SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. __)
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
[X] Definitive Proxy Statement Commission Only (as permitted by
[ ] Definitive Additional Materials Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
SPECTRIAN CORPORATION
----------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
----------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(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>
SPECTRIAN CORPORATION
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held July 15, 1999
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Spectrian Corporation, a Delaware corporation (the "Company"), will be held on
Thursday, July 15, 1999, at 10:00 a.m. local time, at 160 Gibraltar Court,
Sunnyvale, California 94089, for the following purposes:
1. To elect six (6) directors to serve for the ensuing year
and until their successors are duly elected and qualified.
2. To approve an amendment to the 1994 Director Option Plan to
increase the number of shares of Common Stock reserved for issuance
thereunder by 60,000 shares.
3. To approve an amendment to the 1992 Stock Plan to increase
the number of shares of Common Stock reserved for issuance thereunder
by 450,000 shares.
4. To ratify the appointment of KPMG LLP as independent
accountants of the Company for the fiscal year ending March 31, 2000.
5. To transact such other business as may properly come before
the Annual Meeting, including any motion to adjourn to a later date to
permit further solicitation of proxies if necessary, or before any
adjournments 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 June 1, 1999 are entitled to notice of and to vote at the meeting.
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 as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any stockholder attending
the meeting may vote in person even if he or she has returned a proxy.
Sincerely,
/s/ Garrett A. Garrettson
----------------------------------
Garrett A. Garrettson
President and Chief Executive Officer
Sunnyvale, California
June 15, 1999
YOUR VOTE IS IMPORTANT.
- - --------------------------------------------------------------------------------
IN ORDER TO ASSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE
REQUESTED TO COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AS PROMPTLY AS
POSSIBLE AND RETURN IT IN THE ENCLOSED ENVELOPE.
- - --------------------------------------------------------------------------------
<PAGE>
SPECTRIAN CORPORATION
----------------
PROXY STATEMENT FOR 1999
ANNUAL MEETING OF STOCKHOLDERS
INFORMATION CONCERNING SOLICITATION AND VOTING
General
The enclosed Proxy is solicited on behalf of the Board of Directors
(the "Board") of SPECTRIAN CORPORATION, a Delaware corporation (the "Company" or
"Spectrian"), for use at the Annual Meeting of Stockholders (the "Annual
Meeting") to be held Thursday, July 15, 1999, at 10:00 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 160 Gibraltar Court, Sunnyvale, California 94089. The Company's
principal executive offices are located at 350 W. Java Drive, Sunnyvale,
California 94089, and its telephone number at that location is (408) 745-5400.
These proxy solicitation materials and the Annual Report on Form 10-K
for the year ended March 31, 1999, including financial statements, were first
mailed on or about June 15, 1999 to all stockholders entitled to vote at the
meeting.
Record Date; Outstanding Shares
Stockholders of record at the close of business on June 1, 1999 (the
"Record Date") are entitled to notice of and to vote at the meeting. The Company
has one series of common shares outstanding, designated common stock, $.001 par
value per share. As of June 1, 1999, 10,217,578 shares of the Company's common
stock were issued and outstanding and held of record by 286 stockholders.
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 (a) delivering to the Secretary
of the Company a written notice of revocation or a duly executed proxy bearing a
later date or (b) attending the meeting and voting in person.
Voting
Each stockholder is entitled to one vote for each share held. Every
stockholder voting for the election of directors (Proposal One) may cumulate
such stockholder's votes and give one candidate a number of votes equal to the
number of directors to be elected multiplied by the number of shares that such
stockholder is entitled to vote, or distribute such stockholder's votes on the
same principle among as many candidates as the stockholder may select, provided
that votes cannot be cast for more than six candidates. However, no stockholder
shall be entitled to cumulate votes unless the candidate's name has been placed
in nomination prior to the voting and the stockholder, or any other stockholder,
has given notice at the meeting, prior to the voting, of the intention to
cumulate the stockholder's votes. On all other matters, each share of common
stock has one vote.
Solicitation of Proxies
This solicitation of proxies is made by the Company, and all related
costs will be borne by the Company. In addition, the Company may reimburse
brokerage firms and other persons representing beneficial owners of shares for
their expenses in forwarding solicitation material to such beneficial owners.
Proxies may also be solicited by certain of the Company's directors, officers
and regular employees, without additional compensation, personally or by
telephone or telegram.
Quorum; Abstentions; Broker Non-votes
Votes cast by proxy or in person at the Annual Meeting will be
tabulated by the Inspector of Elections (the "Inspector") who will be an
employee of the Company's Transfer Agent. The Inspector will
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also determine whether or not a quorum is present. Except in certain specific
circumstances, the affirmative vote of a majority of shares present in person or
represented by proxy at a duly held meeting at which a quorum is present is
required under Delaware law for approval of proposals presented to stockholders.
In general, Delaware law also provides that a quorum consists of a majority of
shares entitled to vote and present or represented by proxy at the meeting.
The Inspector will treat shares that are voted "WITHHELD" or "ABSTAIN"
as being present and entitled to vote for purposes of determining the presence
of a quorum but will not be treated as votes in favor of approving any matter
submitted to the stockholders for a vote. When proxies are properly dated,
executed and returned, the shares represented by such proxies will be voted at
the Annual Meeting in accordance with the instructions of the stockholder. If no
specific instructions are given, the shares will be voted for the election of
the nominees for the directors set forth herein; for the amendment of the 1994
Director Plan to increase the number of shares available for issuance thereunder
by 60,000 shares; for the amendment of the 1992 Stock Plan to increase the
number of shares available for issuance thereunder by 450,000 shares; for the
ratification of KPMG LLP as independent auditors of the Company for the fiscal
year ending March 31, 2000; and at the discretion of the proxyholders, upon such
other business as may properly come before the Annual Meeting or any adjournment
thereof.
If a broker indicates on the enclosed proxy or its substitute that such
broker does not have discretionary authority as to certain shares to vote on a
particular matter ("Broker Non-Votes"), those shares will not be considered as
present with respect to that matter. The Company believes that the tabulation
procedures to be followed by the Inspector are consistent with the general
statutory requirements in Delaware concerning voting of shares and determination
of a quorum.
Deadline for Receipt of Stockholder Proposals
Stockholders are entitled to present proposals for action at a
forthcoming meeting if they comply with the requirements of the proxy rules
established by the Securities and Exchange Commission. Proposals of stockholders
of the Company that are intended to be presented by such stockholders at the
Company's 2000 Annual Meeting of Stockholders must be received by the Company no
later than April 15, 2000 in order that they may be considered for inclusion in
the proxy statement and form of proxy relating to that meeting.
The attached proxy card grants the proxy holders discretionary
authority to vote on any matter raised at the Annual Meeting. If a stockholder
intends to submit a proposal at the Company's Annual Meeting, which is not
eligible for inclusion in the proxy statement relating to the meeting, the
stockholder must give the Company notice in accordance with the requirements set
forth in the Securities Exchange Act of 1934, as amended, no later than April
15, 2000. If such a stockholder fails to comply with the foregoing notice
provision the proxy holders will be allowed to use their discretionary authority
when and if the proposal is raised at the Company's Annual Meeting in 2000.
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<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of Common Stock of the Company as of June 1, 1999 as to (i)
each person who is known by the Company to own beneficially more than 5% of the
outstanding shares of Common Stock, (ii) each director, (iii) each of the
executive officers named in the Summary Compensation Table below and (iv) all
directors and executive officers as of March 31, 1999 as a group.
Common
Stock Approximate
Five Percent Stockholders, Beneficially Percentage
Directors and Certain Executive Officers Owned Owned(1)
- - ---------------------------------------- ----- --------
Kopp Investment Advisors, Inc.(2) ................... 2,205,300 21.6%
7701 France Avenue South
Suite 500
Edina, MN 55435
Becker Capital Management, Inc.(3) .................. 750,601 7.3
1211 SW Fifth Avenue, Suite 2185
Portland, Oregon 97204
State of Wisconsin Investment Board(4) .............. 568,900 5.6
121 East Wilson Street
Madison, WI 53702
Garrett A. Garrettson(5) ............................ 175,070 1.7
James A. Cole(6) .................................... 8,542 *
Martin Cooper(7) .................................... 24,792 *
Charles D. Kissner .................................. 2,500 *
Robert W. Shaner .................................... -- *
Robert C. Wilson(8) ................................. 8,542 *
Eric A. Young(9) .................................... 8,542 *
Bruce R. Wright(10) ................................. 64,575 *
Stephen B. Greenspan(11) ............................ 83,541 *
William Zucker(12) .................................. 30,438 *
Joseph M. Veni(13) .................................. 49,124 *
All directors and executive officers as a
group (14 persons)(14) ............................. 557,311 5.2
- - ---------------
* Less than 1%
(1) Applicable percentage ownership is based on 10,217,578 shares of Common
Stock outstanding as of June 1, 1999 together with applicable options for
such stockholder. Beneficial ownership is determined in accordance with the
rules of the Securities and Exchange Commission (the "Commission"), and
includes voting and investment power with respect to shares. Shares of
Common Stock subject to options currently exercisable or exercisable within
60 days after June 1, 1999 are deemed outstanding for computing the
percentage ownership of the person holding such options, but are not deemed
outstanding for computing the percentage of any other person.
(2) Reflects ownership as reported on Schedule 13D dated August 10, 1998 with
the Commission by Kopp Investment Advisors, Inc. ("KIA"). Represents shares
beneficially owned by (i) KIA, a registered investment advisor, (ii) Kopp
Holding Company ("Holding") and (iii) LeRoy C. Kopp individually and
through his ownership of a controlling interest in KIA and his control over
Holdings. KIA has sole voting power over 569,000 shares of the Company's
Common Stock, sole dispositive power over 490,000 shares of the Company's
Common Stock and shared dispositive power over 1,594,300 shares of the
Company's Common Stock. Holding has beneficial ownership of 2,084,300
shares of the Company's Common Stock. Mr. Kopp has beneficial ownership of
2,205,300 shares of the Company's Common Stock and sole voting and
dispositive power over 121,000 shares of the Company's Common Stock.
(3) Reflects beneficial ownership as reported on Schedule 13G/A filed with the
Commission by Becker Capital Management, Inc. ("Becker") on February 11,
1999. Becker is a registered investment advisor pursuant to the Investment
Advisors Act of 1940, as amended. Becker has sole voting and dispositive
power over 750,601 shares of the Company's Common Stock.
(4) Reflects ownership as reported on Schedule 13G/A dated February 2, 1999
filed with the Commission by Wisconsin Investment Board ("WIB"). WIB is a
registered investment advisor pursuant to the Investment Advisors Act of
1940, as amended. WIB has sole voting and dispositive power over 568,900
shares of the Company's Common Stock.
(5) Includes 167,373 shares issuable pursuant to options exercisable within 60
days of June 1, 1999.
(6) Includes 8,542 shares issuable pursuant to options exercisable within 60
days of June 1, 1999.
(7) Includes 24,792 shares issuable pursuant to options exercisable within 60
days of June 1, 1999.
(8) Includes 2,500 shares issuable pursuant to options exercisable within 60
days of June 1, 1999.
(9) Includes 8,542 shares issuable pursuant to options exercisable within 60
days of June 1, 1999.
(10) Includes 62,291 shares issuable pursuant to options exercisable within 60
days of June 1, 1999.
(11) Includes 83,541 shares issuable pursuant to options exercisable within 60
days of June 1, 1999.
(12) Includes 26,213 shares issuable pursuant to options exercisable within 60
days of June 1, 1999.
(13) Includes 46,651 shares issuable pursuant to options exercisable within 60
days of June 1, 1999.
(14) Includes 530,018 shares issuable pursuant to options exercisable within 60
days of June 1, 1999.
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PROPOSAL ONE
ELECTION OF DIRECTORS
Nominees
A board of six directors is to be elected at the Annual Meeting of
Stockholders. Unless otherwise instructed, the proxy holders will vote the
proxies received by them for the Company's six nominees named below each of whom
is presently a director 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 of Stockholders, the proxies will be voted for any nominee who shall be
designated by the present Board of Directors to fill the vacancy. The Company is
not aware of any nominee who will be unable or will decline to serve as a
director. 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 (in accordance with cumulative voting) as will assure the election of
as many of the nominees listed below as possible, and, in such event, the
specific nominees to be voted for will be determined by the proxy holders. The
term of office for each person elected as a director will continue until the
next Annual Meeting of Stockholders or until a successor has been elected and
qualified.
Vote Required
If a quorum is present and voting, the six nominees receiving the
highest number of votes will be elected to the Board of Directors. Abstentions
and "broker non-votes" are not counted in the election of directors.
Nominees
<TABLE>
The names of the nominees and certain information about them are set
forth below:
<CAPTION>
Director
Name of Nominee Age Position with Company Since
- - -------------------------------- ----- ----------------------------------- ----------
<S> <C> <C> <C>
Garrett A. Garrettson 55 President, Chief Executive Officer
and Director 1996
James A. Cole(1) 56 Director 1985
Martin Cooper(2) 70 Director 1994
Charles D. Kissner(2) 52 Director 1998
Robert W. Shaner 50 Director 1999
Robert C. Wilson(1),(2) 79 Director 1995
<FN>
- - ---------------
(1) Member of Compensation Committee.
(2) Member of Audit Committee.
</FN>
</TABLE>
There is no family relationship between any director or executive
officer of the Company.
Garrett A. Garrettson joined the Company in April 1996 as President,
Chief Executive Officer and Director. Between March 1993 and March 1996 he was
President and Chief Executive Officer of Censtor Corporation, a company that
designs and sells technology related to magnetic recording heads for the disk
drive industry. From November 1986 to March 1993, he served as a Vice President
of the Imprimis subsidiary of Control Data Corporation, a computer systems
company and subsequently with Seagate Technology, Inc., ("Seagate") a company
that designs and manufactures disk drives, when Seagate acquired the Imprimis
subsidiary in 1989. Prior to 1986, Mr. Garrettson held a variety of positions
with Hewlett Packard Company and served in the U.S. Navy. Mr. Garrettson also
serves on the boards of directors of Benton Oil and Gas Company and RedLakes
Imaging Corporation. He received his B.S. and M.S. in Engineering and Physics
and a Ph.D. in Mechanical Engineering from Stanford University.
James A. Cole has been a director of the Company since June 1985. He
has been a General Partner of Spectra Enterprise Associates, a venture capital
firm, since October 1986 and has been a General Partner with Windward Ventures,
a venture capital firm, since November 1997. Prior to 1986, Mr. Cole
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spent twenty years in various microwave integrated circuit companies, including
Amplica Inc., where he was a co-founder and served as Chief Operating Officer.
Amplica became a public company in 1981 and was acquired by Comsat Corporation
in 1982. He presently serves on the boards of directors of Vitesse Semiconductor
Corp., a semiconductor manufacturer, and Gigatronics Inc., a microwave
instrument supplier.
Martin Cooper has been a director of the Company since January 1994.
Mr. Cooper has served as Chairman and Chief Executive Officer of Array Comm,
Incorporated, a wireless technology manufacturer, since April 1992 and as
Chairman of Dyna, Incorporated, a consulting company, since 1986. From 1985 to
December 1992, he served as President of Cellular Pay Phone Incorporated, a
cellular pay telephone company. From 1982 to 1986, he was a co-founder, Chairman
and Chief Executive Officer of Cellular Business Systems, Inc., a management
information company. From 1954 to 1983, Mr. Cooper served in a variety of
positions including Corporate Vice President, Division Manager and Corporate
Director of Research and Development of Motorola. Mr. Cooper currently serves on
the board of directors of Conductus, Inc., a superconducting products company.
He is a Fellow of the IEEE and of the Radio Club of America and a recipient of
the IEEE Centennial medal. He serves on the Advisory Board of the International
National Electronics Consortium and serves on its Board of Directors. He
received a B.S. and an M.S. in Electrical Engineering from the Illinois
Institute of Technology.
Charles D. Kissner has served as a director of the Company since March
1998. Mr. Kissner has served as Chief Executive Officer of Digital Microwave
Corporation ("Digital"), a wireless telecommunications equipment company, since
July 1995 and was named Chairman of Digital's Board of Directors in August 1996.
Prior to joining Digital, Mr. Kissner served from July 1993 to July 1995 as Vice
President and General Manager of Microelectronics Division of M/A-COM, Inc., a
manufacturer of radio and microwave communication products. From February 1990
to July 1993, Mr. Kissner served as President, Chief Executive Officer and a
Director of Aristacom International, Inc., a communications software company.
From 1971 to 1990, Mr. Kissner was an executive with AT&T and Fujitsu in a
variety of positions. Mr. Kissner is also a member of the board of directors of
Quickturn Design Systems, Inc., an engineering and design services company. Mr.
Kissner received a B.S. in Industrial Management and Electrical Engineering from
California State Polytechnic University and an M.B.A. from the University of
Santa Clara.
Robert W. Shaner has served as a director of the Company since April
1999. Mr. Shaner has served as the President and Chief Executive Officer of
Pacific Bell Wireless since August 1998. Prior to assuming that position, Mr.
Shaner served as President of SBCI Europe and Middle East for SBC International,
Inc. from March 1997 to August 1998. From 1991 to 1995 Mr. Shaner served as
Executive Vice President for Southwestern Bell Mobile System in Dallas. Prior to
1991, Mr. Shaner held various other management positions at Southwestern Bell
Telephone/Telecom and Cellular One. Mr. Shaner earned a B.A. from Central
Methodist College, did graduate work at Southern Illinois University and
completed Stanford University's Advanced Management Program.
Robert C. Wilson has served as a director of the Company since October
1995. Mr. Wilson has been Chairman of Wilson & Chambers, a venture capital and
consulting firm, since December 1982. Mr. Wilson served as President, Chief
Executive Officer and Chairman of the Board at Memorex Corporation from 1974
until 1980. From 1971 to 1974, Mr. Wilson served as President and Chief
Executive Officer of Collins Radio Company, a communications company. From 1969
to 1971, Mr. Wilson was employed by Rockwell International, a diversified
manufacturing company, first as President of Commercial Products and later as
Executive Vice President. He is currently a member of the boards of directors of
Gigatronics Inc., a microwave instrument supplier, and Resound Corporation, a
hearing device manufacturer company. Mr. Wilson received a B.S. in Engineering
from the University of California at Berkeley.
Board Meetings and Committees
The Board of Directors of the Company held a total of nine meetings
during fiscal 1999. No director nominated above attended fewer than 85% of the
meetings of the Board of Directors and 60% of the meetings of the committees, if
any, upon which such director served. The Board of Directors has an Audit
Committee and a Compensation Committee. The Board of Directors has no nominating
committee or any committee performing such functions.
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The Audit Committee, which consisted of Messrs. Cooper, Kissner and
Wilson during fiscal 1999, is responsible for overseeing actions taken by the
Company's independent auditors and reviews the Company's internal financial
controls. The Audit Committee met three times during fiscal 1999.
The Compensation Committee, which during fiscal 1999, consisted of
Messrs. Cole, Wilson and Eric A Young, a director of the Company who is not
seeking re-election met three times during fiscal 1999. The duties of the
Compensation Committee include determining salaries, incentives and other forms
of compensation for directors, officers and other employees of the Company and
administering various incentive compensation and benefit plans.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee consists of Messrs. Cole and Wilson. Mr.
Garrettson, who is President and Chief Executive Officer of the Company, has
participated in all discussions and decisions regarding salaries and incentive
compensation for all employees and consultants to the Company, except that Mr.
Garrettson was excluded from discussions regarding his own salary and incentive
compensation.
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PROPOSAL TWO
AMENDMENT OF 1994 DIRECTOR OPTION PLAN
At the Annual Meeting, the stockholders are being asked to approve an
amendment of the Company's 1994 Director Option Plan (the "Director Plan") to
increase the number of shares of common stock reserved for issuance thereunder
by 60,000 shares. The adoption of the Director Plan was approved by the Board of
Directors in May 1994 and subsequently by the stockholders in June 1994. In July
1997, the stockholders approved an amendment to the Plan to increase the number
of shares of Common Stock reserved for issuance thereunder by 60,000 shares. As
of June 1, 1999, options to purchase an aggregate of 75,000 shares of the
Company's common stock were outstanding, with a weighted average exercise price
of $27.85 per share, and 70,000 shares (including the 60,000 shares subject to
stockholder approval at this Annual Meeting) were available for future grant. No
shares have been purchased pursuant to exercise of stock options under the
Director Plan.
The Director Plan provides for the grant of nonqualified stock options
to non-employee directors of the Company who do not represent stockholders
holding more than 1% of the Company's outstanding common stock ("Outside
Directors") pursuant to an automatic, non-discretionary grant mechanism. The
Company believes that the grant of options to the non-employee directors has
enabled the Company to attract and retain directors with the talent that it
continues to require.
The Board of Directors seeks to replenish the authorized and reserved
shares for the Director Plan to enable the Company to continue its automatic,
non-discretionary grants at their present levels through fiscal 2001, assuming
(i) the size of the Company's Board of Directors is expanded to include one
additional non-employee director and (ii) that the current Outside Directors
remain eligible for the Director Plan.
For these reasons, the Board of Directors recommends that the
stockholders vote "For" approval of the amendments to the Director Plan.
Vote Required
The affirmative vote of a majority of the Votes Cast will be required
to approve the amendments to the Plan. In addition, the affirmative votes must
constitute at least a majority of the required quorum, which quorum is a
majority of the shares outstanding at the Record Date. Votes that are cast
against the proposal will be counted for purposes of determining both (i) the
presence or absence of a quorum and (ii) the total number of Votes Cast with
respect to the proposal. Abstentions will be counted for purposes of determining
both (i) the presence or absence of a quorum for the transaction of business and
(ii) the total number of Votes Cast with respect to the proposal. Accordingly,
abstentions will have the same effect as a vote against the proposal. Broker
non-votes will be counted for purposes of determining the presence or absence of
a quorum for the transaction of business, but will not be counted for purposes
of determining the number of Votes Cast with respect to this proposal.
The essential terms of the Director Plan are summarized as follows:
Purpose
The purposes of the Director Plan are to attract, retain and motivate
the best available non-employee directors and to promote the success of the
Company's business.
Automatic, Non-Discretionary Grants and Eligibility
The Director Plan provides that each future Outside Director
automatically will be granted an option to purchase 5,000 shares of the
Company's common stock on the date upon which such person becomes an Outside
Director (the "First Option"). Subsequently, each Outside Director is granted an
additional option to purchase 5,000 shares of common stock (a "Subsequent
Option") at the next meeting of the Board of Directors following the Annual
Meeting of Stockholders (if, on such date, he or she has served as a director
for at least six months), so long as he or she remains an Outside Director.
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Terms of Options
Each option is evidenced by a stock option agreement between the
Company and the optionee to whom such option is granted and is subject to the
following additional terms and conditions:
(1) Exercise of the Option: The options granted under the
Director Plan may be exercised after the shares subject to the option
become vested. The Director Plan provides for vesting of 25% of the
First Option on each anniversary of the date of grant, and the
Subsequent Options vest as to 2.08% of the shares subject to the option
on each monthly anniversary of the date of grant. An option is
exercised by giving written notice of exercise to the Company,
specifying the number of shares of common stock to be purchased and
tendering payment to the Company of the purchase price. Payment for
shares issued upon exercise of an option may consist of cash, check,
promissory note, delivery of already-owned shares of the Company's
common stock, subject to certain conditions. Payment may also be made
by a cashless exercise procedure under which the optionee provides
irrevocable instructions to a brokerage firm to sell the purchased
shares and to remit to the Company, out of the sale proceeds, an amount
equal to the exercise price plus all applicable withholding taxes or
such other consideration as determined by the Administrator.
Options may be exercised at any time on or following the date
the options are first exercisable. An option may not be exercised for a
fraction of a share.
(2) Option Price: The option price of nonqualified stock
options under the Director Plan is 100% of the fair market value of the
common stock on the date the option is granted. For purposes of the
Plan, fair market value is defined as the closing price per share of
the common stock on the date of grant as reported on the Nasdaq
National Market.
(3) Termination of Employment: The Director Plan provides that
if the optionee's status as a non-employee director of the Company is
terminated for any reason, other than death or disability, options may
be exercised within three months after such termination and may be
exercised only to the extent the options were exercisable on the date
of termination.
(4) Death: If an optionee should die while a non-employee
director of the Company, options may be exercised at any time within
twelve months after the date of death but only to the extent that the
options were exercisable on the date of death and in no event later
than the expiration of the term of such option.
(5) Disability: If an optionee's status as a non-employee
director is terminated due to a disability, options may be exercised at
any time within twelve months from the date of such termination, but
only to the extent that the options were exercisable on the date of
termination of the individual's status as an Outside Director and in no
event later than the expiration of the term of such option.
(6) Termination of Options: Options granted under the Director
Plan expire ten years from the date of grant. No option may be
exercised by any person after such expiration.
(7) Nontransferability of Options: An option is
nontransferable by the optionee, other than by will or the laws of
descent and distribution or a qualified domestic relations order, and
is exercisable only by the optionee during his or her lifetime or, in
the event of death, by a person who acquires the right to exercise the
option by bequest or inheritance or by reason of the death of the
optionee.
Adjustment Upon Changes in Capitalization
In the event any change, such as a stock split or dividend, is made in
the Company's capitalization which results in an increase or decrease in the
number of outstanding shares of common stock without receipt of consideration by
the Company, an appropriate adjustment shall be made in the option price and in
the number of shares subject to each option. In the event of the proposed
dissolution or liquidation of the Company, all outstanding options automatically
terminate. In the event of a merger of the Company with or into another
corporation or sale of substantially all of the assets of the Company, all
outstanding options shall be assumed or an equivalent option substituted by the
successor corporation. If the options
8
<PAGE>
are not assumed or substituted by the successor corporation, the options vest in
full immediately but terminate 30 days from the date notice is given to the
optionee of the fully vested status of the option.
Amendment and Termination
With the exception of the Administration of the Director Plan,
including the number, frequency and price of grants and the eligibility and
vesting of options, the Board of Directors may amend the Directors Plan at any
time or from time to time or may terminate it without approval of the
stockholders, provided, however, that stockholder approval is required for any
amendment which increases the number of shares which may be issued under the
Director Plan or for any amendment that would be required to enable the Director
Plan to comply with Rule 16b-3 promulgated under the Securities Exchange Act of
1934, as amended. However, no action by the Board of Directors or stockholders
may alter or impair any option previously granted under the Director Plan
without the consent of the optionee. In any event, the Director Plan will
terminate in May 2004.
Tax Information
Options granted under the Director Plan are nonqualified options.
An optionee will not recognize any taxable income at the time he or she
is granted a nonqualified option. However, upon its exercise, the optionee will
recognize ordinary income generally measured as the excess of the then fair
market value of the shares purchased over the purchase price. Any taxable income
recognized in connection with an option exercise by an optionee who is also an
employee of the Company will be subject to tax withholding by the Company. Upon
resale of such shares by the optionee, any difference between the sales price
and the optionee's purchase price, to the extent not recognized as taxable
income as described above, will be treated as long-term or short-term capital
gain or loss, depending on the holding period.
Generally, the Company will be entitled to a tax deduction in the same
amount as the ordinary income recognized by the optionee with respect to shares
acquired upon exercise of a nonqualified option.
The foregoing is only a summary of the effect of federal income
taxation upon the optionee and the Company with respect to the grant and
exercise of options under the Director Plan, does not purport to be complete,
and does not discuss the tax consequences of the optionee's death or the income
tax laws of any municipality, state or foreign country in which an optionee may
reside.
Participation in the Plan
The grant of options under the Director Plan to non-employee directors
who do not represent greater than 1% stockholders of the Company is automatic
and non-discretionary. Information regarding options granted to non-employee
directors pursuant to the 1994 Director Option Plan during fiscal 1999 is set
forth under the heading "Executive Compensation and Other Matters--Compensation
of Directors." During fiscal 1999, all non-employee directors as a group
received options to purchase 25,000 shares pursuant to the Director Plan. No
other employee or director of the Company received any shares pursuant to the
Director Plan.
9
<PAGE>
PROPOSAL THREE
AMENDMENT OF 1992 STOCK PLAN
At the Annual Meeting, the stockholders are being asked to approve an
amendment of the Company's 1992 Stock Plan (the "Plan") to increase the number
of shares of common stock reserved for issuance thereunder by 450,000 shares.
The adoption of the Plan was approved by the Board of Directors in July 1992 and
subsequently by the stockholders. In June 1996 the stockholders approved an
amendment to the Plan to increase the number of shares of common stock reserved
for issuance thereunder by 625,000 shares and to make certain changes to the
Plan in order that it comply with the performance-based criteria of Section
162(m) of the Code. In July 1997, the stockholders approved an amendment to the
Plan to increase the number of shares of common stock reserved for issuance
thereunder by 350,000 shares. As of June 1, 1999, options to purchase an
aggregate of 1,214,102 shares of the Company's Common Stock were outstanding,
with a weighted average exercise price of $19.02 per share, and 709,024 shares
(including the 450,000 shares subject to stockholder approval at this Annual
Meeting) were available for future grant. In addition, 1,817,759 shares have
been purchased pursuant to exercise of stock options under the Plan.
The Plan authorizes the Board of Directors to grant stock options to
eligible employees and consultants of the Company. The Plan is structured to
allow the Board of Directors broad discretion in creating equity incentives in
order to assist the Company in attracting, retaining and motivating the best
available personnel for the successful conduct of the Company's business. The
Company has had a longstanding practice of linking key employee compensation to
corporate performance because it believes that this increases employee
motivation to improve stockholder value. The Company has, therefore,
consistently included equity incentives as a significant component of
compensation for a broad range of the Company's employees. This practice has
enabled the Company to attract and retain the talent that it continues to
require.
The Board of Directors believes that the remaining shares available for
grant under the Plan are insufficient to accomplish the purposes of the Plan
described above. The Company anticipates there will be a need to hire additional
technical or management employees during fiscal 2000 and it will be necessary to
offer equity incentives to attract and motivate these individuals, particularly
in the extremely competitive job market in Silicon Valley. In addition, in order
to retain the services of valuable employees as the Company matures and its
employee base grows larger, it will be necessary to grant additional options to
current employees as older options become fully vested.
For these reasons, the Board of Directors recommends that the
stockholders vote "For" approval of the amendment to the Plan.
Vote Required
The affirmative vote of a majority of the Votes Cast will be required
to approve the amendment to the Plan. In addition, the affirmative votes must
constitute at least a majority of the required quorum, which quorum is a
majority of the shares outstanding at the Record Date. Votes that are cast
against the proposal will be counted for purposes of determining both (i) the
presence or absence of a quorum and (ii) the total number of Votes Cast with
respect to the proposal. Abstentions will be counted for purposes of determining
both (i) the presence or absence of a quorum for the transaction of business and
(ii) the total number of Votes Cast with respect to the proposal. Accordingly,
abstentions will have the same effect as a vote against the proposal. Broker
non-votes will be counted for purposes of determining the presence or absence of
a quorum for the transaction of business, but will not be counted for purposes
of determining the number of Votes Cast with respect to this proposal.
The essential terms of the Plan are summarized as follows:
Purpose
The purposes of the Plan are to attract, retain and motivate the best
available personnel for positions of substantial responsibility, to provide
additional incentive to employees and consultants of the Company and to promote
the success of the Company's business.
10
<PAGE>
Administration
The Plan provides for administration by the Board of Directors of the
Company or by a committee of the Board. The Plan is currently being administered
by the Compensation Committee of the Board of Directors, except that grants to
executive officers are approved by the entire Board of Directors. The Board or
the committee appointed to administer the Plan are referred to in this
description as the "Administrator." The Administrator determines the terms of
options granted, including the exercise price, number of shares subject to the
option and the exercisability thereof. All questions of interpretation are
determined by the Administrator and its decisions are final and binding upon all
participants. Members of the Board receive no additional compensation for their
services in connection with the administration of the Plan.
Eligibility
The Plan provides that either incentive or nonqualified stock options
may be granted to employees (including officers and employee directors) of the
Company or any of its designated subsidiaries. In addition, the Plan provides
that nonqualified stock options may be granted to consultants of the Company or
any of its designated subsidiaries. The Administrator elects the optionees and
determines the number of shares to be subject to each option. In making such
determination, there are taken into account the duties and responsibilities of
the optionee, the value of the optionee's services, the optionee's present and
potential contribution to the success of the Company and other relevant factors.
The Plan provides a limit of $100,000 on the aggregate fair market value of
shares subject to all incentive options which are exercisable for the first time
in any one calendar year.
Terms of Options
Each option is evidenced by a stock option agreement between the
Company and the optionee to whom such option is granted and is subject to the
following additional terms and conditions:
(1) Exercise of the Option: The Administrator determines when
options granted under the Plan may be exercised. An option is exercised
by giving written notice of exercise to the Company, specifying the
number of shares of Common Stock to be purchased and tendering payment
to the Company of the purchase price. Payment for shares issued upon
exercise of an option may consist of cash, check, promissory note,
delivery of already-owned shares of the Company's common stock, subject
to certain conditions. Payment may also be made by a cashless exercise
procedure under which the optionee provides irrevocable instructions to
a brokerage firm to sell the purchased shares and to remit to the
Company, out of the sale proceeds, an amount equal to the exercise
price plus all applicable withholding taxes or such other consideration
as determined by the Administrator.
Options may be exercised at any time on or following the date
the options are first exercisable. An option may not be exercised for a
fraction of a share.
(2) Option Price: The option price of all incentive stock
options and nonqualified stock options under the Plan is determined by
the Administrator, but in no event shall it be less than the fair
market value of the Common Stock on the date the option is granted. For
purposes of the Plan, fair market value is defined as the closing price
per share of the common stock on the date of grant as reported on the
Nasdaq National Market. In the case of an option granted to an optionee
who at the time of grant owns stock representing more than 10% of the
voting power of all classes of stock of the Company, the option price
must be not less than 110% of the fair market value on the date of
grant.
(3) Termination of Employment: The Plan provides that if the
optionee's employment by the Company is terminated for any reason,
other than death or disability, options may be exercised within 30 days
(or such other period of time not exceeding three months or such other
period of time, not exceeding three months in the case of incentive
stock options, as is determined by the Administrator) after such
termination and may be exercised only to the extent the options were
exercisable on the date of termination.
(4) Death: If an optionee should die while an employee or a
consultant of the Company (or during such period of time not exceeding
three months, as determined by the Administrator), options
11
<PAGE>
may be exercised at any time within six months after the date of death
but only to the extent that the options were exercisable on the date of
death and in no event later than the expiration of the term of such
option as set forth in the Notice of Grant.
(5) Disability: If an optionee's employment is terminated due
to a disability, options may be exercised at any time within twelve
months from the date of such termination, but only to the extent that
the options were exercisable on the date of termination of employment
and in no event later than the expiration of the term of such option as
set forth in the notice of grant.
(6) Termination of Options: Options granted under the Plan
expire no later than ten years from the date of grant. However,
incentive stock options granted to an optionee who, immediately before
the grant of such option, owned more than 10% of the total combined
voting power of all classes of stock of the Company or a parent or
subsidiary corporation, may not have a term of more than five years. No
option may be exercised by any person after such expiration.
(7) Nontransferability of Options: An option is
nontransferable by the optionee, other than by will or the laws of
descent and distribution or a qualified domestic relations order, and
is exercisable only by the optionee during his or her lifetime or, in
the event of death, by a person who acquires the right to exercise the
option by bequest or inheritance or by reason of the death of the
optionee.
Adjustment Upon Changes in Capitalization
In the event any change, such as a stock split or dividend, is made in
the Company's capitalization which results in an increase or decrease in the
number of outstanding shares of common stock without receipt of consideration by
the Company, an appropriate adjustment shall be made in the option price and in
the number of shares subject to each option. In the event of the proposed
dissolution or liquidation of the Company, all outstanding options automatically
terminate. In the event of a merger of the Company with or into another
corporation or sale of substantially all of the assets of the Company, all
outstanding options shall be assumed or an equivalent option substituted by the
successor corporation. The Administrator may in its discretion make provision
for accelerating the exercisability of shares subject to options under the Plan
in such event.
Amendment and Termination
The Board of Directors may amend the Plan at any time or from time to
time or may terminate it without approval of the stockholders, provided,
however, that stockholder approval is required for any amendment which increases
the number of shares which may be issued under the Plan, materially changes the
standards of eligibility or materially increases the benefits which may accrue
to participants under the Plan. However, no action by the Board of Directors or
stockholders may alter or impair any option previously granted under the Plan
without the consent of the optionee. In any event, the Plan will terminate in
July 2002.
Tax Information
Options granted under the Plan may be either "incentive stock options,"
as defined in Section 422 of the Code, or nonqualified options.
An optionee who is granted an incentive stock option will not recognize
taxable income either at the time the option is granted or upon its exercise,
although the exercise may subject the optionee to the alternative minimum tax.
Upon the sale or exchange of the shares more than two years after grant of the
option and one year after exercising the option, any gain or loss will be
treated as long-term capital gain or loss. If these holding periods are not
satisfied, the optionee will recognize ordinary income at the time of sale or
exchange equal to the difference between the exercise price and the lower of (i)
the fair market value of the shares at the date of the option exercise or (ii)
the sale price of the shares. A different rule for measuring ordinary income
upon such a premature disposition may apply if the optionee is also an officer,
director, or 10% stockholder of the Company. Generally, the Company will be
entitled to a deduction in the same amount as the ordinary income recognized by
the optionee. Any gain or loss
12
<PAGE>
recognized on such a premature disposition of the shares in excess of the amount
treated as ordinary income will be characterized as long-term or short-term
capital gain or loss, depending on the holding period.
All other options which do not qualify as incentive stock options are
referred to as nonqualified options. An optionee will not recognize any taxable
income at the time he or she is granted a nonqualified option. However, upon its
exercise, the optionee will recognize ordinary income generally measured as the
excess of the then fair market value of the shares purchased over the purchase
price. Any taxable income recognized in connection with an option exercise by an
optionee who is also an employee of the Company will be subject to tax
withholding by the Company. Upon resale of such shares by the optionee, any
difference between the sales price and the optionee's purchase price, to the
extent not recognized as taxable income as described above, will be treated as
long-term or short-term capital gain or loss, depending on the holding period.
Generally, the Company will be entitled to a tax deduction in the same
amount as the ordinary income recognized by the optionee with respect to shares
acquired upon exercise of a nonqualified option.
The foregoing is only a summary of the effect of federal income
taxation upon the optionee and the Company with respect to the grant and
exercise of options under the Plan, does not purport to be complete, and does
not discuss the tax consequences of the optionee's death or the income tax laws
of any municipality, state or foreign country in which an optionee may reside.
Participation in the Plan
The grant of options under the Plan to executive officers, including
the officers named in the Summary Compensation Table is subject to the
discretion of the Administrator. As of the date of this proxy statement, there
has been no determination by the Administrator with respect to future awards
under the Plan. Accordingly, future awards are not determinable. The table of
option grants under "Executive Compensation and Other Matters--Option Grants in
Last Fiscal Year" provides information with respect to the grant of options to
the named executive officers during fiscal 1999. Information regarding options
granted to non-employee Directors pursuant to the 1994 Director Option Plan
during fiscal 1999 is set forth under the heading "Executive Compensation and
Other Matters--Compensation of Directors." During fiscal 1999, all current
executive officers as a group and all other employees as a group received
options to purchase 165,000 shares and 102,400 shares, respectively, pursuant to
the Plan. As of March 31, 1999, approximately 515 persons were eligible to
participate in the Plan.
PROPOSAL FOUR
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected KPMG LLP, independent auditors, to
audit the consolidated financial statements of the Company for the fiscal year
ending March 31, 2000, and recommends that stockholders vote for ratification of
such appointment. Although action by stockholders is not required by law, the
Board of Directors has determined that it is desirable to request approval of
this selection by the stockholders. Notwithstanding the selection, the Board of
Directors, in its discretion, may direct the appointment of new independent
auditors at any time during the year, if the Board of Directors feels that such
a change would be in the best interest of the Company and its stockholders. In
the event of a negative vote on ratification, the Board of Directors will
reconsider its selection.
The Board unanimously recommends a vote "For" the ratification of the
appointment of KPMG LLP as independent auditors of the Company for the fiscal
year ending March 31, 2000.
KPMG LLP has audited the Company's financial statements annually since
1993. Representatives of KPMG LLP are expected to be present at the meeting with
the opportunity to make a statement if they desire to do so and are expected to
be available to respond to appropriate questions.
13
<PAGE>
EXECUTIVE COMPENSATION AND OTHER MATTERS
Executive Compensation
SUMMARY COMPENSATION TABLE
<TABLE>
The following Summary Compensation Table sets forth certain information
regarding the compensation of the Chief Executive Officer of the Company and the
other four most highly compensated executive officers of the Company (the "Named
Executive Officers") for services rendered in all capacities to the Company in
the fiscal year ended March 31, 1999.
<CAPTION>
Long-Term
Compensation
Awards
--------
Number of
Annual Compensation(1) Securities
------------------------- Underlying
Name and Principal Position Fiscal Year Salary Bonus(2) Options
--------------------------- ----------- ------ -------- -------
<S> <C> <C> <C> <C>
Garrett A. Garrettson ........................................ 1999 $284,073 $ -- 35,000
President, Chief Executive Officer 1998 275,000 54,000 25,000
and Director(3) 1997 250,159 46,470 250,000
Stephen B. Greenspan ......................................... 1999 188,479 -- 20,000
Executive Vice President and 1998 195,192 31,735 --
Chief Operating Officer(4) 1997 153,831 81,433 100,000
Bruce R. Wright .............................................. 1999 200,189 -- 25,000
Executive Vice President, Finance and 1998 175,384 8,000 10,000
Administration, Chief Financial Officer 1997 -- -- 100,000
and Secretary(5)
Joseph M. Veni ............................................... 1999 154,961 -- 45,000
Executive Vice President and General 1998 145,192 33,824 10,000
Manager, Single Carrier Products(6) 1997 120,803 31,799 75,000
William Zucker ............................................... 1999 156,617 -- 20,000
Vice President, Single Carrier Products(7) 1998 138,462 34,250 10,000
1997 135,503 25,721 --
<FN>
- - ------------
(1) Other than salary and bonus described herein, the Company did not pay the
persons named in the Summary Compensation Table any compensation, including
incidental personal benefits, in excess of 10% of such Named Executive
Officer's salary.
(2) Represents bonuses relating to performance of services for the Company in
fiscal 1998, some of which was paid in fiscal 1999.
(3) Mr. Garrettson became President, Chief Executive Officer and director of
the Company in April 1996.
(4) Mr. Greenspan became Executive Vice President, Operations in April 1996 and
was appointed Chief Operating Officer in April 1997. Mr. Greenspan resigned
effective March 31, 1999. See "--Employment Contracts and Change in Control
Arrangements."
(5) Mr. Wright joined the Company as Executive Vice President, Finance and
Administration, Chief Financial Officer and Secretary in May 1997. Mr.
Wright resigned effective May 7, 1999.
(6) Mr. Veni joined the Company in April 1, 1992 as Vice President of Sales. He
was named Senior Vice President, Sales and Marketing in April 1996, and he
became Executive Vice President and General Manager of Single Carrier
Products in December 1998.
(7) Mr. Zucker joined the Company in October 1995 as Vice President of
Engineering. He was named Vice President of Product Line Management in
August 1996, became Vice President of Marketing in April 1997 and was named
Vice President of Single Carrier Products in June 1998.
</FN>
</TABLE>
14
<PAGE>
Option Grants in Last Fiscal Year
<TABLE>
The following table provides information concerning each grant of
options to purchase the Com-pany's common stock made during the fiscal year
ended March 31, 1999 to the Named Executive Officers.
<CAPTION>
Potential Realizable Value
Number of % of Total Minus Exercise Price at
Securities Options Stock Price Appreciation
Underlying Granted to Exercise for Option Term(1)
Option Employees in Price Per Expiration ------------------------
Name Granted(2) Fiscal Year Share(3)(4) Date 5% 10%
---- ---------- ----------- ------------ ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Garrett A. Garrettson ................ 35,000 3.8% 12.94 8/4/08 $284,771 $721,667
Stephen B. Greenspan ................. 20,000 2.2% 12.94 8/4/08 162,726 412,381
Bruce R. Wright ...................... 25,000 2.7% 12.94 8/4/08 203,408 515,476
Joseph M. Veni ....................... 25,000 2.7% 12.94 8/4/08 203,408 515,476
Joseph M. Veni ....................... 20,000 2.2% 19.00 1/21/09 238,980 605,622
William Zucker ....................... 20,000 2.2% 12.94 8/4/08 203,408 515,476
<FN>
- - --------------
(1) Potential realizable value is based on the assumption that the common stock
of the Company appreciates at the annual rate shown (compounded annually)
from the date of grant until the expiration of the 10 years option term.
These numbers are calculated based on the requirements promulgated by the
Commission and do not reflect the Company's estimate of future stock price
growth.
(2) Except as noted, all options shown granted in fiscal 1999 are exercisable
starting one year after the date of grant, with 1/48th% of the shares
becoming exercisable each at the end of every month thereafter, with full
vesting occurring on the fourth anniversary of the date of grant. Under the
1992 Stock Plan, the Board of Directors retains the discretion to modify
the terms, including the price, of outstanding options.
(3) Options were granted at an exercise price equal to the fair market value of
the Company's common stock, as determined by reference to the closing price
reported on the Nasdaq National Market on the date of grant, or as
determined by the Board of Directors prior to the Company's securities
being traded on the Nasdaq National Market.
(4) Exercise price and tax withholding obligations may be paid in cash,
promissory note, by delivery of already-owned shares subject to certain
conditions, or pursuant to a cashless exercise procedure under which the
optionee provides irrevocable instructions to a brokerage firm to sell the
purchased shares and to remit to the Company, out of the sale proceeds, an
amount equal to the exercise price plus all applicable withholding taxes.
</FN>
</TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
The following table sets forth certain information regarding the
exercise of stock options during fiscal 1999 and the value of options held as of
March 31, 1999 by the Named Executive Officers.
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Shares Options at March 31, 1999 at March 31, 1999 ($)(2)
Acquired on Value ----------------------------- ----------------------------
Name Exercise Realized(1) Exercisable Unexercisable Exercisable Unexercisable
---- -------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Garrett A. Garrettson .............. -- -- 141,338 123,662 -- --
Stephen B. Greenspan ............... -- -- 74,376 55,624 -- --
Bruce R. Wright .................... -- -- 53,125 81,875 -- --
Joseph M. Veni ..................... -- -- 39,277 81,394 31,477 25,781
William Zucker ..................... -- -- 22,193 42,807 -- --
<FN>
- - ------------
(1) Market value of the Company's common stock at the exercise date minus the
exercise price.
(2) Market value of the Company's common stock at fiscal year-end minus the
exercise price.
</FN>
</TABLE>
Employment Contracts and Change-in-control Arrangements
The Company has entered into employment agreements with Garrett A.
Garrettson, Stephen B. Greenspan and Bruce R. Wright (collectively, the
"Employees"). The Employees are eligible to participate in the Company's
employee benefit plans and executive compensation programs.
In April 1996, the Company appointed Garrett A. Garrettson as the
Company's President, Chief Executive Officer and director of the Company. Mr.
Garrettson entered into an employment agreement with the Company pursuant to
which he received an annual base salary of $275,000 and received a
15
<PAGE>
one-time signing bonus of $25,000 in fiscal 1997. The agreement provides for
additional variable compensation in the target amount of $100,000 per year
starting in fiscal year 1997. During fiscal 1999, Mr. Garrettson's salary was
increased to $294,300 and his valuable compensation target was increased to
$150,000. The Company also granted Mr. Garrettson options to purchase 250,000
shares of common stock shortly after he commenced employment with the Company.
These shares are subject to vesting over four years and were priced at the fair
market value of the Company's common stock at the time of grant in April 1996.
On August 27, 1996, the Board of Directors of the Company authorized the
reduction of the exercise price of options to purchase 250,000 shares of the
Company's common stock granted to Mr. Garrettson in April 1996 in connection
with his employment agreement. Mr. Garrettson's hiring package included an
agreement by the Company to protect the value of Mr. Garrettson's options from a
significant decrease in the price of the Company's common stock in the period
following his hiring by the Company. Mr. Garrettson's April 1996 options had
exercise prices of $21.375 per share, and such exercise price was substantially
higher than the $13.75 per share market price of the Company's common stock at
the time of the reissuance. Mr. Garrettson's April 1996 options were exchanged
as of August 27, 1996 for nonstatutory options with exercise prices of $14.50
per share. The vesting periods and expiration dates of Mr. Garrettson's options
were unchanged as a result of the reissuance. The agreement also provides that
in the event that Mr. Garrettson's employment is terminated by the Company, for
any reason other than misconduct, the Company will continue Mr. Garrettson's
base salary for nine months. In fiscal 1999, Mr. Garrettson was granted options
to purchase an additional 35,000 shares of common stock.
In April 1996, in connection with his acceptance of employment with the
Company, Stephen B. Greenspan, Chief Operating Officer, entered into an
employment agreement with the Company pursuant to which he received an annual
base salary of $175,000. The agreement provides for additional variable
compensation in the target amount of $100,000 per year starting in fiscal year
1997. The Company also granted Mr. Greenspan options to purchase 80,000 shares
of common stock shortly after he commenced employment with the Company. The
agreement also provides that in the event that Mr. Greenspan's employment is
terminated by the Company, for any reason other than misconduct, the Company
will continue Mr. Greenspan's base salary for six months. Mr. Greenspan was
granted an additional option to purchase 10,000 shares of the Company's common
stock in August 1996 at an exercise price of $14.50 per share and subject to
four years vesting. In fiscal 1999, Mr. Greenspan was granted options to
purchase an additional 20,000 shares of common stock. These shares are subject
to vesting over four years and are priced at the fair market value of the common
stock at the time of grant.
Stephen B. Greenspan resigned as an officer of the Company effective
March 31, 1999. Pursuant to a separation agreement dated March 23, 1999, the
Company and Mr. Greenspan agreed that Mr. Greenspan would receive a severance
payment of $100,000, or six months salary, and would serve as a consultant to
the Company for 12 months commencing April 1, 1999. The Company also agreed to
pay Mr. Greenspan's group medical, vision and dental premiums until March 21,
2000. The Company also agreed to continue to fund Mr. Greenspan's executive life
insurance premiums for a year after he ceased to be an officer of the Company.
With respect to options held by Mr. Greenspan to purchase the Company's common
stock, Mr. Greenspan will continue to vest until the earlier of the date he
ceases to be a Company consultant or March 31, 2000. Mr. Greenspan's options
will also continue to be subject to acceleration upon a change in control during
this period. Mr. Greenspan will be entitled to exercise such options until June
29, 2000. Mr. Greenspan agreed to release the Company for any and all claims or
any liability for compensation except as set forth in the separation agreement.
In May 1997 the Company appointed Bruce R. Wright as the Company's
Executive Vice President, Finance and Administration, Chief Financial Officer
and Secretary. Mr. Wright entered into an Employment Offer Letter with the
Company pursuant to which he receives an annual base salary of $200,000. Mr.
Wright is also eligible for up to $100,000 of variable compensation per year in
connection with the Company's Executive Variable Compensation Plan. Mr. Wright
received an option to acquire 100,000 shares of the Company's common stock
shortly after he commenced employment with the Company. In fiscal 1999, Mr.
Wright was granted options to purchase an additional 25,000 shares of Common
Stock. All shares are subject to vesting over four years and are priced at the
fair market value of the Company's common stock at the date of grant.
16
<PAGE>
Bruce R. Wright resigned as an officer of the Company on May 8, 1999.
In connection with a separation agreement dated May 7, 1999, the Company and Mr.
Wright agreed that Mr. Wright would receive monthly payments of $250.00 through
May 8, 2000. Mr. Wright agreed to provide 2.5 hours per month of consulting
services to the Company without additional payment. Mr. Wright agreed to provide
additional consulting services as requested at $100 per hour. The Company will
pay Mr. Wright group medical, vision and dental insurance premiums until the
earlier of June 1, 2000 or he accepts full-time employment. Mr. Wright will also
be entitled to continue to participate in the Exec-U-Care executive
reimbursement program until June 1, 2000, and the Company will pay the related
premiums. Mr. Wright's options to purchase the Company's common stock will
continue vesting until the earlier of May 8, 2000 or he ceases to be reasonably
available as a consultant to the Company. During the period Mr. Wright's options
continue to vest, they will continue to be subject to acceleration of vesting
upon a change in control. Mr. Wright will have 180 days from the date his
options cease vesting to exercise such options. Mr. Wright agreed to release the
Company from any and all claims or any liability for compensation except as set
forth in the separation agreement.
Upon the termination of Mr. Garrettson's employment with the Company
for any reason whatsoever, including a Constructive Termination (defined below),
and other than a voluntary termination or termination for Cause (defined below)
or disability or death, such individual is entitled to a severance payment at
the then applicable base salary rate, and payment of COBRA benefits for nine
months. In addition, Mr. Garrettson will have three months from the date of such
termination of employment described above, or if terminated due to a disability
or death, in which to exercise his stock options. Upon the termination of Mr.
Garrettson's employment with the Company due to a disability, he is entitled to
a severance payment equal to the amount by which his then applicable base salary
rate exceeds all disability payments under the Company's insurance plans and any
state or federal disability plans. Such severance payment shall be made for nine
months. Mr. Garrettson is not entitled to severance payments if his employment
is voluntarily terminated or terminated for cause or by death. Constructive
Termination means a material reduction in salary or benefits not agreed to by
Mr. Garrettson or a material change in his responsibilities, or a requirement to
relocate more than 25 miles. Termination for "Cause" means termination of
employment as a result of (i) an act or acts of dishonesty undertaken by Mr.
Garrettson, and intended to result in substantial gain or personal enrichment at
the expense of the Company, (ii) willful, deliberate and persistent failure by
Mr. Garrettson to perform his duties, or (iii) his conviction of a felony.
In the event there is a change in control of the Company in which
substantially all the Company's assets are acquired, each of Mr. Garrettson's,
Mr. Greenspan's, Mr. Wright's and Mr. Veni's options will vest in full. For
purposes of the options held by Messrs. Garrettson, Greenspan, Wright and Veni,
a change of control is defined to mean the occurrence of any of the following
events: (i) any "person" or "group" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"))
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
50% or more of the total voting power represented by the Company's then
outstanding voting securities; (ii) a change in the composition of the Board of
Directors of the Company occurring within a two-year period, as a result of
which fewer than a majority of the directors are Incumbent Directors, where
"Incumbent Directors" means directors who either (A) are directors of the
Company as of the date of grant of the option or (B) are elected, or nominated
for election, to the Board of Directors of the Company with the affirmative
votes of at least a majority of the Incumbent Directors at the time of such
election or nomination (but shall not include an individual whose election or
nomination is in connection with an actual or threatened proxy contest relating
to the election of directors to the Company); or (iii) the stockholders of the
Company approve a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) more than fifty percent (50%) of
the total voting power represented by the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation, or the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all the Company's assets (other than to a
subsidiary or subsidiaries).
17
<PAGE>
Compensation of Directors
Non-employee directors currently receive a quarterly retainer of
$3,000, a fee of $2,000 for attendance at each general Board of Directors
meeting, and a fee of $500 for attendance at each committee meeting for services
provided in that capacity and are reimbursed for out-of-pocket expenses incurred
in connection with attendance at meetings of the Board of Directors and
committees of the Board. Prior to December 1998, directors were paid a per
committee meeting fee of $1,000 for attendance at such meeting. The Company's
Director Plan provides that options may be granted to non-employee directors of
the Company who do not represent stockholders holding more than 1% of the
Company's outstanding common stock pursuant to an automatic nondiscretionary
grant mechanism. Each Outside Director is automatically granted an option to
purchase 5,000 shares (the "First Option") on the date on which such person
first becomes an Outside Director. After the First Option has been granted to an
Outside Director, such Outside Director is thereafter automatically granted an
option to purchase 5,000 shares at the next meeting of the Board of Directors
following the Annual Meeting of Stockholders in each year, if, on such date, he
shall have served on the Board for at least six (6) months. The "First Option"
granted shall be exercisable only while the Outside Director remains a director
with the Company, and vests in installments cumulatively as to 25% of the shares
subject to the option on each anniversary of its date of grant. Subsequent
option grants are exercisable only while the Outside Director remains a director
of the Company, and vest as to 2.08% of the shares subject to the option on each
monthly anniversary of its date of grant.
Report of the Board of Directors on Executive Compensation
During the fiscal year ended March 31, 1999 the Company's executive
compensation program was approved by the Board of Directors as a whole rather
than the Compensation Committee of the Board of Directors. The following is the
report of the Board of Directors with respect to the compensation paid to the
Company's executive officers during fiscal 1999. Actual compensation earned
during the fiscal year by the Named Executive Officers is shown in the Summary
Compensation Table above.
Compensation Philosophy
The Company's philosophy in setting its compensation policies for
executive officers is to maximize stockholder value over time. The primary goal
of the Company's executive compensation program is therefore to closely align
the interests of the executive officers with those of the Company's
stockholders. To achieve this goal the Company attempts to (i) offer
compensation opportunities that attract and retain executives whose abilities
are critical to the long-term success of the Company, motivate individuals to
perform at their highest level and reward outstanding achievement, (ii) maintain
a significant portion of the executive's total compensation at risk, tied to
achievement of financial, organizational and management performance goals, and
(iii) encourage executives to manage from the perspective of owners with an
equity stake in the Company.
The compensation program for the Company's executive officers consists
of the following components:
o Base salary
o Quarterly and annual cash incentives
o Long-term stock option incentives
Base Salary
The Board of Directors reviewed and approved fiscal 1999 base salaries
for the Chief Executive Officer and other Named Executive Officers at the
beginning of the fiscal year. Base salaries were established by the Board based
upon competitive compensation data, an executive's job responsibilities, level
of experience, individual performance and contribution to the business. In
addition, the level of base salaries of each of Mr. Garrettson, the Chief
Executive Officer, Mr. Greenspan and Mr. Wright were governed by employment
agreements entered into with such executives in connection with their original
employment with the Company, and such employment agreements were reviewed and
approved by the Board of Directors. The terms of these employment agreements are
described in the section entitled,
18
<PAGE>
"Employment Contracts and Change-In-Control Arrangements." Officer salaries have
been targeted at or above the average rates paid by competitors to enable the
Company to attract, motivate, reward and retain highly skilled executives. In
order to evaluate the Company's competitive posture in the industry, the Board
reviewed and analyzed the compensation packages, including base salary levels,
offered by other high technology companies. The competitive information was
obtained from surveys prepared by national consulting companies or industry
associations (e.g., Radford Associates, PricewaterhouseCoopers and the American
Electronics Association). The surveys include, but are not limited to, data from
all industries represented in the Standard & Poor's Communication Equipment
Manufacturer Index, the "line of business index" used in the stock performance
graph set forth below. See "Performance Graph." In making base salary decisions,
the Board exercised its discretion and judgment based upon these factors. No
specific formula was applied to determine the weight of each factor. The Company
hired Mr. Garrettson in March 1996 and negotiated the terms of his employment
with him at that time. Mr. Garrettson commenced his employment with the Company
in April 1996. Mr. Garrettson's base salary of $275,000 was increased to
$294,300 in fiscal 1999 and the Board of Directors' policy of fixing
compensation at or above the average rates paid by its competitors.
Quarterly and Annual Cash Incentives
Quarterly and annual incentive bonuses for executive officers are
intended to reflect the Board's belief that a significant portion of the
compensation of each executive officer should be contingent upon the performance
of the Company, as well as the individual contribution of each executive
officer. To carry out this philosophy, the Company has implemented a Variable
Compensation Bonus Plan, which compensates officers in the form of quarterly and
annual cash bonuses. At the beginning of fiscal 1999, the Board of Directors
established target bonuses for each executive officer as a percentage of the
officer's base salary. The target level of bonuses which the executive officers
were eligible to receive varied from 25% to 50% of base salaries. The Variable
Compensation Bonus Plan is intended to motivate and reward executive officers by
directly linking the amount of any cash bonus to specific Company-based
performance targets and specific individual-based performance targets. The Named
Executive Officers, including Mr. Garrettson, Mr. Greenspan and Mr. Wright, must
successfully achieve these performance targets which are submitted by management
to the Board for its evaluation and approval at the beginning of each fiscal
quarter. The Company-based performance goals are tied to different indicators of
Company performance, such as achievement of specific levels of orders, sales and
pre-tax profits. These Company-based performance goals vary from quarter to
quarter, may be subjective in nature and are competitively sensitive to the
Company's business and operations. The individual's performance goals are tied
to different indicators of the individual Named Executive Officer's performance,
such as having received an order from a specific customer, achieved an R&D
project milestone, or achieved a desired on-time customer delivery. The Board
evaluates the completion of the Company and individual goals and approves a
performance rating relative to the goals so completed. This scoring is
subjective and is influenced by the Board's perception of the importance of the
various corporate and individual goals. At the end of the fiscal year, when
determining the bonus payment for the fourth fiscal quarter, the Board considers
the overall performance of the Company and each individual during the entire
fiscal year, including the fourth quarter. No bonuses were awarded during fiscal
1999. The Board of Directors did not award Mr. Garrettson any variable
compensation in fiscal 1999, as the Company did not meet its performance
targets.
Long-Term Stock Option Incentives
The Board provides the Company's Named Executive Officers with
long-term incentive compensation through grants of options to purchase the
Company's common stock. The Board believes that stock options provide the
Company's Named Executive Officers with the opportunity to purchase and maintain
an equity interest in the Company and to share in the appreciation of the value
of the Company's common stock. The Board believes that stock options directly
motivate an executive to maximize long-term stockholder value. The options also
utilize vesting periods that encourage key executives to continue in the employ
of the Company. The Board considers the grant of each option subjectively,
reviewing factors such as the individual performance of the Named Executive
Officer and the anticipated contribution of the Named Executive Officer to the
attainment of the Company's long-term strategic performance goals. Long-term
incentives granted in prior years are also taken into account. In fiscal 1999,
the Board of
19
<PAGE>
Directors granted Mr. Garrettson options to purchase 35,000 shares of common
stock at an exercise price of $12.94 per share, the closing price of the
Company's common stock on the date of grant. Such grants reflect the Board of
Directors' policy of fixing compensation, including long-term incentive
compensation, at or above the average rates paid by its competitors. These
options vested at the rate of one-quarter of the shares subject to the options
on the first anniversary of the date of grant and the remaining shares vest
monthly at a rate of 1/48th of the total of each grant per month. The Board of
Directors believes that this vesting structure provides appropriate alignment of
Mr. Garrettson's interests with those of the Company's stockholders while also
providing him with incentives to remain at the Company.
Section 162(m)
The Board has considered the potential future effects of Section 162(m)
of the Internal Revenue Code on the compensation paid to the Company's executive
officers. Section 162(m) disallows a tax deduction for any publicly-held
corporation for individual compensation exceeding $1.0 million in any taxable
year for any of the Named Executive Officers, unless compensation is
performance-based. The Company has adopted a policy that, where reasonably
practicable, the Company will seek to qualify the variable compensation paid to
its executive officers for an exemption from the deductibility limitations of
Section 162(m).
Respectfully submitted by:
Garrett A. Garrettson Robert W. Shaner
James A. Cole Robert C. Wilson
Martin Cooper Eric A. Young
Charles D. Kissner
20
<PAGE>
Performance Graph
<TABLE>
Set forth below is a line graph comparing the annual percentage change
in the cumulative return to the stockholders of the Company's common stock with
the cumulative return of the Standard & Poor's 500 Index and of the Standard &
Poor's Communication Equipment Manufacturer Index for the period commencing
August 3, 1994 and ending on March 31, 1999. Returns for the indices are
weighted based on market capitalization at the beginning of each fiscal year.
[The following descriptive data is supplied in accordance with Rule 304(d) of
Regulation S-T]
<CAPTION>
8/3/94 3/31/95 3/31/96 3/31/97 3/31/98 3/31/99
------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Spectrian Corporation 100 236 175 86 130 92
S&P 500 Index 100 111 147 176 261 309
S&P Communications Equipment Index 100 142 205 242 406 565
<FN>
- - ------------
(1) The graph assumes that $100 was invested on August 3, 1994 in the Company's
common stock and in the Standard & Poor's 500 Index and in the Standard &
Poor's Communication Equipment Manufacturer Index and that all dividends
were reinvested. No dividends have been declared or paid on the Company's
common stock. Stockholder returns over the indicated period should not be
considered indicative of future stockholder returns.
</FN>
</TABLE>
The information contained above under the captions "Report of the Board
of Directors on Executive Compensation" and "Performance Graph" shall not be
deemed to be "soliciting material" or to be "filed" with the Securities and
Exchange Commission, nor shall such information be incorporated by reference
into any future filing under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, except to the extent that the
Company specifically incorporates it by reference into such filing.
Section 16 Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's executive officers and directors, and
persons who own more than ten percent of a registered class of the Company's
equity securities to file reports of ownership and changes in ownership with the
Securities and Exchange Commission ("Commission") and the National Association
of Securities Dealers, Inc. Executive officers, directors and greater than ten
percent stockholders are required by Commission regulation to furnish the
Company with copies of all Section 16(a) forms they file. Based solely in its
review of the copies of such forms received by it, or written representations
from certain reporting persons, the Company believes that, during fiscal 1999
all executive officers and directors of the Company complied with all applicable
filing requirements.
21
<PAGE>
CERTAIN TRANSACTIONS
The Company had no transactions that were reportable pursuant to Item
404 of Regulation S-K during fiscal 1999. All future transactions, including
loans, between the Company and its officers, directors, principal stockholders
and their affiliates will be approved by a majority of the Board of Directors,
including a majority of the independent and disinterested outside directors, and
will continue to be on terms no less favorable to the Company than could be
obtained from unaffiliated third parties.
OTHER MATTERS
The Company knows of no other matters to be submitted at the meeting.
If any other matters properly come before the meeting, it is the intention of
the persons named in the enclosed form of Proxy to vote the shares they
represent as the Board of Directors may recommend.
THE BOARD OF DIRECTORS
Dated: June 15, 1999
22
<PAGE>
Appendix A
PROXY SPECTRIAN CORPORATION PROXY
1999 ANNUAL MEETING OF STOCKHOLDERS
July 15, 1999
This Proxy is solicited on behalf of the Board of Directors
The undersigned stockholder of SPECTRIAN CORPORATION, a Delaware
corporation, hereby acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement, each dated June 15, 1999, and hereby appoints
Garrett A. Garrettson and Henry C. Montgomery each as proxy and
attorney-in-fact, with full power to each of substitution, on behalf and in the
name of the undersigned, to represent the undersigned at the 1999 Annual Meeting
of Stockholders of SPECTRIAN CORPORATION to be held on July 15, 1999 at 10:00
a.m. local time, at 160 Gibraltar Court, Sunnyvale, California 94089 and at any
adjournment or adjournments thereof, and to vote all shares of common stock
which the undersigned would be entitled to vote if then and there personally
present, on the matters set forth on the reverse side.
(Continued, and to be signed on the other side)
- - --------------------------------------------------------------------------------
^ FOLD AND DETACH HERE ^
<PAGE>
[X] Please mark
your votes
as this
WITHHOLD
FOR FOR ALL
--- -------
1. ELECTION OF DIRECTORS:
NOMINEES: [ ] [ ]
Garrett A. Garrettson,
James A. Cole, Martin Cooper,
Charles D. Kissner, Robert W. Shaner,
Robert C. Wilson
INSTRUCTION: To withhold authority to vote
for any individual nominee, write that
nominee's name in the space provided
below.
__________________________________________
FOR AGAINST ABSTAIN
2. Amendment of 1994 Director Option Plan [ ] [ ] [ ]
3. Amendment of 1992 Stock Plan [ ] [ ] [ ]
4. Appointment of KPMG LLP as independent [ ] [ ] [ ]
auditors of Spectrian Corporation for the
fiscal year ending March 31, 2000
and, in their discretion, upon such other matter
or matters which may properly come before the
meeting or any adjournment or adjournments
thereof.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO
CONTRARY DIRECTION IS INDICATED, WILL BE VOTED FOR
THE ELECTION OF DIRECTORS, THE AMENDMENTS TO THE
1994 DIRECTOR OPTION PLAN AND 1992 STOCK PLAN, AND
THE APPOINTMENT OF KPMG LLP, OR AS SAID PROXIES
DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY
PROPERLY COME BEFORE THE MEETING, INCLUDING, AMONG
OTHER THINGS, CONSIDERATION OF ANY MOTION MADE FOR
ADJOURNMENT OF THE MEETING.
Signature(s) ___________________________________________________________________
Dated __________________________, 1999
This proxy should be marked, dated and signed by the stockholder(s) exactly as
his or her name appears hereon, and returned promptly in the enclosed envelope.
Persons signing in a fiduciary capacity should so indicate. If shares are held
by joint tenants or as community property, both should sign.
(Continued, and to be signed on the other side)
- - --------------------------------------------------------------------------------
^ FOLD AND DETACH HERE ^
<PAGE>
Appendix B
SPECTRIAN CORPORATION
1992 STOCK PLAN
(as amended through June 7, 1999)
1. Purposes of the Plan. The purposes of this Stock Plan are to attract
and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries and to promote the success of the Company's
business. Options granted under the Plan may be incentive stock options (as
defined under Section 422 of the Code) or nonstatutory stock options, as
determined by the Administrator at the time of grant of an option and subject to
the applicable provisions of Section 422 of the Code, as amended, and the
regulations promulgated thereunder.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of its Committees
as shall be administering the Plan, in accordance with Section 4 of the Plan.
(b) "Applicable Laws" means the legal requirements relating to
the administration of stock option plans of Delaware corporate and securities
laws and of the Code.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended
from time to time, and any successor thereto.
(e) "Committee" means a Committee appointed by the Board in
accordance with paragraph (a) of Section 4 of the Plan.
(f) "Common Stock" means the Common Stock of the Company.
(g) "Company" means Spectrian Corporation, a Delaware
corporation.
(h) "Consultant" means any person, including an advisor,
engaged by the Company or a Parent or Subsidiary to render services and who is
compensated for such services. The term "Consultant" shall not include Directors
who are paid only a director's fee by the Company or who are not compensated by
the Company for their services as Directors.
(i) "Continuous Status as an Employee or Consultant" means
that the employment or consulting relationship with the Company, any Parent or
Subsidiary is not interrupted or terminated. Continuous Status as an Employee or
Consultant shall not be considered interrupted in the case of (i) any leave of
absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor. A
leave of absence approved by the Company shall include sick leave, military
leave, or any other personal leave. For purposes of Incentive Stock Options, no
such leave may exceed 90 days, unless reemployment upon expiration of
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<PAGE>
such leave is guaranteed by statute or contract, including Company policies. If
reemployment upon expiration of a leave of absence approved by the Company is
not so guaranteed, on the 91st day of such leave any Incentive Stock Option held
by the Optionee shall cease to be treated as an Incentive Stock Option and shall
be treated for tax purposes as a Nonstatutory Stock Option.
(j) "Director" means a member of the Board.
(k) "Disability" means total and permanent disability as
defined in Section 22(e)(3) of the Code.
(l) "Employee" means any person, including Officers and
Directors, employed by the Company or any Parent or Subsidiary of the Company.
Neither service as a Director nor the payment of Director's fee by the Company
shall be sufficient to constitute "employment" by the Company.
(m) "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
(n) "Fair Market Value" means, as of any date, the value of
Common Stock determined as follows:
(i) If the Common Stock is listed on any established
stock exchange or a national market system, including without limitation the
Nasdaq National Market of the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") System, the Fair Market Value of a Share of
Common Stock shall be the closing sales price for such stock (or the closing
bid, if no sales were reported) as quoted on such system or exchange (or the
exchange with the greatest volume of trading in Common Stock) on the last market
trading day prior to the day of determination, as reported in the Wall Street
Journal or such other source as the Administrator deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ
System (but not on the Nasdaq National Market thereof) or regularly quoted by a
recognized securities dealer but selling prices are not reported, the Fair
Market Value of a Share of Common Stock shall be the mean between the high and
low asked prices for the Common Stock or on the last market trading day prior to
the day of determination, as reported in the Wall Street Journal or such other
source as the Administrator deems reliable;
(iii) In the absence of an established market for the
Common Stock, the Fair Market Value thereof shall be determined in good faith by
the Administrator.
(o) "Incentive Stock Option" means an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code and the regulations promulgated thereunder.
(p) "Nonstatutory Stock Option" means an Option that is not
intended to qualify as an Incentive Stock Option.
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<PAGE>
(q) "Notice of Grant" means a written notice evidencing
certain terms and conditions of an individual Option. The Notice of Grant is
part of the Option Agreement.
(r) "Officer" means a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(s) "Option" means a stock option granted pursuant to the
Plan.
(t) "Option Agreement" means a written agreement between the
Company and an Optionee evidencing the terms and conditions of an individual
Option grant. The Option Agreement is subject to the terms and conditions of the
Plan.
(u) "Option Exchange Program" means a program whereby
outstanding options are surrendered in exchange for options with a lower
exercise price.
(v) "Optioned Stock" means the Common Stock subject to an
Option.
(w) "Optionee" means an Employee or Consultant who holds an
outstanding Option.
(x) "Parent" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(y) "Plan" means this 1992 Stock Plan.
(z) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
(aa) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 11 of the Plan.
(bb) "Subsidiary" means a "subsidiary corporation," whether
now or hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 11
of the Plan, the total number of Shares reserved and available for distribution
pursuant to awards made under the Plan shall be 3,750,886 (as adjusted for a
one-for-two reverse stock split approved by the Board of Directors in May 1994).
The Shares may be authorized, but unissued or reacquired Common Stock.
If an Option should expire or become unexercisable for any
reason without having been exercised in full, the unpurchased Shares which were
subject thereto shall, unless the Plan shall have been terminated, become
available for future grant or sale under the Plan. Should the Company reacquire
vested Shares which were issued pursuant to the exercise of an Option, such
Shares shall
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<PAGE>
not become available for future grant under the Plan. However, if unvested
Shares are repurchased by the Company at their original purchase price, and the
original purchaser of such Shares did not receive any benefits of ownership of
such Shares, such Shares shall become available for future grant under the Plan.
For purposes of the preceding sentence, voting rights shall not be considered a
benefit of Share ownership.
4. Administration of the Plan.
(a) Procedure.
(i) Administration With Respect to Directors and
Officers. With respect to grants of Options to Employees who are also Officers
or Directors of the Company, the Plan shall be administered by (A) the Board if
the Board may administer the Plan in compliance with Rule 16b-3 promulgated
under the Exchange Act or any successor rule ("Rule 16b-3") with respect to a
plan intended to qualify thereunder as a discretionary plan, or (B) a Committee
designated by the Board to administer the Plan, which Committee shall be
constituted in such a manner as to permit the Plan to comply with Rule 16b-3
with respect to a plan intended to qualify thereunder as a discretionary plan.
Once appointed, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. From time to time the Board may
increase the size of the Committee and appoint additional members thereof,
remove members (with or without cause) and appoint new members in substitution
therefor, fill vacancies, however caused, and remove all members of the
Committee and thereafter directly administer the Plan, all to the extent
permitted by Rule 16b-3 with respect to a plan intended to qualify thereunder as
a discretionary plan.
(ii) Administration With Respect to Consultants and
Other Employees. With respect to grants of Options to Employees or Consultants
who are neither Directors nor Officers of the Company, the Plan shall be
administered by (A) the Board or (B) a Committee designated by the Board, which
Committee shall be constituted in such a manner as to satisfy Applicable Laws.
Once appointed, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. From time to time the Board may
increase the size of the Committee and appoint additional members thereof,
remove members (with or without cause) and appoint new members in substitution
therefor, fill vacancies, however caused, and remove all members of the
Committee and thereafter directly administer the Plan, all to the extent
permitted by the Applicable Laws.
(iii) Multiple Administrative Bodies. If permitted by
Rule 16b-3, the Plan may be administered by different bodies with respect to
Directors, non-Director Officers and Employees who are neither Directors nor
Officers and Consultants who are not Directors.
(b) Powers of the Administrator. Subject to the provisions of
the Plan and in the case of a Committee, the specific duties delegated by the
Board to such Committee, the Administrator shall have the authority, in its
discretion:
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<PAGE>
(i) to determine the Fair Market Value of the Common
Stock, in accordance with Section 2(n) of the Plan;
(ii) to select the Officers, Consultants and
Employees to whom Options may from time to time be granted hereunder;
(iii) to determine whether and to what extent Options
are granted hereunder;
(iv) to determine the number of shares of Common
Stock to be covered by each award granted hereunder;
(v) to approve forms of agreement for use under the
Plan;
(vi) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any award granted hereunder
(including, but not limited to, the share price and any restriction or
limitation or waiver of forfeiture restrictions regarding any Option and/or the
shares of Common Stock relating thereto, based in each case on such factors as
the Administrator shall determine, in its sole discretion);
(vii) to determine whether and under what
circumstances an Option may be settled in cash under subsection 9(f) instead of
Common Stock;
(viii) to reduce the exercise price of any Option to
the then current Fair Market Value if the Fair Market Value of the Common Stock
covered by such Option shall have declined since the date the Option was
granted;
(ix) to determine the terms and restrictions
applicable to Options;
(x) to provide for the early exercise of Options for
the purchase of unvested Shares, subject to such terms and conditions as the
Administrator may determine; and
(xi) to modify or amend each Option (subject to
Section 13(b) of the Plan), including the discretionary authority to extend the
post-termination exercisability period of Options longer than is otherwise
provided for in the Plan;
(xii) to authorize any person to execute on behalf of
the Company any instrument required to effect the grant of an Option previously
granted by the Administrator;
(xiii) to institute an Option Exchange Program; and
(xiv) to make all other determinations deemed
necessary or advisable for administering the Plan.
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(c) Effect of Administrator's Decision. All decisions,
determinations and interpreta tions of the Administrator shall be final and
binding.
5. Eligibility.
(a) Nonstatutory Stock Options may be granted only to
Employees and Consultants. Incentive Stock Options may be granted only to
Employees. An Employee or Consultant who has been granted an Option may, if he
or she is otherwise eligible, be granted additional Options.
(b) Each Option shall be evidenced by a written Option
agreement, which shall expressly identify the Options as Incentive Stock Options
or as Nonstatutory Stock Options, and which shall be in such form and contain
such provisions as the Administrator shall from time to time deem appropriate.
However, notwithstanding such designations, to the extent that the aggregate
Fair Market Value of the Shares with respect to which Options designated as
Incentive Stock Options are exercisable for the first time by any Optionee
during any calendar year (under all plans of the Company or any Parent or
Subsidiary) exceeds $100,000, such excess Options shall be treated as
Nonstatutory Stock Options.
(c) For purposes of Section 5(b) above, Incentive Stock
Options shall be taken into account in the order in which they were granted, and
the Fair Market Value of the Shares shall be determined as of the time the
Option with respect to such Shares is granted.
(d) Neither the Plan nor any Option shall confer upon any
Optionee any right with respect to continuation of employment or consulting
relationship with the Company, nor shall it interfere in any way with the
Optionee's right or the Company's right to terminate the Optionee's employment
or consulting relationship at any time, with or without cause.
(e) The following limitations shall apply to grants of Options
to Employees:
(i) No Employee shall be granted, in any fiscal year
of the Company, Options to purchase more than 200,000 Shares.
(ii) The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company's capitalization as
described in Section 11.
(iii) If an Option is canceled (other than in
connection with a transaction described in Section 11, the canceled Option will
be counted against the limit set forth in Section 5(e)(i). For this purpose, if
the exercise price of an Option is reduced, the transaction will be treated as a
cancellation of the Option and the grant of a new Option.
6. Term of Plan. Subject to Section 17 of this Plan, the Plan shall
become effective upon the earlier to occur of its adoption by the Board or its
approval by the shareholders of the Company as
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described in Section 17. It shall continue in effect for a term of ten (10)
years unless sooner terminated under Section 13 of this Plan.
7. Term of Option. The term of each Option shall be the term stated in
the Notice of Grant; provided, however, that in the case of an Incentive Stock
Option, the term shall be no more than ten (10) years from the date of grant
thereof or such shorter term as may be provided in the Notice of Grant. However,
in the case of an Option granted to an Optionee who, at the time the Option is
granted, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or Subsidiary, the term of
the Option shall be five (5) years from the date of grant thereof or such
shorter term as may be provided in the Notice of Grant.
8. Option Exercise Price and Consideration.
(a) The per Share exercise price for the Shares issuable
pursuant to an Option shall be such price as is determined by the Administrator,
but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time
of the grant of such Incentive Stock Option, owns stock representing more than
ten percent (10%) of the voting power or value of all classes of stock of the
Company or any Parent or Subsidiary, the per Share exercise price shall be no
less than 110% of the Fair Market Value per Share on the date of grant.
(B) granted to any other Employee, the per
Share exercise price shall be no less than 100% of the Fair Market Value per
Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option
(A) granted to a person who, at the time of
the grant of such Incentive Stock Option, owns stock representing more than ten
percent (10%) of the voting power or value of all classes of stock of the
Company or any Parent or Subsidiary, the per Share exercise price shall be no
less than 110% of the Fair Market Value per Share on the date of grant.
(B) granted to any person, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
(b) The consideration to be paid for the Shares to be issued
upon exercise of an Option, including the method of payment, shall be determined
by the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option either have been owned by the Optionee for
more than six months on the date of surrender or were not acquired, directly or
indirectly, from the Company, and (y) have a Fair
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Market Value on the date of surrender equal to the aggregate exercise price of
the Shares as to which said Option shall be exercised, (6) delivery of a
properly executed exercise notice together with irrevocable instructions to a
broker to promptly deliver to the Company the amount of sale or loan proceeds
required to pay the exercise price, (7) a reduction in the amount of any Company
liability to the Optionee, including any liability attribut able to the
Optionee's participation in any Company-sponsored deferred compensation program
or arrangement; (8) any combination of the foregoing methods of payment, or (9)
such other consideration and method of payment for the issuance of Shares to the
extent permitted under Applicable Laws.
9. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any
Option granted hereunder shall be exercisable at such times and under such
conditions as determined by the Administrator and as shall be permissible under
the terms of the Plan.
An Option may not be exercised for a fraction of a
Share.
An Option shall be deemed to be exercised when
written notice of such exercise has been given to the Company in accordance with
the terms of the Option by the person entitled to exercise the Option and full
payment for the Shares with respect to which the Option is exercised has been
received by the Company. Full payment may, as authorized by the Adminis trator
(and, in the case of an Incentive Stock Option, determined at the time of grant)
and permitted by the Option Agreement consist of any consideration and method of
payment allowable under subsection 8(b) of the Plan. Until the issuance (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company) of the stock certificate evidencing
such Shares, no right to vote or receive dividends or any other rights as a
shareholder shall exist with respect to the Optioned Stock, notwithstanding the
exercise of the Option. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the stock certificate is issued,
except as provided in Section 11 of the Plan.
Exercise of an Option in any manner shall result in a
decrease in the number of Shares which thereafter shall be available, both for
purposes of the Plan and for sale under the Option, by the number of Shares as
to which the Option is exercised.
(b) Rule 16b-3. Options granted to persons who are subject to
Section 16 of the Exchange Act ("Insiders") must comply with the applicable
provisions of Rule 16b-3 and shall contain such additional conditions or
restrictions as may be required thereunder to qualify for the maximum exemption
from Section 16 of the Exchange Act with respect to Plan transactions.
(c) Termination of Employment or Consulting Relationship. Upon
termination of an Optionee's Continuous Status as an Employee or Consultant
(other than upon the Optionee's death or Disability), the Optionee may, but only
within thirty (30) days (or such other period of time as is
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determined by the Administrator) after the date of such termination, exercise
his or her Option to the extent that it was exercisable at the date of such
termination. If after termination the Optionee does not exercise such Option to
the extent so entitled within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(d) Disability of Optionee. In the event of termination of an
Optionee's Continuous Status as an Employee or Consultant as a result of the
Optionee's Disability, the Optionee may, but only within twelve (12) months from
the date of such termination (but in no event later than the expiration of the
term of such Option as set forth in the Option Agreement), exercise the Option
to the extent that the Optionee was entitled to exercise it at the date of such
termination. If after termination the Optionee does not exercise such Option to
the extent so entitled within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(e) Death of Optionee. In the event of an Optionee's death,
the Option may be exercised at any time within six (6) months following the date
of death by the Optionee's estate or by a person who acquired the right to
exercise the Option by bequest or inheritance, but only to the extent of the
right to exercise that had accrued at the date of the Optionee's death (but in
no event later than the expiration of the term of such Option as set forth in
the Notice of Grant). If, after death, the Optionee's estate or a person who
acquires the right to exercise the Option by bequest or inheritance does not
exercise the Option within the time specified herein, the Option shall terminate
and the Shares covered by such Option shall revert to the Plan.
(f) The Administrator may at any time offer to buy out for a
payment in cash or Shares, an Option previously granted, based on such terms and
conditions as the Administrator shall establish and communicate to the Optionee
at the time such offer is made.
10. Non-Transferability of Options. Options may not be sold, pledged,
assigned, hypothecated, transferred or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
11. Adjustments Upon Changes in Capitalization or Merger.
(a) Subject to any required action by the shareholders of the
Company, the number of Shares covered by each outstanding Option, and the number
of Shares which have been autho rized for issuance under the Plan but as to
which no Options have yet been granted or which have been returned to the Plan
upon cancellation or expiration of an Option, as well as the price per Share
covered by each such outstanding Option, shall be proportionately adjusted for
any increase or decrease in the number of issued Shares resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification of
the Common Stock, or any other increase or decrease in the aggregate number of
issued Shares effected without receipt of consideration by the Company;
provided, however, that conversion of any convertible securities of the Company
shall not be deemed
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to have been "effected without receipt of consideration." Such adjustment shall
be made by the Board, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein, no issuance by the
Company of Shares of stock of any class, or securities convertible into Shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of Shares subject to an Option.
In the event of the proposed dissolution or liquidation of the
Company, the Board shall notify the Optionee at least fifteen (15) days prior to
such proposed action. To the extent it has not been previously exercised, the
Option will terminate immediately prior to the consumma tion of such proposed
action. In the event of a merger of the Company with or into another
corporation, or the sale of substantially all of the assets of the Company, each
outstanding Option shall be assumed or an equivalent option shall be substituted
by such successor corporation or a parent or subsidiary of such successor
corporation. For the purposes of this paragraph, the Option shall be considered
assumed if, following the merger or sale of assets, the option confers the right
to purchase, for each Share of Optioned Stock subject to the Option immediately
prior to the merger or sale of assets, the consideration (whether stock, cash,
or other securities or property) received in the merger or sale of assets by
holders of Common Stock for each Share held on the effective date of the
transaction (and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding Shares);
provided, however, that if such consideration received in the merger or sale of
assets was not solely common stock of the successor corporation or its Parent,
the Administrator may, with the consent of the successor corporation, provide
for the consideration to be received upon the exercise of the Option, for each
Share of Optioned Stock subject to the Option, to be solely common stock of the
successor corporation or its Parent equal in fair market value to the per share
consideration received by holders of Common Stock in the merger or sale of
assets.
12. Time of Granting Options. The date of grant of an Option shall, for
all purposes, be the date on which the Administrator makes the determination
granting such Option, or such later date as is determined by the Administrator.
Notice of the determination shall be given to each Employee or Consultant to
whom an Option so granted within a reasonable time after the date of such grant.
13. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time
amend, alter, suspend, or discontinue the Plan, but no amendment, alteration,
suspension, or discontinuation shall be made which would impair the rights of
any Optionee under any grant theretofore made, without his or her consent. In
addition, to the extent necessary and desirable to comply with Rule 16b-3 under
the Exchange Act or under Section 422 of the Code (or any other applicable law
or regulation), the Company shall obtain shareholder approval of any Plan
amendment in such a manner and to such a degree as required.
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(b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated.
14. Conditions Upon Issuance of Shares. Shares shall not be issued with
respect to an Option unless the exercise of such Option and the issuance and
delivery of such Shares pursuant thereto shall comply with all relevant
provisions of law, including, without limitation, the Securities Act of 1933, as
amended, the Exchange Act, the rules and regulations promulgated thereunder, and
the requirements of any stock exchange upon which the Shares may then be listed,
and shall be further subject to the approval of counsel for the Company with
respect to such compliance.
As a condition to the exercise of an Option or the issuance
of Shares on exercise of an Option, the Company may require the person
exercising such Option to represent and warrant at the time of any such exercise
that the Shares are being purchased only for investment and without any present
intention to sell or distribute such Shares if, in the opinion of counsel for
the Company, such a representation is required by any of the aforementioned
relevant provisions of law.
15. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
Inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company's counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the non-issuance or sale of
such Shares as to which such requisite authority shall not have been obtained.
16. Agreements. Options shall be evidenced by written agreements in
such form as the Board shall approve from time to time.
17. Shareholder Approval. Continuance of the Plan shall be subject to
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted as provided in Section 6. Such shareholder
approval shall be obtained in the degree and manner required under applicable
state and federal law.
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Appendix C
SPECTRIAN CORPORATION
1994 DIRECTOR OPTION PLAN
As Amended through June 7, 1999
1. Purposes of the Plan. The purposes of this 1994 Director Option Plan
are to attract and retain the best available personnel for service as Outside
Directors (as defined herein) of the Company, to provide additional incentive to
the Outside Directors of the Company to serve as Directors, and to encourage
their continued service on the Board.
All options granted hereunder shall be nonstatutory stock
options.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as
amended.
(c) "Common Stock" means the Common Stock of the Company.
(d) "Company" means Spectrian Corporation, a Delaware
corporation.
(e) "Continuous Status as a Director" means the absence of any
interruption or termination of service as a Director.
(f) "Director" means a member of the Board.
(g) "Employee" means any person, including officers and
Directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a Director's fee by the Company shall not be sufficient in and of
itself to constitute "employment" by the Company.
(h) "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
(i) "Fair Market Value" means, as of any date, the value of
Common Stock determined as follows:
(i) If the Common Stock is listed on any established
stock exchange or a national market system, including without limitation the
Nasdaq National Market of the National Association of Securities Dealers, Inc.
Automated Quotation ("Nasdaq") System, the Fair Market Value of a Share of
Common Stock shall be the closing sales price for such stock (or the closing
bid, if no sales were reported) as quoted on such system or exchange (or the
exchange with the greatest volume of trading in Common Stock) on the date of
grant, as reported in The Wall Street Journal or such other source as the Board
deems reliable;
<PAGE>
(ii) If the Common Stock is quoted on the Nasdaq
System (but not on the National Market thereof) or regularly quoted by a
recognized securities dealer but selling prices are not reported, the Fair
Market Value of a Share of Common Stock shall be the mean between the high bid
and low asked prices for the Common Stock on the day of determination, as
reported in The Wall Street Journal or such other source as the Board deems
reliable, or;
(iii) In the absence of an established market for the
Common Stock, the Fair Market Value thereof shall be determined in good faith by
the Board.
(j) "Option" means a stock option granted pursuant to the
Plan.
(k) "Optioned Stock" means the Common Stock subject to an
Option.
(l) "Optionee" means an Outside Director who receives an
Option.
(m) "Outside Director" means a Director who is neither an
Employee nor a representative of a shareholder owning more than one percent (1%)
of the outstanding shares of the Company.
(n) "Parent" means a "parent corporation", whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(o) "Plan" means this 1994 Director Option Plan.
(p) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 10 of the Plan.
(q) "Subsidiary" means a "subsidiary corporation", whether now
or hereafter existing, as defined in Section 424(f) of the Internal Revenue Code
of 1986.
3. Stock Subject to the Plan. Subject to the provisions of Section 10
of the Plan, the maximum aggregate number of Shares which may be optioned and
sold under the Plan is 145,000 Shares (as adjusted for a one-for-two reverse
stock split approved by the Board of Directors in May 1994) (the "Pool") of
Common Stock. The Shares may be authorized but unissued, or reacquired Common
Stock.
If an Option should expire or become unexercisable for any
reason without having been exercised in full, the unpurchased Shares which were
subject thereto shall, unless the Plan shall have been terminated, become
available for future grant under the Plan.
4. Administration and Grants of Options under the Plan.
(a) Procedure for Grants. The provisions set forth in this
Section 4(a) shall not be amended more than once every six months, other than to
comport with changes in the Code, the
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Employee Retirement Income Security Act of 1974, as amended, or the rules
thereunder. All grants of Options to Outside Directors under this Plan shall be
automatic and non-discretionary and shall be made strictly in accordance with
the following provisions:
(i) No person shall have any discretion to select
which Outside Directors shall be granted Options or to determine the number of
Shares to be covered by Options granted to Outside Directors.
(ii) Each Outside Director shall be automatically
granted an Option to purchase 5,000 Shares (the "First Option") on the date on
which such person first becomes an Outside Director, whether through election by
the shareholders of the Company or appointment by the Board to fill a vacancy,
following the effective date of this Plan as determined in accordance with
Section 6 hereof.
(iii) After the First Option has been granted to an
Outside Director, such Outside Director shall thereafter be automatically
granted an Option to purchase 5,000 Shares (a "Subsequent Option") at the next
meeting of the Board of Directors following the Annual Meeting of Shareholders
in each year commencing with the 1997 Annual Meeting of Shareholders, if on such
date, he shall have served on the Board for at least six (6) months.
(iv) Notwithstanding the provisions of subsections
(ii) and (iii) hereof, any exercise of an Option made before the Company has
obtained shareholder approval of the Plan in accordance with Section 16 hereof
shall be conditioned upon obtaining such shareholder approval of the Plan in
accordance with Section 16 hereof.
(v) The terms of a First Option granted hereunder
shall be as follows:
(A) the term of the First Option shall be
ten (10) years.
(B) the First Option shall be exercisable
only while the Outside Director remains a Director of the Company, except as set
forth in Section 8 hereof.
(C) the exercise price per Share shall be
100% of the fair market value per Share on the date of grant of the First
Option.
(D) the First Option shall become
exercisable in installments cumulatively as to 25% of the Shares subject to the
First Option on each anniversary of its date of grant.
(vi) The terms of a Subsequent Option granted
hereunder shall be as follows:
(A) the term of the Subsequent Option shall
be ten (10) years.
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(B) the Subsequent Option shall be
exercisable only while the Outside Director remains a Director of the Company,
except as set forth in Section 8 hereof.
(C) the exercise price per Share shall be
100% of the fair market value per Share on the date of grant of the Subsequent
Option.
(D) the Subsequent Option shall become
exercisable as to 2.08% of the Shares subject to the Subsequent Option on each
monthly anniversary of its date of grant.
(vii) In the event that any Option granted under the
Plan would cause the number of Shares subject to outstanding Options plus the
number of Shares previously purchased under Options to exceed the Pool, then the
remaining Shares available for Option grant shall be granted under Options to
the Outside Directors on a pro rata basis. No further grants shall be made until
such time, if any, as additional Shares become available for grant under the
Plan through action of the shareholders to increase the number of Shares which
may be issued under the Plan or through cancellation or expiration of Options
previously granted hereunder.
5. Eligibility. Options may be granted only to Outside Directors. All
Options shall be automatically granted in accordance with the terms set forth in
Section 4 hereof. An Outside Director who has been granted an Option may, if he
is otherwise eligible, be granted an additional Option or Options in accordance
with such provisions.
The Plan shall not confer upon any Optionee any right with
respect to continuation of service as a Director or nomination to serve as a
Director, nor shall it interfere in any way with any rights which the Director
or the Company may have to terminate his or her directorship at any time.
6. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board or its approval by the shareholders of the
Company as described in Section 16 of the Plan. It shall continue in effect for
a term of ten (10) years unless sooner term inated under Section 11 of the Plan.
7. Form of Consideration. The consideration to be paid for the Shares
to be issued upon exercise of an Option, including the method of payment, shall
consist of (i) cash, (ii) check, (iii) other shares which (x) in the case of
Shares acquired upon exercise of an Option, have been owned by the Optionee for
more than six (6) months on the date of surrender, and (y) have a Fair Market
Value on the date of surrender equal to the aggregate exercise price of the
Shares as to which said Option shall be exercised, (iv) delivery of a properly
executed exercise notice together with such other documentation as the Company
and the broker, if applicable, shall require to effect an exercise of the Option
and delivery to the Company of the sale or loan proceeds required to pay the
exercise price, or (v) any combination of the foregoing methods of payment.
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8. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any
Option granted hereunder shall be exercisable at such times as are set forth in
Section 4 hereof; provided, however, that no Options shall be exercisable until
shareholder approval of the Plan in accordance with Section 16 hereof has been
obtained.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice
of such exercise has been given to the Company in accordance with the terms of
the Option by the person entitled to exercise the Option and full payment for
the Shares with respect to which the Option is exercised has been received by
the Company. Full payment may consist of any consideration and method of payment
allowable under Section 7 of the Plan. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing such Shares, no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
A share certificate for the number of Shares so acquired shall be issued to the
Optionee as soon as practicable after exercise of the Option. No adjustment will
be made for a dividend or other right for which the record date is prior to the
date the stock certificate is issued, except as provided in Section 10 of the
Plan.
Exercise of an Option in any manner shall result in a decrease
in the number of Shares which thereafter may be available, both for purposes of
the Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Rule 16b-3. Options granted to Outside Directors must
comply with the applicable provisions of Rule 16b-3 promulgated under the
Exchange Act or any successor thereto and shall contain such additional
conditions or restrictions as may be required thereunder to qualify Plan
transactions, and other transactions by Outside Directors that otherwise could
be matched with Plan transactions, for the maximum exemption from Section 16 of
the Exchange Act.
(c) Termination of Continuous Status as a Director. In the
event an Optionee's Continuous Status as a Director terminates (other than upon
the Optionee's death or total and permanent disability (as defined in Section
22(e)(3) of the Code)), the Optionee may exercise his or her Option, but only
within three (3) months from the date of such termination, and only to the
extent that the Optionee was entitled to exercise it at the date of such
termination (but in no event later than the expiration of its ten (10) year
term). To the extent that the Optionee was not entitled to exercise an Option at
the date of such termination, and to the extent that the Optionee does not
exercise such Option (to the extent otherwise so entitled) within the time
specified herein, the Option shall terminate.
(d) Disability of Optionee. In the event Optionee's Continuous
Status as a Director terminates as a result of total and permanent disability
(as defined in Section 22(e)(3) of the
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Code), the Optionee may exercise his or her Option, but only within twelve (12)
months from the date of such termination, and only to the extent that the
Optionee was entitled to exercise it at the date of such termination (but in no
event later than the expiration of its ten (10) year term). To the extent that
the Optionee was not entitled to exercise an Option at the date of termination,
or if he or she does not exercise such Option (to the extent otherwise so
entitled) within the time specified herein, the Option shall terminate.
(e) Death of Optionee. In the event of an Optionee's death,
the Optionee's estate or a person who acquired the right to exercise the Option
by bequest or inheritance may exercise the Option, but only within twelve (12)
months following the date of death, and only to the extent that the Optionee was
entitled to exercise it on the date of death (but in no event later than the
expiration of its ten (10) year term). To the extent that the Optionee was not
entitled to exercise an Option at the date of death, and to the extent that the
Optionee's estate or a person who acquired the right to exercise such Option
does not exercise such Option (to the extent otherwise so entitled) within the
time specified herein, the Option shall terminate.
9. Non-Transferability of Options. The Option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
10. Adjustments Upon Changes in Capitalization, Dissolution, Merger,
Asset Sale or Change of Control.
(a) Changes in Capitalization. Subject to any required action
by the shareholders of the Company, the number of Shares covered by each
outstanding Option and the number of Shares which have been authorized for
issuance under the Plan but as to which no Options have yet been granted or
which have been returned to the Plan upon cancellation or expiration of an
Option, as well as the price per Share covered by each such outstanding Option,
shall be proportionately adjusted for any increase or decrease in the number of
issued Shares resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued Shares effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of Shares
subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, to the extent that an Option has not
been previously exercised, it will terminate immediately prior to the
consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the
Company with or into another corporation, or the sale of substantially all of
the assets of the Company, each outstanding Option shall be assumed or an
equivalent option shall be substituted by the successor corporation or a
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Parent or Subsidiary of the successor corporation. In the event that the
successor corporation does not agree to assume the Option or to substitute an
equivalent option, each outstanding Option shall become fully vested and
exercisable, including as to Shares as to which it would not otherwise be
exercisable. If an Option becomes fully vested and exercisable in the event of a
merger or sale of assets, the Board shall notify the Optionee that the Option
shall be fully exercisable for a period of thirty (30) days from the date of
such notice, and the Option shall terminate upon the expiration of such period.
For the purposes of this paragraph, the Option shall be considered assumed if,
following the merger or sale of assets, the option or right confers the right to
purchase, for each Share of Optioned Stock subject to the Option immediately
prior to the merger or sale of assets, the consideration (whether stock, cash,
or other securities or property) received in the merger or sale of assets by
holders of Common Stock for each Share held on the effective date of the
transaction (and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding Shares).
11. Amendment and Termination of the Plan.
(a) Amendment and Termination. Except as set forth in Section
4, the Board may at any time amend, alter, suspend, or discontinue the Plan, but
no amendment, alteration, suspension, or discontinuation shall be made which
would impair the rights of any Optionee under any grant theretofore made,
without his or her consent. In addition, to the extent necessary and desirable
to comply with Rule 16b-3 under the Exchange Act (or any other applicable law or
regulation), the Company shall obtain shareholder approval of any Plan amendment
in such a manner and to such a degree as required.
(b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated.
12. Time of Granting Options. The date of grant of an Option shall, for
all purposes, be the date determined in accordance with Section 4 hereof.
13. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, state securities laws, and the requirements of any stock exchange
upon which the Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may
require the person exercising such Option to represent and warrant at the time
of any such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares, if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
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Inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the Company's
counsel to be necessary to the lawful issuance and sale of any Shares hereunder,
shall relieve the Company of any liability in respect of the failure to issue or
sell such Shares as to which such requisite authority shall not have been
obtained.
14. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
15. Option Agreement. Options shall be evidenced by written option
agreements in such form as the Board shall approve.
16. Shareholder Approval. Continuance of the Plan shall be subject to
approval by the shareholders of the Company at or prior to the first annual
meeting of shareholders held subsequent to the granting of an Option hereunder.
Such shareholder approval shall be obtained in the degree and manner required
under applicable state and federal law.
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