to the
United States federal income tax consequences under current law of participation
in the 1997 Plan and does not attempt to describe all possible federal or other
tax consequences of such participation or tax consequences based on particular
circumstances.
Incentive Stock Options
An optionee recognizes no taxable income for regular income tax
purposes as the result of the grant or exercise of an incentive stock option
qualifying under section 422 of the Code. Optionees who do not dispose of their
shares for two years following the date the option was granted nor within one
year following the exercise of the option will normally recognize a mid-term or
long-term capital gain or loss equal to the difference, if any, between the sale
price and the purchase price of the shares. If an optionee satisfies such
holding periods upon a sale of the shares, the Company will not be entitled to
any deduction for federal income tax purposes. If an optionee disposes of shares
within two years after the date of grant or within one year from the date of
exercise (a "disqualifying disposition"), the difference between the fair market
value of the shares on the exercise date and the option exercise price (not to
exceed the gain realized on the sale if the disposition is a transaction with
respect to which a loss, if sustained, would be recognized) will be taxed as
ordinary income at the time of disposition. Any gain in excess of that amount
will be a capital gain. If a loss is recognized, there will be no ordinary
income, and such loss will be a capital loss. A capital gain or loss will be
mid-term or long-term if the optionee's holding period is more than 12 months.
Any ordinary income recognized by the optionee
18
<PAGE>
upon the disqualifying disposition of the shares generally should be deductible
by the Company for federal income tax purposes, except to the extent such
deduction is limited by applicable provisions of the Code or the regulations
thereunder. The difference between the option exercise price and the fair market
value of the shares on the exercise date of an incentive stock option is an
adjustment in computing the optionee's alternative minimum taxable income and
may be subject to an alternative minimum tax which is paid if such tax exceeds
the regular tax for the year. Special rules may apply with respect to certain
subsequent sales of the shares in a disqualifying disposition, certain basis
adjustments for purposes of computing the alternative minimum taxable income on
a subsequent sale of the shares and certain tax credits which may arise with
respect to optionees subject to the alternative minimum tax.
Nonstatutory Stock Options
Options not designated or qualifying as incentive stock options will be
nonstatutory stock options. Nonstatutory stock options have no special tax
status. An optionee generally recognizes no taxable income as the result of the
grant of such an option. Upon exercise of a nonstatutory stock option, the
optionee normally recognizes ordinary income in the amount of the difference
between the option exercise price and the fair market value of the shares on the
exercise date. If the optionee is an employee, such ordinary income generally is
subject to withholding of income and employment taxes. Upon the sale of stock
acquired by the exercise of a nonstatutory stock option, any gain or loss, based
on the difference between the sale price and the fair market value on the
exercise date, will be taxed as capital gain or loss. A capital gain or loss
will be mid-term or long-term if the optionee's holding period is more than 12
months. No tax deduction is available to the Company with respect to the grant
of a nonstatutory option or the sale of the stock acquired pursuant to such
grant. The Company generally should be entitled to a deduction equal to the
amount of ordinary income recognized by the optionee as a result of the exercise
of a nonstatutory option, except to the extent such deduction is limited by
applicable provisions of the Code or the regulations there under.
New Plan Benefits and Additional Information
The future grant of options under the 1997 Plan will be made at the
discretion of the Board, and, accordingly, are not yet determinable. In
addition, benefits under the 1997 Plan will depend on a number of factors,
including the fair market value of the Company's Common Stock on future dates
and the exercise decisions made by the optionees. Consequently, it is not
possible to determine the benefits that might be received by optionees receiving
discretionary grants under the 1997 Plan. The numbers of shares of Common Stock
subject to options granted under the 1997 Plan to certain persons during the
year ended December 31, 1999 are as follows: Messrs. [________],[________],and
[________] were granted options to purchase [________] shares, [________] shares
and [________] shares, respectively; all current executive officers as a group
were granted options to purchase an aggregate of [________] shares; and all
current employees, including officers who are not executive officers, as a group
were granted options to purchase an aggregate of [________] shares. No person,
other than those individuals set forth above, was granted five percent or more
of the total amount of options granted under the 1997 Plan during such fiscal
year.
Vote Required and Board of Directors Recommendation
The affirmative vote of a majority of the votes cast on the proposal at
the Annual Meeting of Stockholders, at which a quorum representing a majority of
all outstanding shares of Common Stock of the Company is present, either in
person or by proxy, is required for approval of this proposal. Votes for and
against, abstentions and broker non-votes will each be counted as present for
purposes of determining the presence of a quorum. Abstentions and broker
non-votes will have no effect on the outcome of this vote.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL OF
AN INCREASE BY 1,000,000 IN THE MAXIMUM AGGREGATE NUMBER OF SHARES ISSUABLE
UNDER THE OPTION PLAN AND THE ESTABLISHMENT OF THE GRANT LIMIT.
19
<PAGE>
PROPOSAL 4
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected PricewaterhouseCoopers LLP as the
independent accountants to audit the financial statements of the Company for the
fiscal year ending December 31, 2000. PricewaterhouseCoopers has audited the
Company's financial statements since 1989. A representative of
PricewaterhouseCoopers is expected to be present at the Annual Meeting with the
opportunity to make a statement if he or she so desires, and is expected to be
available to respond to appropriate questions.
Vote Required and Board of Directors Recommendation
The affirmative vote of a majority of the votes present or represented
by proxy and entitled to vote at the Annual Meeting of Stockholders, at which a
quorum representing a majority of all outstanding shares of Common Stock of the
Company is present, either in person or by proxy, is required for approval of
this proposal. Abstentions and broker non-votes will each be counted as present
for purposes of determining the presence of a quorum. Abstentions will have the
same effect as a negative vote on this proposal. Broker non-votes will have no
effect on the outcome of this vote.
The Board of Directors has conditioned its appointment of the Company's
independent accountants upon the receipt of the affirmative vote. In the event
that the stockholders do not approve the selection of PricewaterhouseCoopers,
the Board of Directors will reconsider the appointment of the independent
accountants.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE
RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS THE COMPANY'S
INDEPENDENT ACCOUNTANTS.
OTHER MATTERS
The Company knows of no other matters to be submitted at the Annual
Meeting. If any other matters are properly brought before the meeting, it is the
intention of the persons named in the enclosed proxy to vote the shares they
represent as the Board of Directors may recommend.
It is important that your shares be represented at the meeting,
regardless of the number of shares, which you hold. You are, therefore, urged to
complete, date, execute and return, at your earliest convenience, the
accompanying proxy card in the envelope, which has been enclosed.
THE BOARD OF DIRECTORS
Dated: March 14, 2000
20
