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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
[_] 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 (S) 14a-11 or (S) 240.14a-12.
P-COM, INC.
________________________________________________________________________________
(Name of Registrant as Specified in Charter)
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 of 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.
6. Amount previously paid:
________________________________________________________________________________
7. Form, Schedule or Registration Statement No.:
________________________________________________________________________________
8. Filing Party:
________________________________________________________________________________
9. Date filed:
________________________________________________________________________________
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[P-COM LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 30, 2000
TO THE STOCKHOLDERS OF P-COM, INC.:
NOTICE IS HEREBY GIVEN that the 2000 Annual Meeting of Stockholders of P-
Com, Inc., a Delaware corporation (the "Company"), will be held on November
30, 2000 at 9:45 a.m., Pacific Standard Time at the Los Gatos Lodge, 50 Los
Gatos/Saratoga Rd., Los Gatos, California 95032, for the following purposes,
as more fully described in the Proxy Statement accompanying this Notice:
1. To elect 2 directors to serve for "three-year" terms ending upon the year
2003 annual meeting of stockholders, or until their successors are duly
elected;
2. To approve a series of amendments to the Company's 1995 Stock
Option/Stock Issuance Plan (the "1995 Plan") to: (i) eliminate the automatic
share increase provisions of the 1995 Plan; (ii) eliminate the provisions of
the 1995 Plan that would otherwise allow option grants to be made with
exercise prices below the fair market value of the option shares on the grant
date; (iii) modify the option cancellation/regrant provisions of the 1995 Plan
to require stockholder approval of any repricing of outstanding options; (iv)
increase the maximum number of shares authorized for issuance under the 1995
plan; (v) increase the limitation on the maximum number of shares any one
individual may be granted; and (vi) change the vesting period for 4,000-share
automatic option grants to non-employee Board members so they fully vest upon
grant.
3. To ratify the appointment of PricewaterhouseCoopers LLP as independent
auditors of the Company for the fiscal year ending December 31, 2000; and
4. To transact such other business as may properly come before the meeting
or any postponements or adjournments thereof.
Only stockholders of record at the close of business on October 16, 2000 are
entitled to notice of and to vote at the Annual Meeting. The stock transfer
books of the Company will remain open between the record date and the date of
the meeting. A list of stockholders entitled to vote at the Annual Meeting
will be available for inspection at the executive offices of the Company.
All stockholders are cordially invited to attend the meeting in person.
Whether or not you plan to attend, please sign and return the enclosed proxy
as promptly as possible in the envelope enclosed for your convenience. Should
you receive more than one proxy because your shares are registered in
different names and addresses, each proxy should be signed and returned to
assure that all your shares will be voted. You may revoke your proxy at any
time prior to the Annual Meeting. If you attend the Annual Meeting and vote by
ballot, your proxy will be revoked automatically and only your vote at the
Annual Meeting will be counted.
Sincerely,
/s/ George P. Roberts
George P. Roberts
Chief Executive Officer and
Chairman of the Board of Directors
Campbell, California
October 30, 2000
YOUR VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN.
PLEASE READ THE ATTACHED PROXY STATEMENT CAREFULLY, COMPLETE, SIGN AND DATE
THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE AND RETURN IT IN THE ENCLOSED
ENVELOPE.
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P-COM, INC.
3175 South Winchester Boulevard
Campbell, California 95008
PROXY STATEMENT
FOR THE 2000 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 30, 2000
General
The enclosed proxy ("Proxy") is solicited on behalf of the Board of
Directors of P-Com, Inc., a Delaware corporation (the "Company"), for use at
the Annual Meeting of Stockholders to be held on November 30, 2000 (the
"Annual Meeting"). The 2000 Annual Meeting will be held at 9:45 a.m., Pacific
Standard Time at the Los Gatos Lodge, 50 Los Gatos/Saratoga Rd., Los Gatos,
California 95032. These proxy solicitation materials were mailed on or about
October 30, 2000, to all stockholders entitled to vote at the Annual Meeting.
Voting
The specific proposals to be considered and acted upon at the Annual Meeting
are summarized in the accompanying Notice and are described in more detail in
this Proxy Statement. On October 16, 2000, which is the record date for
determination of stockholders entitled to notice of and to vote at the Annual
Meeting, 80,373,358 shares of the Company's common stock, par value $0.0001
("Common Stock"), were issued and outstanding, and no shares of the Company's
Series A Preferred Stock, par value $0.0001, were issued and outstanding. Each
common stockholder is entitled to one vote for each share of Common Stock held
by such stockholder on October 16, 2000. Stockholders may not cumulate votes
in the election of directors.
All votes will be tabulated by the inspector of election appointed for the
meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Directors are elected by a plurality vote.
All other proposals will be decided by an affirmative vote of the holders of a
majority of the shares present in person or represented by proxy and entitled
to vote on such matter. Abstentions and broker non-votes are counted as
present for purposes of determining the presence or absence of a quorum for
the transaction of business. Abstentions will be counted towards the
tabulations of votes cast on proposals presented to the stockholders and will
have the same effect as negative votes, whereas broker non-votes will not be
counted for purposes of determining whether a proposal has been approved.
Proxies
If the enclosed form of proxy is properly signed and returned, the shares
represented thereby will be voted at the Annual Meeting in accordance with the
instructions specified thereon. If the proxy does not specify how the shares
represented thereby are to be voted, the proxy will be voted FOR the election
of the directors proposed by the Board unless the authority to vote for the
election of such director is withheld and, if no contrary instructions are
given, the proxy will be voted FOR the approval of Proposals 2 and 3 described
in the accompanying Notice and this Proxy Statement. In addition, the proxy
solicited by the Board of Directors for the 2000 Annual Meeting will confer
discretionary authority to vote on any stockholder proposal presented at that
meeting. You may revoke or change your Proxy at any time before the Annual
Meeting by filing with the Chief Financial Officer of the Company at the
Company's principal executive offices at 3175 South Winchester Boulevard,
Campbell, California 95008, a notice of revocation or another signed Proxy
with a later date. You may also revoke your Proxy by attending the Annual
Meeting and voting in person.
Solicitation
The Company will bear the entire cost of solicitation, including the
preparation, assembly, printing and mailing of this Proxy Statement, the Proxy
and any additional solicitation materials furnished to the stockholders.
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The original solicitation of proxies by mail may be supplemented by a
solicitation by telephone or other means by directors, officers or employees
of the Company. No additional compensation will be paid to these individuals
for any such services. Except as described above, the Company does not
presently intend to solicit proxies other than by mail.
Deadline for Receipt of Stockholder Proposals
Proposals of stockholders of the Company that are intended to be presented
by such stockholders at the Company's 2001 Annual Meeting must be received no
later than March 1, 2001 in order that they may be included in the proxy
statement and form of proxy relating to that meeting. We anticipate that such
meeting will be held in June 2001.
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MATTERS TO BE CONSIDERED AT ANNUAL MEETING
PROPOSAL ONE
ELECTION OF DIRECTORS
General
The Company's Certificate of Incorporation provides for a classified Board
of Directors consisting of three classes of directors with staggered three-
year terms. Each class consists, as nearly as possible, of one-third of the
total number of directors. The Board currently consists of five persons. The
class whose term of office expires at the 2000 Annual Meeting currently
consists of two directors. The directors elected to this class will serve for
a term of three years, expiring at the 2003 annual meeting of stockholders or
until their successors have been duly elected. Both of the nominees listed
below currently are directors of the Company.
Each nominee for election has agreed to serve if elected, and management has
no reason to believe that such nominee will be unavailable to serve. If either
nominee is unable or declines to serve as a director at the time of the Annual
Meeting, the proxies will be voted for any nominee who may be designated by
the present Board of Directors to fill the vacancy. Unless otherwise
instructed, the proxy holders will vote the proxies received by them FOR the
nominees named below.
Nominees for Term Ending Upon the 2003 Annual Meeting of Stockholders
John A. Hawkins, 39, has served as a Director of the Company since September
1991. Since August 1995, Mr. Hawkins has been a General Partner of Generation
Capital Partners, L.P., a private equity firm. Mr. Hawkins serves as a
director of PixTech, Inc., a manufacturer of flat panel displays.
James J. Sobczak, 58, has served as a Director of the Company since April
1997. Mr. Sobczak has also served as the President and Chief Operating Officer
of the Company since September 1999. Since 1991, Mr. Sobczak has been the
President of Telecommunications Education and Research Network, Inc., a
corporation providing research and education services to universities offering
degrees in telecommunications. Additionally, since 1993, Mr. Sobczak has
taught graduate courses in telecommunications at the University of Pittsburgh
and, from 1993 to 1995, was a lecturer in the Carnegie-Mellon University
executive education program.
Continuing Director for Term Ending Upon the 2001 Annual Meeting of
Stockholders
M. Bernard Puckett, 54, has served as a Director of the Company since May
1994. Since January 1996, Mr. Pukett has been a private investor. From June
1995 to January 1996, he was President and Chief Executive Officer of Mobile
Telecommunication Technologies Corp. ("Mtel"), a telecommunications
corporation. Mr. Puckett currently serves as a director of Nielson Media
Research, Inc. (formerly known as Cognizant Corp.), R.R. Donnelley & Sons Co.
and Software.com, Inc..
Continuing Directors for Term Ending Upon the 2002 Annual Meeting of
Stockholders
George P. Roberts, 67, is a founder of the Company and has served as Chief
Executive Officer and a Director since October 1991. From October 1991 to
December 1996, Mr. Roberts served as President of the Company. Since September
1993, he has also served as Chairman of the Board of Directors.
Brian T. Josling, 58, is a co-founder of Aval Communications Inc., a company
that designs and manufactures products for wireless telecommunications
networks, where he has served as the Chairman of the Board of Directors and
Chief Technology Officer since 1994.
The foregoing assumes that Mr. Roberts and Mr. Josling are re-elected, at
the "1999" Annual Meeting of Stockholders held early on November 30, 2000
(after the date of this Proxy Statement) to a new term on the Board ending
upon the 2002 Annual Meeting of Stockholders.
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Board Committees and Meetings
The Board of Directors held 10 meetings and acted by unanimous written
consent 18 times during the fiscal year ended December 31, 1999 (the "1999
Fiscal Year"). The Board of Directors has an Audit Committee and a
Compensation Committee. Each director attended or participated in 75% or more
of the aggregate of (I) the total number of meetings of the Board of Directors
and (ii) the total number of meetings held by all committees of the Board on
which such director served during the 1999 Fiscal Year.
The Audit Committee currently consists of two directors, Mr. Josling and Mr.
Puckett, and is primarily responsible for approving the services performed by
the Company's independent auditors and reviewing their reports regarding the
Company's accounting practices and systems of internal accounting controls.
The Audit Committee held 4 meetings during the 1999 Fiscal Year.
The Compensation Committee currently consists of two directors, Mr. Josling
and Mr. Hawkins, and is primarily responsible for reviewing and approving the
Company's general compensation policies and setting compensation levels for
the Company's executive officers. The Compensation Committee also has the
authority to administer the Company's Employee Stock Purchase Plan and the
Company's 1995 Stock Option/Stock Issuance Plan and to make option grants
thereunder. The Compensation Committee met 1 time and acted by unanimous
written consent 8 times during the 1999 Fiscal Year.
Director Compensation
Board members who are employees of the Company do not receive cash
compensation for their services as directors.
Under the Automatic Option Grant Program contained in the Company's 1995
Stock Option/Stock Issuance Plan (the "1995 Plan"), each individual who first
joins the Board as a non-employee director any time after February 1, 1996
will receive, at the time of such initial election or appointment, an
automatic option grant, to purchase 40,000 shares of Common Stock, provided
such person has not previously been in the Company's employ. Mr. Josling
received such an automatic grant, with an exercise price of $4.438 per share,
on September 1, 1999. In addition, on the date of each annual stockholders
meeting, each individual who continues to serve as a non-employee Board
member, whether or not such individual is standing for re-election at that
particular Annual Meeting, will be granted an option to purchase 4,000 shares
of Common Stock, provided such individual has not received an option grant
under the Automatic Option Grant Program within the preceding six months. Each
grant under the Automatic Option Grant Program will have an exercise price per
share equal to the fair market value per share of the Company's Common Stock
on the grant date, and will have a maximum term of 10 years, subject to
earlier termination should the optionee cease to serve as a Board of Directors
member.
Please see the description of the Automatic Grant Program under Proposal 2
for further information concerning the remaining terms and provisions of these
automatic option grants.
Because the "1999" Annual Meeting of Stockholders is being held so soon
before the 2000 Annual Meeting of Stockholders and the non-employee directors
will be receiving 4,000-share automatic option grants upon the 1999 Annual
Meeting, the technical terms of the 1995 Plan preclude the three non-employee
directors (Messrs. Hawkins, Josling and Puckett) from receiving automatic
4,000-share options upon the 2000 Annual Meeting. The Company believes it
would be unfair if the three directors were deprived of this compensation and
therefore intends to grant the three directors 4,000-share options under the
1995 Plan's Discretionary Option Grant Program, with the same terms and
conditions as the erstwhile automatic grants, immediately after the 2000
Annual Meeting.
Recommendation of the Board of Directors
The Board of Directors unanimously recommends that the stockholders vote FOR
the election of the nominees listed above.
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PROPOSAL TWO
APPROVAL OF AMENDMENTS TO THE
1995 STOCK OPTION/STOCK ISSUANCE PLAN
The Company's stockholders are being asked to approve a series of amendments
to the Company's 1995 Stock Option/Stock Issuance Plan (the "1995 Plan") that
will effect the following changes:
(i) eliminate the automatic share increase provisions of the 1995 Plan
pursuant to which the number of shares available for issuance under the
1995 Plan would automatically increase on the first trading day in January
in each of calendar years 2000 and 2001 by an amount equal to 1.6% of the
total number of shares of Common Stock outstanding on the last trading day
in the immediately preceding calendar year;
(ii) eliminate the provisions of the 1995 Plan that would otherwise allow
option grants to be made with exercise prices below the fair market value
of the option shares on the grant date; and
(iii) modify the option cancellation/regrant provisions of the 1995 Plan
to require stockholder approval of any further repricing of outstanding
options and to subject any subsequent changes to that requirement to
additional stockholder approval.
(iv) increase the maximum number of shares of the Common Stock authorized
for issuance over the term of the 1995 Plan by an additional 1,500,000
shares, from 13,434,459 shares to 14,934,459 shares of Common Stock;
(v) increase the limitation on the maximum number of shares for which any
one individual may be granted stock options, separately exercisable stock
appreciation rights and direct stock issuances over the term of the 1995
Plan from 1,600,000 shares to 2,400,000 shares;
(vi) revise the provisions of the automatic option grant program in
effect for non-employee Board members so that the annual 4,000-share option
grant made to each continuing non-employee Board member would be fully
vested upon grant rather than vesting in quarterly installments over the
two-year period measured from the grant date.
The proposed 1,500,000 share increase will assure that a sufficient reserve
of Common Stock remains available under the 1995 Plan in order to allow the
Company to continue to utilize equity incentives to attract and retain the
services of key individuals essential to the Company's long-term growth and
success. The Company relies significantly on equity incentives in the form of
stock option grants in order to attract and retain key employees in the market
in which the Company competes for such talented individuals. The Company
believes that such equity incentives are necessary for the Company to remain
competitive in the marketplace for executive talent and other key employees.
Option grants will be made under the 1995 Plan to newly hired and continuing
employees on the basis of competitive market factors and individual
performance levels.
The proposed change to the limitation on the maximum number of shares for
which any one individual may be granted stock options, separately-exercisable
stock appreciation rights and direct issuances under the 1995 Plan will
provide the Company with the continuing opportunity to structure equity
incentive awards for senior management so that the compensation deemed paid to
the Company's executive officers in connection with their exercise of stock
options or stock appreciation rights granted under the 1995 Plan will qualify
as tax-deductible performance-based compensation under the federal tax laws
which will not otherwise be subject to the $1 million limitation per covered
individual on the tax deductibility of compensation paid to certain executive
officers of the Company.
The proposed change to the vesting provisions in effect for the annual
option grants made under the automatic option grant program is intended to
mitigate the compensation expense the Company may otherwise be required to
recognize for financial reporting purposes in the event the proposed treatment
of non-employee director option grants set forth in the March 31, 1999
Exposure Draft of the Financial Accounting Standards Board is adopted.
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The remaining amendments have been made to align more closely the interests
of the option holders with those of the stockholders by eliminating certain
dilutive features of the 1995 Plan such as below-market option grants and the
automatic increase to the share reserve scheduled for calendar years 2000 and
2001 and by subjecting any future option re-pricing programs to stockholder
approval.
The 1,500,000-share increase in the maximum number of shares available for
issuance under the 1995 Plan and the 800,000-share increase to the per-
participant limit under the 1995 Plan were authorized by the Board in March
1999 and re-authorized by the Board in October 2000. The remaining amendments
to the 1995 Plan, which are the subject of this Proposal, were adopted by the
Board in June 1999 and re-adopted by the Board in August and October 2000.
The following is a summary of the principal features of the 1995 Plan, as so
amended. This summary does not, however, purport to be a complete description
of all the provisions of the 1995 Plan. Any stockholder of the Company who
wishes to obtain a copy of the actual plan document may do so upon written
request to the Company's Chief Financial Officer at the Company's principal
executive offices in Campbell, California.
Equity Incentive Programs
The 1995 Plan consists of three separate equity incentive programs: (i) a
Discretionary Option Grant Program, (ii) a Stock Issuance Program and (iii) an
Automatic Option Grant Program. The principal features of each of these
programs are described below. The Compensation Committee of the Board
administers the provisions of the 1995 Plan (other than the Automatic Option
Grant Program) with respect to all officers and directors of the Company
subject to the short-swing trading restrictions of the federal securities laws
("Section 16 Insiders"). With respect to all other participants, the 1995 Plan
may be administered by either the Compensation Committee or a special stock
option committee (the "Secondary Committee") comprised of one or more Board
members appointed by the Board or by the entire Board itself. Each entity,
whether the Compensation Committee, the Secondary Committee or the Board, will
be referred to in this summary as the Plan Administrator with respect to its
particular administrative functions under the 1995 Plan, and each Plan
Administrator will have complete discretion (subject to the provisions of the
1995 Plan) to authorize option grants and direct stock issuances under the
1995 Plan within the scope of its administrative jurisdiction. However, all
grants under the Automatic Option Grant Program will be made in strict
compliance with the provisions of that program, and no administrative
discretion will be exercised by any Plan Administrator with respect to the
grants made under such program.
Share Reserve
13,434,459 shares of Common Stock have been reserved for issuance over the
10 year term of the 1995 Plan, including the 714,834-share increase effected
on January 2, 1999 pursuant to the automatic share increase feature of the
1995 Plan that was in effect for the 1999 calendar year (but not including any
January 3, 2000 automatic share increase). Pursuant to the automatic share
increase provisions of the 1995 Plan approved by the stockholders at the 1998
Annual Meeting, the share reserve was to increase automatically on the first
trading day of January each calendar year, beginning with the 1998 calendar
year and ending with calendar year 2001, by an amount equal to 1.6% of the
total number of shares of Common Stock outstanding on the last trading day in
December of the immediately preceding calendar year. However, if the
stockholders approve this Proposal 2, the automatic share increases scheduled
for calendar years 2000 and 2001 will not take effect, but the share reserve
would be increased by 1,500,000 shares for a total of 14,934,459 shares of
common stock reserved for issuance under the plan.
Should any option terminate prior to exercise in full, the shares subject to
the unexercised portion of that option will be available for subsequent option
grants. In addition, any unvested shares issued under the 1995 Plan and
subsequently repurchased by the Company at the option exercise or direct issue
price paid per share pursuant to the Company's repurchase rights under the
1995 Plan will be added back to the number of shares of Common Stock reserved
for issuance under the 1995 Plan and will accordingly be available for
reissuance
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through one or more subsequent option grants or direct stock issuances made
under the 1995 Plan. However, shares subject to any option surrendered in
accordance with the stock appreciation right provisions of the 1995 Plan will
not be available for subsequent issuance.
Before the proposed amendment, in no event could any one participant in the
1995 Plan be granted stock options, separately exercisable stock appreciation
rights and direct stock issuances for more than 1,600,000 shares in the
aggregate under the 1995 Plan. However, if approved the limitation on the
maximum number of shares would be increased from 1,600,000 shares to 2,400,000
shares.
Changes in Capitalization
If any change is made to the outstanding shares of Common Stock by reason of
any recapitalization, stock dividend, stock split, combination of shares,
exchange of shares or other change in corporate structure effected without the
Company's receipt of consideration, appropriate adjustments will be made to
(i) the maximum number and class of securities issuable under the 1995 Plan,
(ii) the maximum number and class of securities for which any one participant
may be granted stock options, separately exercisable stock appreciation rights
and direct stock issuances under the 1995 Plan, (iii) the number and class of
securities for which option grants will subsequently be made under the
Automatic Option Grant Program to each newly-elected or continuing non-
employee Board member and (iv) the number and class of securities and the
exercise price per share in effect under each outstanding option under the
Plan. All such adjustments will be designed to preclude the enlargement or
dilution of participant rights and benefits under the 1995 Plan.
Eligibility
Employees, non-employee Board members, and independent consultants and
advisors to the Company and its subsidiaries (whether now existing or
subsequently established) will be eligible to participate in the Discretionary
Option Grant and Stock Issuance Programs. Non-employee members of the Board
will also be eligible to participate in the Automatic Option Grant Program.
As of September 30, 2000, 4 executive officers, 3 non-employee Board members
and approximately 854 other employees were eligible to participate in the
Discretionary Option Grant and Stock Issuance Programs, and the 3 non-employee
Board members were also eligible to participate in the Automatic Option Grant
Program.
Valuation
The fair market value per share of Common Stock on any relevant date under
the 1995 Plan will be the closing selling price per share on that date on the
Nasdaq National Market. On September 29, 2000, the closing selling price of
the Company's Common Stock was $7.00 per share.
Discretionary Option Grant Program
Grants
The Plan Administrator has complete discretion under the Discretionary
Option Grant Program to determine which eligible individuals are to receive
option grants or stock issuances, the time or times when such grants or
issuances are to be made, the number of shares subject to each such grant or
issuance, the status of any granted option as either an incentive stock option
or a non-statutory option under the federal tax laws, the vesting schedule (if
any) to be in effect for the option grant or stock issuance and the maximum
term for which any granted option is to remain outstanding. All expenses
incurred in administering the 1995 Plan will be paid by the Company.
Price and Exercisability
The exercise price per share for options granted under the Discretionary
Option Grant Program may not be, if the proposed amendment is approved, less
than the fair market value per share of Common Stock on the option grant date.
No option will have a term in excess of 10 years, and each option will
generally become exercisable
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in one or more installments over the optionee's period of service with the
Company. Also, one or more options may be granted that are immediately
exercisable for all the option shares, but any shares acquired under those
options will be subject to repurchase by the Company, at the exercise price
paid per share, upon the optionee's cessation of service with the Company
prior to vesting in those shares. Finally, one or more options may be granted
that are immediately vested for all the option shares and are not subject to
any repurchase right. The Plan Administrator may at any time cancel the
Company's outstanding repurchase rights with respect to any such unvested
shares and thereby accelerate the vesting of those shares.
The exercise price may be paid in cash or in shares of the Common Stock.
Outstanding options may also be exercised through a same-day sale program
pursuant to which a designated brokerage firm is to effect an immediate sale
of the shares purchased under the option and pay over to the Company, out of
the sale proceeds available on the settlement date, sufficient funds to cover
the exercise price for the purchased shares plus all applicable withholding
taxes.
No optionee will have any stockholder rights with respect to the option
shares until such optionee has exercised the option and paid the exercise
price for the purchased shares. Options are generally not assignable or
transferable other than by will or the laws of inheritance and, during the
optionee's lifetime, the option may be exercised only by such optionee.
However, the Plan Administrator may allow non-statutory options to be
transferred or assigned during the optionee's lifetime to one or more members
of the optionee's immediate family or to a trust established exclusively for
one or more such family members, to the extent such transfer or assignment is
in furtherance of the optionee's estate plan.
Termination of Service
Upon the optionee's cessation of employment or service, the optionee will
have a limited period of time in which to exercise his or her outstanding
options for any shares in which the optionee is vested at that time. However,
at any time while the options remain outstanding, the Plan Administrator will
have complete discretion to extend the period following the optionee's
cessation of employment or service during which his or her outstanding options
may be exercised. The Plan Administrator will also have complete discretion to
accelerate the exercisability or vesting of those options in whole or in part
at any time.
Stock Appreciation Rights
The Plan Administrator is authorized to issue two types of stock
appreciation rights in connection with option grants made under the
Discretionary Option Grant Program:
Tandem stock appreciation rights provide the holders with the right to
surrender their options for an appreciation distribution from the Company
equal in amount to the excess of (a) the fair market value of the vested
shares of Common Stock subject to the surrendered option over (b) the
aggregate exercise price payable for those shares. Such appreciation
distribution may, at the discretion of the Plan Administrator, be made in
cash or in shares of Common Stock.
Limited stock appreciation rights may be provided to one or more Section 16
insiders as part of their option grants. Any option with such a limited
stock appreciation right may be surrendered to the Company upon the
successful completion of a hostile tender offer for more than 50% of the
Company's outstanding voting stock. In return for the surrendered option,
the officer will be entitled to a cash distribution from the Company in an
amount per surrendered option share equal to the excess of (a) the highest
price per share of Common Stock paid in connection with the tender offer
over (b) the exercise price payable for such share.
Cancellation and Regrant of Options
Before the proposed amendment, the Plan Administrator had the authority to
effect the cancellation of any or all options outstanding under the 1995 Plan
and to grant, in substitution therefor, new options covering the
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same or different numbers of shares of Common Stock but with an exercise price
per share based upon the fair market value of the Common Stock on the new
grant date. However, if the proposed amendment is approved, no option
cancellation/regrant programs can be effected after the amendment without
prior stockholder approval, and any subsequent amendment or other change to
this stockholder-approval requirement must also be approved by the
stockholders.
On July 15, 1998, the Plan Administrator implemented an option
cancellation/regrant program for all employees and the non-employee directors
of the Company, excluding the Company's executive officers. Pursuant to that
program, each participant was given the opportunity to surrender his or her
outstanding options under the 1995 Plan with exercise prices in excess of
$5.8125 per share in return for a new option grant for the same number of
shares but with an exercise price of $5.8125 per share, the closing selling
price per share of Common Stock as reported on the Nasdaq National Market on
July 31, 1998, the grant date of the new option. Options for a total of
2,746,354 shares with a weighted average exercise price of $16.45 per share
were surrendered for cancellation, and new options for the same number of
shares were granted with an exercise price of $5.8125 per share. The new
options granted to employees did not vest or become exercisable unless the
participant continued in the Company's employ through January 31, 1999. On
that date, the option became exercisable for (i) the number of shares for
which the cancelled higher-priced option was exercisable on July 31, 1998 plus
(ii) the number of shares for which the higher-priced option would have become
exercisable over the period from August 1, 1998 to January 31, 1999 had that
option not been cancelled. The new option will become exercisable for the
balance of the option shares in a series of installments, with each such
installment to become exercisable on the same date that installment would have
become exercisable under the cancelled higher-priced option. In addition, each
new option will vest and become exercisable on an accelerated basis in the
event the Company were to be acquired by a merger or asset sale in which those
options were not assumed by the successor entity.
The non-employee Board members also elected to participate in the option
cancellation/regrant program pursuant to which certain outstanding options
they had previously received under the Automatic Grant Program with exercise
prices substantially in excess of $5.8125 per share were cancelled, and new
options for the same number of shares were granted to them with an exercise
price of $5.8125 per share, the fair market value per share of Common Stock on
the grant date of those new options. Each of the new options is immediately
exercisable for all the option shares, but any shares purchased under the
option will be subject to repurchase by the Company, at the exercise price
paid per share, upon the optionee's cessation of Board service prior to
vesting in those shares. The shares subject to each new option vested in a
series of 8 successive equal quarterly installments upon the optionee's
completion of each successive 3-month period of Board service over the
24-month period measured from the July 31, 1998 grant date.
Stock Issuance Program
Shares may be sold under the Stock Issuance Program at a price per share not
less than their fair market value, payable in cash or through a promissory
note payable to the Company. Shares may also be issued as a bonus for past
services.
The shares issued as a bonus for past services will be fully vested upon
issuance. All other shares issued under the program will be subject to a
vesting schedule tied to the performance of service or the attainment of
performance goals. The Plan Administrator will, however, have the
discretionary authority at any time to accelerate the vesting of any and all
unvested shares outstanding under the 1995 Plan.
Automatic Option Grant Program
Under the Automatic Option Grant Program, non-employee Board members will
receive option grants at specified intervals over their period of Board
service. All grants under the Automatic Option Grant Program will be made in
strict compliance with the express provisions of such program.
9
<PAGE>
Each individual serving as a non-employee Board member on February 1, 1996
was automatically granted on that date a non-statutory option to purchase
40,000 shares of Common Stock. (All share numbers in this section pertaining
to pre-September 1997 periods have been adjusted to reflect the September 1997
one-for-one common stock dividend.) Each individual who first becomes a non-
employee Board member after February 1, 1996, whether through election by the
stockholders or appointment by the Board, will automatically be granted, at
the time of such initial election or appointment, a non-statutory option to
purchase 40,000 shares of Common Stock, provided such individual has not
previously been in the Company's employ.
On the date of each Annual Meeting, beginning with the 1997 Annual Meeting,
each individual who is to continue to serve as a non-employee Board member,
whether or not such individual is standing for re-election at that particular
Annual Meeting, will automatically be granted a non-statutory option to
purchase 4,000 shares of Common Stock, provided such individual has not
received an option grant under the Automatic Option Grant Program within the
preceding 6 months. There will be no limit on the number of such 4,000-share
option grants any one non-employee Board member may receive over his or her
period of Board service, and non-employee Board members who have previously
been in the Company's employ will be eligible to receive one or more of those
annual grants.
Each automatic option grant will have an exercise price per share equal to
100% of the fair market value per share of Common Stock on the grant date. The
option will have a maximum term of 10 years, subject to earlier termination at
the end of the 12 month period measured from the date of the optionee's
cessation of Board service. Each option will be immediately exercisable for
all of the option shares. However, currently any shares purchased under any
automatic option grant are subject to repurchase by the Company, at the
exercise price paid per share, upon the optionee's cessation of Board service
prior to vesting in those shares. The shares vest in a series of 8 successive
equal quarterly installments upon the optionee's completion of each successive
3-month period of Board service over the 24-month period measured from the
grant date. If the proposed amendment is approved, however, all annual 4,000
share grants shall be fully vested upon grant.
Each automatic option will remain exercisable for a twelve month period
following the optionee's cessation of service as a Board member. In no event,
however, may the option be exercised after the expiration date of the option
term. During the applicable post-service exercise period, the option may not
be exercised for more than the number of option shares (if any) in which the
Board member is vested at the time of his or her cessation of Board service.
The shares subject to each automatic option grant which is subject to
vesting requirements, will immediately vest upon (i) the optionee's death or
permanent disability while a Board member, (ii) an acquisition of the Company
by merger or asset sale, (iii) the successful completion of a tender offer for
more than 50% of the Company's outstanding voting stock or (iv) a change in
the majority of the Board effected through one or more proxy contests for
Board membership.
Upon the successful completion of a hostile tender offer for more than 50%
of the Company's outstanding voting stock, each outstanding automatic option
grant may be surrendered to the Company for a cash distribution per
surrendered option share in an amount equal to the excess of (a) the highest
price per share of Common Stock paid in connection with such tender offer over
(b) the exercise price payable for such share. Stockholder approval of this
proposal two will also constitute pre-approval of each option granted with
such a surrender right on or after the date of the Annual Meeting and the
subsequent exercise of that right in accordance with the foregoing terms.
The remaining terms and conditions of each automatic option grant will in
general conform to the terms summarized above for option grants made under the
Discretionary Option Grant Program and will be incorporated into the option
agreement evidencing the automatic grant.
10
<PAGE>
General Provisions
Acceleration
If the Company is acquired by merger or asset sale, each outstanding option
under the 1995 Plan that is not to be assumed by the successor corporation
will automatically accelerate in full, and all unvested shares under the 1995
Plan will immediately vest, except to the extent the Company's repurchase
rights with respect to those shares are to be assigned to the successor
corporation. If the optionee's service with the Company or any successor
entity is subsequently terminated within 18 months after the acquisition, any
options that are assumed in connection with such acquisition will immediately
become exercisable for all the option shares, and any unvested shares that do
not vest at the time of such acquisition will immediately vest in full.
However, the Plan Administrator has the authority to grant options that will
immediately vest upon an acquisition of the Company, regardless of whether
those options are assumed by the successor corporation. The Plan Administrator
also has the discretionary authority to provide for the full and immediate
vesting of all outstanding stock options and unvested shares under the
Discretionary Option Grant and Stock Issuance Programs in connection with a
change in control of the Company (whether by successful tender offer for more
than 50% of the outstanding voting stock or a change in the majority of the
Board by reason of one or more proxy contests for the election of Board
members), with such vesting to occur either at the time of such change in
control or upon the subsequent termination of the individual's service.
The acceleration of vesting upon a change in the ownership or control of the
Company may be seen as an anti-takeover provision and may have the effect of
discouraging a merger proposal, a takeover attempt or other efforts to gain
control of the Company.
Financial Assistance
The Plan Administrator may institute a loan program to assist one or more
participants in financing the exercise of outstanding options or the purchase
of shares under the 1995 Plan. The Plan Administrator will have complete
discretion to determine the terms of any such financial assistance. However,
the maximum amount of financing provided any individual may not exceed the
cash consideration payable for the issued shares plus all applicable taxes.
Any such financing may be subject to forgiveness in whole or in part, at the
discretion of the Plan Administrator, over the participant's period of
service.
11
<PAGE>
Option Grants
The table below shows, as to each of the executive officers named below and
the various other indicated persons and groups, the following information with
respect to stock option grants effected during the period from January 1, 1999
through December 31, 1999: (i) the number of shares of Common Stock subject to
options granted under the 1995 Plan during that period; and (ii) the weighted
average exercise price payable per share under such options.
OPTION TRANSACTIONS
<TABLE>
<CAPTION>
Options Weighted Average
Granted Exercise Price
(Number of of Granted
Name Shares) Options ($)
---- ---------- ----------------
<S> <C> <C>
George P. Roberts................................. 0 --
Chief Executive Officer and Chairman of the Board
of Directors
Pier G. Antoniucci................................ 0 --
Former President and Former Chief Operating
Officer
Paul T. Obert..................................... 30,000 3.97
Former Senior Vice President, No./So. America,
Asia
Sunil B. Poduval.................................. 75,000 3.97
Former Vice President, European Operations
Michael J. Sophie................................. 0 --
Former Chief Financial Officer and Former Vice
President, Finance and Administration
Robert E. Collins................................. 19,161 5.22
Former Chief Financial Officer and Former Vice
President, Finance and Administration
John R. Wood...................................... 20,000 3.97
Senior Vice President, Engineering
All current executive officers as a group (6
persons)......................................... 300,000 4.70
All current non-employee directors as a group (3
persons)......................................... 40,000 4.44
All employees (other than executive officers) as a
group (115 persons).............................. 1,113,350 4.47
</TABLE>
As of September 30, 2000, options covering 6,381,470 shares of Common Stock
were outstanding under the 1995 Plan, 11,309 shares remained available for
future option grant or direct issuance and 7,107,613 shares have been issued
pursuant to the exercise of outstanding options under the 1995 Plan.
Amendment and Termination
The Board may amend or modify the 1995 Plan in any or all respects
whatsoever, subject to any stockholder approval required under applicable law
or regulation or pursuant to the express provisions of the 1995 Plan
summarized above. The Board may terminate the 1995 Plan at any time, and the
1995 Plan will in all events terminate on January 10, 2005.
Federal Income Tax Consequences
Options granted under the 1995 Plan may be either incentive stock options
that satisfy the requirements of Section 422 of the Internal Revenue Code or
non-statutory options that are not intended to meet such requirements. The
Federal income tax treatment for the two types of options differs as follows:
Incentive Options. No taxable income is recognized by the optionee at the
time of the option grant, and no taxable income is generally recognized at the
time the option is exercised. The optionee will, however,
12
<PAGE>
recognize taxable income in the year in which the purchased shares are sold or
otherwise made the subject of a taxable disposition. For Federal income tax
purposes, dispositions are divided into two categories: qualifying
dispositions and disqualifying dispositions. A qualifying disposition occurs
if the sale or other disposition is made more than 2 years after the option
grant date and more than 1 year after the exercise date. If either of these
two holding periods is not satisfied, then a disqualifying disposition will
result.
Upon a qualifying disposition, the optionee will recognize long-term capital
gain or loss in an amount equal to the excess or shortfall of (i) the amount
realized upon the sale or other disposition of the purchased shares over (ii)
the exercise price paid for the shares. If there is a disqualifying
disposition of the shares, then the excess of (i) the fair market value of
those shares on the exercise date over (ii) the exercise price paid for the
shares will be taxable as ordinary income to the optionee. Any additional gain
or loss recognized upon the disposition will be recognized as a capital gain
or loss by the optionee.
If the optionee makes a disqualifying disposition of the purchased shares,
then the Company will be entitled to an income tax deduction, for the taxable
year in which such disposition occurs, equal to the excess of (i) the fair
market value of such shares on the option exercise date over (ii) the exercise
price paid for the shares. If the optionee makes a qualifying disposition, the
Company will not be entitled to any income tax deduction.
Non-Statutory Options. No taxable income is recognized by an optionee upon
the grant of a non-statutory option. The optionee will in general recognize
ordinary income, in the year in which the option is exercised, equal to the
excess of the fair market value of the purchased shares on the exercise date
over the exercise price paid for the shares, and the optionee will be required
to satisfy the tax withholding requirements applicable to such income.
If the shares acquired upon exercise of the non-statutory option are
unvested and subject to repurchase by the Company in the event of the
optionee's termination of service prior to vesting in those shares, then the
optionee will not recognize any taxable income at the time of exercise but
will have to report as ordinary income, as and when the Company's repurchase
right lapses, an amount equal to the excess of (i) the fair market value of
the shares on the date the repurchase right lapses over (ii) the exercise
price paid for the shares. The optionee may, however, elect under Section
83(b) of the Internal Revenue Code to include as ordinary income in the year
of exercise of the option an amount equal to the excess of (i) the fair market
value of the purchased shares on the exercise date over (ii) the exercise
price paid for such shares. If the Section 83(b) election is made, the
optionee will not recognize any additional income as and when the repurchase
right lapses.
The Company will be entitled to an income tax deduction equal to the amount
of ordinary income recognized by the optionee with respect to the exercised
non-statutory option. The deduction will in general be allowed for the taxable
year of the Company in which such ordinary income is recognized by the
optionee.
Stock Appreciation Rights
An optionee who is granted a stock appreciation right will recognize
ordinary income in the year of exercise equal to the amount of the
appreciation distribution. The Company will be entitled to an income tax
deduction equal to such distribution for the taxable year in which the
ordinary income is recognized by the optionee.
Direct Stock Issuance
The tax principles applicable to direct stock issuances under the 1995 Plan
will be substantially the same as those summarized above for the exercise of
non-statutory option grants.
Deductibility of Executive Compensation
The Company anticipates that any compensation deemed paid by it in
connection with the disqualifying disposition of incentive stock option shares
or the exercise of non-statutory options will qualify as performance-
13
<PAGE>
based compensation for purposes of Code Section 162(m) and will not have to be
taken into account for purposes of the $1 million limitation per covered
individual on the deductibility of the compensation paid to certain executive
officers of the Company. Accordingly, all compensation deemed paid under the
1995 Plan with respect to such dispositions or exercises will remain
deductible by the Company without limitation under Code Section 162(m).
Accounting Treatment
Under APB Opinion No. 25, which the Company has elected to apply to its
equity compensation, options granted to employees and non-employee directors
under the 1995 Plan should not result in any direct charge to the Company's
reported earnings because the exercise price must be at least 100% of fair
market value of the underlying stock on the date of grant. However, the fair
value of those options must be disclosed in the notes to the Company's
financial statements, and the Company must also disclose, in footnotes to the
Company's financial statements, the pro-forma impact those options would have
upon the Company's reported earnings were the fair value of those options at
the time of grant treated as a compensation expense. In addition, the number
of outstanding options may be a factor in determining the Company's earnings
per share on a fully-diluted basis.
If shares are acquired under the Stock Issuance Program for less than 100%
of fair market value of the underlying stock on the date of acquisition, the
difference between such fair market value and such exercise price must be
recorded as compensation expense over the vesting period of the option.
At the end of each fiscal quarter, the amount (if any) by which the fair
market value of the shares of Common Stock subject to each outstanding tandem
stock appreciation rights held by an employee or non-employee director has
increased from the prior quarter-end would be accrued as direct compensation
expense, to the extent such fair market value exceeds the aggregate exercise
price in effect for those rights. A limited stock appreciation right held by
an employee or non-employee director will generally result in a compensation
expense only if, at the time that, it is triggered, in which case the amount
of the compensation expense would equal the excess of the fair market value of
the underlying common stock at such time over the exercise price.
In March 2000, the Financial Accounting Standards Board issued
Interpretation No. 44 to APB Opinion No. 25. Under the Interpretation, options
and other equity compensation granted to independent consultants (but not non-
employee Board members) after December 15, 1998 will be subject to the fair
value accounting rules of FAS 123 rather than APB Opinion No. 25. As a result,
options granted to non-employee consultants and advisors after that date will
generally result in a direct charge to the Company's reported earnings based
upon the fair value of the option measured initially as of the grant date of
that option and then subsequently on the vesting date of each installment of
the underlying option shares. No charge will be required for periods before
July 1, 2000 (the general effective date of the Interpretation); however,
options granted to non-employee consultants and advisors after December 15,
1998 but before July 1, 2000 will result in a charge based on any increase in
fair value of the options between July 1, 2000 and a subsequent vesting date.
If an optionee changes status from an employee or non-employee director to a
non-employee consultant or advisor or vice versa, then to the extent that any
outstanding option held by such individual would continue to vest after such
change in status, it will be deemed to have been newly granted to such
individual in his new status for purposes determining whether there is
compensation expense with respect to such option.
In addition, any employee or non-employee director options that are repriced
after December 15, 1998 would trigger a direct charge to the Company's
reported earnings for each fiscal quarter beginning on and after July 1, 2000
equal to the amount (if any) by which the fair market value of the shares of
Common Stock subject to each such option has increased from the prior quarter-
end, to the extent that such fair market value exceeds the option exercise
price.
14
<PAGE>
Stockholder Approval
The affirmative vote of a majority of the outstanding voting shares present
or represented and entitled to vote at the 2000 Annual Meeting is required for
approval of the amendments to the 1995 Plan. In the absence of such
stockholder approval, none of the amendments to the 1995 Plan will be
implemented. The 1995 Plan will, however, continue to remain in effect, and
option grants and direct stock issuances may continue to be made.
Recommendation of the Board of Directors
The Board of Directors unanimously recommends that the stockholders vote FOR
the amendments to the 1995 Plan.
15
<PAGE>
PROPOSAL THREE
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has appointed the firm of PricewaterhouseCoopers LLP
independent public auditors for the Company during the 1999 Fiscal Year, to
serve in the same capacity for the fiscal year ending December 31, 2000, and
is asking the stockholders to ratify this appointment. The affirmative vote of
a majority of the shares represented and voting at the Annual Meeting is
required to ratify the selection of PricewaterhouseCoopers LLP.
If the stockholders fail to ratify the appointment, the Board of Directors
will reconsider its selection. Even if the selection is ratified, the Board of
Directors in its discretion may direct the appointment of a different
independent auditing firm at any time during the year if the Board of
Directors believes that such a change would be in the best interests of the
Company and its stockholders.
A representative of PricewaterhouseCoopers LLP is expected to be present at
the Annual Meeting, will have the opportunity to make a statement if he or she
desires to do so, and will be available to respond to appropriate questions.
Recommendation of the Board of Directors
The Board of Directors unanimously recommends that the stockholders vote FOR
the ratification of the selection of PricewaterhouseCoopers LLP to serve as
the Company's independent auditors for the fiscal year ending December 31,
2000.
OTHER MATTERS
The Company knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters properly come before
the Annual Meeting, it is the intention of the persons named in the enclosed
form of Proxy to vote the shares they represent as the Board of Directors may
recommend. Discretionary authority with respect to such other matters is
granted by the execution of the enclosed Proxy.
16
<PAGE>
OWNERSHIP OF SECURITIES
The following table sets forth certain information known to the Company with
respect to the beneficial ownership of the Company's Common Stock as of
September 30, 2000, by (i) all persons who are beneficial owners of five
percent (5%) or more of the Company's Common Stock, (ii) each director of the
Company, (iii) the five persons serving as executive officers of the Company
on December 31, 1999 who were the most highly compensated by the Company in
1999, (iv) two additional persons (Messrs. Antoniucci and Sophie) who were
executive officers at some times during 1999 but not on December 31, 1999, and
whose cash compensation would have placed them among the five most highly-
compensated executive officers for 1999, and (v) all current directors and
executive officers as a group. Each of the stockholders has sole voting and
investment power with respect to the shares beneficially owned, subject to
community property laws, where applicable.
<TABLE>
<CAPTION>
Percentage
Shares of Shares
Beneficially Beneficially
Beneficial Owner Owned (#) Owned(1)
---------------- ------------ ------------ ---
<S> <C> <C> <C>
State of Wisconsin Investment Board............. 14,199,300 17.7
P.O. Box 7842
Madison, WI 53707
Firsthand Capital Management, Inc. ............. 10,981,800 13.7
101 Park Center Plaza, Ste. 1300
San Jose, CA 95113
George P. Roberts(2)............................ 1,322,405 1.7
Pier G. Antoniucci.............................. 29,947 *
Paul T. Obert(3)................................ 42,294 *
Sunil B. Poduval................................ 8,800 *
Michael J. Sophie............................... -0- *
Robert E. Collins(4)............................ 61,979 *
John R. Wood(5)................................. 132,176 *
John A. Hawkins(6).............................. 30,000 *
Brian T. Josling(7)............................. 20,000 *
M. Bernard Puckett(8)........................... 81,332 *
James J. Sobczak(9)............................. 126,909 *
All current directors and executive officers as
a group (9 persons)(10)........................ 1,825,895 2.3
</TABLE>
--------
* Less than one percent of the outstanding Common Stock
(1) Percentage of ownership is based on 80,357,688 shares of Common Stock
outstanding on September 30, 2000. Shares of Common Stock subject to
stock options that are currently exercisable or will become exercisable
within 60 days after September 30, 2000 are deemed outstanding for
computing the percentage of the person or group holding such options, but
are not deemed outstanding for computing the percentage of any other
person or group.
(2) Includes 1,138,581 shares issuable upon exercise of options that are
currently exercisable or will become exercisable within 60 days after
September 30, 2000.
(3) Includes 44,402 shares issuable upon exercise of options that are
currently exercisable or will become exercisable within 60 days after
September 30, 2000.
(4) Includes 19,271 shares issuable upon exercise of options that are
currently exercisable or will become exercisable within 60 days after
September 30, 2000.
(5) Includes 88,958 shares issuable upon exercise of options that are
currently exercisable or will become exercisable within 60 days after
September 30, 2000.
(6) Includes 30,000 shares issuable upon exercise of options that are
currently exercisable or will become exercisable within 60 days after
September 30, 2000.
17
<PAGE>
(7) Includes 20,000 shares issuable upon exercise of options that are
currently exercisable or will become exercisable within 60 days after
September 30, 2000.
(8) Includes 61,332 shares issuable upon exercise of options that are
currently exercisable or will become exercisable within 60 days after
September 30, 2000.
(9) Includes 137,750 shares issuable upon exercise of options that are
currently exercisable or will become exercisable within 60 days after
September 30, 2000.
(10) Includes 1,528,726 shares issuable upon exercise of options that are
currently exercisable or will become exercisable within 60 days after
September 30, 2000.
18
<PAGE>
EXECUTIVE COMPENSATION AND RELATED INFORMATION
The following table provides certain information summarizing the
compensation earned by (i) the five persons serving as executive officers of
the Company on December 31, 1999 who were the most highly compensated by the
Company in 1999, and (ii) two additional persons (Messrs. Antoniucci and
Sophie) who were executive officers at some times during 1999 but not on
December 31, 1999, and whose cash compensation would have placed them among
the five most highly-compensated executive officers for 1999, for the 1999
Fiscal Year (collectively, the "1999 Named Executive Officers"), for services
rendered in all capacities to the Company and its subsidiaries for each of the
last three fiscal years. Messrs. Antoniucci, Poduval, Sophie, Obert and
Collins are no longer employed by the Company.
1999 SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Number of
Compensation Securities
--------------- ------------
Long-Term
Salary Bonus Compensation
Name and Principal Position Year ($)(1) ($) Awards
--------------------------- ---- ------- ------- ------------
<S> <C> <C> <C> <C>
George P. Roberts............................ 1999 376,000 0 0
Chief Executive Officer and 1998 366,600 0 450,000
Chairman of the Board of Directors 1997 330,069 358,000 300,000
Pier G. Antoniucci........................... 1999 270,000 0 0
Former President and Chief Operating Officer 1998 270,855 0 200,000
1997 244,962 165,000 200,000
Paul T. Obert................................ 1999 204,123 0 30,000
Senior Vice President, 1998 165,360 46,000 60,000
No./So. America, Asia 1997 18,461 0 35,000
Sunil B. Poduval............................. 1999 161,250 165,000 75,000
Vice President, European Operations 1998 140,488 0 91,500
1997 113,429 0 40,000
Michael J. Sophie............................ 1999 143,077 0 0
Former Chief Financial Officer and Former 1998 195,000 0 200,000
Vice President, Finance and Administration 1997 175,673 109,000 150,000
Robert E. Collins............................ 1999 142,308 0 175,000
Former Chief Financial Officer and Former
Vice President, Finance and Administration
John R. Wood................................. 1999 144,900 0 20,000
Senior Vice President, Technology 1998 141,278 0 45,000
1997 147,421 28,980 10,000
</TABLE>
--------
(1) Includes amounts deferred under the Company's 401(k) Plan.
19
<PAGE>
Option Grants
The following table contains information concerning the stock option grants
made in 1999 to each of the Named Executive Officers. No stock appreciation
rights (SARs) were granted to these individuals during such fiscal year.
<TABLE>
<CAPTION>
Potential
Realizable Value
at Assumed Annual
Rates of Stock
Price
Number of % of Total Appreciation for
Securities Options Individual Grant Option Term(1)
Underlying Granted to ----------------------- -----------------
Options Employees in Exercise Expiration
Granted (#) Fiscal Year Price ($/Sh) Date 5% ($) 10% ($)
----------- ------------ ------------ ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
John R. Wood ........... 20,000(2) 1.32 3.97 08/17/09 48,914 126,498
Robert E. Collins....... 19,161(2) 1.32 5.22 04/19/09 62,887 159,369
155,839(2) 10.72 5.22 04/19/09 511,470 1,296,166
Paul T. Obert........... 30,000(2) 2.12 3.97 8/17/09 74,882 189,767
Sunil B. Poduval........ 75,000(2) 5.31 3.97 8/17/09 187,206 474,417
</TABLE>
--------
(1) There can be no assurance provided to any executive officer or any other
holder of the Company's securities that the actual stock price
appreciation over the ten-year option term will be at the assumed 5% and
10% levels or at any other defined level. Unless the market price of the
Common Stock appreciates over the option term, no value will be realized
from the option grants made to the executive officers.
(2) Each option is immediately exercisable for all the option shares, but any
shares purchased under the option will be subject to repurchase by the
Company, at the option exercise price paid per share, should the
individual cease service with the Company prior to vesting in those
shares. Twenty-five percent (25%) of the option shares will vest upon the
optionee's continuation in service through one year following the grant
date and the balance of the shares will vest in 36 successive equal
monthly installments upon the optionee's completion of each of the next 36
months of service thereafter. The shares subject to the option will
immediately vest in full should (i) the Company be acquired by merger or
asset sale in which the option is not assumed or replaced by the acquiring
entity or (ii) the optionee's employment be involuntarily terminated
within 18 months after certain changes in control or ownership of the
Company.
Aggregated Option Exercises and Fiscal Year-End Values
The table below sets forth certain information with respect to the Company's
Chief Executive Officer and the other Named Executive Officers concerning the
exercise of options during 1999 and unexercised options held by such
individuals as of the end of such fiscal year. No SARs were exercised during
1999 nor were any SARs outstanding at the end of such fiscal year.
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised in-the-Money
Shares Aggregate Unexercised Options at FY-End (#) Options at FY-End(1)
Acquired on Value Realized ------------------------------------- ---------------------------------
Exercise (#) ($)(2) Exercisable(3) Unexercisable Exercisable ($) Unexercisable ($)
------------ -------------- ----------------- ---------------- --------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
George P. Roberts....... 0 0 869,164 544,168 1,795,644 1,815,609
Pier G. Antoniucci...... 84,744 258,993 0 0 0 0
Paul T. Obert........... 0 0 22,395 67,605 89,857 308,577
Sunil B. Poduval........ 39,750 138,106 5,344 128,542 10,460 624,592
Michael J. Sophie....... 54,639 151,212 161,879 0 76,597 0
John J. Wood............ 0 0 68,641 56,356 245,928 278,292
Robert E. Collins....... 0 0 0 175,000 0 634,384
</TABLE>
--------
(1) Based on the fair market value of the option shares at the 1999 Fiscal
Year-end ($8.844 per share based on the closing selling price on the
Nasdaq National Market as of December 31, 1999) less the exercise price.
(2) Based on the fair market value of the shares on the exercise date less the
exercise price paid for those shares.
20
<PAGE>
(3) The exercisable options are immediately exercisable for all the option
shares. However, any shares purchased under the options are subject to
repurchase by the Company, at the original exercise price paid per share,
upon the optionee's cessation of service prior to vesting in such shares.
As of December 31, 1999, the following number of shares were unvested: Mr.
Roberts--544,168 shares; Mr. Wood--56,356 shares; Mr. Collins--175,000
shares. Mr. Bean--114,793; Mr. Poduval--128,542; Mr. Obert--67,605.
Employment Contracts, Termination of Employment Arrangements and Change of
Control Agreements
The Compensation Committee of the Board of Directors, as Plan Administrator
of the 1995 Stock Option/Stock Issuance Plan, has the authority to provide for
accelerated vesting of the shares of Common Stock subject to any outstanding
options held by the Chief Executive Officer and any other executive officer or
any unvested share issuances actually held by such individual, in connection
with certain changes in control of the Company or the subsequent termination
of the officer's employment following the change in control event.
The Company has entered into severance agreements (the "Agreements") with
George Roberts, Chairman of the Board of Directors and Chief Executive
Officer, and James Sobczak, President and Chief Operating Officer
(individually, the "Officer" and collectively the "Officers"), dated December
15, 1997 and September 10, 1999, respectively. Each of these Agreements
provides for the following benefits should the Officer's employment terminate,
either voluntarily or involuntarily, for any reason within 24 months following
a Change in Control: (a) a severance payment in an amount equal to 2 times his
annual rate of base salary; (b) a bonus in an amount equal to the greater of
either (i) 2 times the full amount of the Officer's target bonus for the
fiscal year in which the termination occurs or (ii) 2 times the full amount of
his target bonus for the fiscal year in which a Change in Control occurs; (c)
the shares subject to each outstanding option held by the Officer (to the
extent not then otherwise fully vested) will automatically vest so that each
such option will become immediately exercisable for all the option shares as
fully-vested shares (notwithstanding anything in this Proxy Statement to the
contrary); and (d) the Company will, at its own expense, provide (i) Mr.
Sobczak and his dependents with continued health care coverage for a period of
up to 24 months following his termination of employment, and (ii) Mr. Roberts
and his dependents with continued health care coverage for life. A Change in
Control will be deemed to occur under the Agreements upon: (a) a merger or
consolidation in which securities possessing 50% or more of the total combined
voting power of the Company's outstanding securities are transferred to person
or persons different from the persons holding those securities immediately
prior to such transaction, (b) the sale, transfer or other disposition of all
or substantially all of the assets of the Company in complete liquidation or
dissolution of the Company; (c) a hostile take-over of the Company, whether
effected through a tender offer for more than 25% of the Company's outstanding
voting securities or a change in the majority of the Board by one or more
contested elections for Board membership; or (d) the acquisition, directly or
indirectly by any person or related group of persons (other than the Company
or a person that directly or indirectly controls, is controlled by, or is
under common control with, the Company), of beneficial ownership (within the
meaning of Rule 13d-3 of the Securities Exchange Act of 1934) of securities
possessing more than 30% of the total combined voting power of the Company's
outstanding securities pursuant to a tender or exchange offer made directly to
the Company's stockholders. In addition, each Officer will be entitled to a
full tax gross-up to the extent one or more of the severance benefits provided
under his Agreement are deemed to constitute excess parachute payments under
the federal income tax laws.
In addition, the Company entered into a separation agreement with Robert
Collins, Former Chief Financial Officer/Vice President of Finance and
Administration, calling for continuation of his salary ($200,000 per annum)
from August 29, 2000 through August 14, 2001. The Company also agreed to pay
the required premium for COBRA fringe benefits coverage for Mr. Collins and
his eligible dependents for the same period (or, if sooner, until he commences
new employment with equivalent or better benefits coverage). In addition, Mr.
Collins will vest, over the same period, in 43,750 of his stock options which
were unvested at the date his employment terminated.
21
<PAGE>
The Company does not have any existing agreements with the Chief Executive
Officer or any other executive officer named in the Summary Compensation Table
that establish a specific term of employment for them, and their employment
may accordingly be terminated at any time at the discretion of the Board of
Directors. The Compensation Committee of the Board of Directors has the
authority as Plan Administrator of the 1995 Plan to provide for the
accelerated vesting of the shares of Common Stock subject to outstanding
options held by the Company's executive officers, whether granted under that
plan or any predecessor plan, in the event their employment were to be
terminated (whether involuntarily or through a forced resignation) following
certain changes in control or ownership of the Company.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the Company's Board of Directors currently
consists of Mr. Josling and Mr. Hawkins. Neither of these individuals was an
officer or employee of the Company at any time during the 1999 Fiscal Year or
at any other time.
No current executive officer of the Company has ever served as a member of
the board of directors or compensation committee of any other entity that has
or has had one or more executive officers serving as a member of the Company's
Board of Directors or Compensation Committee.
22
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE OF
THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
"The Compensation Committee of the Board of Directors is responsible for
establishing the base salary and incentive cash bonus programs for the
Company's executive officers. The Committee also has the exclusive
responsibility for the administration of the Company's 1995 Stock Option/Stock
Issuance Plan, under which grants may be made to executive officers and other
key employees of the Company.
Compensation Philosophy
Since the initial public offering of the Company's Common Stock in March
1995, it has been the Committee's policy and objective to provide the
Company's executive officers and other key employees with competitive
compensation opportunities based upon their contribution to the financial
success of the Company, the enhancement of corporate and stockholder values,
the market levels of compensation in effect at companies with which the
Company competes for executive talent and the personal performance of such
individuals. The primary factors that the Committee considered in establishing
the compensation levels of the executive officers for the 1999 fiscal year are
summarized below. The Committee may, however, in its discretion, apply
different factors in setting executive compensation for future fiscal years.
It is the Committee's current objective to have a significant portion of
each officer's compensation contingent upon the Company's performance as well
as upon the officer's own level of performance. Accordingly, the compensation
package for each executive officer and key employee is comprised of three
elements: (i) base salary that reflects individual performance and is designed
primarily to be competitive with salary levels in effect at a select group of
companies with which the Company competes for executive talent, (ii) annual
performance awards payable in cash and based upon the Company's financial
performance and the market performance of the Company's common stock and (iii)
long-term equity incentive awards with overlapping vesting schedules that
strengthen the mutuality of interests between the executive officers and the
Company's stockholders while fostering retention of existing personnel.
The Committee recognizes that the highly-specialized industry sector in
which the Company operates is both extremely competitive and globally-
challenging, with the result that there is substantial demand for high-
caliber, seasoned executives with a high level of industry-specific knowledge
and industry contacts, especially overseas contacts. It is crucial that the
Company reward and be assured of retaining the executive personnel essential
to the attainment of the Company's performance goals. For these reasons, the
Committee believes the Company's executive compensation arrangements must
remain competitive with those offered by other companies of similar magnitude,
complexity and performance records (the "peer group") in order to provide
adequate incentive to the Company's executive officers to continue to provide
services to the Company.
Cash Compensation
A key objective of the Company's current executive compensation program is
to position its key executives to earn annual cash compensation (base salary
plus bonus) equaling or exceeding that which the executive would earn at other
peer group companies. During 1999, the Committee reviewed and relied on
technology industry compensation surveys in its assessment of appropriate
compensation levels.
The Fiscal Year 1999 base salaries for the named executive officers are
based upon a number of factors, including, without limitation, each
executive's performance and contribution to overall Company performance and
the levels of base salary in effect for comparable positions with the peer
group companies. Base salary decisions are made as part of a formal review
process. Generally, the base salaries of the Company's executive officers for
the 1999 fiscal year ranged from the 10th percentile to the 75th percentile of
the salaries surveyed for comparable positions at the peer group companies. In
defining "peer group companies," the Company considered companies with
revenues between $100 million and $200 million. In 1999, the Company was, and
at
23
<PAGE>
the beginning of 2000, the Company expects to be in 2000, in the range from
$200 million to $500 million in revenues. In comparison to other companies in
the $200 million to $500 million range, the base salaries for the Company's
executive officers as of the beginning of the 2000 fiscal year ranged from the
10th percentile to the 50th percentile. This should not be construed as a
continuing prediction that the Company's 2000 revenues will exceed $200
million.
For purposes of the stock price performance graph that appears later in this
Proxy Statement, the Company has selected the Standard & Poor's Communications
Equipment Manufacturers Index as the industry index. Several of the companies
included in that index were also among the companies that the Committee
surveyed as part of the peer group for comparative compensation purposes.
However, in selecting companies to survey for such compensation purposes, the
Committee focused primarily on whether those companies were actually
competitive with the Company in seeking executive talent and whether those
companies had a management style and corporate culture and annual revenues
similar to the Company's. For this reason, the number of companies surveyed
for compensation data was substantially less than the number of companies
included in the Standard & Poor's Communications Equipment Manufacturers
Index.
The annual incentive compensation provided to the Company's executive
officers is in the form of cash bonuses based on the Committee's assessment of
the Company's financial performance for the year and the individual officer's
contribution to that performance. For the 1999 fiscal year, the Committee
determined not to award any cash bonus to the executive officers.
Stock Options
Equity incentives are provided primarily through stock option grants under
the 1995 Plan. The grants are designed to align the interests of each
executive officer with those of the stockholders and provide each individual
with a significant incentive to manage the Company from the perspective of an
owner with an equity stake in the business. Each grant allows the individual
to acquire shares of the Company's Common Stock at a fixed price per share
(the market price on the grant date) over a specified period of time (up to 10
years). The shares subject to each option generally vest in installments over
a two-to-four-year period, contingent upon the executive officer's continued
employment with the Company. Accordingly, the option will provide a return to
the executive officer only if the executive officer remains employed by the
Company during the applicable vesting period, and then only if the market
price of the underlying shares appreciates over the option term.
The number of shares subject to each option grant is set at a level intended
to create a meaningful opportunity for stock ownership based on the officer's
current position with the Company, the base salary associated with that
position, the size of comparable awards made to individuals in similar
positions within the industry, the individual's potential for increased
responsibility and promotion over the option term, and the individual's
personal performance in recent periods. The Committee will also take into
account the executive officer's existing holdings of the Company's Common
Stock and the number of vested and unvested options held by that individual in
order to maintain an appropriate level of equity incentive. However, the
Committee does not intend to adhere to any specific guidelines as to the
relative option holdings of the Company's executive officers.
Chief Executive Officer Performance and Compensation
In setting the base salary for Mr. Roberts for the 1999 fiscal year, the
Committee sought to achieve two objectives: (i) make his base salary
competitive with the base salaries paid to the chief executive officers of the
same peer group of companies that the Committee surveyed for comparative
compensation purposes for all other executive officers of the Company and (ii)
make a significant percentage of his total compensation package contingent
upon Company performance. For the 1999 fiscal year, the base salary of Mr.
Roberts was set at the 75th percentile of the base salary levels in effect for
those other chief executive officers. In comparison to companies in the range
from $200 million to $500 million in revenues, Mr. Roberts' base salary was at
the
24
<PAGE>
50th percentile of the base salary levels for those chief executive officers.
As indicated above, the Committee decided not to award any cash bonus to Mr.
Roberts or any other executive officer for the 1999 fiscal year.
It is the Committee's view that the total compensation package provided Mr.
Roberts for the 1999 fiscal year is competitive with the typical compensation
packages awarded to chief executive officers in the Company's peer group.
Compliance with Internal Revenue Code Section 162(m)
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to publicly held companies for compensation exceeding $1 million
paid to certain of the corporation's executive officers. The limitation
applies only to compensation that is not considered to be performance-based.
The non-performance based compensation to be paid to the Company's executive
officers for the 1999 fiscal year did not exceed the $1 million limit per
officer, nor is it expected that the non-performance based compensation to be
paid to the Company's executive officers for fiscal 1999 will exceed that
limit. Options granted under the Company's 1995 Plan are structured so that
any compensation deemed paid to an executive officer in connection with the
exercise of those options will qualify as performance-based compensation that
will not be subject to the $1 million limitation. Because it is very unlikely
that the cash compensation payable to any of the Company's executive officers
in the foreseeable future will approach the $1 million limit, the Compensation
Committee has decided at this time not to take any other action to limit or
restructure the elements of cash compensation payable to the Company's
executive officers. The Compensation Committee will reconsider this decision
should the individual compensation of any executive officer ever approach the
$1 million level.
It is the opinion of the Compensation Committee that the executive
compensation policies and programs in effect for the Company's executive
officers provide an appropriate level of total remuneration that properly
aligns the Company's performance and the interests of the Company's
stockholders with competitive and equitable executive compensation in a
balanced and reasonable manner, for both the short and long-term."
Brian T. Josling
Member, Compensation Committee
John A. Hawkins
Member, Compensation Committee
25
<PAGE>
Stock Performance Graph
The graph depicted below shows a comparison of cumulative total stockholder
returns for the Company, the Standard & Poor's 500 Index and the Standard &
Poor's Communications Equipment Manufacturers Index.
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
S&P Communications
S&P 500 Equipment Index P-Com
<S> <C> <C> <C>
Mar-95 500.71 91.16 4.813
Jun-95 544.75 107.58 5.906
Sep-95 584.41 124.72 11.188
Dec-95 615.93 125.77 10
Mar-96 645.5 131.43 10.063
Jun-96 670.63 151.67 15.75
Sep-96 687.31 162.1 12.375
Dec-96 740.74 166.24 14.813
Mar-97 757.12 142.65 13
Jun-97 885.14 190.87 16.5
Sep-97 947.28 212.12 23.938
Dec-97 970.43 200.74 17.25
Mar-98 1101.75 268.43 20
Jun-98 1133.84 324.71 9.156
Sep-98 1017.01 279.2 3.906
Dec-98 1229.23 427.74 3.984
Mar-99 1286.37 465.57 7.625
Jun-99 1372.71 578.61 5.234
Sep-99 1282.71 599.18 7
Dec-99 1469.25 943.56 8.844
</TABLE>
--------
(1) The graph covers the period from March 2, 1995, the date of the Company's
initial public offering of shares of its Common Stock, to December 31,
1999.
(2) The graph assumes that $100 was invested on March 2, 1995, in the
Company's Common Stock and in each index, and that all dividends were
reinvested. No cash dividends have been declared on the Company's Common
Stock.
(3) Stockholder returns over the indicated period should not be considered
indicative of future stockholder returns.
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings made under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, that might incorporate future
filings made by the Company under those statutes, neither the preceding Stock
Performance Graph nor the Compensation Committee Report is to be incorporated
by reference into any such prior filings, nor shall such graph or report be
incorporated by reference into any future filings made by the Company under
those statutes.
26
<PAGE>
CERTAIN TRANSACTIONS
In addition to the indemnification provisions contained in the Company's
Restated Certificate of Incorporation and Bylaws, the Company has entered into
separate indemnification agreements with each of its directors and officers.
These agreements require the Company, among other things, to indemnify such
director or officer against expenses (including attorneys' fees), judgments,
fines and settlements (collectively, "Liabilities") paid by such individual in
connection with any action, suit or proceeding arising out of such
individual's status or service as a director or officer of the Company (other
than Liabilities arising from willful misconduct or conduct that is knowingly
fraudulent or deliberately dishonest) and to advance expenses incurred by such
individual in connection with any proceeding against such individual with
respect to which such individual may be entitled to indemnification by the
Company.
Mr. Robert's adult son and Mr. Antoniucci's adult daughter each held a
minority interest in a private company that supplied synthesizers to the
Company for use in its products. To date, the Company has purchased
approximately $10.5 million of synthesizers from each supplier, including
approximately $298,324 in 1999 which is down from $965,000 in 1998. Due to the
fact that such supplier ceased operation in 1999, the percentage of sales from
P-Com of such supplier cannot be ascertained. The terms of the Company's
purchase agreement with such supplier were no less favorable to the company
than could be obtained from an unaffiliated third party supplier. The Company
also purchased synthesizers from several unaffiliated third entities,
including qGeritel S.p.A., Communication Techniques, Inc. and SPC Electronics
Corp., at competitive prices approximately equal to those of such supplier.
Each such adult is financially independent of his or her parent and resides at
a different address from his or her parent.
In connection with certain relocation expenses, the Company issued a
promissory note in the amount of $250,000 to Mr. Sobczak. This note is
interest free and payable one year after Mr. Sobczak leaves the Company. In
addition, P-Com agreed to pay for certain fees and services in connection with
the sale of Mr. Sobczak's home in Pennsylvania so that he may complete his
relocation to California. We anticipate these fees and services to amount to
approximately $55,000.
All future transactions between the Company and its officers, directors,
principal stockholders and affiliates will be approved by a majority of the
independent and disinterested members of the Board of Directors, and will be
on terms no less favorable to the Company than could be obtained from
unaffiliated third parties.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
The members of the Board of Directors, the executive officers of the Company
and persons who hold more than 10% of the Company's outstanding Common Stock
are subject to the reporting requirements of Section 16(a) of the Securities
Exchange Act of 1934, as amended, that require them to file reports with
respect to their ownership of the Common Stock and their transactions in such
Common Stock. Based upon (i) the copies of Section 16(a) reports that the
Company received from such persons for their 1999 Fiscal Year transactions in
the Common Stock and their Common Stock holdings, and (ii) the written
representations received from one or more of such persons that no annual Form
5 reports were required to be filed by them for the 1999 Fiscal Year, the
Company believes that all reporting requirements under Section 16(a) for such
fiscal year were met in a timely manner by its directors, executive officers
and greater than ten percent beneficial owners.
27
<PAGE>
ANNUAL REPORT
A copy of the Annual Report of the Company for the 1999 Fiscal Year has been
mailed concurrently with this Proxy Statement to all stockholders entitled to
notice of and to vote at the Annual Meeting. The 1999 Annual Report is not
incorporated into this Proxy Statement and is not considered proxy
solicitation material.
FORM 10-K
The Company filed an Annual Report on Form 10-K/A (for the year ended
December 31, 1999) with the Securities and Exchange Commission on April 24,
2000. Stockholders may obtain a copy of this report, without charge, by
writing to Mr. Leighton Stephenson, Chief Financial Officer and Vice
President, Finance and Administration of the Company, at the Company's
principal executive offices that are located at 3175 South Winchester
Boulevard, Campbell, California 95008.
THE BOARD OF DIRECTORS OF P-COM,
INC.
Dated: October 30, 2000
28
<PAGE>
P-COM, INC.
1995 STOCK OPTION/STOCK ISSUANCE PLAN
-------------------------------------
As Amended and Restated Through November 30, 2000
(Assuming Stockholder Approval at the 2000 Annual Meeting)
ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSE OF THE PLAN
This 1995 Stock Option/Stock Issuance Plan is intended to promote the
interests of P-COM, Inc., a Delaware corporation, by providing eligible persons
with the opportunity to acquire a proprietary interest, or otherwise increase
their proprietary interest, in the Corporation as an incentive for them to
remain in the service of the Corporation.
Capitalized terms shall have the meanings assigned to such terms in
the attached Appendix.
II. STRUCTURE OF THE PLAN
A. The Plan shall be divided into three separate equity programs:
(i) the Discretionary Option Grant Program under which
eligible persons may, at the discretion of the Plan Administrator, be granted
options to purchase shares of Common Stock,
(ii) the Stock Issuance Program under which eligible persons
may, at the discretion of the Plan Administrator, be issued shares of Common
Stock directly, either through the immediate purchase of such shares or as a
bonus for services rendered the Corporation (or any Parent or Subsidiary), and
(iii) the Automatic Option Grant Program under which
Eligible Directors shall automatically receive option grants at periodic
intervals to purchase shares of Common Stock.
B. The provisions of Articles One and Five shall apply to all equity
programs under the Plan and shall accordingly govern the interests of all
persons under the Plan.
<PAGE>
III. ADMINISTRATION OF THE PLAN
A. The Primary Committee shall have sole and exclusive authority to
administer the Discretionary Option Grant and Stock Issuance Programs with
respect to Section 16 Insiders. Except to the extent the Primary Committee is
granted sole and exclusive authority under one or more specific provisions of
the Plan, administration of the Discretionary Option Grant and Stock Issuance
Programs with respect to all other persons eligible to participate in these
programs may, at the Board's discretion, be vested in the Primary Committee or a
Secondary Committee, or the Board may retain the power to administer those
programs with respect to all such persons. The members of the Secondary
Committee may be individuals who are Employees eligible to receive discretionary
option grants or direct stock issuances under the Plan or any stock option,
stock appreciation, stock bonus or other stock plan of the Corporation (or any
Parent or Subsidiary).
B. Members of the Primary Committee or any Secondary Committee shall
serve for such period of time as the Board may determine and shall be subject to
removal by the Board at any time. The Board may also at any time terminate the
functions of any Secondary Committee and reassume all powers and authority
previously delegated to such committee.
C. Each Plan Administrator shall, within the scope of its
administrative functions under the Plan, have full power and authority (subject
to the provisions of the Plan) to establish such rules and regulations as it may
deem appropriate for proper administration of the Discretionary Option Grant and
Stock Issuance Programs and to make such determinations under, and issue such
interpretations of, the provisions of such programs and any outstanding options
or stock issuances thereunder as it may deem necessary or advisable. Decisions
of the Plan Administrator within the scope of its administrative functions under
the Plan shall be final and binding on all parties who have an interest in the
Discretionary Option Grant or Stock Issuance Program under its jurisdiction or
any option or stock issuance thereunder.
D. Service on the Primary Committee or the Secondary Committee shall
constitute service as a Board member, and members of each such committee shall
accordingly be entitled to full indemnification and reimbursement as Board
members for their service on such committee. No member of the Primary Committee
or the Secondary Committee shall be liable for any act or omission made in good
faith with respect to the Plan or any option grants or stock issuances under the
Plan.
E. Administration of the Automatic Option Grant Program shall be
self-executing in accordance with the terms of that program, and no Plan
Administrator shall exercise any discretionary functions with respect to option
grants made thereunder.
2
<PAGE>
IV. ELIGIBILITY
A. The persons eligible to participate in the Discretionary Option
Grant and Stock Issuance Programs are as follows:
(i) Employees,
(ii) non-employee members of the Board or of the board of
directors of any Parent or Subsidiary, and
(iii) consultants or other independent advisors who provide
services to the Corporation (or any Parent or Subsidiary).
B. Each Plan Administrator shall, within the scope of its
administrative jurisdiction under the Plan, have full authority to determine,
(i) with respect to the option grants under the Discretionary Option Grant
Program, which eligible persons are to receive option grants, the time or times
when such option grants are to be made, the number of shares to be covered by
each such grant, the status of the granted option as either an Incentive Option
or a Non-Statutory Option, the time or times at which each option is to become
exercisable, the vesting schedule (if any) applicable to the option shares and
the maximum term for which the option is to remain outstanding and (ii) with
respect to stock issuances under the Stock Issuance Program, which eligible
persons are to receive stock issuances, the time or times when such issuances
are to be made, the number of shares to be issued to each Participant, the
vesting schedule (if any) applicable to the issued shares and the consideration
to be paid by the Participant for such shares.
C. The Plan Administrator shall have the absolute discretion either
to grant options in accordance with the Discretionary Option Grant Program or to
effect stock issuances in accordance with the Stock Issuance Program.
D. The individuals eligible to receive option grants under the
Automatic Option Grant Program shall be limited to (i) those individuals who
were serving as non-employee Board members on February 1, 1996, (ii) those
individuals who first become non-employee Board members after February 1, 1996,
whether through appointment by the Board or election by the Corporation's
stockholders, and (iii) those individuals who continue to serve as non-employee
Board members at one or more Annual Stockholders Meetings held after February 1,
1996. A non-employee Board member who has previously been in the employ of the
Corporation (or any Parent or Subsidiary) shall not be eligible to receive an
initial 40,000-share option grant under the Automatic Option Grant Program at
the time he or she first becomes a non-employee Board member, but such
individual shall be eligible to receive periodic option grants under the
Automatic Option Grant Program upon his or her continued service as a non-
employee Board member.
3
<PAGE>
V. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of authorized
but unissued or reacquired Common Stock, including shares repurchased by the
Corporation on the open market. The maximum number of shares of Common Stock
which may be issued over the term of the Plan shall not exceed 14,934,459
shares. Such authorized share reserve is comprised of (i) the number of shares
which remained available for issuance, as of the Plan Effective Date, under the
Predecessor Plan as last approved by the Corporation's stockholders prior to
such date, including the shares subject to the outstanding options incorporated
into the Plan and any other shares which would have been available for future
option grants under the Predecessor Plan, (ii) an additional increase of 640,000
shares of Common Stock previously authorized by the Board and approved by the
Corporation's stockholders prior to the Plan Effective Date, (iii) an additional
increase of 1,600,000 shares of Common Stock authorized by the Board on February
1, 1996 and approved by the Corporation's stockholders at the 1996 Annual
Meeting, (iv) a further increase of 3,000,000 shares of Common Stock authorized
by the Board in April 1997 and approved by the stockholders at the 1997 Annual
Meeting, (v) the 683,737 shares of Common Stock added to the share reserve on
January 2, 1998 by reason of the automatic share increase provisions of Section
V.B of this Article One, (vi) a further increase of 3,500,000 shares of Common
Stock authorized by the Board on March 11, 1998 and approved by the
Corporation's stockholders at the 1998 Annual Meeting, (vii) the 714,834 shares
of Common Stock added to the share reserve on January 4, 1999 by reason of the
automatic share increase provisions of Section V.B of this Article One, plus
(viii) a further increase of 1,500,000 shares of Common Stock authorized by the
Board in October 2000 and approved by the stockholders at the 2000 Annual
Meeting.
B. The number of shares of Common Stock available for issuance under
the Plan shall automatically increase on the first trading day of each of the
1998 and 1999 calendar years by an amount equal to one and six-tenths percent
(1.6%) of the total number of shares of Common Stock outstanding on the last
trading day of the immediately preceding calendar year. No Incentive Options
may be granted on the basis of the additional shares of Common Stock resulting
from such annual increases. The automatic share increases previously approved
by the stockholders for calendar years 2000 and 2001 shall not be implemented.
C. No one person participating in the Plan may receive options,
separately exercisable stock appreciation rights and direct stock issuances for
more than 2,400,000 shares of Common Stock in the aggregate over the term of the
Plan. The increase to this limitation from 1,600,000 shares to 2,400,000 shares
was authorized by the Board in October 2000 and approved by the Stockholders at
the 2000 Annual Meeting.
D. Shares of Common Stock subject to outstanding options shall be
available for subsequent issuance under the Plan to the extent (i) the options
(including any options incorporated from the Predecessor Plan) expire or
terminate for any reason prior to exercise in full or (ii) the options are
cancelled in accordance with the cancellation-regnant provisions of
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Article Two. Unvested shares issued under the Plan and subsequently cancelled
or repurchased by the Corporation, at the original option exercise or direct
issue price paid per share, pursuant to the Corporation's repurchase rights
under the Plan shall be added back to the number of shares of Common Stock
reserved for issuance under the Plan and shall accordingly be available for
reissuance through one or more subsequent option grants or direct stock
issuances under the Plan. However, should the exercise price of an option under
the Plan (including any option incorporated from the Predecessor Plan) be paid
with shares of Common Stock or should shares of Common Stock otherwise issuable
under the Plan be withheld by the Corporation in satisfaction of the withholding
taxes incurred in connection with the exercise of an option or the vesting of a
stock issuance under the Plan, then the number of shares of Common Stock
available for issuance under the Plan shall be reduced by the gross number of
shares for which the option is exercised or which vest under the stock issuance,
and not by the net number of shares of Common Stock issued to the holder of such
option or stock issuance.
E. Should any change be made to the Common Stock by reason of any
stock split, stock dividend, recapitalization, combination of shares, exchange
of shares or other change affecting the outstanding Common Stock as a class
without the Corporation's receipt of consideration, appropriate adjustments
shall be made to (i) the maximum number and/or class of securities issuable
under the Plan, (ii) the number and/or class of securities for which any one
person may be granted options, separately exercisable stock appreciation rights
and direct stock issuances over the term of the Plan, (iii) the number and/or
class of securities for which automatic option grants are to be subsequently
made per Eligible Director under the Automatic Option Grant Program and (iv) the
number and/or class of securities and the exercise price per share in effect
under each outstanding option (including any option incorporated from the
Predecessor Plan) in order to prevent the dilution or enlargement of benefits
thereunder. The adjustments deter-mined by the Plan Administrator shall be
final, binding and conclusive.
5
<PAGE>
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
----------------------------------
I. OPTION TERMS
Each granted option shall be evidenced by one or more documents in the
form approved by the Plan Administrator; provided, however, that each such
document shall comply with the terms specified below. Each document evidencing
an Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.
A. Exercise Price.
--------------
1. The exercise price per share shall be fixed by the Plan
Administrator but shall not be less than one hundred percent (100%) of the
Fair Market Value per share of Common Stock on the option grant date.
2. The exercise price shall become immediately due upon exercise of
the option and shall, subject to the provisions of Section I of Article Five
and the documents evidencing the option grant, be payable in one or more of
the forms specified below :
(i) cash or check made payable to the Corporation,
(ii) shares of Common Stock held for the requisite period
necessary to avoid a charge to the Corporation's earnings for financial
reporting purposes and valued at Fair Market Value on the Exercise Date, or
(iii) to the extent the option is exercised for vested shares,
through a special sale and remittance procedure pursuant to which the Optionee
shall concurrently provide irrevocable written instructions to (A) a
Corporation-designated brokerage firm to effect the immediate sale of the
purchased shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate
exercise price payable for the purchased shares plus all applicable Federal,
state and local income and employment taxes required to be withheld by the
Corporation by reason of such exercise and (B) the Corporation to deliver the
certificates for the purchased shares directly to such brokerage firm in order
to complete the sale transaction.
Except to the extent such sale and remittance procedure is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.
B. Exercise and Term of Options. Each option shall be exercisable at such
----------------------------
times or times, during such period and for such number of shares as shall be
determined by the Plan Administrator and set forth in the document evidencing
the option. However, no option shall have a term in excess of ten (10) years
measured from the option grant date.
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C. Effect of Termination of Service.
--------------------------------
1. The following provisions shall govern the exercise of any options
held by the Optionee at the time of cessation of Service or death:
(i) Any option outstanding at the time of the Optionee's
cessation of Service for any reason shall remain exercisable for such period of
time thereafter as shall be determined by the Plan Administrator and set forth
in the documents evidencing the option, but no such option shall be exercisable
after the expiration of the option term.
(ii) Any option exercisable in whole or in part by the Optionee
at the time of death may be subsequently exercised by the personal
representative of the Optionee's estate or by the person or persons to whom the
option is transferred pursuant to the Optionee's will or in accordance with the
laws of descent and distribution.
(iii) During the applicable post-Service exercise period, the
option may not be exercised in the aggregate for more than the number of vested
shares for which the option is exercisable on the date of the Optionee's
cessation of Service. Upon the expiration of the applicable exercise period or
(if earlier) upon the expiration of the option term, the option shall terminate
and cease to be outstanding for any vested shares for which the option has not
been exercised. However, the option shall, immediately upon the Optionee's
cessation of Service, terminate and cease to be outstanding to the extent it is
not exercisable for vested shares on the date of such cessation of Service.
(iv) Should the Optionee's Service be terminated for Misconduct,
then all outstanding options held by the Optionee shall terminate immediately
and cease to be outstanding.
2. The Plan Administrator shall have complete discretion, exercisable
either at the time an option is granted or at any time while the option remains
outstanding, to:
(i) extend the period of time for which the option is to remain
exercisable following the Optionee's cessation of Service from the period
otherwise in effect for that option to such greater period of time as the Plan
Administrator shall deem appropriate, but in no event beyond the expiration of
the option term, and/or
(ii) permit the option to be exercised, during the applicable
post-Service exercise period, not only with respect to the number of vested
shares of Common Stock for which such option is exercisable at the time of the
Optionee's cessation of Service but also with respect to one or more additional
installments in which the Optionee would have vested had the Optionee continued
in Service.
7
<PAGE>
D. Stockholder Rights. The holder of an option shall have no stockholder
------------------
rights with respect to the shares subject to the option until such person shall
have exercised the option, paid the exercise price and become a holder of record
of the purchased shares.
E. Repurchase Rights. The Plan Administrator shall have the discretion
-----------------
to grant options which are exercisable for unvested shares of Common Stock.
Should the Optionee cease Service while holding such unvested shares, the
Corporation shall have the right to repurchase, at the exercise price paid per
share, any or all of those unvested shares. The terms upon which such
repurchase right shall be exercisable (including the period and procedure for
exercise and the appropriate vesting schedule for the purchased shares) shall be
established by the Plan Administrator and set forth in the document evidencing
such repurchase right.
F. Limited Transferability of Options. During the lifetime of the
----------------------------------
Optionee, Incentive Options shall be exercisable only by the Optionee and shall
not be assignable or transferable other than by will or by the laws of descent
and distribution following the Optionee's death. However, a Non-Statutory Option
may, in connection with the Optionee's estate plan, be assigned in whole or in
part during the Optionee's lifetime to one or more members of the Optionee's
immediate family or to a trust established exclusively for one or more such
family members. The assigned portion may only be exercised by the person or
persons who acquire a proprietary interest in the option pursuant to the
assignment. The terms applicable to the assigned portion shall be the same as
those in effect for the option immediately prior to such assignment and shall be
set forth in such documents issued to the assignee as the Plan Administrator may
deem appropriate.
II. INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive Options.
Except as modified by the provisions of this Section II, all the provisions of
Articles One, Two and Five shall be applicable to Incentive Options. Options
which are specifically designated as Non-Statutory Options when issued under the
Plan shall not be subject to the terms of this Section II.
A. Eligibility. Incentive Options may only be granted to Employees.
-----------
B. Dollar Limitation. The aggregate Fair Market Value (determined as
-----------------
of the respective date or dates of grant) of the Common Stock for which one or
more options granted to any Employee under the Plan (or any other option plan of
the Corporation or any Parent or Subsidiary) may for the first time become
exercisable as Incentive Options during any one calendar year shall not exceed
the sum of One Hundred Thousand Dollars ($100,000). To the extent the Employee
holds two (2) or more such options which become exercisable for the first time
in the same calendar year, the foregoing limitation on the exercisability of
such options as Incentive Options shall be applied on the basis of the order in
which such options are granted.
8
<PAGE>
C. 10% Stockholder. If any Employee to whom an Incentive Option is
---------------
granted is a 10% Stockholder, then the exercise price per share shall not be
less than one hundred ten percent (110%) of the Fair Market Value per share of
Common Stock on the option grant date, and the option term shall not exceed five
(5) years measured from the option grant date.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction, each outstanding option
shall automatically accelerate so that each such option shall, immediately prior
to the effective date of the Corporate Transaction, become fully exercisable for
all of the shares of Common Stock at the time subject to such option and may be
exercised for any or all of those shares as fully-vested shares of Common Stock.
However, an outstanding option shall not so accelerate if and to the extent: (i)
such option is, in connection with the Corporate Transaction, either to be
assumed by the successor corporation (or parent thereof) or to be replaced with
a comparable option to purchase shares of the capital stock of the successor
corporation (or parent thereof), (ii) such option is to be replaced with a cash
incentive program of the successor corporation which preserves the spread
existing on the unvested option shares at the time of the Corporate Transaction
and provides for subsequent payout in accordance with the same vesting schedule
applicable to such option or (iii) the acceleration of such option is subject to
other limitations imposed by the Plan Administrator at the time of the option
grant. The determination of option comparability under clause (i) above shall be
made by the Plan Administrator, and its determination shall be final, binding
and conclusive.
B. All outstanding repurchase rights shall also terminate
automatically, and the shares of Common Stock subject to those terminated rights
shall immediately vest in full, in the event of any Corporate Transaction,
except to the extent: (i) those repurchase rights are to be assigned to the
successor corporation (or parent thereof) in connection with such Corporate
Transaction or (ii) such accelerated vesting is precluded by other limitations
imposed by the Plan Administrator at the time the repurchase right is issued.
C. The Plan Administrator shall have the discretion, exercisable
either at the time the option is granted or at any time while the option remains
outstanding, to provide for the automatic acceleration of one or more
outstanding options upon the occurrence of a Corporate Transaction, whether or
not those options are to be assumed or replaced in the Corporate Transaction.
D. Immediately following the consummation of the Corporate
Transaction, all outstanding options shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof).
E. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to the exercise price payable
9
<PAGE>
per share under each outstanding option, provided the aggregate exercise price
payable for such securities shall remain the same. In addition, appropriate
adjustments to reflect the Corporate Transaction shall be made to (i) the class
and number of securities available for issuance over the remaining term of the
Plan and (ii) the maximum number and/or class of securities for which any one
person may be granted stock options, separately exercisable stock appreciation
rights and direct stock issuances in the aggregate over the remaining term of
the Plan.
F. Any options which are assumed or replaced in the Corporate
Transaction and do not otherwise accelerate at that time shall automatically
accelerate (and any of the Corporation's outstanding repurchase rights which do
not otherwise terminate at the time of the Corporate Transaction shall
automatically terminate and the shares of Common Stock subject to those
terminated rights shall immediately vest in full) in the event the Optionee's
Service should subsequently terminate by reason of an Involuntary Termination
within eighteen (18) months following the effective date of such Corporate
Transaction. Any options so accelerated shall remain exercisable for fully-
vested shares until the earlier of (i) the expiration of the option term or (ii)
the expiration of the one (1)-year period measured from the effective date of
the Involuntary Termination.
G. The Plan Administrator shall have the discretion, exercisable
either at the time the option is granted or at any time while the option remains
outstanding, to (i) provide for the automatic acceleration of one or more
outstanding options (and the automatic termination of one or more outstanding
repurchase rights with the immediate vesting of the shares of Common Stock
subject to those rights) upon the occurrence of a Change in Control or (ii)
condition any such option acceleration (and the termination of any outstanding
repurchase rights) upon the subsequent Involuntary Termination of the Optionee's
Service within a specified period following the effective date of such Change in
Control. Any options accelerated in connection with a Change in Control shall
remain fully exercisable until the expiration of the option term.
H. The portion of any Incentive Option accelerated in connection with
a Corporate Transaction or Change in Control shall remain exercisable as an
Incentive Option only to the extent the applicable One Hundred Thousand Dollar
($100,000) limitation is not exceeded. To the extent such dollar limitation is
exceeded, the accelerated portion of such option shall be exercisable as a Non-
Statutory Option under the Federal tax laws.
I. The grant of options under the Discretionary Option Grant Program
shall in no way affect the right of the Corporation to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.
IV. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall not (a) cancel any outstanding options under
the Discretionary Option Grant Program (including outstanding options
incorporated from the Predecessor Plan) and grant in substitution new options
covering the same or different number of shares of common Stock but with an
exercise price per share based on the Fair Market Value per share of Common
Stock on the new options grant date, or (b) except as provided in Article One,
Section V(E), reduce the exercise price of any outstanding options.
10
<PAGE>
V. STOCK APPRECIATION RIGHTS
A. The Plan Administrator shall have full power and authority to
grant to selected Optionees tandem stock appreciation rights and/or limited
stock appreciation rights.
B. The following terms shall govern the grant and exercise of tandem
stock appreciation rights:
(i) One or more Optionees may be granted the right,
exercisable upon such terms as the Plan Administrator may establish, to elect
between the exercise of the underlying option for shares of Common Stock and
the surrender of that option in exchange for a distribution from the
Corporation in an amount equal to the excess of (A) the Fair Market Value (on
the option surrender date) of the number of shares in which the Optionee is at
the time vested under the surrendered option (or surrendered portion thereof)
over (B) the aggregate exercise price payable for such shares.
(ii) No such option surrender shall be effective unless
it is approved by the Plan Administrator. If the surrender is so approved,
then the distribution to which the Optionee shall be entitled may be made in
shares of Common Stock valued at Fair Market Value on the option surrender
date, in cash, or partly in shares and partly in cash, as the Plan
Administrator shall in its sole discretion deem appropriate.
(iii) If the surrender of an option is rejected by the
Plan Administrator, then the Optionee shall retain whatever rights the
Optionee had under the surrendered option (or surrendered portion thereof) on
the option surrender date and may exercise such rights at any time prior to
the later of (A) five (5) business days after the receipt of the rejection
notice or (B) the last day on which the option is otherwise exercisable in
accordance with the terms of the documents evidencing such option, but in no
event may such rights be exercised more than ten (10) years after the option
grant date.
C. The following terms shall govern the grant and exercise of limited
stock appreciation rights:
11
<PAGE>
(i) One or more Section 16 Insiders may be granted
limited stock appreciation rights with respect to their outstanding options.
(ii) Upon the occurrence of a Hostile Take-Over, each
such individual holding one or more options with such a limited stock
appreciation right shall have the unconditional right (exercisable for a
thirty (30)-day period following such Hostile Take-Over) to surrender each
such option to the Corporation, to the extent the option is at the time
exercisable for vested shares of Common Stock. In return for the surrendered
option, the Optionee shall receive a cash distribution from the Corporation in
an amount equal to the excess of (A) the Take-Over Price of the shares of
Common Stock which are at the time vested under each surrendered option (or
surrendered portion thereof) over (B) the aggregate exercise price payable for
such shares. Such cash distribution shall be paid within five (5) days
following the option surrender date.
(iii) The Plan Administrator shall pre-approve, at the
time the limited right is granted, the subsequent exercise of that right in
accordance with the terms of the grant and the provisions of this Section V.
No additional approval of the Plan Administrator or the Board shall be
required at the time of the actual option surrender and cash distribution.
(iv) The balance of the option (if any) shall continue in
full force and effect in accordance with the documents evidencing such option.
12
<PAGE>
ARTICLE THREE
STOCK ISSUANCE PROGRAM
----------------------
I. STOCK ISSUANCE TERMS
Shares of Common Stock may be issued under the Stock Issuance Program
through direct and immediate issuances without any intervening option grants.
Each such stock issuance shall be evidenced by a Stock Issuance Agreement which
complies with the terms specified below.
A. Purchase Price.
--------------
1. The purchase price per share shall be fixed by the Plan
Administrator, but shall not be less than one hundred percent (100%) of the Fair
Market Value per share of Common Stock on the stock issuance date.
2. Subject to the provisions of Section I of Article Five, shares
of Common Stock may be issued under the Stock Issuance Program for one or both
of the following items of consideration which the Plan Administrator may deem
appropriate in each individual instance:
(i) cash or check made payable to the Corporation, or
(ii) past services rendered to the Corporation (or any Parent
or Subsidiary).
B. Vesting Provisions.
------------------
1. Shares of Common Stock issued under the Stock Issuance Program
may, in the discretion of the Plan Administrator, be fully and immediately
vested upon issuance or may vest in one or more installments over the
Participant's period of Service or upon attainment of specified performance
objectives. The elements of the vesting schedule applicable to any unvested
shares of Common Stock issued under the Stock Issuance Program, namely:
(i) the Service period to be completed by the Participant or
the performance objectives to be attained,
(ii) the number of installments in which the shares are to
vest,
(iii) the interval or intervals (if any) which are to lapse
between installments, and
13
<PAGE>
(iv) the effect which death, Permanent Disability or other
event designated by the Plan Administrator is to have upon the vesting schedule,
shall be determined by the Plan Administrator and incorporated into the Stock
Issuance Agreement.
2. Any new, substituted or additional securities or other property
(including money paid other than as a regular cash dividend) which the
Participant may have the right to receive with respect to his or her unvested
shares of Common Stock by reason of any stock dividend, stock split,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration shall be issued subject to (i) the same vesting
requirements applicable to the Participant's unvested shares of Common Stock and
(ii) such escrow arrangements as the Plan Administrator shall deem appropriate.
3. The Participant shall have full stockholder rights with respect
to any shares of Common Stock issued to him or her under the Stock Issuance
Program, whether or not his or her interest in those shares is vested.
Accordingly, the Participant shall have the right to vote such shares and to
receive any regular cash dividends paid on such shares.
4. Should the Participant cease to remain in Service while holding
one or more unvested shares of Common Stock issued under the Stock Issuance
Program or should the performance objectives not be attained with respect to one
or more such unvested shares of Common Stock, then those shares shall be
immediately surrendered to the Corporation for cancellation, and the Participant
shall have no further stockholder rights with respect to those shares. To the
extent the surrendered shares were previously issued to the Participant for
consideration paid in cash or cash equivalent (including the Participant's
purchase-money indebtedness), the Corporation shall repay to the Participant the
cash consideration paid for the surrendered shares and shall cancel the unpaid
principal balance of any outstanding purchase-money note of the Participant
attributable to such surrendered shares.
5. The Plan Administrator may in its discretion waive the
surrender and cancellation of one or more unvested shares of Common Stock (or
other assets attributable thereto) which would otherwise occur upon the non-
completion of the vesting schedule applicable to such shares. Such waiver shall
result in the immediate vesting of the Participant's interest in the shares of
Common Stock as to which the waiver applies. Such waiver may be effected at any
time, whether before or after the Participant's cessation of Service or the
attainment or non-attainment of the applicable performance objectives.
14
<PAGE>
II. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. All of the Corporation's outstanding repurchase rights under the
Stock Issuance Program shall terminate automatically, and all the shares of
Common Stock subject to those terminated rights shall immediately vest in full,
in the event of any Corporate Transaction, except to the extent (i) those
repurchase rights are assigned to the successor corporation (or parent thereof)
in connection with such Corporate Transaction or (ii) such accelerated vesting
is precluded by other limitations imposed in the Stock Issuance Agreement.
B. The Plan Administrator shall have the discretion, exercisable
either at the time the unvested shares are issued or at any time while the
Corporation's repurchase right remains outstanding, to provide for the automatic
termination of one or more of those outstanding rights and the immediate vesting
of the shares of Common Stock subject to such rights upon the occurrence of a
Corporate Transaction.
C. Any repurchase rights that are assigned in the Corporate
Transaction shall automatically terminate, and all the shares of Common Stock
subject to those terminated rights shall immediately vest in full, in the event
the Optionee's Service should subsequently terminate by reason of an Involuntary
Termination within eighteen (18) months following the effective date of such
Corporate Transaction.
D. The Plan Administrator shall have the discretion, exercisable
either at the time the unvested shares are issued or at any time while the
Corporation's repurchase right remains outstanding, to (i) provide for the
automatic termination of one or more of those outstanding rights and the
immediate vesting of the shares subject to such rights upon the occurrence of a
Change in Control or (ii) condition any such accelerated vesting upon the
subsequent Involuntary Termination of the Participant's Service within a
specified period following the effective date of such Change in Control.
III. SHARE ESCROW/LEGENDS
Unvested shares may, in the Plan Administrator's discretion, be held
in escrow by the Corporation until the Participant's interest in such shares
vests or may be issued directly to the Participant with restrictive legends on
the certificates evidencing those unvested shares.
15
<PAGE>
ARTICLE FOUR
AUTOMATIC OPTION GRANT PROGRAM
------------------------------
I. OPTION TERMS
A. Grant Dates. Pursuant to the provisions of the February 1, 1996
-----------
restatement of this Article Four, option grants shall be made to Eligible
Directors in accordance with the grant date provisions specified below:
1. Each individual serving as an Eligible Director on February 1, 1996
was automatically granted on such date a Non-Statutory Option to purchase 40,000
shares of Common Stock.
2. Each individual who first becomes an Eligible Director after
February 1, 1996 shall automatically be granted, on the date such individual is
first elected or appointed as a non-employee Board member, a Non-Statutory
Option to purchase 40,000 shares of Common Stock.
3. On the date of each Annual Stockholders Meeting, beginning with the
1997 Annual Meeting, each individual who is to continue as an Eligible Director
shall automatically be granted, whether or not he or she is standing for re-
election as a Board member at that Annual Meeting, a Non-Statutory Option to
purchase an additional 4,000 shares of Common Stock, provided such individual
has not received an option grant pursuant to this Automatic Option Grant Program
within six (6) months prior to the date of such Annual Meeting. There shall be
no limit on the number of such 4,000-share option grants any one Eligible
Director may receive over his or her period of Board service. The number of
shares for which the automatic option grants are to be made to each newly-
elected or continuing Eligible Director shall be subject to periodic adjustment
pursuant to the applicable provisions of Section V.D. of Article One.
Stockholder approval of this 2000 Restatement at the 2000 Annual
Stockholders Meeting will constitute pre-approval of each option subsequently
granted on or after the date of such Annual Meeting pursuant to the express
terms of this Automatic Option Grant Program and the subsequent exercise of that
option in accordance with its terms.
B. Exercise Price.
--------------
1. The exercise price per share shall be equal to one hundred percent
(100%) of the Fair Market Value per share of Common Stock on the option grant
date.
2. The exercise price shall be payable in one or more of the
alternative forms authorized under the Discretionary Option Grant Program.
Except to the extent the sale and remittance procedure specified thereunder is
utilized, payment of the exercise price for the purchased shares must be made on
the Exercise Date.
16
<PAGE>
C. Option Term. Each option shall have a term of ten (10) years
-----------
measured from the option grant date.
D. Exercise and Vesting of Options. Each option shall be immediately
-------------------------------
exercisable for any or all of the option shares. However, any shares purchased
under the 40,000-share initial option grant made to each newly elected or
appointed non-employee Board member shall be subject to repurchase by the
Corporation, at the exercise price paid per share, upon such individual's
cessation of Board service prior to vesting in those shares. The shares subject
to each such initial option grant shall vest, and the Corporation's repurchase
right with respect to those shares shall lapse, in a series of eight (8)
successive equal quarterly installments upon the Optionee's completion of each
three (3) months of continued service as a Board member over the twenty-four
(24)-month period measured from the option grant date. The shares subject to
each 4,000-share annual option grant made to each continuing non-employee Board
member at the 1999 Annual Stockholders Meeting or at any subsequent Annual
Stockholders Meeting shall be fully-vested as of the grant date.
E. Effect of Termination of Board Service. The following provisions
--------------------------------------
shall govern the exercise of any options held by the Optionee at the time the
Optionee ceases to serve as a Board member:
(i) The Optionee (or, in the event of Optionee's death, the
personal representative of the Optionee's estate or the person or persons to
whom the option is transferred pursuant to the Optionee's will or in accordance
with the laws of descent and distribution) shall have a twelve (12)-month period
following the date of such cessation of Board service in which to exercise each
such option.
(ii) During the twelve (12)-month exercise period, the option may
not be exercised in the aggregate for more than the number of vested shares of
Common Stock for which the option is exercisable at the time of the Optionee's
cessation of Board service.
(iii) Should the Optionee cease to serve as a Board member by
reason of death or Permanent Disability, then all shares at the time subject to
the option shall immediately vest so that such option may, during the twelve
(12)-month exercise period following such cessation of Board service, be
exercised for all or any portion of such shares as fully-vested shares of Common
Stock.
(iv) In no event shall the option remain exercisable after the
expiration of the option term. Upon the expiration of the twelve (12)-month
exercise period or (if earlier) upon the expiration of the option term, the
option shall terminate and cease to be outstanding for any vested shares for
which the option has not been exercised. However, the option shall, immediately
upon the Optionee's cessation of Board service, terminate and cease to be
outstanding to the extent it is not exercisable for vested shares at that time.
17
<PAGE>
II. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Corporate Transaction, any shares of Common
Stock at the time subject to an outstanding option under this Article Four but
not otherwise vested shall automatically vest in full so that such option shall,
immediately prior to the effective date of the Corporate Transaction, become
exercisable for all of those option shares as fully-vested shares of Common
Stock and may be exercised for all or any portion of those vested shares.
Immediately following the consummation of the Corporate Transaction, each
automatic option grant shall terminate and cease to be outstanding, except to
the extent assumed by the successor corporation (or parent thereof).
B. In connection with any Change in Control, any shares of Common
Stock at the time subject to an outstanding option under this Article Four but
not otherwise vested shall automatically vest in full so that such option shall,
immediately prior to the effective date of the Change in Control, become
exercisable for all of the option shares as fully-vested shares of Common Stock
and may be exercised for all or any portion of those vested shares. Each such
option shall remain exercisable for the fully-vested option shares until the
expiration or sooner termination of the option term or the surrender of the
option in connection with a Hostile Take-Over.
C. Upon the occurrence of a Hostile Take-Over, the Optionee shall
have a thirty (30)-day period in which to surrender to the Corporation each
automatic option held by him or her. The Optionee shall in return be entitled to
a cash distribution from the Corporation in an amount equal to the excess of (i)
the Take-Over Price of the shares of Common Stock at the time subject to the
surrendered option (whether or not the Optionee is otherwise at the time vested
in those shares) over (ii) the aggregate exercise price payable for such shares.
Such cash distribution shall be paid within five (5) days following the
surrender of the option to the Corporation. No additional approval or consent of
the Plan Administrator or the Board shall be required at the time of the actual
option surrender and cash distribution.
D. The grant of options under the Automatic Option Grant Program
shall in no way affect the right of the Corporation to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.
III. REMAINING TERMS
The remaining terms of each option granted under the Automatic Option
Grant Program shall be the same as the terms in effect for option grants made
under the Discretionary Option Grant Program.
18
<PAGE>
ARTICLE FIVE
MISCELLANEOUS
-------------
I. FINANCING
A. The Plan Administrator may permit any Optionee or Participant to
pay the option exercise price under the Discretionary Option Grant Program or
the purchase price of shares issued under the Stock Issuance Program by
delivering a promissory note payable in one or more installments. The terms of
any such promissory note (including the interest rate and the terms of
repayment) shall be established by the Plan Administrator in its sole
discretion. Promissory notes may be authorized with or without security or
collateral. In all events, the maximum credit available to the Optionee or
Participant may not exceed the sum of (i) the aggregate option exercise price or
purchase price payable for the purchased shares plus (ii) any Federal, state and
local income and employment tax liability incurred by the Optionee or the
Participant in connection with the option exercise or share purchase.
B. The Plan Administrator may, in its discretion, determine that one
or more such promissory notes shall be subject to forgiveness by the Corporation
in whole or in part upon such terms as the Plan Administrator may deem
appropriate.
II. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of Common Stock
upon the exercise of options or stock appreciation rights or upon the issuance
or vesting of such shares under the Plan shall be subject to the satisfaction of
all applicable Federal, state and local income and employment tax withholding
requirements.
B. The Plan Administrator may, in its discretion, provide any or all
holders of Non-Statutory Options or unvested shares of Common Stock under the
Plan (other than the options granted or the shares issued under the Automatic
Option Grant Program) with the right to use shares of Common Stock in
satisfaction of all or part of the Withholding Taxes incurred by such holders in
connection with the exercise of their options or the vesting of their shares.
Such right may be provided to any such holder in either or both of the following
formats:
(i) Stock Withholding: The election to have the
-----------------
Corporation withhold, from the shares of Common Stock otherwise issuable
upon the exercise of such Non-Statutory Option or the vesting of such
shares, a portion of those shares with an aggregate Fair Market Value equal
to the percentage of the Withholding Taxes (not to exceed one hundred
percent (100%)) designated by the holder.
(ii) Stock Delivery: The election to deliver to the
--------------
Corporation, at the time the Non-Statutory Option is exercised or the
shares vest, one or more shares of Common Stock previously acquired by such
holder (other than in connection with the option exercise or share vesting
triggering the Withholding Taxes) with an aggregate Fair Market Value equal
to the percentage of the Withholding Taxes (not to exceed one hundred
percent (100%)) designated by the holder.
19
<PAGE>
III. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan became effective on the date on which the Underwriting
Agreement was executed and the initial public offering price of the Common Stock
was established. The Plan serves as the successor to the Predecessor Plan, and
no further option grants shall be made under the Predecessor Plan after the Plan
Effective Date. All options outstanding under the Predecessor Plan on the Plan
Effective Date have been incorporated into the Plan and treated as outstanding
options under the Plan. However, each outstanding option so incorporated shall
continue to be governed solely by the terms of the documents evidencing such
option, and no provision of the Plan shall be deemed to affect or otherwise
modify the rights or obligations of the holders of such incorporated options
with respect to their acquisition of shares of Common Stock.
B. The Plan was amended and restated by the Board, effective February
1, 1996 (the "February 1996 Restatement") to effect the following revisions: (i)
increase the maximum number of shares of Common Stock authorized for issuance
over the term of the Plan by an additional 1,600,000 shares to 5,535,888 shares
and (ii) enhance the benefit and eligibility provisions of the Automatic Option
Grant Program in order to (A) effect an automatic option grant for 40,000 shares
of Common Stock on February 1, 1996 to each individual serving as a non-employee
Board member at that time, (B) increase the number of shares for which an
initial option grant is to be made under the Automatic Option Grant Program to
each newly-elected non-employee Board member to 40,000 shares, (C) authorize a
series of automatic option grants to be made annually to each non-employee Board
member, in the amount of 4,000 shares per annual grant, over that individual's
period of continued service as a Board member and (D) allow non-employee Board
members who joined the Board prior to the implementation of the Plan to qualify
for such annual option grants. The February 1996 Restatement became effective
immediately upon adoption by the Board and was approved by the Corporation's
stockholders at the 1996 Annual Meeting. All option grants made under the Plan
prior to the February 1996 Restatement shall remain outstanding in accordance
with the terms and conditions of the respective instruments evidencing those
options, and nothing in the February 1996 Restatement shall be deemed to modify
or in any way affect those outstanding options.
C. In April 1997, the Board further amended and restated the Plan
(the "April 1997 Restatement") to effect the following revisions: (i) increase
the number of shares of Common Stock reserved for issuance over the term of the
Plan by an additional 3,000,000 shares to 8,535,888 shares, (ii) implement an
automatic share increase feature pursuant to which the number of shares
available for issuance under the 1995 Plan shall automatically increase on the
first trading day of each calendar year, beginning with the 1998 calendar year
and continuing through calendar year 2001, by an amount equal to one and six
tenths percent (1.6%) of the total number of shares of Common Stock outstanding
on the last trading day of the immediately preceding calendar year, (iii) render
the non-employee Board members eligible to receive option grants under the
Discretionary Option Grant and Stock Issuance Programs, (iv) allow unvested
shares issued under the Plan and subsequently repurchased by the Corporation at
the option exercise or direct issue price paid per share to be reissued under
the Plan, (v) remove certain
20
<PAGE>
restrictions on the eligibility of non-employee Board members to serve as Plan
Administrator and (vi) effect a series of additional changes to the provisions
of the Plan (including the stockholder approval requirements) in order to take
advantage of the recent amendments to Rule 16b-3 of the Securities and Exchange
Commission which exempts certain officer and director transactions under the
Plan from the short-swing liability provisions of the federal securities laws.
The stockholders approved the April 1997 Restatement at the 1997 Annual Meeting.
All option grants made under the Plan prior to the April 1997 Restatement shall
remain outstanding in accordance with the terms and conditions of the respective
instruments evidencing those options, and nothing in the April 1997 Restatement
shall be deemed to modify or in any way affect those outstanding options.
D. On March 11, 1998 the Board further amended and restated the Plan
(the "1998 Restatement") to increase the number of shares of Common Stock
reserved for issuance over the term of the Plan by an additional 3,500,000
shares. The stockholders approved the 1998 Restatement at the 1998 Annual
Meeting. All option grants made under the Plan prior to the 1998 Restatement
shall remain outstanding in accordance with the terms and conditions of the
respective instruments evidencing those options, and nothing in the 1998
Restatement shall be deemed to modify or in any way affect those outstanding
options.
E. In both August and October of 2000 the Board further amended and
restated the Plan (the "2000 Restatement") to (i) increase the number of shares
of Common Stock reserved for issuance over the term of the Plan by an additional
1,500,000 shares, (ii) increase the limit on the maximum number of shares for
which any one participant may be granted stock options, separately exercisable
stock appreciation rights and direct stock issuances over the term of the Plan
from 1,600,000 shares to 2,400,000 shares, (iii) eliminate the automatic share
increase provisions of the Plan pursuant to which the number of shares available
for issuance under the Plan would automatically increase on the first trading
day in January in each of calendar years 2000 and 2001 by an amount equal to
1.6% of the total number of shares of Common Stock outstanding on the last
trading day in the immediately preceding calendar year, (iv) eliminate the
provisions of the Plan which would otherwise allow option grants to be made
with exercise prices below the Fair Market Value of the option shares on the
grant date, (v) modify the option cancellation/regrant provisions of the Plan
to require stockholder approval of any further repricing of outstanding options
and to subject any subsequent changes to that requirement to further stockholder
approval and (vi) revise the provisions of the Automatic Option Grant Program
in effect under Article Four so that the annual 4,000-share option grant made to
each continuing non-employee Board member would be fully vested upon grant
rather than vesting in quarterly installments over the two-year period measured
from the grant date.
21
<PAGE>
All option grants and stock issuances made prior to the 2000 Restatement shall
remain outstanding in accordance with the terms and conditions of the respective
instruments evidencing those options or issuances, and nothing in the 2000
Restatement shall be deemed to modify or in any way affect those outstanding
options or issuances.
F. The option/vesting acceleration provisions of Article Two relating
to Corporate Transactions and Changes in Control may, in the Plan
Administrator's discretion, be extended to one or more options incorporated from
the Predecessor Plan which do not otherwise provide for such acceleration.
G. The Plan shall terminate upon the earliest of (i) January 10,
2005, (ii) the date on which all shares available for issuance under the Plan
shall have been issued pursuant to the exercise of the options or the issuance
of shares (whether vested or unvested) under the Plan or (iii) the termination
of all outstanding options in connection with a Corporate Transaction. Upon such
Plan termination, all options and unvested stock issuances outstanding on such
date shall thereafter continue to have force and effect in accordance with the
provisions of the documents evidencing such options or issuances.
IV. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and authority to
amend or modify the Plan in any or all respects. However, (i) no such amendment
or modification shall adversely affect the rights and obligations with respect
to options, stock appreciation rights or unvested stock issuances at the time
outstanding under the Plan unless the Optionee or the Participant consents to
such amendment or modification, and (ii) any amendment made to the Automatic
Option Grant Program (or any options outstanding thereunder) shall be in
compliance with the limitations of that program. In addition, certain
amendments may require stockholder approval pursuant to applicable laws or
regulations. Also, after August 30, 2000, Article Two, Section I(A)(1) and
Article Two, Section IV (and, to the extent those sections are incorporated,
Article Four, Section III) cannot be amended except with the consent of the
holders of a majority of the shares present and entitled to vote at a duly
convened meeting of the stockholders.
B. Options to purchase shares of Common Stock may be granted under
the Discretionary Option Grant Program and shares of Common Stock may be issued
under the Stock Issuance Program that are in each instance in excess of the
number of shares then available for issuance under the Plan, provided any excess
shares actually issued under those programs are held in escrow until there is
obtained stockholder approval of an amendment sufficiently increasing the number
of shares of Common Stock available for issuance under the Plan. If such
stockholder approval is not obtained within twelve (12) months after the date
the first such excess grants or issuances are made, then (i) any unexercised
options granted on the basis of such excess shares shall terminate and cease to
be outstanding and (ii) the Corporation shall
22
<PAGE>
promptly refund to the Optionees and the Participants the exercise or purchase
price paid for any excess shares issued under the Plan and held in escrow,
together with interest (at the applicable Short Term Federal Rate) for the
period the shares were held in escrow, and such shares shall thereupon be
automatically cancelled and cease to be outstanding.
V. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of shares
of Common Stock under the Plan shall be used for general corporate purposes.
VI. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any option or
stock appreciation right under the Plan and the issuance of any shares of Common
Stock (i) upon the exercise of any option or stock appreciation right or (ii)
under the Stock Issuance Program shall be subject to the Corporation's
procurement of all approvals and permits required by regulatory authorities
having jurisdiction over the Plan, the options and stock appreciation rights
granted under it and the shares of Common Stock issued pursuant to it.
B. No shares of Common Stock or other assets shall be issued or
delivered under the Plan unless and until there shall have been compliance with
all applicable requirements of Federal and state securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the shares
of Common Stock issuable under the Plan, and all applicable listing requirements
of any stock exchange (or the Nasdaq National Market, if applicable) on which
Common Stock is then listed for trading.
VII. NO EMPLOYMENT/SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee or the Participant
any right to continue in Service for any period of specific duration or
interfere with or otherwise restrict in any way the rights of the Corporation
(or any Parent or Subsidiary employing or retaining such person) or of the
Optionee or the Participant, which rights are hereby expressly reserved by each,
to terminate such person's Service at any time for any reason, with or without
cause.
23
<PAGE>
APPENDIX
--------
The following definitions shall be in effect under the Plan:
A. Automatic Option Grant Program shall mean the automatic option
------------------------------
grant program in effect under Article Four of the Plan.
B. Board shall mean the Corporation's Board of Directors.
-----
C. Change in Control shall mean a change in ownership or control of
-----------------
the Corporation effected through either of the following transactions:
(i) the acquisition, directly or indirectly, by any person or
related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under common
control with, the Corporation) of beneficial ownership (within the meaning
of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty
percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made directly
to the Corporation's stockholders, or
(ii) a change in the composition of the Board over a period of
thirty-six (36) consecutive months or less such that a majority of the
Board members ceases, by reason of one or more contested elections for
Board membership, to be comprised of individuals who either (A) have been
Board members continuously since the beginning of such period or (B) have
been elected or nominated for election as Board members during such period
by at least a majority of the Board members described in clause (A) who
were still in office at the time such election or nomination was approved
by the Board.
D. Code shall mean the Internal Revenue Code of 1986, as amended.
----
E. Common Stock shall mean the Corporation's common stock.
------------
F. Corporate Transaction shall mean either of the following
---------------------
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities possessing
more than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior to
such transaction; or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation.
G. Corporation shall mean P-COM, Inc., a Delaware corporation.
-----------
A-1
<PAGE>
H. Discretionary Option Grant Program shall mean the discretionary
----------------------------------
option grant program in effect under Article Two of the Plan.
I. Eligible Director shall mean a non-employee Board member eligible
-----------------
to participate in the Automatic Option Grant Program in accordance with the
provisions of Section IV.E of Article One.
J. Employee shall mean an individual who is in the employ of the
--------
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
K. Exercise Date shall mean the date on which the Corporation shall
-------------
have received written notice of the option exercise.
L. Fair Market Value per share of Common Stock on any relevant date
-----------------
shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question, as such price is
reported by the National Association of Securities Dealers on the Nasdaq
National Market. If there is no closing selling price for the Common Stock
on the date in question, then the Fair Market Value shall be the closing
selling price on the last preceding date for which such quotation exists.
(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing selling price per
share of Common Stock on the date in question on the Stock Exchange
determined by the Plan Administrator to be the primary market for the
Common Stock, as such price is officially quoted in the composite tape of
transactions on such exchange. If there is no closing selling price for the
Common Stock on the date in question, then the Fair Market Value shall be
the closing selling price on the last preceding date for which such
quotation exists.
M. Hostile Take-Over shall mean the acquisition, directly or
-----------------
indirectly, by any person or related group of persons (other than the
Corporation or a person that directly or indirectly controls, is controlled by,
or is under common control with, the Corporation) of beneficial ownership
(within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing more
than fifty percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made directly to
the Corporation's stockholders which the Board does not recommend such
stockholders to accept.
N. Incentive Option shall mean an option which satisfies the
----------------
requirements of Code Section 422.
A-2
<PAGE>
O. Involuntary Termination shall mean the termination of the Service
-----------------------
of any individual which occurs by reason of:
(i) such individual's involuntary dismissal or discharge by
the Corporation for reasons other than Misconduct, or
(ii) such individual's voluntary resignation following (A) a
change in his or her position with the Corporation which materially reduces
his or her level of responsibility, (B) a reduction in his or her level of
compensation (including base salary, fringe benefits and any non-
discretionary and objective-standard incentive payment or bonus award) by
more than fifteen percent (15%) or (C) a relocation of such individual's
place of employment by more than fifty (50) miles, provided and only if
such change, reduction or relocation is effected by the Corporation without
the individual's consent.
P. Misconduct shall mean the commission of any act of fraud,
----------
embezzlement or dishonesty by the Optionee or Participant, any unauthorized use
or disclosure by such person of confidential information or trade secrets of the
Corporation (or any Parent or Subsidiary) or any other intentional misconduct by
such person adversely affecting the business or affairs of the Corporation (or
any Parent or Subsidiary) in a material manner. The foregoing definition shall
not be deemed to be inclusive of all the acts or omissions which the Corporation
(or any Parent or Subsidiary) may consider as grounds for the dismissal or
discharge of any Optionee, Participant or other person in the Service of the
Corporation (or any Parent or Subsidiary).
Q. 1934 Act shall mean the Securities Exchange Act of 1934, as
--------
amended.
R. Non-Statutory Option shall mean an option not intended to satisfy
--------------------
the requirements of Code Section 422.
S. Optionee shall mean any person to whom an option is granted under
--------
the Discretionary Option Grant or Automatic Option Grant Program.
T. Parent shall mean any corporation (other than the Corporation) in
------
an unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
U. Participant shall mean any person who is issued shares of Common
-----------
Stock under the Stock Issuance Program.
V. Permanent Disability or Permanently Disabled shall mean the
--------------------------------------------
inability of the Optionee or the Participant to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment expected to result in death or to be of continuous duration of twelve
(12) months or more.
A-3
<PAGE>
W. Plan shall mean the Corporation's 1995 Stock Option/Stock
----
Issuance Plan, as set forth in this document and as amended from time to time.
X. Plan Administrator shall mean the particular entity, whether the
------------------
Primary Committee, the Board or the Secondary Committee, which is authorized to
administer the Discretionary Option Grant and Stock Issuance Programs with
respect to one or more classes of eligible persons, to the extent such entity is
carrying out its administrative functions under those programs with respect to
the persons under its jurisdiction.
Y. Plan Effective Date shall mean the date on which the Underwriting
-------------------
Agreement was executed and the initial public offering price was established.
Z. Predecessor Plan shall mean the Corporation's 1992 Stock Option
----------------
Plan.
AA. Primary Committee shall mean the committee of two (2) or more
-----------------
non-employee Board members appointed by the Board to administer the
Discretionary Option Grant and Stock Issuance Programs with respect to Section
16 Insiders.
BB. Secondary Committee shall mean a committee of two (2) or more
-------------------
Board members appointed by the Board to administer the Discretionary Option
Grant and Stock Issuance Programs with respect to eligible persons other than
Section 16 Insiders.
CC. Section 16 Insider shall mean an officer or director of the
------------------
Corporation subject to the short-swing profit liabilities of Section 16 of the
1934 Act.
DD. Section 12(g) Registration Date shall mean the first date on
-------------------------------
which the Common Stock was registered under Section 12(g) of the 1934 Act.
EE. Service shall mean the provision of services to the Corporation
-------
(or any Parent or Subsidiary) by a person in the capacity of an Employee,
a non--employee member of the board of directors or a consultant or independent
advisor, except to the extent otherwise specifically provided in the documents
evidencing the option grant.
FF. Stock Exchange shall mean either the American Stock Exchange or
--------------
the New York Stock Exchange.
GG. Stock Issuance Agreement shall mean the agreement entered into by
------------------------
the Corporation and the Participant at the time of issuance of shares of Common
Stock under the Stock Issuance Program.
HH. Stock Issuance Program shall mean the stock issuance program in
----------------------
effect under Article Three of the Plan.
A-4
<PAGE>
II. Subsidiary shall mean any corporation (other than the
----------
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation in the unbroken chain (other than the
last corporation) owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.
JJ. Take-Over Price shall mean the greater of (i) the Fair Market
---------------
Value per share of Common Stock on the date the option is surrendered to the
Corporation in connection with a Hostile Take-Over or (ii) the highest reported
price per share of Common Stock paid by the tender offeror in effecting such
Hostile Take-Over. However, if the surrendered option is an Incentive Option,
the Take-Over Price shall not exceed the clause (i) price per share.
KK. 10% Stockholder shall mean the owner of stock (as determined
---------------
under Code Section 424(d)) possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation (or any Parent
or Subsidiary).
LL. Underwriting Agreement shall mean the agreement executed between
----------------------
the Corporation and the underwriter or underwriters who managed the initial
public offering of the Common Stock.
MM. Withholding Taxes shall mean the Federal, state and local income
-----------------
and employment withholding taxes to which the holder of Non-Statutory Options or
unvested shares of Common Stock may become subject in connection with the
exercise of such holder's options or the vesting of his or her shares.
A-5
<PAGE>
4940-PF-00
<PAGE>
P-COM, INC.
PROXY
2000 ANNUAL MEETING OF STOCKHOLDERS
NOVEMBER 30, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints George P. Roberts and Leighton J. Stephenson
and each of them as Proxyholders of the undersigned, with full power of
substitution, and hereby authorizes them to represent and to vote, as designated
below, all of the shares of Common Stock of P-Com, Inc. (the "Company"), held of
record by the undersigned on October 16, 2000 at the Annual Meeting of
Stockholders of P-Com, Inc. to be held on November 30, 2000 or at any
adjournment or postponement thereof.
The Board of Directors recommends a vote FOR Proposal Nos. 1, 2 and 3. This
Proxy, when properly executed, will be voted as specified below and on the
reverse side. This Proxy will be voted FOR Proposal Nos. 1, 2 and 3 if no
specification is made.
1. To elect two directors to serve for "three-year" terms ending upon the 2003
annual meeting of stockholders or until their successors are duly elected.
FOR all nominees WITHHOLD AUTHORITY EXCEPTIONS
listed below [_] [_] [_]
INSTRUCTION: To withhold authority to vote for any individual nominee mark the
"EXCEPTIONS" box, and strike a line through the nominee's name in the list
below:
John A. Hawkins
James J. Sobczak
2. To approve a series of amendments to the Company's 1995 Stock Option/Stock
Issuance Plan to eliminate automatic share increase provisions, forbid option
grants with exercise prices below the fair market value of the option shares
on the grant date, forbid repricing of options unless stockholder approval is
obtained, increase the maximum number of shares authorized for issuance under
the plan, increase the limitation on the maximum number of shares any one
individual may be granted, and provide that 4,000-share automatic option
grants to non-employee Board members shall fully vest upon grant.
FOR AGAINST ABSTAIN
[_] [_] [_]
(continued, and to be signed, on the other side)
________________________________________________________________________________
3. To ratify the appointment of PricewaterhouseCoopers LLP as independent
auditors of the Company for the fiscal year ending December 31, 2000.
FOR AGAINST ABSTAIN
[_] [_] [_]
In their discretion, the Proxyholders are authorized to vote upon such other
matters as may properly come before the meeting, including the election of any
director if either of the above nominees is unable to serve or for good cause
will not serve.
Please sign exactly as your name(s) is (are) shown on the share certificate
to which the Proxy applies. When shares are held by joint tenants, both should
sign. When signing as an attorney, executor, administrator, trustee or guardian,
please give full title as such. If a corporation, please sign in full corporate
name by President or other authorized officer. If a partnership, please sign in
partnership name by authorized person.
DATED:______________________________________________________, 2000
____________________________________________________________
Signature
____________________________________________________________
(Additional signature if held jointly)
PLEASE SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
