<PAGE>
================================================================================
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
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
NETVANTAGE, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies: _______
(2) Aggregate number of securities to which transaction applies: __________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction: ______________________
(5) Total fee paid: _______________________________________________________
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: _______________________________________________
(2) Form, Schedule or Registration Statement No.: _________________________
(3) Filing Party: _________________________________________________________
(4) Date Filed: ___________________________________________________________
<PAGE>
NETVANTAGE, INC.
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 29, 1997
----------------
TO THE STOCKHOLDERS:
The Annual Meeting ("Annual Meeting") of Stockholders of NetVantage, Inc.
(the "Company"), a Delaware corporation, will be held at the Company's
principal executive offices located at 201 Continental Boulevard, Suite 201,
El Segundo, California 90245-4427 on Tuesday, July 29, 1997 at 10:00 a.m.,
local time, for the following purposes:
1. To elect five directors to serve until the 1998 annual meeting and their
successors have been elected and qualified.
2. To approve the Company's 1997 Equity Incentive Plan.
3. To transact such other business as may properly come before the Annual
Meeting or any adjournments thereof.
Only stockholders of record at the close of business on June 2, 1997, shall
be entitled to notice of, and to vote at, the Annual Meeting and any
adjournments thereof. All such stockholders are cordially invited to attend
the Annual Meeting in person. Any such stockholder may vote in person even if
the stockholder has previously signed and returned a proxy.
FOR THE BOARD OF DIRECTORS
/s/ Stephen R. Rizzone
Stephen R. Rizzone
Chairman of the Board, President and
Chief Executive Officer
El Segundo, California
June 27, 1997
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE URGED TO EXECUTE
AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENCLOSED POSTAGE-PREPAID
ENVELOPE IN ORDER THAT AS MANY SHARES AS POSSIBLE MAY BE REPRESENTED AT THE
ANNUAL MEETING.
<PAGE>
NETVANTAGE, INC.
201 CONTINENTAL BOULEVARD, SUITE 201
EL SEGUNDO, CALIFORNIA 90245-4427
----------------
PROXY STATEMENT
----------------
This Proxy Statement is being furnished in connection with the solicitation
of proxies by the Board of Directors of NetVantage, Inc. (the "Company"), a
Delaware corporation, for use at the Company's Annual Meeting of Stockholders
(the "Annual Meeting") to be held at the Company's principal executive offices
located at 201 Continental Boulevard, Suite 201, El Segundo, California,
90245-4427, on Tuesday, July 29, 1997 at 10:00 a.m. local time and any
adjournments thereof for purposes set forth herein and in the accompanying
Notice of Annual Meeting of Stockholders. These proxy solicitation materials
are being mailed to all stockholders entitled to vote beginning on or about
June 27, 1997.
GENERAL
PURPOSE
The purpose of the Annual Meeting is to consider and vote upon proposals to:
(i) elect five directors to serve until the next annual meeting and their
successors have been elected and qualified; (ii) approve the NetVantage, Inc.
Equity Incentive Plan (the "1997 Equity Plan"); and (iii) transact such other
business as may properly come before the Annual Meeting or any adjournments
thereof.
RECORD DATE AND OUTSTANDING SHARES
Only holders of record of Common Stock of the Company at the close of
business on June 2, 1997 (the "Record Date") are entitled to notice of and to
vote at the Annual Meeting and any adjournments thereof. As of the Record
Date, there were outstanding 9,932,357 shares of Class A Common Stock, par
value $0.001 per share; 425,494 shares of Class B Common Stock, par value
$0.001 per share; and 540,995 shares of Class E Common Stock, par value $0.001
per share.
Each holder of Class A Common Stock is entitled to one vote for each share
of Class A Common Stock held by such holder. Each holder of Class B or Class E
Common Stock is entitled to five votes for each share of such stock held by
such holder. The Class A, Class B and Class E Common Stock vote together on
all matters as a single class.
REQUIRED VOTE
The required quorum for the transaction of business at the Annual Meeting is
a majority of the voting power of the shares of Class A, Class B and Class E
Common Stock outstanding on the Record Date. The Company intends to include
abstentions and broker non-votes as present or represented for purposes of
establishing a quorum for the transaction of business.
Persons receiving a plurality of the votes cast at the Annual Meeting will
be elected directors. Plurality means that the individuals who receive the
largest number of votes cast are elected as directors up to the maximum number
of directors to be chosen at the Annual Meeting. Consequently, any shares not
voted (whether by abstention, broker non-votes or otherwise) have no impact on
the election of directors.
Approval of all other matters presented for consideration requires the
affirmative vote of the majority of the voting power of the shares present in
person or represented by a properly executed proxy at the Annual Meeting.
Abstentions are counted as votes against a proposal for purposes of
determining whether or not a proposal has been approved, whereas broker non-
votes are not counted for purposes of whether a proposal has been approved.
<PAGE>
PROXIES
All shares of Class A, Class B and Class E Common Stock that are entitled to
vote and are represented at the Annual Meeting by properly executed proxies
received prior to or at the Annual Meeting and not duly and timely revoked
will be voted at the Annual Meeting in accordance with the instructions
indicated on such proxies. If no such instructions are indicated, such proxies
will be voted to (i) elect the five nominated directors and (ii) approve the
1997 Equity Plan.
If any other matters are properly presented for consideration at the Annual
Meeting (or any adjournments thereof) including, among other things,
consideration of a motion to adjourn the Annual Meeting to another time and/or
place (including, without limitation, for the purpose of soliciting additional
proxies), the proxy holders will vote on such matters in their discretion.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by (i) filing
with the Secretary of the Company, at or before the taking of the vote at the
Annual Meeting, a written notice of revocation bearing a later date than the
proxy; (ii) duly executing a later dated proxy relating to the same shares and
delivering it to the Secretary of the Company, before the taking of the vote
at the Annual Meeting, or (iii) attending the Annual Meeting and voting in
person (although attendance at the Annual Meeting will not in and of itself
constitute a revocation of a proxy).
PROPOSAL NO. 1--ELECTION OF DIRECTORS
Five directors of the Company are to be elected at the Annual Meeting to
hold office until the next annual meeting and their successors have been
elected and qualified. Unless otherwise instructed, the proxy holders will
vote all proxies for the five nominees named below. If any nominee is unable
or declines to serve as a director at the time of the Annual Meeting, the
proxy holders will vote the proxies in their discretion for any nominee
designated by the present Board of Directors to fill the vacancy. It is not
expected that any nominee will be unable or will decline to serve as a
director. Stockholders do not have the right to cumulate their votes in the
election of directors.
The following table sets forth certain information with respect to the
nominees:
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE POSITION(S) WITH THE COMPANY SINCE
---- --- ---------------------------- --------
<C> <C> <S> <C>
Stephen R. Rizzone.......... 48 Chairman of the Board, President 1995
and Chief Executive Officer
Carlos A. Tomaszewski(a)(b). 66 Director of the Company 1991
Seiji Uehara................ 50 Director of the Company 1996
Richard N. Tinsley.......... 33 Director of the Company 1997
John E. Marman(a)(b)........ 55 Director of the Company 1997
</TABLE>
- --------
(a) Member of the Compensation Committee
(b) Member of the Audit Committee
Stephen R. Rizzone joined the Company and was elected President, Chief
Operating Officer and a director in December 1995. He became Chairman of the
Board and Chief Executive Officer in March 1996 and served as the acting Chief
Financial Officer from January 1997 until June 1997. From February 1995 to
October 1995, Mr. Rizzone was Senior Vice President, World Wide Field
Operations of Retix ("Retix"), a publicly traded company involved in the
manufacture and sale of multiprototcol routers, Ethernet switches, remote and
local bridges, ISDN access devices and fiber transport products. From April
1990 until February 1995, he was Senior Vice President, Field Operations of
MAKE Systems, Inc., a software developer of computer aided network design and
simulation products for the LAN/WAN communications industry. Prior to April
1990, Mr. Rizzone held various executive positions at 3Com Corporation, Bridge
Communications and Timeplex, Inc. Under his employment agreement with the
Company, Mr. Rizzone is entitled to retain the position of Chairman of the
2
<PAGE>
Board until December 31, 2001, unless such employment agreement is earlier
terminated in accordance with its provisions. See "Executive Compensation--
Employment and Severance Agreements and Arrangements" below.
Carlos A. Tomaszewski was Chairman of the Board of Directors of the Company
from its inception in March 1991 until October 1994. From 1985 to May 1991, he
served as Chairman of the Board and a Principal Systems Architect of Retix.
Seiji Uehara has served on the Board of Directors of the Company since
January 1996. Since early 1997, Mr. Uehara has been the principal owner and
President of Telecom Device K.K., a distributor of network equipment,
headquartered in Japan. From 1991 to early 1997, Mr. Uehara was President of
NextCom K.K., a network systems integrator and a customer of the Company,
headquartered in Japan. From 1989 to 1990, Mr. Uehara was President of
Ungerman-Bass K.K., a wholly owned subsidiary of Ungerman-Bass Networks, Inc.
("UB"), a customer of the Company.
Richard N. Tinsley has served on the Board of Directors of the Company since
May 1997. Since June 1995, Mr. Tinsley has served as Vice President and
General Manager of the Video, Voice, Image, and Data ("VIVID") business unit
at Newbridge Networks Corporation ("Newbridge"), the parent company of UB.
Under a 1995 stock purchase agreement with the Company, UB has the right until
July 1997 to designate one candidate to the Board of Directors of the Company
and, on May 1, 1997, it designated Mr. Tinsley as such director. Mr. Tinsley
joined Newbridge in September 1993 as Director of Marketing and in February
1994 became Assistant Vice President of Product Management. Prior to joining
Newbridge, Mr. Tinsley served as Director of Marketing at Transwitch
Corporation from June 1992 to July 1993. Prior to joining Transwitch
Corporation, he was Business Development Manager at Texas Instruments from
January 1989 through May 1992. He is also a director of Kaspia Systems, a
manufacturer of network monitoring software.
John E. Marman has served on the Board of Directors since June 1997. Since
June 1990, Mr. Marman has been the principal owner and President of JEM
Associates, an independent consulting firm which provides marketing and
management assistance to emerging high-technology companies. From January 1992
to April 1993, Mr. Marman also served as Vice President of Marketing for Gain
Technology, Inc., a developer and distributor of an object-based multimedia
application development system for the Unix environment, which was acquired by
the Sybase Corporation in October 1992. From November 1985 to June 1990, he
was Senior Vice President of Sales, Marketing and Services for 3Com
Corporation, a publicly traded company, which distributes local area networks
and network access systems.
There are no family relationships between any of the directors or the
executive officers of the Company.
COMMITTEES OF THE BOARD AND ATTENDANCE AT MEETINGS
As of December 31, 1996, the Board's Compensation Committee and Audit
Committee each consisted of one member, Carlos A. Tomaszewski. In June 1997,
John E. Marman was also appointed to both Committees. The Compensation
Committee makes recommendations concerning salaries and incentive compensation
for executive officers of the Company. The principal functions of the Audit
Committee are to recommend engagement of the Company's independent auditors,
to consult with the Company's auditors concerning the scope of the audit and
review with them the results of their examination, to review and approve any
material accounting policy changes affecting the Company's operating results
and to review the Company's financial control procedures and personnel. The
Company does not have a nominating committee or a committee performing the
functions of a nominating committee.
During the year ended December 31, 1996, the Board of Directors met eight
times, the Compensation Committee met two times and the Audit Committee met
two times. During 1996, no director attended fewer than 75% of the total
number of meetings of the Board of Directors and the committees of which he
was a member.
3
<PAGE>
DIRECTOR COMPENSATION
Directors do not receive any cash compensation for their services as members
of the Board of Directors, although they are reimbursed for their reasonable
expenses in attending Board and committee meetings. Directors are not
precluded from serving the Company in any other capacity and receiving
compensation therefor.
In June 1997, Carlos A. Tomaszewski and John E. Marman were each granted
non-qualified options to purchase 20,000 shares of Class A Common Stock, at an
exercise price of $7.875 per share, under the 1997 Equity Plan, subject to
approval of the 1997 Equity Plan by the Company's stockholders. Such options
become exercisable on the earlier of June 4, 1998 or a reorganization of the
Company, expire on June 4, 2003, and are subject to early termination in the
event that the option holder ceases to be a director. The exercise price of
the options was the fair market value of the Class A Common Stock at the date
of grant.
4
<PAGE>
SECURITY OWNERSHIP
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding ownership of
shares of Common Stock as of June 2, 1997 for (i) each director and nominee
for director of the Company, (ii) each individual named in the "Summary
Compensation Table" below, (iii) each person known to the Company to be the
beneficial owner of more than 5% of the outstanding shares, and (iv) all
directors and executive officers as a group. Except as otherwise indicated,
each stockholder has sole voting and investment power with respect to the
shares beneficially owned, subject to community property where applicable.
Each outstanding share of Class A Common Stock is entitled to one vote and
each share of Class B Common Stock or Class E Common Stock is entitled to five
votes.
<TABLE>
<CAPTION>
PERCENTAGE
NUMBER OF PERCENTAGE OF VOTING
NAME OF BENEFICIAL OWNER SHARES OF CLASS POWER
- ------------------------ --------- ---------- ----------
<S> <C> <C> <C>
Stephen R. Rizzone......................... 695,300(1) 6.00% 8.54%
201 Continental Boulevard, Suite 201
El Segundo, California 90245-4427
Aubrey C. Brown............................ 24,514(2) * *
George M. Pontiakos........................ 12,500(3) * *
Carlos A. Tomaszewski...................... 155,251(4) 1.42% 4.19%
Seiji Uehara............................... 854,993(5) 7.84% 5.79%
Telecom Device K.K.--4F Miyanaga Bldg.
1-5-12 Motoakasaka Minato-ku, Tokyo 107
Japan
Richard N. Tinsley......................... --
John E. Marman............................. --
Errol Ginsberg............................. 15,000(6) * *
Thomas V. Baker............................ -- (7)
All directors and executive officers as a
group (9 persons)(1)(2)(3)(4)(5)(6)(7) ... 1,757,558 15.09% 18.05%
</TABLE>
- --------
* Holds less than 1%.
(1) Represents 1,300 shares of Class A Common Stock; and 546,100 shares of
Class A Common Stock, 98,600 shares of Class B Common Stock and 49,300
shares of Class E Common Stock which such person or his spouse has the
right to purchase within 60 days of June 2, 1997, pursuant to the exercise
of outstanding options and warrants.
(2) Represents 18,958 shares of Class A Common Stock, 3,704 shares of Class B
Common Stock and 1,852 shares of Class E Common Stock which such person
has the right to purchase within 60 days of June 2, 1997, pursuant to the
exercise of outstanding options (some of which options lapse during the
60-day period). As of June 23, 1997, Mr. Brown was no longer employed by
the Company.
(3) Represents 12,500 shares of Class A Common Stock which such person has the
right to purchase within 60 days of June 2, 1997, pursuant to the exercise
of outstanding options.
(4) Represents 39,516 shares of Class A Common Stock, 58,535 shares of Class B
Common Stock and 57,200 shares of Class E Common Stock, most of which are
held by Microprocessor Associates, which is 90% owned by Mr. Tomaszewski.
(5) See "Certain Relationships and Related Transactions."
(6) Represents 15,000 shares of Class A Common Stock which such person had the
right to purchase until June 18, 1997, pursuant to the exercise of
outstanding options. As of March 18, 1997, Mr. Ginsberg was no longer
employed by the Company.
(7) As of January 22, 1997, Mr. Baker was no longer employed by the Company.
5
<PAGE>
EXECUTIVE COMPENSATION
EXECUTIVE OFFICERS
The following table sets forth the names, ages and titles of the current
executive officers of the Company. Officers are elected by and serve at the
discretion of the Company's Board of Directors.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Stephen R. Rizzone.......... 48 Chairman of the Board, President and Chief
Executive Officer
George M. Pontiakos......... 38 Senior Vice President of Product Development
Dana R. Nelson.............. 49 Senior Vice President of Sales
Thomas G. Iwanski........... 39 Chief Financial Officer, Vice President of
Finance and Secretary
Daniel Sullivan............. 36 Vice President of Operations
Hava V. Zernik.............. 35 Vice President of Marketing
Sharam Hakimi............... 36 Vice President and Chief Technical Officer
</TABLE>
George M. Pontiakos joined the Company in July 1996 as Vice President of
Operations, and became Senior Vice President of Product Development in
February 1997. Prior to joining the Company, Mr. Pontiakos was
Vice President/General Manager of Wavetek Corporation from January 1995 to
July 1996, and LAN Business Unit Director for Ascom Timeplex from August 1988
to January 1995. He has also held senior management positions at Rowe
International and ITT Avionics. In addition, in 1992 Mr. Pontiakos served on
AT&T's Policy Board for the ISO Business Unit.
Dana R. Nelson joined the Company in the position of Senior Vice President
of Sales in June 1997. Mr. Nelson served as Vice President, Worldwide Sales
and Marketing for Digi International, Inc., a manufacturer of adapter cards
and communication devices, from May 1995 to June 1997. From June 1992 to
February 1995, he was Vice President, Worldwide Sales at Ascom Timeplex, Inc.
("Ascom Timeplex"), a manufacturer of multiprotocol switching routers and WAN
bandwith managers, which he had originally joined in December 1983.
Thomas G. Iwanski joined the Company in June 1997 as Chief Financial
Officer, Vice President of Finance and Secretary. Mr. Iwanski served as Vice
President of Finance, Chief Financial Officer and Assistant Corporate
Secretary from July 1994 until January 1997, and as a director from July 1994
until April 1997, of Computer Marketplace, Inc., a computer hardware broker
and system integrator. From August 1991 to April 1994, he was Corporate
Controller at Wahlco Environmental Systems, Inc. a manufacturer of air
pollution control systems. Mr. Iwanski was also a senior manager, with
approximately ten years of public accounting experience, with KPMG Peat
Marwick.
Daniel Sullivan has served as Vice President of Operations of the Company
since June 1997. Mr. Sullivan previously held the position of Director of
Operations from December 1996 to May 1997, after joining the Company in June
1996 as Operations Manager. From October 1995 to June 1996, he served as
Operations Manager at 20th Century Fox. Mr. Sullivan also held management
positions in the production and inventory departments at Retix from March 1989
to October 1995.
Hava V. Zernik joined the Company in September 1996 as Vice President of
Marketing. From November 1994 to August 1996, Ms. Zernik was Assistant Vice
President of Marketing for Ascom Timeplex. From January 1994 to November 1994,
she served as product Manager of Switching and ATM for Retix. From April 1992
to January 1994, Ms. Zernik was Manager of Marketing Communications for
Tekelec, a manufacturer of LAN and WAN protocol analyzers and SS7 switching
systems.
Sharam Hakimi joined the Company in May 1997 as Vice President and Chief
Technical Officer. Mr. Hakimi previously held the position of Director of
Engineering at UB from February 1994 to May 1997. UB, a customer of the
Company, is also a manufacturer of hub-based network products, where
Mr. Hakimi was responsible for the development of Ethernet, Token Ring and
FDDI switching products. From August 1992 to February 1994, Mr. Hakimi served
as Principal Network Architect at UB.
6
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's executive compensation policies are generally determined by
the Compensation Committee of the Board of Directors (the "Compensation
Committee"). As of December 31, 1996, the Compensation Committee consisted of
one outside director. In June 1997, a second outside director was appointed to
the Compensation Committee.
The objectives of the Company's executive compensation program (which is
intended to apply to all executive officers including the Chief Executive
Officer) are to align executive compensation with the Company's business
objectives and performance, and to enable the Company to attract, retain and
reward executives who contribute to the long-term business success of the
Company. Executive compensation generally consists of (i) current compensation
consisting of base salary, and cash bonuses and/or commissions; and (ii) long-
term compensation consisting primarily of stock options.
Base salaries for executive officers are designed to be competitive with
salary levels of equivalent positions at similar high-technology companies.
From time to time, the Compensation Committee utilizes industry survey
information to ensure that executive salaries are within a competitive range.
For 1996, certain executives (other than the Chief Executive Officer) were
eligible to receive bonuses based in part on performance, the Company's
achievement of certain revenue and profit objectives, and recommendations of
the Chief Executive Officer based on the executive's overall performance and
contributions during the year.
Long-term compensation is tied directly to stockholder return. Executives
and other employees of the Company receive stock option grants based on
individual performance, potential contributions to the Company and comparisons
to practices of similar companies in the high-technology industry.
Base salary and other compensation for 1996 for Stephen R. Rizzone, the
Company's Chief Executive Officer, are as reflected in the "Summary
Compensation Table" and the sections following and have been fixed by his
employment agreements with the Company. See "Employment and Severance
Agreements and Arrangements" below. In establishing Mr. Rizzone's compensation
package for 1996, the Compensation Committee's primary objective was that Mr.
Rizzone's principal form of incentive compensation be in the form of stock-
based compensation. As such, in addition to his base salary in 1996, Mr.
Rizzone was awarded both options and warrants to purchase Class A Common
Stock. In determining his 1996 compensation package, the Compensation
Committee considered Mr. Rizzone's performance and the Company's financial
growth, in addition to surveys of compensation packages of chief executive
officers of companies in similar industries and of similar size.
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), limits to $1,000,000 the amount of "applicable employee remuneration"
deductible by the Company for "covered" employees for any taxable year. No
policy has been adopted with respect to Section 162(m) of the Code for
executive officers; however, the Compensation Committee will continue to
review the issue and monitor whether the Company's compensation plans should
be amended in the future to meet the deductibility requirements.
The Compensation Committee of the Board of
Directors
Carlos A. Tomaszewski
John E. Marman
7
<PAGE>
PERFORMANCE GRAPH
The Securities and Exchange Commission rules require the Company to present
a performance graph comparing the annual percentage change in the cumulative
total stockholder return on the Company's Class A Common Stock with the
cumulative total return of (i) a broad equity market index and (ii) a
published industry index or Company selected peer group. The following
performance graph assumes an initial investment of $100 and the reinvestment
of all dividends and compares the Company's stockholder return on its Class A
Common Stock with that of companies listed on Standard and Poor's SmallCap 600
Index and a peer group selected by the Company. Although such graph would
normally be for a five-year period, the Company's Class A Common Stock has
only been publicly traded since May 3, 1995 (the date of the Company's initial
public offering) and, as a result, the following graph compares quarterly
percentage changes commencing as of that date. From the time trading commenced
until January 7, 1997, the Company's Class A Common Stock traded on the Small
Cap Market of the Nasdaq Stock Market. On January 7, 1997, the Company's Class
A Common Stock commenced trading on the Nasdaq National Market. As a result,
the percentage increase in stockholder return shown on the graph should not be
considered indicative of future performance.
The Company has created a special peer group index that includes companies
in the principal line of business in which the Company does business. The
following companies have been included in the peer group index: Digi
International, Inc., Madge Networks, Network Peripherals, Inc., ODS Networks,
Inc., Plaintree Systems, Inc., Premisys Communications, Inc., Retix, Standard
Microsystems Corporation and Xylan Corporation.
[GRAPH APPEARS HERE]
INDEXED RETURNS
QUARTER ENDED
<TABLE>
<CAPTION>
BASE PERIOD
COMPANY/INDEX MAY 3, 1995 JUNE 1995 SEP 1995 DEC 1995 MAR 1996 JUN 1996 SEP 1996 DEC 1996
- ------------- ----------- --------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NetVantage, Inc.--CLA... $100 $ 94.74 $160.53 $165.79 $152.63 $234.21 $310.53 $189.47
Peer Group.............. 100 105.05 123.82 133.41 113.53 104.13 92.21 63.08
S & P SmallCap 600
Index.................. 100 108.67 122.56 123.12 130.16 136.93 141.33 149.37
</TABLE>
8
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Carlos A. Tomaszewski, the only member of the Company's Compensation
Committee as of December 31, 1996, has never been an officer or employee of
the Company, except when he served as Chairman of the Board from 1991 to 1994.
John E. Marman has never been an officer or employee of the Company. During
1996, no executive officer of the Company served on the board of directors or
compensation committee of another company that had an executive officer serve
on the Company's Board of Directors or Compensation Committee.
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the compensation paid
to or earned by the Chief Executive Officer and the four other most highly
compensated executive officers of the Company (collectively, the "Named
Executive Officers") serving at December 31, 1996, for services rendered in
all capacities to the Company:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION(1) AWARDS
---------------------------------- ------------
OTHER ANNUAL SHARES
NAME AND PRINCIPAL COMPENSATION UNDERLYING
POSITION YEAR(2) SALARY($) BONUS($) ($)(3) OPTIONS(#)
------------------ ------- --------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Stephen R. Rizzone(4)............................... 1996 $147,115 -- $1,798 70,000(5)
Chairman of the Board, President................... 1995 60,000(5)
and Chief Executive Officer
Aubrey C. Brown(6).................................. 1996 98,335 $282,395(7) 1,210 42,500
Former Senior Vice President of.................... 1995 98,308 2,213 -- 50,000
Sales and Marketing
George M. Pontiakos(8).............................. 1996 59,538 55,000 291 60,000
Senior Vice President of
Product Development
Thomas V. Baker(9).................................. 1996 115,016 80,000 -- 66,500
Former Chief Financial Officer,.................... 1995 82,850 -- 36,000
Secretary and Director
Errol Ginsberg(10).................................. 1996 120,374 52,279 -- 110,000
Former Vice President of
Engineering
</TABLE>
- --------
(1) Excludes perquisites and other personal benefits paid to each Named
Executive Officer, as such amounts were less than the lesser of (i)
$50,000 or (ii) 10% of the Named Executive Officer's total reported
salary and bonus.
(2) The Company completed its initial public offering in 1995. As such, only
information for 1995 and 1996 is provided in accordance with the rules of
the Securities and Exchange Commission.
(3) Amounts reflect the Company's contributions to the NetVantage 401(k) Plan
on behalf of the Named Executive Officer.
(4) Although employment commenced in November 1995, Mr. Rizzone waived his
right to receive salary until January 1, 1996. Mr. Rizzone's spouse is also
employed by the Company as Director of Sales. In 1996, Mrs. Rizzone earned
$75,385 in salary, $432,115 in commissions, $2,000 in bonus, in addition to
a Company contribution of $971 to the NetVantage 401(k) Plan on her behalf.
Mrs. Rizzone commenced employment on June 5, 1995 and earned $39,039 in
salary and $3,927 in commissions during 1995. See also "Certain
Relationships and Related Transactions."
9
<PAGE>
(5) Amounts do not include (i) two warrants, each to purchase 15,000 shares
of Class A Common Stock at an exercise price of $7.125 per share granted
to Mr. Rizzone in 1996 in connection with his then employment agreement;
(ii) a warrant to purchase 11,765 shares of Class A Common Stock at an
exercise price of $8.50 per share granted to Mr. Rizzone in 1996 in lieu
of interest on a short-term loan to the Company; (iii) a warrant to
purchase 11,110 shares of Class A Common Stock at an exercise price of
$9.00 per share granted to Mr. Rizzone in 1996 in lieu of interest on a
short-term loan to the Company; and (iv) options to purchase 32,500
shares of Class A Common Stock under the Company's 1996 Incentive and
Nonstatutory Stock Option Plan (the "1996 Plan") and 7,500 shares of
Class A Common Stock under the Company's 1994 Incentive and Nonstatutory
Stock Option Plan (the "1994 Plan") granted to Mrs. Rizzone. See also
"Certain Relationships and Related Transactions." On April 22, 1997, the
exercise prices of the options and warrants listed in (i) and (iv) above
were changed to $5.8125 per share and the warrants listed in (ii) and
(iii) above were changed to $3.8125 per share.
(6) Employment commenced on March 1, 1995 and ceased on June 12, 1997.
(7) Includes sales commissions of $257,395 earned during 1996.
(8) Employment commenced on July 1, 1996.
(9) Employment commenced on October 10, 1994 and ceased on January 22, 1997.
(10) Employment commenced on March 11, 1996 and ceased on March 18, 1997.
STOCK OPTION GRANTS DURING 1996
The following table sets forth specified information concerning grants of
options to purchase Class A, Class B and Class E Common Stock of the Company
made during 1996 to each of the Named Executive Officers. The Company granted
no stock appreciation rights to the Named Executive Officers in 1996.
STOCK OPTION GRANTS DURING 1996
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------
PERCENTAGE POTENTIAL REALIZABLE
OF TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS MARKET ANNUAL RATES OF STOCK
SECURITIES GRANTED TO EXERCISE PRICE AT PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES OR BASE DATE OF OPTION TERM(5)(6)
OPTIONS IN FISCAL PRICE GRANT EXPIRATION -------------------------
NAME GRANTED(#) YEAR ($/SH) ($/SH)(5) DATE 0%($) 5%($) 10%($)
---- ---------- ---------- -------- --------- ---------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Stephen R. Rizzone(1)
1994 Plan(2).......... 70,000 7% $ 6.0600 $7.0625 5/23/02 $70,175 $238,310 $451,615
Aubrey C. Brown(7)
1996 Plan(2).......... 42,500 4% 10.5625 6/5/02 152,529 346,170
George M. Pontiakos(8)
1996 Plan(2).......... 5,000 1% 11.6875 11/20/02 19,891 45,110
1996 Plan(2).......... 50,000 5% 11.6875 7/24/02 178,139 423,643
1996 Plan(2).......... 5,000 1% 10.8750 9/18/02 18,526 41,998
Thomas V. Baker(9)
1996 Plan(2).......... 31,500 3% 10.5625 6/5/02 113,051 256,573
1996 Plan(2).......... 10,000 1% 11.3750 7/24/02 38,753 87,854
Bonus Plan(3)......... 25,000 3% 9.2500 10.8800 9/18/02 40,750 133,256 250,615
Errol Ginsberg(10)
1992 Plan(4).......... 25,000 3% 5.8500 4/30/02 44,714 106,197
1994 Plan(2).......... 25,000 3% 7.3125 3/20/02 62,174 141,051
1996 Plan(2).......... 45,000 5% 10.5625 6/5/02 161,501 366,533
Bonus Plan(3)......... 15,000 2% 9.2500 10.8800 9/18/02 24,450 79,954 150,369
</TABLE>
- --------
(1) Amounts do not include certain warrants granted to Mr. Rizzone and
options granted to Mrs. Rizzone. See Note 5 to Summary Compensation Table
and "Certain Relationships and Related Transactions." On April 22, 1997,
the exercise price of the option listed was changed to $5.8125 per share.
10
<PAGE>
(2) Options to purchase Class A Common Stock granted under the 1994 Plan and
the 1996 Plan are exercisable at the rate of 25% each year and are
subject to earlier termination in the event the employee is no longer
employed by the Company.
(3) Options to purchase Class A Common Stock granted under the 1996 Bonus and
Nonstatutory Stock Option Plan (the "Bonus Plan") are exercisable upon
the occurrence of certain events: (i) one-third upon the redemption or
conversion of at least 80% of the Class A Warrants issued in the initial
public offering; (ii) one-third upon the redemption or conversion of at
least 60% of the aggregate of the Class B Warrants issued in the initial
public offering and upon the subsequent conversion of Class A Warrants;
and (iii) one-third upon the release from escrow of one-half of the
outstanding Class E Common Stock. Options issued under this plan are
subject to earlier termination in the event the employee is no longer
employed by the Company.
(4) Options to purchase Class B Common Stock and Class E Common Stock (of
which, on the date of grant, one-third of such shares were Class B Common
Stock and two-thirds of such shares were Class E Common Stock, and after
the release of one-half of the shares of Class E Common Stock from escrow
in late 1996, two-thirds of such shares are Class B Common Stock and one-
third of such shares are Class E Common Stock) granted under the
Company's 1992 Incentive and Nonstatutory Stock Option Plan (the "1992
Plan") are exercisable at the rate of one-third each year and are subject
to earlier termination in the event the employee is no longer employed by
the Company.
(5) The market price for options to purchase Class A Common Stock was set at
the average of the bid and ask prices of the Class A Common Stock on the
applicable date as reported by Nasdaq. Due to certain restrictions on the
transferability of the underlying shares, the market price for options to
purchase Class B and Class E Common Stock was set at 80% of the average
of the bid and ask prices of the Class A Common Stock on the applicable
date as reported by Nasdaq.
(6) Potential gains are net of the exercise price but before taxes associated
with the exercise. Amounts represent hypothetical gains that could be
achieved for the respective options if exercised at the end of the option
term. The assumed 0% (in the case of options granted at an exercise price
below market price), 5% and 10% rates of stock price appreciation are
provided in accordance with the rules of the Securities and Exchange
Commission and do not represent the Company's estimate or projection of
the future market price of the Common Stock. Actual gains, if any, on
stock option exercises are dependent on the future financial performance
of the Company, overall market conditions and the option holders'
continued employment through the vesting period.
(7) Amounts shown reflect the options granted to Mr. Brown as of December 31,
1996 and assume expiration on the dates indicated in the table; however,
by their terms, such options are subject to earlier termination in the
event Mr. Brown is no longer employed by the Company. On April 22, 1997,
the exercise price of the option listed was changed to $5.8125 per share.
Mr. Brown's employment ceased on June 23, 1997.
(8) On April 22, 1997, the exercise prices of the options listed were changed
to $5.8125 per share.
(9) Amounts shown reflect the options granted to Mr. Baker as of December 31,
1996 and assume expiration on the dates indicated in the table; however,
by their terms, such options are subject to earlier termination in the
event Mr. Baker is no longer employed by the Company. Mr. Baker's
employment ceased on January 22, 1997.
(10) Amounts shown reflect the options granted to Mr. Ginsberg as of December
31, 1996 and assume expiration on the dates indicated in the table;
however, by their terms, such options are subject to earlier termination
in the event Mr. Ginsberg is no longer employed by the Company. Mr.
Ginsberg's employment ceased on March 18, 1997.
11
<PAGE>
OPTION EXERCISES AND VALUES IN 1996
The following table summarizes options exercises during 1996, and the number
of all options and the value of all in-the-money options held at the end of
1996, by each of the Named Executive Officers:
AGGREGATE OPTION EXERCISES IN 1996
AND DECEMBER 31, 1996 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 1996(#) DECEMBER 31, 1996($)(5)
ACQUIRED ON VALUE ------------------------- -------------------------
NAME EXERCISES(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Stephen R. Rizzone(1)
1992 Plan(2).......... -- -- 6,667 13,333 $18,333 $ 36,667
1994 Plan(3).......... -- -- 10,000 30,000 34,375 103,125
1994 Plan(3).......... -- -- -- 70,000 -- 227,675
Aubrey C. Brown
1992 Plan(2).......... -- -- 5,556 11,111 12,222 24,445
1994 Plan(3).......... -- -- 8,333 25,000 22,916 68,749
1996 Plan(3).......... -- -- -- 42,500 -- --
George M. Pontiakos
1996 Plan(3).......... -- -- -- 60,000 -- --
Thomas V. Baker
1992 Plan(2).......... -- -- 12,000 6,000 38,400 19,200
1994 Plan(3).......... -- -- 9,000 27,000 45,563 136,688
1996 Plan(3).......... -- -- -- 41,500 -- --
Bonus Plan(4)......... -- -- 16,667 8,333 1,042 521
Errol Ginsberg
1992 Plan(2).......... -- -- -- 25,000 -- 40,000
1994 Plan(3).......... -- -- -- 25,000 -- 50,000
1996 Plan(3).......... -- -- -- 45,000 -- --
Bonus Plan(4)......... -- -- 10,000 5,000 625 312
</TABLE>
- --------
(1) Amounts do not include certain warrants to purchase Class A Common Stock
granted to Mr. Rizzone or options granted to Mrs. Rizzone. See Note 5 to
Summary Compensation Table and "Certain Relationships and Related
Transactions."
(2) Options to purchase Class B Common Stock and Class E Common Stock (of
which, on the date of grant, one-third of such shares were Class B Common
Stock and two-thirds of such shares were Class E Common Stock, and after
the release of one-half of the shares of Class E Common Stock from escrow
in late 1996, two-thirds of such shares are Class B Common Stock and one-
third of such shares are Class E Common Stock) granted under the 1992 Plan
are exercisable at the rate of one-third each year and are subject to
earlier termination in the event the employee is no longer employed by the
Company.
(3) Options to purchase Class A Common Stock granted under the 1994 Plan and
the 1996 Plan are exercisable at the rate of 25% each year and are subject
to earlier termination in the event the employee is no longer employed by
the Company.
(4) Options to purchase Class A Common Stock granted under the Bonus Plan are
exercisable upon the occurrence of certain events: (i) one-third upon the
redemption or conversion of at least 80% of the Class A Warrants issued in
the initial public offering; (ii) one-third upon the redemption or
conversion of at least 60% of the aggregate of the Class B Warrants issued
in the initial public offering and upon the subsequent conversion of Class
A Warrants; and (iii) one-third upon the release from escrow of one-half
of the outstanding Class E Common Stock. Options issued under this plan
are subject to earlier termination in the event the employee is no longer
employed by the Company.
12
<PAGE>
(5) Valuation based on the difference between the then option exercise price
and the market value of the Company's Common Stock on December 31, 1996.
The market price for options to purchase Class A Common Stock was set at
the average of the bid and ask prices of the Class A Common Stock on that
date as reported by Nasdaq. Due to certain restrictions on transferability
of the underlying shares, the market price for options to purchase Class B
and Class E Common Stock was set at 80% of the average of the bid and ask
prices of the Class A Common Stock on that date as reported by Nasdaq. On
April 22, 1997, the exercise prices of the options granted to Messrs.
Rizzone, Brown and Pontiakos were changed to $5.8125 per share for options
granted under the 1994 and 1996 Plans and $4.65 per share for options
granted under the 1992 Plan.
EMPLOYMENT AND SEVERANCE AGREEMENTS AND ARRANGEMENTS
The Company has had an employment agreement with Stephen Rizzone since
November 1995, which has been amended and restated from time to time. On April
22, 1997, Mr. Rizzone's employment agreement was further amended and restated,
effective as of January 1, 1997. His employment agreement provides for, among
other things, his employment as Chairman of the Board, President and Chief
Executive Officer through December 31, 2001, at an initial base salary of
$200,000 per year commencing January 1, 1997, the use of a leased automobile
and such other incentive compensation as is consistent with industry practice,
subject to review annually by the Board. In addition to previous option grants
(which were agreed to be made fully exercisable under this employment
agreement), he will be granted fully exercisable options to purchase a total
of 392,100 shares of Class A Common Stock, 85,267 shares of Class B Common
Stock and 42,633 shares of Class E Common Stock, all with exercise prices set
at the fair market value of the underlying shares as of the date of the grant.
In the event of a "Reorganization" (as defined in the agreement) or the
execution of an agreement for a Reorganization, he would be entitled to a cash
bonus based on the total consideration to be paid in the Reorganization,
divided by the number of shares of Class A Common Stock outstanding at the
time of the Reorganization, such that if the resulting price per share is $15
or less, he would receive a bonus equal to 2% of the total consideration; if
the resulting price per share was greater than $15 but less than $20, the
bonus would be equal 3% of the total consideration; and if the resulting price
per share was $20 or more, the bonus would be equal to 4% of the total
consideration. The Company will reimburse and gross-up any extraordinary tax
assessments or penalties that may be applied by any tax authority on the
payment of such bonus and any exercise of stock options at the time of a
Reorganization. The Company also agreed to lend him the total of $750,000 in
exchange for his promissory note secured by options and warrants to purchase
182,875 shares of Company Common Stock (see "Certain Relationships and Related
Transactions" below). Pursuant to a Letter Agreement with Mr. Rizzone
effective April 22, 1997, the Company agreed that each year when he pays
interest on the loan, the Company will pay him a cash bonus of $49,250 subject
to withholding as required by law.
The Company's agreement with Mr. Rizzone is subject to termination by either
party, with or without cause on 30 days written notice. In the event the
Company terminates Mr. Rizzone's agreement for any reason, or he terminates
his employment due to (i) a change in duties, title or responsibility of his
position, (ii) a removal from or non-election to the Board or from the
position of Chairman of the Board, (iii) a change affecting Mr. Rizzone's
position in organizational structure of the Company, (iv) a reduction in
compensation, (v) he is required to travel more than fifty miles from his
principal residence to the principal offices of the Company or (vi) an
acquisition or merger of the Company, Mr. Rizzone would be entitled to certain
termination benefits. Such termination benefits would include the following:
(a) his salary and benefits would continue for a period of thirty-six months
from the date of termination, (b) payment would be made for accrued and unused
vacation time vested as of the date of termination, and (c) the Reorganization
cash bonus discussed above would be paid, effective for 48 months after
termination. In the event of voluntary termination by Mr. Rizzone other than
for the reasons set forth above ("Voluntary Termination"), he would not be
entitled to the above termination benefits. Mr. Rizzone will have two years to
exercise all options granted to him as of the effective date of his Voluntary
Termination from the Company or the end of the Termination Period (as defined
in the agreement). He would also be entitled to receive his Reorganization
Cash Bonus up to 12 months after his Voluntary Termination. In addition, in
the event Mr. Rizzone's employment with the Company should terminate for any
reason, $421,667 of the principal balance of the $750,000 promissory note will
be forgiven by the Company.
13
<PAGE>
The Company has an employment agreement with George Pontiakos which provides
for an initial base salary of $120,000 per year (which has been currently
adjusted to $150,000), eligibility for quarterly and annual bonuses ranging
from 5% to 15% of base salary, and certain other benefits. In the event Mr.
Pontiakos' employment is terminated for any reason, other than cause, he is
entitled to a severance, at his base salary amount for six months. The Company
is not obligated to provide any severance to Mr. Pontiakos should he
voluntarily resign his position. In addition, if the current Chief Executive
Officer is removed from his position, Mr. Pontiakos will have the option of
resigning from the Company and receiving twelve months of severance at his
base salary. Aubrey Brown also had a similar option to resign and receive
twelve months of severance at his base salary (which is currently $180,000) in
the event the current Chief Executive Officer is removed from his position.
The Company had an employment agreement with Errol Ginsberg which provided
for a base salary of $150,000 per year and certain other benefits. In the
event Mr. Ginsberg is terminated for any reason, other than cause, he was
entitled to severance at his base salary for one year provided he did not
violate any terms of his confidentiality agreement with the Company. The
Company is not obligated to provide any severance to Mr. Ginsberg should he
voluntarily resign his position.
The Company had an employment agreement with Thomas Baker which provided for
an initial base salary of $80,000 which was increased from time to time by the
Company. The agreement also provided for incentive compensation based on the
Company achieving certain enumerated performance goals and as determined to be
fair and reasonable by the Compensation Committee of the Board of Directors.
The agreement further provided that in the event the employee's employment was
terminated by the Company at any time for any reason other than cause,
disability, death or upon the employees' voluntary termination, or by
termination of the employee (or reduction in statute, nature of duties,
employee benefits or working conditions from those enjoyed by all other
executives at the same level or higher) within 120 days following a "Change of
Control" of the Company, the Company would pay the employee an amount equal to
the sum of (i) the employee's accrued but unpaid base salary, and one year's
base salary at the employee's then prevailing base salary; (ii) all accrued
and unpaid vacation pay as of his termination date; and (iii) all accrued and
unpaid incentive compensation through the most recent date prior to
termination for which such incentive compensation would be calculated.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
that the Company's executive officers and directors and persons who own more
than ten percent of the Company's Common Stock timely file initial reports of
ownership of the Company's Common Stock and other equity securities and
reports of changes in such ownership with the Securities and Exchange
Commission and the Nasdaq Stock Market. After a review of such insider
reports, the Company believes that all required reports have been timely
filed, except (i) Mr. Rizzone was late in filing a Form 3, a Form 5 for 1995
(showing three exempt transactions) and a Form 5 for 1996 (showing nine
transactions, most of which should have been reported on a total of five Form
4s during that year but were not), all such transactions related to option and
warrant grants to Mr. Rizzone and his spouse; (ii) Mr. Brown was late in
filing a Form 3, a Form 5 for 1995 (showing three exempt transactions) and a
Form 5 for 1996 (showing two transactions that should have been reported on a
total of two Form 4s during that year but were not), all such transactions
related to option grants to Mr. Brown; and (iii) Mr. Pontiakos was late in
filing a Form 3 and a Form 5 for 1996 (showing four transactions, most of
which should have been reported on a total of two Form 4s during that year but
were not), all such transactions related to option grants to Mr. Pontiakos.
These individuals have made the appropriate filings.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Rizzone, the Company's Chairman of the Board, Chief Executive Officer
and President is married to Mashid Rizzone, the Company's Director of Sales,
who is separately compensated by the Company. See Notes 4 and 5 to "Executive
Compensation--Summary Compensation Table." Since the beginning of 1997, the
Company has lent Mr. Rizzone a total of $750,000 in exchange for a promissory
note. Interest on the note accrues at a rate of 6.23% per annum and is payable
annually in arrears. The unpaid principal and any unpaid
14
<PAGE>
accrued interest, less any amounts forgiven, is due and payable upon the
earlier of (i) April 22, 2000 or (ii) 180 days following the date Mr. Rizzone
ceases to be employed by the Company. The loan is secured by options and
warrants to purchase 182,875 shares of Common Stock granted to Mr. Rizzone.
See also "Employment and Severance Agreements and Arrangements."
In 1996, the Company issued four warrants to Mr. Rizzone to purchase Class A
Common Stock. Two warrants were issued in consideration of the payment of $300
in connection with Mr. Rizzone's 1996 Employment Agreement. The first warrant
granted him the right to purchase 15,000 shares of Class A Common Stock, at an
exercise price of $7.125 per share, exercisable on the date the first half of
the outstanding shares of Class E Common Stock were converted into shares of
Class B Common Stock (an event which occurred prior to the end of 1996). The
other warrant granted him the right to purchase 15,000 shares of Class A
Common Stock, at an exercise price of $7.125 per share, exercisable on the
date all remaining outstanding shares of Class E Common Stock are converted
into shares of Class B Common Stock (an event which has yet to occur). Both
warrants terminate on January 1, 1999. Two additional warrants were issued in
lieu of interest owed by the Company to Mr. Rizzone for two short-term loans
totaling $200,000 made by him to fund operations. One warrant granted him the
right to purchase 11,765 shares of Class A Common Stock at an exercise price
of $8.50 per share (a $2.00 discount from the closing price of the Class A
Common Stock on the date the first loan was made). The other warrant granted
him the right to purchase 11,110 shares of Class A Common Stock at an exercise
price of $9.00 per share (a $2.00 discount from the closing price of the Class
A Common Stock on the date the second loan was made). Both warrants were
immediately exercisable and terminate on October 14, 2001. On April 22, 1997,
the exercise prices of each of the warrants to purchase 15,000 shares were
changed to $5.8125 per share and the other warrants were changed to $3.8125
per share.
On January 10, 1996, the Company completed the sale of 512,996 shares and
341,997 shares (or 854,993 shares in the aggregate) of its Class A Common
Stock to Seiji Uehara, a director of the Company, and Isao Okawa,
respectively, for cash consideration of $5.848 per share (or $5,000,000 in the
aggregate). The per share purchase price, although less than the market price
of the Class A Common Stock at time, was deemed to be fair to the Company
because the shares issued in the transaction were "restricted securities"
within the meaning of Rule 144 of the Securities Act. The average of the bid
and ask prices of the Company's Class A Common Stock on January 10, 1996 was
$7.50 per share. Under the stock purchase agreement between the parties, the
Company granted Messrs. Uehara and Okawa certain "piggy back" registration
rights and agreed to provide them certain indemnification. At the time of the
transaction, Mr. Uehara was also the president of NextCom, and Mr. Okawa was
the chairman and president of the parent of NextCom.
In June 1996, NextCom advanced the Company $500,000 in cash. In lieu of
interest expense, NextCom received an additional 5% discount on all its
purchases of Company products until the advance was paid off in October 1996.
The amount of the additional discount received by NextCom totaled $23,312.
Total 1996 sales to NextCom were $1.5 million (or 6% of total revenues). At
December 31, 1996, the amount due the Company for product purchases by NextCom
were $899,381 (or 10% of the Company's total accounts receivable). The Company
also entered into a sales incentive plan with NextCom to promote sales growth
and market awareness of the Company's products. In connection with the plan,
the Company paid NextCom $27,000 in cash.
In July 1995, the Company completed a private sale of 165,000 shares of
Class A Common Stock to Ungermann-Bass Networks, Inc. ("UB"), a customer of
the Company. In accordance with the stock purchase agreement with UB, for the
two year period following the date of the agreement, UB has the right to
designate one candidate to the Board of Directors of the Company. On May 1,
1997, Newbridge Networks Corporation ("Newbridge"), the parent company of UB,
designated Richard Tinsley as such candidate. On the same day, the Company's
Board of Directors appointed Mr. Tinsley to fill a vacancy on the Board. The
Company's total sales to UB for the year ended December 31, 1996 were
$2,454,135 (or 9% of total annual revenues) and for the quarter ended March
31, 1997 were $520,200 (or 16% of total quarterly revenues). At December 31,
1996, UB owed the Company $345,600 for product purchases in 1996.
15
<PAGE>
PROPOSAL NO. 2--APPROVAL OF THE 1997 EQUITY INCENTIVE PLAN
GENERAL
At the Annual Meeting, the Company's stockholders will be asked to approve
the NetVantage, Inc. Equity Incentive Plan (the "1997 Equity Plan"). The 1997
Equity Plan authorizes the issuance of up to 800,000 shares of the Company's
Class A Common Stock pursuant to awards granted thereunder. Awards may be in
the form of stock options, restricted stock, stock purchase rights or
performance shares. The number of shares subject to awards granted to a single
participant over the life of the 1997 Equity Plan may not exceed 500,000.
Approximately 60 persons, of whom seven are executive officers, four are
directors who are not executive officers, and approximately 45 are non-
executive officer employees, are expected to be eligible to participate in the
1997 Equity Plan. As of June 16, 1997, the average of the bid and ask prices
of the Company's Class A Common Stock was $7.75 per share. A copy of the 1997
Equity Plan is set forth in Exhibit A to this proxy statement, and the
following description of such Plan is qualified in its entirety by this
reference thereto.
BACKGROUND
The 1997 Equity Plan is intended to strengthen the Company by providing
selected employees, consultants and directors of the Company an opportunity to
participate in the Company's future by offering them an opportunity to acquire
stock in the Company so as to retain, attract and motivate them.
Administration of the 1997 Equity Plan may be either by the Board or, upon
delegation by the Board, by a committee of the Board (in either case, the
"Committee"). The Committee may select key employees, including executive
officers, consultants and directors to receive awards under the 1997 Equity
Plan and has broad discretion to determine the amount and type of awards and
terms and conditions of the awards. Individual grants will generally be based
on a person's present and potential contribution to the Company.
The 1997 Equity Plan is intended to supplement the Company's 1992 Incentive
and Nonstatutory Stock Option Plan, the 1994 Incentive and Nonstatutory Stock
Option Plan and the 1996 Incentive Stock Plan (the "Prior Plans"). Under the
Prior Plans, as of June 16, 1997, a total of 52,600 shares remained available
for future grants, which is insufficient to meet the Company's equity
compensation objectives. Stock-based awards are a critical component of the
Company's employee compensation structure, and are especially important in
attracting and retaining qualified employees at a time when the Company is
experiencing rapid growth. The Company believes that the additional shares
authorized by the 1997 Equity Plan are necessary to enable it to maintain an
adequate equity incentive program.
Without approval of the 1997 Equity Plan, the Company would be (i) unable to
make future option grants to employees beyond the level of shares currently
authorized in other option plans of the Company, (ii) disadvantaged in its
recruitment and retention of employees and (iii) less attractive to
acquisition targets and their key executives and technology personnel that the
Company desires to acquire in implementing its growth strategy.
DESCRIPTION OF PLAN
General. Awards may be granted in the form of stock options ("Options"),
restricted stock ("Restricted Stock"), stock purchase rights ("Stock Purchase
Rights") or performance shares ("Performance Shares"). Any award may be
granted either alone or in addition to other awards granted under the 1997
Equity Plan. The Committee may condition the grant of the award upon the
attainment of specified Company, group or division performance goals or other
criteria, which need not be the same for all participants. No award may be
granted under the 1997 Equity Plan on or after May 1, 2007, but outstanding
awards may extend beyond that date.
Options. Options granted under the 1997 Equity Plan may be incentive stock
options ("ISOs") within the meaning of Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), or nonqualified stock options ("NQOs"
or "Non-Qualified Options"). The exercise price of ISOs may not be less than
the fair market value of the shares subject to the option on the date of the
grant. The exercise price of NQOs must be at least
16
<PAGE>
85% of the fair market value of the shares subject to the option on the date
of grant. The term of any ISO granted under the Plan may not exceed ten years
and the term of any NQO may not exceed 15 years. Certain other limitations are
also applicable to ISOs in order to take advantage of the favorable tax
treatment that may be available for ISOs.
Restricted Stock. Restricted Stock awards consist of non-transferable shares
of Class A Common Stock of the Company. The Committee may provide for the
lapse of the transfer restrictions over a period of not more than ten years,
or may accelerate or waive such restrictions, in whole or in part, based on
service, performance or other criteria determined by the Committee.
Stock Purchase Rights. Stock Purchase Rights consist of a grant to purchase
Class A Common Stock of the Company at a purchase price of not less than 85%
of the fair market value of the Class A Common Stock on the grant date. Stock
Purchase Rights are exercisable for a period determined by the Committee not
exceeding 30 days from the grant date.
Performance Shares. Performance shares are shares of Class A Common Stock
issuable upon the attainment of performance criteria. At the time of a grant,
the Committee will determine the number of shares of Class A Common Stock to
be awarded at the end of the performance period if and to the extent that the
specified performance targets are met. The consideration payable by a
participant with respect to a Performance Share award will be determined by
the Committee but may not exceed 50% of the fair market value of the Class A
Common Stock on the date of grant. The Committee will determine the
performance period, which must be at least one year and not more than six
years, the performance objectives to be used in granting the awards, and the
extent to which the awards have been earned. Performance periods may overlap,
and participants may be awarded Performance Shares having different
performance criteria. Performance Share awards may be payable in cash or stock
at the discretion of the Committee, and may bear interest or earn dividends.
Other Provisions. The consideration payable for, upon exercise of, or for
tax payable in connection with, an award may be paid in cash or by delivery of
other property, including securities of the Company, as authorized by the
Committee. The Committee shall determine the consideration payable, if any,
upon the grant of any awards. Unless otherwise provided in the applicable
award agreement or by the Committee, awards generally may be exercised at any
time within three months after a participant's employment by, or consulting
relationship with, the Company terminates (but only to the extent exercisable
or payable at the time of termination). If termination is due to the
participant's death, retirement or disability, the award my be exercised for
one year thereafter. Shares issued under an award may be subject to a right of
repurchase by the Company. No award shall be assignable or otherwise
transferable by a participant other than by will or by the laws of descent and
distribution.
The Committee may adjust the performance goals and measurements applicable
to awards. The Committee also may waive in whole or in part any or all
restrictions, conditions, vesting or forfeiture with respect to any award
granted under the 1997 Equity Plan.
The Board may amend, alter or discontinue the 1997 Equity Plan or any award
at any time, except that the consent of a participant is required if the
participant's rights under an outstanding award would be impaired. In
addition, no amendment, alteration or discontinuance of the 1997 Equity Plan
will require the approval of the shareholders of the Company except (i) an
increase in the total number of shares reserved for issuance pursuant to
awards under the 1997 Equity Plan, or (ii) with respect to provisions solely
as they relate to ISOs, to the extent required for the 1997 Equity Plan to
comply with Section 422 of the Code, or (iii) to the extent required by other
applicable laws, rules or regulations, or (iv) to the extent the Board
otherwise concludes that stockholder approval is advisable. The 1997 Equity
Plan will constitute an unfunded plan for incentive and deferred compensation.
The Committee may authorize the creation of trusts or arrangements to meet the
obligations under the 1997 Equity Plan to deliver stock or make payments.
17
<PAGE>
FEDERAL INCOME TAX CONSEQUENCES
Incentive Stock Options. ISOs are intended to constitute "incentive stock
options" within the meaning of Section 422 of the Code. ISOs may be granted
only to employees of the Company (including directors who are also employees).
An optionee does not recognize taxable income upon either the grant or
exercise of an ISO. However, the excess of the fair market value of the shares
purchased upon exercise over the option exercise price (the "Option Spread")
is includable in the optionee's "alternative minimum taxable income" ("AMTI")
for purposes of the alternative minimum tax ("AMT"). The Option Spread is
generally measured on the date of exercise and is includable in AMTI in the
year of exercise. Special rules regarding the time of AMTI inclusion may apply
for shares subject to repurchase right or other "substantial risk of
forfeiture" (including, in the case of each person subject to the reporting
requirements of Section 16 of the Exchange Act, limitations on resale of
shares imposed under Section 16(b) of the Exchange Act).
If an optionee holds the shares purchased under an ISO for at least two
years from the date the ISO is granted and for at least one year from the date
the ISO is exercised, any gain from a sale of the shares other than to the
Company is taxable as long-term capital gain. Under these circumstances, the
Company would not be entitled to a tax deduction at the time the ISO is
exercised or at the time the stock is sold. If an optionee were to dispose of
stock acquired pursuant to an ISO before the end of the required holding
periods (a "Disqualifying Disposition"), the amount by which the market value
of the stock at the time the ISO is exercised exceeds the exercise price (or,
if less, the amount of gain realized on the sale) is taxable as ordinary
income, and the Company is entitled to a corresponding tax deduction. Such
income is subject to information reporting requirements and may become subject
to income and employment tax withholding. Gain from a Disqualifying
Disposition in excess of the amount required to be recognized as ordinary
income is capital gain. Optionees are required to notify the Company
immediately prior to making a Disqualifying Disposition. If stock is sold to
the Company rather than to a third party, the sale may not produce capital
gain or loss; such a sale will constitute a redemption of such shares which
could be taxable as a dividend unless it is "not essentially equivalent to a
dividend" within the meaning of the Code. The timing and amount of income from
a Disqualifying Disposition and the beginning of the optionee's holding period
for determining whether capital gain or loss is long- or short-term may be
affected if option stock is acquired subject to a repurchase right or other
"substantial risk of forfeiture" (including in the case of each person subject
to the reporting requirements of Section 16 of the Exchange Act, limitations
on resale of shares imposed under Section 16(b) of the Exchange Act).
Nonqualified Stock Options. An optionee is not taxable upon the award of a
NQO. Federal income tax consequences upon exercise depend upon whether the
shares thereby acquired are subject to a "substantial risk of forfeiture." If
the shares are not subject to a substantial risk of forfeiture, or if they are
so restricted and the optionee files an election under Section 83(b) of the
Code (a "Section 83(b) Election") with respect to the shares, the optionee
will have ordinary income at the time of exercise measured by the Option
Spread on the exercise date. The optionee's tax basis in the shares will be
the fair market value of the shares on the date of exercise, and the holding
period for purposes of determining whether capital gain or loss upon sale is
long- or short-term also will begin on or immediately after that date. If the
shares are subject to a substantial risk of forfeiture and no Section 83(b)
Election is filed, the optionee will not be taxable upon exercise, but instead
will have ordinary income on the date the restrictions lapse, in an amount
equal to the difference between the amount paid for the shares under the NQO
and their fair market value as of the date of lapse; in addition, the
optionee's holding period will begin on the date of the lapse. Whether or not
the shares are subject to a substantial risk of forfeiture, the amount of
ordinary income taxable to an optionee who is an employee at the time of grant
constitutes "supplemental wages" subject to withholding of income and
employment taxes by the Company, and the Company receives a corresponding
income tax deduction.
Upon sale, other than to the Company, of shares acquired under a NQO, an
optionee generally will recognize capital gain or loss to the extent of the
difference between the sale price and the optionees's tax basis in the shares,
which will be long-term gain or loss if the employee's holding period in the
shares is more than one year. If stock is sold to the Company, rather than to
a third party, the sale may not produce capital gain or
18
<PAGE>
loss. A sale of shares to the Company will constitute a redemption of such
shares, which could be taxable as a dividend unless the redemption is "not
essentially equivalent to a dividend" within the meaning of the Code.
Restricted Stock. Upon receipt of Restricted Stock, a recipient generally
has taxable income in the amount of the excess of the then fair market value
of the Common Stock over any consideration paid for the Common Stock (the
"spread"). However, if the Common Stock is subject to a "substantial risk of
forfeiture" (described under "Incentive Stock Options," above) and the
recipient does not make a Section 83(b) Election, the recipient will have
taxable income upon lapse of the risk of forfeiture, rather than at receipt,
in an amount equal to the spread on the date of lapse. The taxable income
constitutes supplemental wages subject to income and employment tax
withholding, and the Company receives a corresponding income tax deduction.
The consequences upon sale or disposition of Restricted Stock generally are
the same as for Common Stock acquired under a NQO (see above).
Performance Shares. Receipt of an award of Performance Shares will generally
be treated for tax purposes in the same manner as an award of Restricted
Stock, i.e., as receipt of property subject to restrictions.
Stock Purchase Rights. The tax treatment of Stock Purchase Rights is
identical to that of NQOs, as described above.
Restrictions on Deductibility of Compensation. The 1997 Equity Plan permits
acceleration and vesting of Awards and Options in the event of a change in
control of the Company. If a change in control occurs and such acceleration
and vesting is permitted, then the value that thereby accrues to an employee
or consultant who is also an officer or stockholder of the Company, or who is
"highly compensated" (which, generally, means among the highest paid one
percent of all employees (and consultants) of the Company) may constitute an
"excess parachute payment." In general, payments are "excess parachute
payments" if they are triggered by a change in control and exceed three times
the recipient's average compensation from the Company over the preceding five
years (or term of service if shorter). "Excess parachute payments" are not
deductible by the Company and are subject to a 20 percent excise tax that is
imposed on the recipient but that must be withheld by the Company.
Compensation paid to the Chief Executive Officer and the next four most
highly compensated officers of the Company is not deductible by the Company to
the extent that it exceeds $1 million in a tax year of the Company unless it
constitutes qualified performance-based compensation and certain other
conditions are satisfied. While the Company generally intends to attempt to
cause compensation paid under the 1997 Equity Plan to qualify as "performance-
based" for this purpose, when consistent with the goals of the Plan, certain
discretionary features of the Plan may prevent such compensation from so
qualifying.
The foregoing summarizes certain Federal income tax consequences relating to
the awards; however, reference is made to the applicable provisions of the
Code and its rules and regulations. In addition, various state and local laws
may provide tax consequences that vary significantly from the Federal income
tax consequences described above. Each participant may wish to discuss
specific questions with his own tax adviser or attorney.
19
<PAGE>
The following table sets forth the number of shares of Class A Common Stock
which can be purchased upon exercise of the grants of options awarded to date
to (i) the Company's Chief Executive Officer and one Named Executive Officer
(the other Named Executive Officers, who are no longer with the Company and
received no awards under the 1997 Equity Plan, are not included); (ii) the
Company's current executive officers who are not Named Executive Officers
(excluding those individuals who did not receive grants under the 1997 Equity
Plan); (iii) all current executive officers as a group; (iv) all current
directors who are not executive officers; and (v) all employees, including all
current officers who are not executive officers as a group, under the 1997
Equity Plan subject to approval of such Plan by the stockholders. Additional
grants under the 1997 Equity Plan will be made at the discretion of the Board,
and accordingly, are not yet determinable. Benefits under the 1997 Equity Plan
will depend on a number of factors, including the fair market value of the
Company's Common Stock on future dates and, in the case of stock options, the
exercise decisions made by the optionees. Consequently, it is not possible to
determine the benefits that might be received by participants in the 1997
Equity Plan.
NEW PLAN BENEFITS TABLE
<TABLE>
<CAPTION>
SHARES
UNDERLYING
NAME AND PRINCIPAL POSITION OPTIONS(#)(1)
--------------------------- -------------
<S> <C>
Stephen R. Rizzone........................................ 133,600
Chairman of the Board, President and Executive Officer
George M. Pontiakos....................................... --
Senior Vice President of Product Development
Dana R. Nelson ........................................... 85,000
Senior Vice President of Sales
Thomas G. Iwanski ........................................ 50,000
Chief Financial Officer, Vice President of Finance and
Secretary
Sharam Hakimi ............................................ 25,000
Vice President and Chief Technical Officer
All Executive Officers as a Group......................... 293,600
All Non-Executive Directors as a Group.................... 40,000
All Non-Executive Officer Employees as a Group............ 51,000
</TABLE>
- --------
(1) All options are granted at fair market value at date of grant.
VOTE REQUIRED
The affirmative vote of a majority of the shares of Common Stock present or
represented and voting at the Annual Meeting is required to adopt this
proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE 1997 EQUITY
INCENTIVE PLAN.
20
<PAGE>
OTHER MATTERS
INDEPENDENT ACCOUNTANTS
The Board has selected Price Waterhouse LLP, independent accountants, to
audit the financial statements of the Company for the fiscal year ending
December 31, 1997. Price Waterhouse LLP has audited the Company's financial
statements since its inception. Representatives of Price Waterhouse LLP are
expected to be present at the Annual Meeting with the opportunity to make a
statement if they desire to do so, and are to be available to respond to
appropriate questions.
EXPENSES OF SOLICITATION
The cost of the solicitation of the Company's stockholders will be borne by
the Company. Proxies may be solicited by certain directors, officers and
employees of the Company personally or by telephone without receiving
additional compensation. The Company has engaged MacKenzie Partners, Inc. to
assist in soliciting proxies from brokers, bank nominees and institutional
holders for an estimated fee of $2,500 plus reasonable expenses. The Company
will reimburse brokers, fiduciaries and custodians for their reasonable costs
in forwarding proxy materials to beneficial owners of Common Stock held in
their names.
ANNUAL REPORT
THE COMPANY'S ANNUAL REPORT TO STOCKHOLDERS, INCLUDING A COPY OF THE
COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1996
(EXCLUSIVE OF EXHIBITS THERETO), IS BEING MAILED TO ALL STOCKHOLDERS. ANY
STOCKHOLDER WHO HAS NOT RECEIVED A COPY MAY OBTAIN ONE BY WRITING TO THE
SECRETARY OF THE COMPANY, 201 CONTINENTAL BOULEVARD, SUITE 201, EL SEGUNDO,
CALIFORNIA 90245-4427.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Proposals that are intended to be presented by stockholders at the 1998
Annual Meeting of Stockholders must be received by the Company at its
principal executive offices no later than March 9, 1998 and all other
conditions for inclusion must be satisfied, in order that they may be included
in the proxy statement and form of proxy related to that meeting.
OTHER MATTERS
The Company knows of no other matters to be brought before the Annual
Meeting. If any other matters properly come before the Annual Meeting, it is
the intention of the persons named in the accompanying form of proxy to vote
the shares they represent in their discretion.
BY ORDER OF THE BOARD OF DIRECTORS
Stephen R. Rizzone
Chairman of the Board, President and
Chief Executive Officer
June 27, 1997
21
<PAGE>
EXHIBIT A
NETVANTAGE, INC.
EQUITY INCENTIVE PLAN
SECTION 1. PURPOSE; DEFINITIONS.
(a) Purpose. The purpose of the Plan is to provide the directors and
selected eligible employees of, and consultants to, NetVantage, Inc., a
Delaware corporation, its subsidiaries and affiliates an opportunity to
participate in the Company's future by offering them an opportunity to acquire
stock in the Company so as to retain, attract and motivate them.
(b) Definitions. For purposes of the Plan, the following terms have the
following meanings:
(i) "Award" means any award under the Plan, including any Option,
Restricted Stock, Stock Purchase Right or Performance Share Award.
(ii) "Award Agreement" means, with respect to each Award, the signed
written agreement between the Company and the Plan participant setting
forth the terms and conditions of the Award.
(iii) "Board" means the Board of Directors of the Company.
(iv) "Change in Control" has the meaning set forth in Section 9(a).
(v) "Change in Control Price" has the meaning set forth in Section 9(c).
(vi) "Code" means the Internal Revenue Code of 1986, as amended from time
to time, and any successor statute.
(vii) "Commission" means the Securities and Exchange Commission and any
successor agency.
(viii) "Committee" means the Committee referred to in Section 2, or the
Board in its capacity as administrator of the Plan in accordance with
Section 2.
(ix) "Company" means NetVantage, Inc., a Delaware corporation.
(x) "Disability" means permanent and total disability as determined by
the Committee for purposes of the Plan.
(xi) "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and any successor statute.
(xii) "Fair Market Value" means as of any given date (a) if the Stock is
listed on any established stock exchange or a national market system,
either the closing sale price for the Stock or the closing bid if no sales
were reported, or the average of the bid and ask prices, as selected by the
Committee in its discretion, as quoted on such system or exchange, as
reported in The Wall Street Journal; or (b) in the absence of an
established market for the Stock, the fair market value of the Stock as
determined by the Committee in good faith.
(xiii) "Incentive Stock Option" means any Option intended to be and
designated as an "incentive stock option" within the meaning of Section 422
of the Code.
(xiv) "Nonqualified Stock Option" means any Option that is not an
Incentive Stock Option.
(xv) "Option" means an option granted under Section 5.
(xvi) "Performance Period" means the period determined by the Committee
under Section 8(a).
(xvii) "Performance Share" means a share of Stock granted pursuant to a
Performance Share Award.
(xiii) "Performance Share Award" means an Award under Section 8.
A-1
<PAGE>
(xix) "Plan" means this NetVantage, Inc. Equity Incentive Plan, as
amended from time to time.
(xx) "Restricted Stock" means an Award of Stock subject to restrictions,
as more fully described in Section 6.
(xxi) "Restriction Period" means the period determined by the Committee
under Section 6(b).
(xxii) "Rule 16b-3" means Rule 16b-3 under Section 16(b) of the Exchange
Act, as amended from time to time, and any successor rule.
(xxiii) "Stock" means the Class A Common Stock of the Company, and any
successor security.
(xxiv) "Stock Purchase Right" means an Award granted under Section 7.
(xxv) "Subsidiary" has the meaning set forth in Section 424 of the Code.
(xxvi) "Tax Date" means the date defined in Section 10(f).
(xxvii) "Termination" means, for purposes of the Plan, with respect to a
participant, that (a) if the participant is a director of the Company, he
or she has ceased to be, for any reason, a director and (b) if the
participant is an employee of or consultant to the Company, he or she has
ceased to be, for any reason, employed by, or consulting to, the Company, a
subsidiary or an affiliate; provided, that for purposes of this definition,
if so determined by the Committee, Termination shall not include a change
in status from an employee of, to a consultant to the Company or any
subsidiary or affiliate, or vice versa.
SECTION 2. ADMINISTRATION.
(a) Committee. The Plan shall be administered by the Board or, upon
delegation by the Board, by a committee of the Board that will satisfy Rule
16b-3 and Section 162(m) of the Code, as in effect with respect to the Company
from time to time. In connection with the administration of the Plan, the
Committee shall have the powers possessed by the Board. The Committee may act
only by a majority of its members, except that the Committee may from time to
time select another committee or one or more other persons to be responsible
for any matters so long as the selection comports with the requirements of
Section 162(m) of the Code and Rule 16b-3. The Board at any time may abolish
the Committee and revest in the Board the administration of the Plan.
(b) Authority. The Committee shall grant Awards to directors, eligible
employees and consultants. In particular and without limitation, the
Committee, subject to the terms of the Plan, shall:
(i) select the directors, officers, other key employees and consultants
to whom Awards may be granted;
(ii) determine whether and to what extent Awards are to be granted under
the Plan;
(iii) determine the number of shares to be covered by each Award granted
under the Plan;
(iv) determine the terms and conditions of any Award granted under the
Plan and any related loans to be made by the Company, based upon factors
determined by the Committee; and
(v) determine to what extent and under what circumstances any Award
payments may be deferred by a participant.
(c) Committee Determinations Binding. The Committee may adopt, alter and
repeal administrative rules, guidelines and practices governing the Plan as it
from time to time shall deem advisable, may interpret the terms and provisions
of the Plan, any Award and any Award Agreement and may otherwise supervise the
administration of the Plan. Any determination made by the Committee pursuant
to the provisions of the Plan with respect to any Award shall be made in its
sole discretion at the time of the grant of the Award or, unless in
contravention of any express term of the Plan or Award, at any later time. All
decisions made by the Committee under the Plan shall be binding on all
persons, including the Company and Plan participants.
A-2
<PAGE>
SECTION 3. STOCK SUBJECT TO PLAN.
(a) Number of Shares. The total number of shares of Stock reserved and
available for issuance pursuant to Awards under this Plan shall be 800,000
shares. Such shares may consist, in whole or in part, of authorized and
unissued shares or treasury shares or shares reacquired in private
transactions or open market purchases, but all shares issued under the Plan,
regardless of source, shall be counted against the 800,000 share limitation.
If any Option terminates or expires without being exercised in full or if any
shares of Stock subject to an Award are forfeited, or if an Award otherwise
terminates without a payment being made to the participant in the form of
Stock, the shares issuable under such Option or Award shall again be available
for issuance in connection with Awards. Any Award under this Plan shall be
governed by the terms of the Plan and any applicable Award Agreement.
(b) Adjustments. In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, stock split or other change in corporate
structure affecting the Stock, such substitution or adjustments shall be made
in the aggregate number of shares of Stock reserved for issuance under the
Plan, in the number and exercise price of shares subject to outstanding
Options, and in the number of shares subject to other outstanding Awards, as
may be determined to be appropriate by the Committee, in its sole discretion;
provided, however, that the number of shares subject to any Award shall always
be a whole number.
SECTION 4. ELIGIBILITY.
Awards may be granted to directors, officers and other key employees of, and
consultants to, the Company, its subsidiaries and affiliates.
SECTION 5. STOCK OPTIONS.
(a) Types. Any Option granted under the Plan shall be in such form as the
Committee may from time to time approve. The Committee shall have the
authority to grant to any participant Incentive Stock Options, Nonqualified
Stock Options or both types of Options. Incentive Stock Options may be granted
only to employees of the Company, its parent (within the meaning of Section
424(e) of the Code) or Subsidiaries. Any portion of an Option that is not
designated as, or does not qualify as, an Incentive Stock Option shall
constitute a Nonqualified Stock Option.
(b) Terms and Conditions. Options granted under the Plan shall be subject to
the following terms and conditions:
(i) Option Term. The term of each Option shall be fixed by the Committee,
but no Incentive Stock Option shall be exercisable more than ten years
after the date the Option is granted, and no Nonqualified Stock Option
shall be exercisable more than 15 years after the date the Option is
granted. If, at the time the Company grants an Incentive Stock Option, the
optionee owns directly or by attribution stock possessing more than 10
percent of the total combined voting power of all classes of stock of the
Company, or any parent or Subsidiary of the Company, the Incentive Stock
Option shall not be exercisable more than five years after the date of
grant.
(ii) Grant Date. The Company may grant Options under the Plan at any time
and from time to time before the Plan terminates. The Committee shall
specify the date of grant or, if it fails to, the date of grant shall be
the date of action taken by the Committee to grant the Option. However, if
an Option is approved in anticipation of employment, the date of grant
shall be the date the intended optionee is first treated as an employee for
payroll purposes.
(iii) Exercise Price. The exercise price per share of Stock purchasable
under an Option shall be equal to at least 85 percent of the Fair Market
Value on the date of grant, and in the case of Incentive Stock Options
shall be equal to at least the Fair Market Value on the date of grant;
provided, however, that if, at the time the Company grants an Incentive
Stock Option, the optionee owns directly or by attribution stock possessing
more than 10 percent of the total combined voting power of all classes of
stock of the Company,
A-3
<PAGE>
or any parent or Subsidiary of the Company, then the exercise price shall
be not less than 110 percent of the Fair Market Value on the date the
Incentive Stock Option is granted.
(iv) Exercisability. Subject to the other provisions of the Plan, an
Option shall be exercisable in its entirety at grant or at such times and
in such amounts as are specified in the Award Agreement evidencing the
Option. The Committee, in its absolute discretion, at any time may waive
any limitations respecting the time at which an Option first becomes
exercisable, in whole or in part, including acceleration in connection with
a reorganization of the Company if there is no adverse consequences to the
Company therefrom.
(v) Method of Exercise; Payment. To the extent the right to purchase
shares has accrued, Options may be exercised, in whole or in part, from
time to time, by written notice from the optionee to the Company stating
the number of shares being purchased, accompanied by payment of the
exercise price for the shares.
SECTION 6. RESTRICTED STOCK.
(a) Price. The Committee may grant to a participant Restricted Stock. The
grantee shall pay no consideration therefor.
(b) Restrictions. Subject to the provisions of the Plan and the Award
Agreement, during the Restriction Period set by the Committee, commencing
with, and not exceeding ten years from, the date of such Award, the
participant shall not be permitted to sell, assign, transfer, pledge or
otherwise encumber shares of Restricted Stock. Within these limits, the
Committee may provide for the lapse of such restrictions in installments and
may accelerate or waive such restrictions, in whole or in part, based on
service, performance or such other factors or criteria as the Committee may
determine.
(c) Dividends. Unless otherwise determined by the Committee, with respect to
dividends on shares of Restricted Stock, dividends payable in cash shall be
automatically reinvested in additional Restricted Stock, and dividends payable
in Stock shall be paid in the form of Restricted Stock.
(d) Termination. Except to the extent otherwise provided in the Award
Agreement and pursuant to Section 6(b), in the event of a Termination during
the Restriction Period, all shares still subject to restriction shall be
forfeited by the participant.
SECTION 7. STOCK PURCHASE RIGHTS.
(a) Price. The Committee may grant Stock Purchase Rights which shall enable
the recipient to purchase Stock at a price equal to not less than 85 percent
of its Fair Market Value on the date of grant.
(b) Exercisability. Stock Purchase Rights shall be exercisable for a period
determined by the Committee not exceeding 30 days from the date of the grant.
SECTION 8. PERFORMANCE SHARES.
(a) Awards. The Committee shall determine the nature, length and starting
date of the Performance Period for each Performance Share Award, which period
shall be at least one year and not more than six years. The consideration
payable by a participant with respect to a Performance Share Award shall be an
amount determined by the Committee in the exercise of the Committee's
discretion at the time of the Award; provided, that the amount of
consideration may be zero and may in no event exceed 50 percent of the Fair
Market Value at the time of grant. The Committee shall determine the
performance objectives to be used in awarding Performance Shares and the
extent to which such Performance Shares have been earned. Performance Periods
may overlap and participants may participate simultaneously with respect to
Performance Share Awards that are subject to different Performance Periods and
different performance factors and criteria. At the beginning of each
Performance Period, the Committee shall determine for each Performance Share
Award subject to such Performance Period the number of shares of Stock (which
may consist of Restricted Stock) to be awarded to the
A-4
<PAGE>
participant at the end of the Performance Period if and to the extent that the
relevant measures of performance for such Performance Share Award are met.
Such number of shares of Stock may be fixed or may vary in accordance with
such performance or other criteria as may be determined by the Committee. The
Committee may provide that (i) amounts equivalent to interest at such rates as
the Committee may determine, or (ii) amounts equivalent to dividends paid by
the Company upon outstanding Stock shall be payable with respect to
Performance Share Awards.
(b) Termination. Except as otherwise provided in the Award Agreement or
determined by the Committee, in the event of a Termination during a
Performance Period, the participant shall not be entitled to any payment with
respect to the Performance Shares subject to the Performance Period.
(c) Form of Payment. Payment shall be made in the form of cash or whole
shares of Stock, as the Committee, in its discretion, shall determine.
SECTION 9. CHANGE IN CONTROL.
(a) Definition of "Change in Control". For purposes of Section 9(b), a
"Change in Control" means the occurrence of any one of the following:
(i) Any "person," as such term is used in Sections 13(d) and 14(d) of the
Exchange Act (other than the Company, a subsidiary, an affiliate, or a
Company employee benefit plan, including any trustee of such plan acting as
trustee) 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 35 percent or more of the combined voting power of the
Company's then outstanding securities;
(ii) The solicitation of proxies (within the meaning of Rule 14a-1(k)
under the Exchange Act and any successor rule) with respect to the election
of any director of the Company where such solicitation is for any candidate
who is not a candidate proposed by a majority of the Board in office prior
to the time of such election; or
(iii) The dissolution or liquidation (partial or total) of the Company or
a sale of assets involving 30 percent or more of the assets of the Company,
any merger or reorganization of the Company whether or not another entity
is the survivor, a transaction pursuant to which the holders, as a group,
of all of the shares of the Company outstanding prior to the transaction
hold, as a group, less than 70 percent of the shares of the Company
outstanding after the transaction, or any other event which the Board
determines, in its discretion, would materially alter the structure of the
Company or its ownership.
(b) Impact of Event. In the event of a "Change in Control" as defined in
Section 9(a), but only if and to the extent so specifically determined by the
Board in its discretion, which determination may be amended or reversed only
by the affirmative vote of a majority of the persons who were directors at the
time such determination was made, acceleration and valuation provisions no
more favorable to participants than the following may apply:
(i) Any Options outstanding as of the date such Change in Control is
determined to have occurred and not then exercisable and vested shall
become fully exercisable and vested.
(ii) The restrictions and limitations applicable to any Restricted Stock
and Stock Purchase Rights shall lapse, and such Restricted Stock shall
become fully vested.
(iii) The value (net of any exercise price) of all outstanding Options,
Restricted Stock and Stock Purchase Rights, unless otherwise determined by
the Committee at or after grant and subject to Rule 16b-3, shall be cashed
out on the basis of the "Change in Control Price," as defined in Section
9(c), as of the date such Change in Control is determined to have occurred
or such other date as the Board may determine prior to the Change in
Control.
A-5
<PAGE>
(iv) Any outstanding Performance Share Awards shall be vested and paid in
full as if all performance criteria had been met.
(c) Change in Control Price. For purposes of this Section 9, "Change in
Control Price" means the highest price per share paid in any transaction
reported on the National Market System of the National Association of
Securities Dealers, Inc. Automated Quotation System or paid or offered in any
bona fide transaction related to a potential or actual Change in Control of
the Company at any time during the preceding 60-day period as determined by
the Board, except that, in the case of Incentive Stock Options, such price
shall be based only on transactions reported for the date on which the Board
decides to cash out such Options.
SECTION 10. GENERAL PROVISIONS.
(a) Award Grants. Any Award may be granted either alone or in addition to
other Awards granted under the Plan. Subject to the terms and restrictions set
forth elsewhere in the Plan, the Committee shall determine the consideration,
if any, payable by the participant for any Award and, in addition to those set
forth in the Plan, any other terms and conditions of the Awards. The Committee
may condition the grant or payment of any Award upon the attainment of
specified performance goals or such other factors or criteria, including
vesting based on continued service on the Board, employment or consulting, as
the Committee shall determine. Performance objectives may vary from
participant to participant and among groups of participants and shall be based
upon such Company, subsidiary, group or division factors or criteria as the
Committee may deem appropriate, including, but not limited to, earnings per
share or return on equity. The other provisions of Awards also need not be the
same with respect to each recipient. Unless specified otherwise in the Plan or
by the Committee, the date of grant of an Award shall be the date of action by
the Committee to grant the Award. The Committee may also substitute new
Options for previously granted Options, including previously granted Options
having higher exercise prices.
(b) Award Agreement. As soon as practicable after the date of an Award
grant, the Company and the participant shall enter into a written Award
Agreement identifying the date of grant, and specifying the terms and
conditions of the Award. Options are not exercisable until after execution of
the Award Agreement by the Company and the Plan participant, but a delay in
execution of the Award Agreement shall not affect the validity of the Option
grant.
(c) Certificates. All certificates for shares of Stock or other securities
delivered under the Plan shall be subject to such stock transfer orders,
legends and other restrictions as the Committee may deem advisable under the
rules, regulations and other requirements of the Commission, any market in
which the Stock is then traded and any applicable federal, state or foreign
securities law.
(d) Termination. Unless otherwise provided in the applicable Award Agreement
or by the Committee, in the event of Termination for any reason other than
death, retirement or Disability, Awards held at the date of Termination (and
only to the extent then exercisable or payable, as the case may be) may be
exercised in whole or in part at any time within three months after the date
of Termination, or such lesser period specified in the Award Agreement (but in
no event after the expiration date of the Award), but not thereafter. If
Termination is due to retirement or to death or Disability, Awards held at the
date of Termination (and only to the extent then exercisable or payable, as
the case may be) may be exercised in whole or in part by the participant in
the case of retirement or Disability, by the participant's guardian or legal
representative or by the person to whom the Award is transferred by will or
the laws of descent and distribution, at any time within one year from the
date of Termination or any lesser period specified in the Award Agreement (but
in no event after the expiration of the Award).
A-6
<PAGE>
(e) Delivery of Purchase Price. If and only to the extent authorized by the
Committee, participants may make all or any portion of any payment due to the
Company
(i) with respect to the consideration payable for an Award,
(ii) upon exercise of an Award, or
(iii) with respect to federal, state, local or foreign tax payable in
connection with an Award, by delivery of (x) cash, (y) check, or (z) any
property other than cash (including a promissory note of the participant or
shares of Stock or securities) so long as, if applicable, such property
constitutes valid consideration for the Stock under, and otherwise complies
with, applicable law. No promissory note under the Plan shall have a term
(including extensions) of more than five years or shall be of a principal
amount exceeding 90 percent of the purchase price paid by the borrower.
(f) Tax Withholding. Unless the Committee permits otherwise, the participant
shall pay to the Company in cash, promptly when the amount of such obligations
becomes determinable (the "Tax Date"), all applicable federal, state, local
and foreign withholding taxes that the Committee in its discretion determines
to result, (i) from the lapse of restrictions imposed upon an Award, (ii) upon
exercise of an Award, or (iii) from a transfer or other disposition of shares
acquired upon exercise or payment of an Award, or otherwise related to the
Award or the shares acquired in connection with an Award.
A participant who has received an Award or payment under an Award may, to
the extent, if any, authorized by the Committee in its discretion, make an
election to (x) deliver to the Company a promissory note of the participant on
the terms set forth in Section 10(e), or (y) tender any such securities to the
Company to pay the amount of tax that the Committee in its discretion
determines to be required to be withheld by the Company; provided, however,
that such election shall be subject to the disapproval of the Committee.
Any shares or other securities so withheld or tendered shall be valued by
the Committee as of the date they are withheld or tendered; provided, however,
that Stock shall be valued at Fair Market Value on such date. The value of the
shares withheld or tendered may not exceed the required federal, state, local
and foreign withholding tax obligations as computed by the Company.
(g) No Transferability. No Award shall be assignable or otherwise
transferable by the participant other than by will or by the laws of descent
and distribution. During the life of a participant, an Award shall be
exercisable, and any elections with respect to an Award may be made, only by
the participant or participant's guardian or legal representative.
(h) Adjustment of Awards; Waivers. The Committee may adjust the performance
goals and measurements applicable to Awards (i) to take into account changes
in law and accounting and tax rules, (ii) to make such adjustments as the
Committee deems necessary or appropriate to reflect the inclusion or exclusion
of the impact of extraordinary or unusual items, events or circumstances in
order to avoid windfalls or hardships, and (iii) to make such adjustments as
the Committee deems necessary or appropriate to reflect any material changes
in business conditions. In the event of hardship or other special
circumstances of a participant and otherwise in its discretion, the Committee
may waive in whole or in part any or all restrictions, conditions, vesting, or
forfeiture with respect to any Award granted to such participant.
(i) Non-Competition. The Committee may condition its discretionary waiver of
a forfeiture, the acceleration of vesting at the time of Termination of a
participant holding any unexercised or unearned Award, the waiver of
restrictions on any Award, or the extension of the expiration period to a
period not longer than that provided by the Plan upon such participant's
agreement (and compliance with such agreement) (i) not to engage in any
business or activity competitive with any business or activity conducted by
the Company and (ii) to be available for consultations at the request of the
Company's management, all on such terms and conditions (including conditions
in addition to (i) and (ii)) as the Committee may determine.
A-7
<PAGE>
(j) Dividends. The reinvestment of dividends in additional Stock or
Restricted Stock at the time of any dividend payment pursuant to Section 6(c)
shall only be permissible if sufficient shares of Stock are available under
Section 3 for such reinvestment (taking into account then outstanding Awards).
(k) Regulatory Compliance. Each Award under the Plan shall be subject to the
condition that, if at any time the Committee shall determine that (i) the
listing, registration or qualification of the shares of Stock upon any
securities exchange or for trading in any securities market or under any state
or federal law, (ii) the consent or approval of any government or regulatory
body or (iii) an agreement by the participant with respect thereto, is
necessary or desirable, then such Award shall not be consummated in whole or
in part unless such listing, registration, qualification, consent, approval or
agreement shall have been effected or obtained free of any conditions not
acceptable to the Committee.
(l) Rights as Shareholder. Unless the Plan or the Committee expressly
specifies otherwise, an optionee shall have no rights as a shareholder with
respect to any shares covered by an Award until the stock certificates
representing the shares are actually delivered to the optionee. Subject to
Sections 3(b) and 6(c), no adjustment shall be made for dividends or other
rights for which the record date is prior to the date the certificates are
delivered.
(m) Beneficiary Designation. The Committee, in its discretion, may establish
procedures for a participant to designate a beneficiary to whom any amounts
payable in the event of the participant's death are to be paid.
(n) Additional Plans. Nothing contained in the Plan shall prevent the
Company, a subsidiary or an affiliate from adopting other or additional
compensation arrangements for its directors, employees and consultants.
(o) No Employment Rights; No Right to Directorship. Neither the adoption of
this Plan nor the grant of any Award hereunder shall (i) confer upon any
employee any right to continued employment nor shall it interfere in any way
with the right of the Company, a subsidiary or an affiliate to terminate the
employment of any employee at any time; or (ii) confer upon any participant
any right with respect to continuation of the participant's membership on the
Board or shall interfere in any way with provisions in the Company's Articles
of Incorporation and Bylaws relating to the election, appointment, terms of
office, and removal of members of the Board.
(p) Rule 16b-3. With respect to persons subject to Section 16 of the
Exchange Act, transactions under this Plan are intended to comply with the
applicable conditions of Rule 16b-3 under the Exchange Act. To the extent any
provision of this Plan or action by the Committee fails to so comply, it shall
be adjusted to comply with Rule 16b-3, to the extent permitted by law and
deemed advisable by the Committee. It shall be the responsibility of persons
subject to Section 16 of the Exchange Act, not of the Company or the
Committee, to comply with the requirements of Section 16 of the Exchange Act;
and neither the Company nor the Committee shall be liable if this Plan or any
transaction under this Plan fails to comply with the applicable conditions of
Rule 16b-3, or if any such person incurs any liability under Section 16 of the
Exchange Act.
(q) Governing Law. The Plan and all Awards shall be governed by and
construed in accordance with the laws of the State of California.
(r) Use of Proceeds. All cash proceeds to the Company under the Plan shall
constitute general funds of the Company.
(s) Unfunded Status of Plan. The Plan shall constitute an "unfunded" plan
for incentive and deferred compensation. The Committee may authorize the
creation of trusts or arrangements to meet the obligations created under the
Plan to deliver Stock or make payments; provided, however, that unless the
Committee otherwise determines, the existence of such trusts or other
arrangements shall be consistent with the "unfunded" status of the Plan.
A-8
<PAGE>
(t) Assumption by Successor. The obligations of the Company under the Plan
and under any outstanding Award may be assumed by any successor corporation,
which for purposes of the Plan shall be included within the meaning of
"Company".
(u) Limitation on Award Grants. The Company may not grant Awards under the
Plan for more than 500,000 shares to any one participant over the life of the
Plan.
SECTION 11. AMENDMENTS AND TERMINATION.
The Board may amend, alter or discontinue the Plan or any Award, but no
amendment, alteration or discontinuance shall be made which would impair the
rights of a participant under an outstanding Award without the participant's
consent. No amendment, alteration or discontinuance shall require shareholder
approval except:
(a) an increase in the total number of shares reserved for issuance
pursuant to Awards under the Plan, or
(b) with respect to provisions solely as they relate to Incentive Stock
Options, to the extent required for the Plan to comply with Section 422 of
the Code, or
(c) to the extent required by other applicable laws, rules or
regulations, or
(d) to the extent the Board otherwise concludes that shareholder approval
is advisable.
SECTION 12. EFFECTIVE DATE OF PLAN.
The Plan shall be effective as of May 1, 1997, but all Awards shall be
conditioned upon approval of the Plan (a) at a duly held stockholders' meeting
by the affirmative vote of the holders of a majority of the voting power of
the shares of the Company represented in person or by proxy at the meeting and
entitled to vote thereon, or (b) by an action by written consent of the
holders of a majority of the voting power of the shares of the Company
entitled to vote.
SECTION 13. TERM OF PLAN.
No Award shall be granted on or after May 1, 2007, but Awards granted prior
to May 1, 2007 may extend beyond that date.
A-9
<PAGE>
NETVANTAGE, INC. PROXY
The undersigned hereby appoints Stephen R. Rizzone and Carlos A. Tomaszewski,
and each of them, proxies of the undersigned, each with full power to act
without the other, and with full power of substitution, to represent the
undersigned and vote as directed below all shares of Common Stock of
NetVantage, Inc. (the "Company") which the undersigned may be entitled to vote
at the Annual Meeting of Stockholders to be held July 29, 1997, or any
adjournments thereof, and in their discretion on all other matters which may
properly come before the Annual Meeting or any adjournments thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED AND, IF NO DIRECTIONS ARE GIVEN, WILL BE VOTED FOR THE
ELECTION OF THE NOMINEES LISTED BELOW AND FOR PROPOSAL NO. 2.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE NOMINEES
LISTED BELOW AND FOR PROPOSAL NO. 2.
PROPOSAL NO. 1:
ELECTION OF DIRECTORS: Stephen R. Rizzone, Seiji Uehara, Carlos A.
Tomaszewski, Richard N. Tinsley and John E. Marman
[_] FOR ALL NOMINEES [_] WITHHOLD AUTHORITY
(Except As Indicated Below) To Vote For All Nominees
TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE HIS NAME IN
THE SPACE PROVIDED BELOW:
-----------------------------------------------------------------------------
PROPOSAL NO. 2:
APPROVAL OF THE COMPANY'S 1997 EQUITY INCENTIVE PLAN
FOR [_] AGAINST [_] ABSTAIN [_]
(over)
Dated __________________________, 1997
--------------------------------------
Signature
Dated __________________________, 1997
--------------------------------------
Signature if held jointly
PLEASE SIGN EXACTLY AS YOUR NAME
APPEARS HEREON. WHEN SIGNING AS
ATTORNEY, ADMINISTRATOR, TRUSTEE OR
GUARDIAN, SET FORTH YOUR FULL TITLE.
WHEN SHARES ARE HELD IN MORE THAN ONE
NAME, ALL PARTIES SHOULD SIGN. IF A
CORPORATION, SIGN IN FULL CORPORATE
NAME BY PRESIDENT OR OTHER AUTHORIZED
OFFICER. IF A PARTNERSHIP, SIGN IN
PARTNERSHIP NAME BY AUTHORIZED
PERSON.
PLEASE MARK, SIGN, DATE AND RETURN
THE PROXY CARD USING THE ENCLOSED
ENVELOPE
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
