SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. ________)
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
[X] Definitive Proxy Statement Commission Only (as permitted by
[ ] Definitive Additional Materials Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
PREMISYS COMMUNICATIONS, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transactions applies:
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(2) Aggregate number of securities to which transactions applies:
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(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date filed:
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<PAGE>
[Premisys Letterhead]
November 7, 1997
To Our Stockholders:
You are cordially invited to attend the 1997 Annual Meeting of Stockholders
of Premisys Communications, Inc. to be held at 48664 Milmont Drive, Fremont,
California 94538 on Wednesday, December 10, 1997 at 1:00 p.m. P.S.T.
The matters expected to be acted upon at the meeting are described in
detail in the following Notice of Annual Meeting of Stockholders and Proxy
Statement.
It is important that you use this opportunity to take part in the affairs
of your Company by voting on the business to come before this meeting. WHETHER
OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE SO
THAT YOUR SHARES MAY BE REPRESENTED AT THE MEETING. Returning the Proxy does not
deprive you of your right to attend the meeting and to vote your shares in
person.
We look forward to seeing you at the meeting.
Sincerely,
/s/ Riley R. Willcox
-----------------------------------
Riley R. Willcox
Senior Vice President, Finance and
Administration, Chief Financial
Officer and Secretary
<PAGE>
Premisys Communications, Inc.
48664 Milmont Drive
Fremont, California 94538
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
-----------
To Our Stockholders:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Premisys
Communications, Inc. (the "Company") will be held at 48664 Milmont Drive,
Fremont, California 94538, on Wednesday, December 10, 1997, at 1:00 p.m. P.S.T.
for the following purposes:
1. To elect directors of the Company, each to serve until the next Annual
Meeting of Stockholders and until his successor has been elected and
qualified or until his earlier resignation or removal. The Company's
Board of Directors intends to present the following nominees for
election as directors:
Boris J. Auerbuch Gary J. Morgenthaler
Robert C. Hawk Marino R. Polestra
Edward A. Keible, Jr. Lip-Bu Tan
Raymond C. Lin
2. To consider and vote upon a proposal to amend the Company's 1994 Stock
Option Plan to increase the number of shares of Common Stock reserved
for issuance thereunder from 4,000,000 to 5,200,000.
3. To ratify the selection of Price Waterhouse LLP as independent
accountants for the Company for the current fiscal year.
4. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on October 14, 1997
are entitled to notice of and to vote at the meeting or any adjournment thereof.
By Order of the Board of Directors
/s/ Riley R. Willcox
-----------------------------------
Riley R. Willcox
Senior Vice President, Finance and
Administration, Chief Financial
Officer and Secretary
Fremont, California
November 7, 1997
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE SO
THAT YOUR SHARES MAY BE REPRESENTED AT THE MEETING.
<PAGE>
PREMISYS COMMUNICATIONS, INC.
48664 Milmont Drive
Fremont, California 94538
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PROXY STATEMENT
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November 7, 1997
The accompanying proxy is solicited on behalf of the Board of Directors of
Premisys Communications, Inc., a Delaware corporation (the "Company"), for use
at the Annual Meeting of Stockholders of the Company to be held at 48664 Milmont
Drive, Fremont, California 94538, on December 10, 1997 at 1:00 p.m. P.S.T. (the
"Meeting"). All proxies will be voted in accordance with the instructions
contained therein and, if no choice is specified, the proxies will be voted in
favor of the nominees and the proposals set forth in the accompanying Notice of
Meeting and this Proxy Statement. This Proxy Statement and the accompanying form
of proxy were first mailed to stockholders on or about November 7, 1997. An
annual report for the fiscal year ended June 27, 1997 is enclosed with this
Proxy Statement.
VOTING RIGHTS AND SOLICITATION OF PROXIES
Only holders of record of the Company's Common Stock at the close of
business on October 14, 1997 will be entitled to vote at the Meeting. At the
close of business on October 14, 1997, the Company had 25,374,406 shares of
Common Stock outstanding and entitled to vote. A majority of the shares
outstanding on the record date will constitute a quorum for the transaction of
business. Holders of the Company's Common Stock are entitled to one vote for
each share held as of the foregoing record date. Shares of Common Stock may not
be voted cumulatively.
Directors will be elected by a plurality of the votes of the shares of
Common Stock present in person or represented by proxy at the Meeting and
entitled to vote on the election of directors. Proposals No. 2 and 3 require for
approval the affirmative vote of a majority of the shares of Common Stock
present in person or represented by proxy at the Meeting and entitled to vote on
the proposal. All votes will be tabulated by the inspector of elections
appointed for the Meeting who will separately tabulate, for each proposal,
affirmative and negative votes, abstentions and broker non-votes. Abstentions
will be counted toward the tabulation of votes cast on proposals presented to
the stockholders and will have the same effect as negative votes. Broker
non-votes will be counted for purposes of determining the presence or absence of
a quorum for the transaction of business but are not considered present and
entitled to vote with respect to that matter.
In the event that sufficient votes in favor of the proposals are not
received by the date of the Meeting, the persons named as proxies may propose
one or more adjournments of the Meeting to permit further solicitations of
proxies. Any such adjournment would require the affirmative vote of the majority
of the outstanding shares present in person or represented by proxy at the
Meeting.
The expenses of soliciting proxies to be voted at the Meeting will be paid
by the Company. Following the original mailing of the proxies and other
soliciting materials, the Company and/or its agents may also solicit proxies by
mail, telephone, telegraph or in person. The Company has retained a proxy
solicitation firm, Corporate Investor Communications, Inc., to aid it in the
solicitation process and will pay a fee of approximately $7,500 to such firm.
Following the original mailing of the proxies and
<PAGE>
other soliciting materials, the Company will request that brokers, custodians,
nominees and other record holders of the Company's Common Stock forward copies
of the proxy and other soliciting materials to persons for whom they hold shares
of Common Stock and request authority for the exercise of proxies. In such
cases, the Company, upon the request of the record holders, will reimburse such
holders for their reasonable expenses.
REVOCABILITY OF PROXIES
Any person signing a proxy in the form accompanying this Proxy Statement
has the power to revoke it prior to the Meeting or at the Meeting prior to the
vote pursuant to the proxy. A proxy may be revoked by a written instrument
delivered to the Company stating that the proxy is revoked, by a subsequent
proxy that is signed by the person who signed the earlier proxy and is presented
at the Meeting or by attendance at the Meeting and voting in person. Please
note, however, that if a stockholder's shares are held of record by a broker,
bank or other nominee and that stockholder wishes to vote at the Meeting, the
stockholder must bring to the Meeting a letter from the broker, bank or other
nominee confirming that stockholder's beneficial ownership of the shares.
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<PAGE>
PROPOSAL NO. 1 -- ELECTION OF DIRECTORS
At the Meeting, stockholders will elect directors to hold office until the
next Annual Meeting of Stockholders and until their respective successors have
been elected and qualified or until such directors' earlier resignation or
removal. The size of the Company's Board of Directors (the "Board") is currently
set at seven members. Accordingly, seven nominees will be elected at the Meeting
to be the seven directors of the Company. In the election of directors, each
stockholder is entitled to one vote for each share of Common Stock held. Each
share represented by the accompanying proxy will be voted for the election of
the seven nominees recommended by the Board unless the proxy is marked in such a
manner as to withhold authority so to vote. Shares of Common Stock may not be
voted cumulatively. If any nominee for any reason is unable to serve, or for
good cause, will not serve as a director, the proxies may be voted for such
substitute nominee as the proxy holder may determine. The Company is not aware
of any nominee who will be unable to or, for good cause, will not serve as a
director.
<TABLE>
Directors/Nominees
The names of the nominees, and certain information about them as of October
14, 1997, are set forth below:
<CAPTION>
Director
Name of Nominee Age Principal Occupation Since
<S> <C> <C> <C>
Boris J. Auerbuch 51 Senior Vice President and Chief Technical Officer of 1990
the Company
Robert C. Hawk 58 Consultant 1995
Edward A. Keible, Jr. 54 President, Chief Executive Officer and Director of 1994
Endgate Technology Corporation
Raymond C. Lin 43 Chief Executive Officer of the Company 1990
Gary J. Morgenthaler (1)(2) 49 General Partner of Morgenthaler Management Corporation 1992
Marino R. Polestra (1) 40 General Partner of Alta Partners 1992
Lip-Bu Tan (2) 38 General Partner of Walden Group 1990
<FN>
- --------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
</FN>
</TABLE>
Mr. Auerbuch has been Senior Vice President and Chief Technical Officer and
a Director of the Company since co-founding the Company in July 1990 and was
Senior Vice President, Engineering of the Company between September 1993 and
October 1996. From August 1979 to May 1990, he held various engineering
positions with Telco Systems, Inc. ("Telco"), most recently as Vice President,
Engineering between 1987 and May 1990. Mr. Auerbuch holds Bachelor of Science
and Master of Science degrees in electrical engineering from the Moscow
Institute of Information and Technology, Russia.
Mr. Hawk has been a director of the Company since March 1995. Since his
retirement in April 1997, Mr. Hawk has served as a consultant to various
telecommunications companies. From May 1996 until his retirement in April 1997,
Mr. Hawk served as President and Chief Executive Officer of US West Multimedia
Communications, Inc., a telephony/cable enterprise. From January 1988 to April
1996, he served as President of the Carrier Division of US WEST Communications,
a division of US WEST. From April 1986 to December 1987, Mr. Hawk served as Vice
President of Marketing at Mountain Bell.
3
<PAGE>
From August 1983 to March 1986, Mr. Hawk served as Vice President of Marketing
and Strategic Planning for the CXC Corporation, a start-up manufacturer of PBX
systems. Mr. Hawk also serves as a director of PairGain Technologies, Inc., a
telecommunications manufacturing company, and Xylan Corp, a manufacturer of
high-end data switches. Mr. Hawk holds a Bachelor of Business Administration
degree from the University of Iowa and a Master of Business Administration
degree from the University of San Francisco.
Mr. Keible has been a director of the Company since November 1994. Since
January 1994, he has been President, Chief Executive Officer and a director of
Endgate Corporation, a telecommunications equipment manufacturer. From 1973 to
June 1993, Mr. Keible held various positions at Raychem Corporation, an
electronics manufacturer, most recently as Senior Vice President and General
Manager, International Sector. Mr. Keible holds a Bachelor of Arts degree in
engineering science, a Bachelor of Engineering degree in materials science and a
Master of Engineering degree in materials science, all from Dartmouth College,
and a Master in Business Administration degree from Harvard University. Mr.
Keible is also a director of the American Electronics Association, an industry
trade association.
Mr. Lin has been Chief Executive Officer and a director of the Company
since co-founding the Company in July 1990. From April 1988 to May 1990, he was
Senior Vice President of Telco, a telecommunications manufacturer, and General
Manager of Telco Systems Network Access Corporation, a wholly-owned subsidiary
of Telco. Mr. Lin holds a Bachelor of Science degree in civil engineering and a
Master of Science degree in geotechnical engineering from the University of
California, Berkeley.
Mr. Morgenthaler has been a director of the Company since March 1992. Since
November 1989, he has been a General Partner of Morgenthaler Management
Corporation, a venture capital firm. From 1984 to 1988, he was Chief Executive
Officer of INGRES Corporation, a relational database management systems company,
of which he was a founder. Mr. Morgenthaler holds a Bachelor of Arts degree in
government from Harvard University.
Mr. Polestra has been a director of the Company since March 1992. Since
February 1996, Mr. Polestra has been a General Partner of Alta Partners, a
venture capital firm. From February 1989 to February 1996, he was a Vice
President of Burr, Egan, Deleage & Co., a venture capital firm. Mr. Polestra
holds a Bachelor of Science degree in mechanical engineering from Cornell
University and a Master in Business Administration degree from Indiana
University. Mr. Polestra is also a director of Individual Inc., an information
services company, and Security Dynamics Technologies, Inc., a designer and
developer of security products.
Mr. Tan has been a director of the Company since its inception in July
1990. Since 1984, he has been a General Partner of Walden Group, a venture
capital firm. Mr. Tan holds a Bachelor of Science degree in physics from Nanyang
University, Singapore, a Master of Science degree in nuclear engineering from
the Massachusetts Institute of Technology and a Master in Business
Administration degree from the University of San Francisco. Mr. Tan has also
served as a director of Creative Technology Ltd., a multimedia products company,
Integrated Silicon Solutions, Inc., a semiconductor company, and JTS Corporation
since 1990, 1990 and 1995, respectively.
Board of Directors' Meetings and Committees
The Board met twelve times, including telephone conference meetings, and
acted by unanimous written consent once, during fiscal 1997. No director
attended fewer than 75% of the aggregate of the total number of meetings of the
Board (held during the period for which he was a director) and the total number
of meetings held by all committees of the Board on which such director served
(during the period that such director served).
4
<PAGE>
Standing committees of the Board include an Audit Committee and a
Compensation Committee. The Board does not have a nominating committee or a
committee performing similar functions.
Messrs. Morgenthaler and Polestra are the current members of the Audit
Committee. The Audit Committee met seven times during fiscal 1997. The Audit
Committee meets with the Company's independent accountants to review the
adequacy of the Company's internal control systems and financial reporting
procedures; reviews the general scope of the Company's annual audit and the fees
charged by the independent accountants; reviews and monitors the performance of
non-audit services by the Company's auditors; reviews the fairness of any
proposed transaction between any officer, director or other affiliate of the
Company and the Company, and after such review, makes recommendations to the
full Board; and performs such further functions as may be required by any stock
exchange or over-the-counter market upon which the Company's Common Stock may be
listed.
Messrs. Morgenthaler and Tan are the current members of the Compensation
Committee which met three times and acted by unanimous written consent four
times during fiscal 1997. The Compensation Committee recommends compensation for
executive officers and certain other employees of the Company, grants options
and stock awards under the Company's employee benefit plans (other than grants
to non-executive officers of options to purchase no more than 20,000 shares in a
fiscal year, pursuant to guidelines established by the Compensation Committee,
which may be made by Raymond Lin, a director and President and Chief Executive
Officer of the Company) and reviews and recommends adoption of and amendments to
certain stock option and employee benefit plans.
<TABLE>
Director Compensation
Directors of the Company do not receive cash compensation for their
services but are reimbursed for their reasonable expenses in attending meetings
of the Board of Directors. All members of the Board of Directors who are not
also employees of the Company, or of a parent, subsidiary or affiliate of the
Company, are eligible to receive options under the 1995 Directors Stock Option
Plan (the "Directors Plan"). Each non-employee director who was a member of the
Board on the effective date (the "Effective Date") of the Company's initial
public offering of its Common Stock was automatically granted an option to
purchase 24,000 shares of Common Stock (as adjusted for the Company's 100% stock
dividend effected in December 1995) under the Directors Plan (the "Initial
Grant"), provided that such directors had not previously received options by
virtue of being a member of the Board of Directors. On each anniversary of a
director's Initial Grant (or the anniversary of the director's election to the
Board in the case of directors who received options prior to the Effective
Date), each non-employee director will be automatically granted an option to
purchase 6,000 shares of Common Stock under the Directors Plan. During fiscal
1997, the following stock options to purchase shares of the Company's Common
Stock were granted under the Directors Plan:
<CAPTION>
Optionee No. of Options Option Exercise Price Date of Grant
-------- -------------- --------------------- -------------
<S> <C> <C> <C>
Edward Keible ...................................... 6,000 $ 51.00 Nov. 25, 1996
Robert Hawk ........................................ 6,000 $ 8.06 March 17, 1997
Gary Morgenthaler .................................. 6,000 $ 10.25 April 7, 1997
Marino Polestra .................................... 6,000 $ 10.25 April 7, 1997
Lip-Bu Tan ......................................... 6,000 $ 10.25 April 7, 1997
THE BOARD RECOMMENDS A VOTE FOR THE ELECTION OF
EACH OF THE NOMINATED DIRECTORS
</TABLE>
5
<PAGE>
PROPOSAL NO. 2 - APPROVAL OF AMENDMENT TO THE
1994 STOCK OPTION PLAN
Stockholders are being asked to approve an amendment to the Company's 1994
Stock Option Plan (the "1994 Plan") to increase the number of shares of Common
Stock reserved for issuance thereunder from 4,000,000 shares to 5,200,000 shares
(an increase of 1,200,000 shares). The purpose of this amendment is to secure
sufficient additional shares under the 1994 Plan so that the Company can
maintain a competitive equity compensation program. The granting of options
under the 1994 Plan plays an important role in the Company's efforts to attract
and retain employees of outstanding ability. The Board of Directors of the
Company (the "Board") believes that this increase of the shares available for
future equity awards is necessary to ensure that the Company can continue to
meet its goals.
The Board approved the proposed amendment to the 1994 Plan on September 18,
1997 to be effective on stockholder approval. Stockholder approval of the
amendment requires the affirmative vote of a majority of shares of Common Stock
of the Company that are present in person or represented by proxy and entitled
to vote at the Meeting.
Below is a summary of the principal provisions of the 1994 Plan, assuming
approval of the above amendment. This summary is not necessarily complete, and
reference is made to the full text of the 1994 Plan.
1994 Stock Option Plan
Stock Option Plan History
The Board adopted the 1994 Plan in November 1994, and it was approved by
stockholders in February 1995. The purpose of the 1994 Plan is to attract,
retain and provide equity incentives to selected persons to promote the
financial success of the Company through awards of stock options. The 1994 Plan
was amended by the Board in September 1995 to increase the number of shares
reserved for issuance thereunder from 2,000,000 to 4,000,000 shares (as adjusted
for the Company's 100% stock dividend effected in December 1995.) The Company's
stockholders approved this amendment in December 1995. As indicated above, the
Board approved a proposed amendment to increase the number of shares reserved
for issuance thereunder to 5,200,000 shares in September 1997. The Board also
approved certain amendments to the 1994 Plan on October 13, 1997 to reflect
certain amendments adopted to Section 16 of the Securities Exchange Act, of
1934, as amended (the "Exchange Act") since the initial adoption of the 1994
Plan.
Shares Subject to the 1994 Plan
An aggregate of 5,200,000 shares (assuming approval of the proposed
amendment) of the Common Stock of the Company have been reserved by the Board
for issuance under the 1994 Plan. If any option granted pursuant to the 1994
Plan expires or terminates for any reason without being exercised in whole or in
part, the shares released from such option will again become available for grant
and purchase under the 1994 Plan.
As of October 14, 1997, 479,855 options to purchase shares under the 1994
Plan have been canceled or become unexercisable (excluding options that were
amended to effect repricing). Pursuant to the terms of the 1994 Plan, such
options upon cancellation were returned to the shares reserved for issuance
under the 1994 Plan.
6
<PAGE>
Administration
The 1994 Plan is administered by the Compensation Committee (the
"Committee"), the members of which are appointed by the Board. The Committee
currently consists of Gary J. Morgenthaler and Lip-Bu Tan, both of whom are
"non-employee directors", as that term is defined in the Exchange Act, and
"outside directors", as that term is defined pursuant to Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code").
Subject to the terms of the 1994 Plan, the Committee determines the persons
who are to receive options, the number of shares subject to each such option and
the terms and conditions of each such option. However, Raymond C. Lin, a
director and President and Chief Executive Officer of the Company, is also
authorized to make grants to non-officer employees of options to purchase no
more than 20,000 shares in a fiscal year pursuant to guidelines established by
the Committee. The Committee has the authority to construe and interpret any of
the provisions of the 1994 Plan or any options granted thereunder, which
interpretation is final and conclusive.
Eligibility
Options may be granted under the 1994 Plan to employees, officers,
directors, consultants and advisors of the Company, or any parent, subsidiary or
affiliate of the Company whom the Committee determines have the potential to
contribute to the future success of the Company (the "Optionees"). The maximum
number of shares that may be issued to any one Optionee under the 1994 Plan is
1,000,000 shares. As of October 14, 1997, approximately 245 persons were
eligible to receive options under the 1994 Plan, 305,599 shares had been issued
upon exercise of options and 3,423,111 shares were subject to outstanding
options. As of that date, 1,471,291 shares were available for future option
grants, after taking into account the proposed increase. The closing price of
the Company's Common Stock on the Nasdaq National Market as of that date was
$28.5625 per share. The Chief Executive Officer of the Company and the four
other most highly compensated executive officers of the Company during fiscal
1997 (the "Named Executive Officers") have been granted options under the 1994
Plan to purchase shares of Common Stock as follows: Raymond C. Lin - 330,000
shares, Riley R. Willcox - 160,000 shares, Boris J. Auerbuch - 254,000 shares
and Antonio Flores - 111,000 shares over the term of the 1994 Plan through June
27, 1997. In addition, Nicholas Williams, the Company's President and Chief
Operating Officer, and Andrew Aczel, Senior Vice President, Engineering, have
been granted options to purchase 300,000 and 230,000 shares, respectively, over
the same period. During that same time period, the Company's current executive
officers as a group have been granted options to purchase an aggregate of
1,610,859 shares, and all employees as a group, other than executive officers,
have been granted options to purchase an aggregate of 3,216,388 shares under the
1994 Plan. During that same time period, the Company's current non-employee
directors as a group, other than executive officers, have been granted 62,500
options under the 1994 Plan. These shares represent a grant made to one of the
Company's directors prior to its initial public offering. As the Company's
executive officers and directors are eligible to participate in the 1994 Plan,
they may have an interest in the proposed amendment to increase the number of
shares authorized for issuance thereunder.
Stock Options
Options granted under the 1994 Plan may be incentive stock options ("ISOs")
within the meaning of Section 422 of the Code, or nonqualified stock options
("NQSOs"); however, only employees of the Company, or of a parent or subsidiary
of the Company, may be granted ISOs. Options under the 1994 Plan have a maximum
term of ten (10) years after the date of grant for holders of 10% or less of the
outstanding capital stock of the Company, or any parent or subsidiary's. The
option term is limited to five (5) years for holders of more than 10% of such
stock.
7
<PAGE>
The option exercise price of an ISO granted under the 1994 Plan may not be
less than the fair market value (as defined in the 1994 Plan) of the Common
Stock of the Company on the date of grant, except that for an option granted to
a person holding more than 10% of the total combined voting power of all classes
of capital stock of the Company or of any parent or subsidiary of the Company,
the exercise price must be not less than 110% of such fair market value. The
exercise price of an NQSO granted under the 1994 Plan may not be less than 85%
of the fair market value of the Common Stock of the Company on the date of
grant. To date, the Company has not granted options under the 1994 Plan at less
than fair market value.
The exercise of options granted under the 1994 Plan, plus any applicable
income tax withholding, may be paid (1) in cash (by check); or where permitted
by law and approved by the Committee, in its sole discretion, at the time of
grant (2) by cancellation of indebtedness of the Company to the Optionee; (3) by
surrender of shares of the Company's Common Stock owned by the Optionee for at
least six months and having a fair market value on the date of surrender equal
to the aggregate exercise price of the option; (4) by tender of a full recourse
promissory note; (5) by waiver of compensation due to or accrued by the Optionee
for services rendered; (6) by a "same-day sale" commitment from the Optionee and
a broker-dealer that is a member of the National Association of Securities
Dealers (a "NASD Dealer"); (8) by a "margin" commitment from the Optionee and a
NASD Dealer; or (9) by any combination of the foregoing.
Mergers, Consolidations, Change of Control
In the event of a merger, consolidation, dissolution or liquidation of the
Company, the sale of substantially all the assets of the Company or any other
similar corporate transaction, the successor corporation may assume, replace or
substitute equivalent options in exchange for those granted under the 1994 Plan
or provide substantially similar consideration, shares or other property subject
to repurchase restrictions no less favorable to Optionees under the 1994 Plan.
In the event that the successor corporation, if any, does not assume or
substitute the options, the options shall expire on such transaction at the time
and upon the conditions as the Committee determines.
Amendment of the 1994 Plan
The Committee may at any time amend or terminate the 1994 Plan, including
amendment of any form of grant, exercise agreement or instrument to be executed
pursuant to the 1994 Plan. However, the Committee may not amend the 1994 Plan in
any manner that requires stockholder approval pursuant to the Code, or the
regulations promulgated thereunder, the Exchange Act or Rule 16b-3 (or its
successor) promulgated thereunder without obtaining such stockholder approval.
Term of the 1994 Plan
The 1994 Plan will terminate in November 2004, ten (10) years from the date
the 1994 Plan was adopted by the Board.
Federal Income Tax Information
THE FOLLOWING IS A GENERAL SUMMARY AS OF THE DATE OF THIS PROXY STATEMENT
OF THE FEDERAL INCOME TAX CONSEQUENCES TO THE COMPANY AND OPTIONEES ASSOCIATED
WITH STOCK OPTIONS GRANTED UNDER THE 1994 PLAN. THE FEDERAL TAX LAWS MAY CHANGE
AND THE FEDERAL, STATE AND LOCAL TAX CONSEQUENCES FOR ANY OPTIONEE WILL DEPEND
UPON HIS OR HER INDIVIDUAL CIRCUMSTANCES. EACH OPTIONEE HAS BEEN, AND IS,
ENCOURAGED TO SEEK THE
8
<PAGE>
ADVICE OF A QUALIFIED TAX ADVISOR REGARDING THE TAX CONSEQUENCES OF
PARTICIPATION IN THE 1994 PLAN.
Incentive Stock Options. The Optionee will not recognize income upon grant
of an ISO and will not incur tax on its exercise (unless the Optionee is subject
to the alternative minimum tax described below). If the Optionee holds the stock
acquired upon exercise of an ISO (the "ISO Shares") for more than one year after
the date the option was exercised and for more than two years after the date the
option was granted, the Optionee generally will realize long-term capital gain
or loss (rather than ordinary income or loss) upon disposition of the ISO
Shares. This gain or loss will be equal to the difference between the amount
realized upon such disposition and the amount paid for the ISO shares.
If the Optionee disposes of ISO Shares prior to the expiration of either
required holding period described above (a "disqualifying disposition"), then
gain realized upon such disqualifying disposition, up to the difference between
the fair market value of the ISO Shares on the date of exercise (or, if less,
the amount realized on a sale of such shares) and the option exercise price,
will be treated as ordinary income to the Optionee. Any additional gain will be
capital gain, taxed at a rate dependent upon the amount of time the ISO Shares
were held by the Optionee.
Alternative Minimum Tax. The difference between the fair market value of
the ISO Shares on the date of exercise and the exercise price is an adjustment
to income for purposes of the alternative minimum tax (the "AMT"). The AMT
(imposed to the extent it exceeds the taxpayer's regular income tax) is 26% of
an individual taxpayer's alternative minimum taxable income (28% in the case of
alternative minimum taxable income in excess of $175,000). A maximum 20% AMT
rate applies to the portion of alternative minimum taxable income that would
normally be taxed as net capital gain. Alternative minimum taxable income is
determined by adjusting regular taxable income for certain items, increasing
that income by certain tax preference items (including the difference between
the fair market value of the ISO Shares on the date of exercise and the exercise
price) and reducing this amount by the applicable exemption amount ($45,000 in
the case of a joint return, subject to reduction under certain circumstances).
If a disqualifying disposition of the ISO Shares occurs in the same calendar
year as exercise of the ISO, there is no AMT adjustment with respect to those
ISO Shares. Also, upon a sale of ISO Shares that is not a disqualifying
disposition, alternative minimum taxable income is reduced in the year of sale
by the excess of fair market value of the ISO shares at exercise over the amount
paid for the ISO Shares.
Nonqualified Stock Options. An Optionee will not recognize any taxable
income at the time a NQSO is granted. However, upon exercise of a NQSO, the
Optionee generally must include in income as compensation an amount equal to the
difference between the fair market value of the shares purchased on the date of
exercise and the Optionee's exercise price. The included amount will be treated
as ordinary income by the Optionee and may be subject to income tax and FICA
withholding by the Company (either by payment in cash or withholding out of the
Optionee's salary). Upon resale of the NQSO shares by the Optionee, any
subsequent appreciation or depreciation in the value of the shares will be
treated as capital gain or loss.
Maximum Tax Rates. The maximum tax rate applicable to ordinary income is
39.6%. Long-term capital gain will be taxed at a maximum of 20%. For this
purpose, in order to receive long-term capital gain treatment, the shares must
be held for more than eighteen months. Mid-term capital gains will be taxed at a
maximum of 28%. For this purpose, in order to receive mid-term capital gains
treatment, the shares must be held between one year and eighteen months. Capital
gains may be offset by capital losses and up to $3,000 of capital losses may be
offset annually against ordinary income.
9
<PAGE>
Tax Treatment of the Company
The Company will generally be entitled to a deduction in connection with
the exercise of a NQSO by a domestic employee or director to the extent that the
Optionee recognizes ordinary income and the Company withholds tax. The Company
will be entitled to a deduction in connection with the disposition of ISO Shares
only to the extent that the Optionee recognizes ordinary income on a
disqualifying disposition of the ISO Shares.
ERISA
The 1994 Plan is not subject to any of the provisions of the Employee
Retirement Income Security Act of 1974 ("ERISA").
THE BOARD RECOMMENDS A VOTE FOR APPROVAL
OF THE AMENDMENT TO THE 1994 STOCK OPTION PLAN
PROPOSAL NO. 3 - RATIFICATION OF
OF INDEPENDENT ACCOUNTANTS
The Company has selected Price Waterhouse LLP as its independent
accountants to perform the audit of the Company's financial statements for
fiscal 1998, and the stockholders are being asked to ratify such selection.
Representatives of Price Waterhouse LLP are expected to be present at the
Meeting, will have the opportunity to make a statement at the Meeting if they
desire to do so and are expected to be available to respond to appropriate
questions.
THE BOARD RECOMMENDS A VOTE FOR THE RATIFICATION
OF THE SELECTION OF PRICE WATERHOUSE LLP
10
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
<TABLE>
The following table sets forth certain information, as of October 14, 1997,
with respect to the beneficial ownership of the Company's Common Stock by (i)
each stockholder known by the Company to be the beneficial owner of more than 5%
of the Company's Common Stock, (ii) each director and nominee, (iii) the Chief
Executive Officer of the Company and each of the Company's four most highly
compensated executive officers (other than the Chief Executive Officer) who were
serving as executive officers at the end of fiscal 1997 (together, the "Named
Executive Officers") and (iv) all current directors and executive officers as a
group.
<CAPTION>
Percent of
Amount of Outstanding
Name of Beneficial Owner Beneficial Ownership(1) Common Stock(1)
------------------------ ----------------------- ---------------
<S> <C> <C>
Amerindo Investment Advisors Inc.
Amerindo Investment Advisors, Inc. (Panama)
Amerindo Investment Advisors Inc. Profit Sharing Trust
Alberto W. Vilar
Gary A. Tanaka (2) ..................................................................... 2,967,272 11.7%
Putnam Investments Inc.
The Putnam Advisory Company, Inc.
Putnam Investment Management, Inc.(3) .................................................. 2,952,400 11.6
Wisconsin Investment Board(4) .......................................................... 2,335,000 9.2
Lip-Bu Tan
Pacven Investment Ltd.
Seed Ventures Limited (5) .............................................................. 720,730 2.8
Raymond C. Lin (6) ..................................................................... 661,279 2.6
Boris J. Auerbuch (7) .................................................................. 365,296 1.4
William J. Smith (8) ................................................................... 141,799 *
Riley R. Willcox (9) ................................................................... 86,880 *
Gary J. Morgenthaler (10) .............................................................. 54,815
Antonio Flores (11) .................................................................... 40,519 *
Robert C. Hawk (12) .................................................................... 26,574 *
Edward A. Keible, Jr. (13) ............................................................. 26,314 *
Marino R. Polestra (14) ................................................................ 8,500 *
All current executive officers and directors
as a group (14) persons) (15) ......................................................... 2,150,566 8.5
<FN>
- --------------------------
* Less than 1%
(1) Unless otherwise indicated below, the persons and entities named in the
table have sole voting and sole investment power with respect to all shares
beneficially owned, subject to community property laws where applicable.
Shares of Common Stock subject to options that are currently exercisable,
or exercisable within 60 days of October 14, 1997, are deemed to be
outstanding and to be beneficially owned by the person holding such options
for the purpose of computing the percentage ownership of such person but
are not treated as outstanding for the purpose of computing the percentage
ownership of any other person.
(2) Represents 2,764,994 shares held of record by Amerindo Investment Advisors
Inc., an institutional investment advisor ("Amerindo USA"), 200,278 shares
held of record by Amerindo Investment Advisors, Inc., a Panama corporation
and institutional investment advisor ("Amerindo Panama" and collectively,
with Amerindo USA, "Amerindo Investment"), and 2,000 shares held of record
by the Amerindo Investment Advisors Inc. Profit Sharing Trust (the
"Trust"). The address of
11
<PAGE>
Amerindo USA is One Embarcadero, Suite 2300, San Francisco, California
94111. The address of Amerindo Panama is Edificio Sucre, Calle 48 Este,
Bella Vista, Apartado 6277, Panama 5. The address of the Trust is Gables
International Plaza, 2655 Le Jeune Road, Suite 524, Coral Gables, Florida
33134. Messrs. Alberto Vilar and Gary Tanaka are directors and executive
officers of Amerindo USA and Amerindo Panama and share investment and
voting power over all shares owned by such entities. Mr. Villar, as sole
trustee of the Trust, has sole investment and voting power over all shares
owned by the Trust. The aforementioned entities filed a Form 13D with the
Securities and Exchange Commission on September 5, 1997 with respect to the
shares set forth herein and upon which the information included herein is
based. Amerindo Investment and Messrs. Vilar and Tanaka disclaim beneficial
ownership of the shares held by Amerindo Investment. Mr. Vilar disclaims
beneficial ownership of the shares held by the Trust except to the extent
of his pecuniary interest therein.
(3) Represents 2,290,900 shares held of record by Putnam Investment Management,
Inc. ("PIM") and 661,500 shares held of record by The Putnam Advisory
Company, Inc. ("PAC"). PIM and PAC are registered investment advisers under
the Investment Advisers Act of 1940 and are both wholly-owned subsidiaries
of Putnam Investments, Inc. ("PI"). PI shares voting and dispositive power
over shares held by PIM and PAC. The address of each of PI, PIM and PAC is
One Post Office Square, Boston, Massachusetts 02109. The aforementioned
entities filed a Form 13G/A with the Securities and Exchange Commission on
September 9, 1997 with respect to the shares set forth herein and upon
which the information included herein is based. PI disclaims beneficial
ownership of the shares held by PIM and PAC.
(4) The address of the Wisconsin Investment Board is 121 East Wilson Street,
Madison, Wisconsin 53702. The Wisconsin Investment Board filed a Form 13F-E
with the Securities and Exchange Commission on July 31, 1997 as an
institutional investment manager with respect to the shares set forth
herein and upon which the information included herein is based.
(5) Includes 565,116 shares held of record by Pacven Investment Ltd.
("Pacven"), 114,404 shares held of record by Seed Ventures Limited
("Seed"), 26,210 shares held by the Lip-Bu Tan and Ysa Loo Trust Agreement
(the "Trust"), 1,500 shares held by managed retirement accounts for the
benefit of Mr. Tan and 13,500 shares subject to options held by Mr. Tan
which are exercisable within 60 days of October 14, 1997. Mr. Tan is
Chairman of Pacven and Seed and a trustee and beneficiary of the Trust. Mr.
Tan disclaims beneficial ownership of all shares held by Pacven and Seed,
except to the extent of his pecuniary interest in such entities. Mr. Tan is
a director of the Company.
(6) Includes 233,559 shares subject to options exercisable within 60 days of
October 14, 1997. Mr. Lin is President, Chief Executive Officer and a
director of the Company.
(7) Includes 99,467 shares subject to options exercisable within 60 days of
October 14, 1997. Mr. Boris Auerbuch is the Senior Vice President, Chief
Technical Officer and a director of the Company.
(8) Represents 82,791 shares held by William J. Smith, 785 shares held by Mr.
Smith's wife, and 58,223 shares subject to options exercisable within 60
days of October 14, 1997 held by Mr. Smith. Mr. Smith served as Senior Vice
President, Sales and Marketing of the Company until October 1997 and is
currently a sales and marketing advisor to the Company.
(9) Includes 82,188 shares subject to options exercisable within 60 days of
October 14, 1997. Mr. Willcox is Senior Vice President, Finance and
Administration, Chief Financial Officer and Secretary of the Company.
12
<PAGE>
(10) Represents 33,023 shares held by Gary M. Morgenthaler, 5,800 shares held by
the Morgenthaler Management Corporation 401(k) Retirement Plan for the
account of Mr. Morgenthaler, 2,492 shares representing Mr. Morgenthaler's
proportionate interest in shares held by the Morgenthaler family
partnership and 13,500 shares subject to options held by Mr. Morgenthaler
exercisable with 60 days of October 22, 1997. Mr. Morgenthaler is a
director of the Company.
(11) Represents 40,519 shares subject to options exercisable within 60 days of
October 14, 1997. Mr. Flores is Senior Vice President, Operations of the
Company.
(12) Includes 25,574 shares subject to options exercisable within 60 days of
October 14, 1997. Mr. Hawk is a director of the Company.
(13) Includes 26,184 shares subject to options exercisable within 60 days of
October 14, 1997. Mr. Keible is a director of the Company.
(14) Includes 7,500 shares subject to options exercisable within 60 days of
October 14, 1997. Mr. Polestra is a director of the Company.
(15) Includes the shares referenced in footnotes (5) through (7) and (9) through
(14), 20,628 additional shares and 139,031 additional shares subject to
options exercisable within 60 days of October 14, 1997.
</FN>
</TABLE>
13
<PAGE>
EXECUTIVE OFFICERS
The executive officers of the Company, and their ages as of October 14,
1997, are as follows:
Name Age Position
---- --- --------
Raymond C. Lin 43 Chief Executive Officer and Director
Nicholas J. Williams 50 President and Chief Operating Officer
Andrew Aczel 46 Senior Vice President, Engineering
Boris J. Auerbuch 51 Senior Vice President, Chief Technical
Officer and Director
Antonio Flores 37 Senior Vice President, Operations
Riley R. Willcox 57 Senior Vice President, Finance and
Administration, Chief Financial Officer
and Secretary
Robert W. Dilfer 53 Vice President and Controller
Robert A. Fyffe 43 Vice President, North America Sales
Joseph L. Lias 40 Vice President, Marketing
For information regarding the positions and offices with the Company held
by Messrs. Lin and Auerbuch, please refer to the discussion regarding nominees
for election as directors in "Directors/Nominees" under Proposal No. 1 above.
Mr. Williams became the Company's President and Chief Operating Officer in
April 1997. Prior to joining the Company, Mr. Williams was Vice President and
General Manager, International of Tellabs, Inc., a telecommunications equipment
manufacturing company ("Tellabs"). Before joining Tellabs in 1993, he held
positions as Vice President and General Manager of the Advanced Technology
Division from 1992 to 1993 and Vice President of North American Sales at AT&T
Paradyne Corporation (now Paradyne Corporation) from 1984 to 1992. Mr. Williams
holds a Bachelor of Science degree in Operations Analysis from the United States
Naval Academy at Annapolis.
Mr. Aczel became the Company's Senior Vice President, Engineering in
October 1996. Prior to joining the Company, Mr. Aczel was the Chief Engineer of
the Signaling Server Group of Northern Telecom, Inc., a telecommunications
company ("Nortel"), from October 1995 through October 1996, was Technology Prime
of another business unit of Nortel from July 1993 through October 1995, and was
Director of Product Management of the Transmission Division of Nortel from
August 1991 through July 1993. Mr. Aczel holds a Bachelor of Arts degree in
Anthropology from the University of Toronto and a Bachelor of Engineering
Sciences degree from the University of Western Ontario.
Mr. Flores has been Senior Vice President, Operations of the Company since
October 1997 and was its Vice President, Operations from July 1991 to October
1997. From April 1989 to June 1991, he was Director of Manufacturing of Telco,
where he directed both domestic and offshore production. Mr. Flores holds a
certificate of management from Mission College and an Associate of Science
degree in electronics from Monterey Peninsula College.
Mr. Willcox has been Senior Vice President, Finance and Administration,
Chief Financial Officer and Secretary of the Company since April 1994. From
October 1990 to March 1994, he was Vice President, Finance, Chief Financial
Officer and Secretary of Network General Corporation, a LAN trouble-shooting
software company, and, from February 1985 to June 1990, he was Vice President,
Finance, Chief Financial Officer and Secretary of Cygnet Systems, Inc., an
optical memory subsystems corporation. Mr. Willcox holds a Bachelor of
Industrial Engineering degree from the Georgia Institute of Technology and a
Master in Business Administration degree from Harvard University.
14
<PAGE>
Mr. Dilfer has been Vice President and Controller of the Company since July
1992. From July 1980 to June 1992, he held various controller positions at
Signetics Corporation, a semiconductor company. Mr. Dilfer holds a Bachelor of
Science degree in industrial engineering, a Master of Science degree in
industrial engineering and a Master of Business Administration degree, all from
Stanford University.
Mr. Fyffe became the Company's Vice President, North America Sales in
October 1997 and was the Company's Vice President, U.S. Sales from July 1996
until September 1997. From September 1990 to July 1993, he was Area Vice
President of Sales of Telco. Mr. Fyffe holds a Bachelor of Computer Science
degree from ITT Technical Institute.
Mr. Lias became the Company's Vice President, Marketing in October 1997,
was the Company's Vice President, Business Development from April 1996 until
September 1997, and was the Company's Director of Product Line Management from
March 1994 to April 1996. Mr. Lias earned his Master of Science degree in
Electrical Engineering from the Georgia Institute of Technology, his Bachelor of
Science degree in Electrical Engineering from North Carolina A&T State
University and his Master of Business Administration degree from Georgia State
University.
EXECUTIVE COMPENSATION
<TABLE>
The following table sets forth compensation awarded to or earned or paid
for services rendered in all capacities to the Company by the Company's Named
Executive Officers during fiscal 1995, 1996 and 1997. This information includes
the dollar values of base salaries and bonus awards, the number of shares
subject to stock options granted and certain other compensation, whether paid or
deferred.
<CAPTION>
Summary Compensation Table
Long-Term
Compensation
Annual Compensation Awards
------------------- ------
Securities All Other
Underlying Compensation
Name and Principal Position Year Salary ($) Bonus ($)(1) Options(#)(2) ($) (3)
- --------------------------- ---- ---------- ------------ ------------- -----------
<S> <C> <C> <C> <C> <C>
Raymond C. Lin ......................................... 1997 $275,000 $110,213 230,000 $ 800
Chief Executive Officer 1996 200,000 200,000 200,000 1,200
1995 160,000 102,976 -- 0
Riley R. Willcox ....................................... 1997 185,000 37,072 120,000 800
Senior Vice President, Finance and 1996 154,000 107,800 50,000 1,200
Administration and Chief Financial 1995 140,000 67,578 -- 0
Officer
Boris J. Auerbuch ...................................... 1997 180,000 35,082 110,000 800
Senior Vice President and Chief 1996 150,000 89,782 184,000 1,200
Technology Officer 1995 136,620 55,778 -- 0
William J. Smith (4) ................................... 1997 170,000 41,214 110,000 800
Former Senior Vice President, Sales and 1996 143,000 121,237 90,000 1,200
Marketing 1995 130,000 79,183 -- 0
Antonio Flores ......................................... 1997 150,000 29,235 95,000 800
Senior Vice President, Operations 1996 125,000 55,715 31,000 1,200
1995 100,450 33,264 -- 0
<FN>
- ------------------
(1) Bonus amounts in respect of the fiscal years indicated are paid in two
installments in the month of January of the relevant fiscal year and the
month of July following the end of such fiscal year. The Company did not
pay a bonus in July 1997 for the second half of fiscal 1997.
(2) Adjusted to reflect the 100% stock dividend effected in December 1995.
(3) Represents the Company's 401(k) Plan matching contributions.
15
<PAGE>
(4) Mr. Smith resigned as the Company's Senior Vice President, Sales and
Marketing in October 1997 and currently serves as a sales and marketing
advisor to the Company. The bonus amounts for Mr. Smith also include sales
commissions earned during each of the indicated fiscal years.
</FN>
</TABLE>
During fiscal 1997, the Company hired Nicholas J. Williams as its President
and Chief Operating Officer and Andrew Aczel as its Senior Vice President,
Engineering. See "Employment Agreements" for a description of certain
compensation arrangements between the Company and such executive officers.
Option Grants in Fiscal 1997
<TABLE>
The following table sets forth information regarding option grants to Named
Executive Officers in fiscal 1997. In accordance with the rules of the
Securities and Exchange Commission, the table sets forth the hypothetical gains
or "option spreads" that would exist for the options at the end of their
ten-year term. These gains are based on assumed rates of annual compound stock
price appreciation of 5% and 10% from the date the options were granted to the
end of the option terms.
<CAPTION>
Option Grants in Fiscal 1997
Individual Grants
----------------------------------------------------------
Potential Realizable Value
Number of Percent of Total at Assumed Annual Rates of
Securities Options Stock Price Appreciation for
Underlying Granted to Option Term($)(2)
Options Employees in Exercise Price Expiration -----------------------
Name Granted(#)(1) Fiscal 1997(%) Per Share Date 5% 10%
---- ------------- -------------- --------- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Raymond C. Lin........ 160,000 6.82 $32.0000 8/21/2006 $3,219,940 $8,159,961
70,000 2.98 8.1875 4/24/2007 360,435 913,414
William J. Smith...... 80,000 3.41 32.0000 8/21/2006 1,609,970 4,079,981
30,000 1.28 8.1875 4/24/2007 154,472 391,463
Riley R. Willcox...... 80,000 3.41 32.0000 8/21/2006 1,609,970 4,079,981
40,000 1.70 8.1875 4/24/2007 205,963 521,951
Boris J. Auerbuch..... 80,000 3.41 32.0000 8/21/2006 1,609,970 4,079,981
30,000 1.28 8.1875 4/24/2007 154,472 391,463
Antonio Flores........ 50,000 2.13 32.0000 8/21/2006 1,006,231 2,549,988
45,000 1.92 8.1875 4/24/2007 231,708 587,195
<FN>
- -----------
(1) The options shown in the table were granted at fair market value and become
exercisable with respect to 2.083% of the shares for each full month that
the optionee renders services to the Company after the date of grant. The
options shown in the table will expire ten years from the date of grant,
subject to earlier termination upon termination of employment.
(2) The assumed annual compound rates of stock price appreciation referred to
in the foregoing sentence are mandated by the rules of the Securities and
Exchange Commission and do not represent the Company's estimate or
projection of future stock prices.
</FN>
</TABLE>
As indicated above, during fiscal 1997, the Company hired Nicholas J.
Williams as its President and Chief Operating Officer and Andrew Aczel as its
Senior Vice President, Engineering. The Company granted options to purchase
shares of Common Stock to both Mr. Williams and Mr. Aczel during fiscal 1997.
The details of these grants are discussed in the report of the Compensation
Committee of the Board of Directors under the title "Stock Options."
16
<PAGE>
Aggregate Option Exercises in Fiscal 1997 and Fiscal Year-End Values
<TABLE>
The following table sets forth certain information concerning the exercise
of options by each of the Named Executive Officers during fiscal 1997, including
the aggregate amount of gains on the date of exercise. In addition, the table
includes the number of shares covered by both exercisable and unexercisable
stock options as of June 27, 1997. Also reported are values of "in-the-money"
options that represent the positive spread between the respective exercise
prices of outstanding stock options and $15.75 per share, which was the closing
price of the Company's Common Stock as reported on the Nasdaq National Market on
June 27, 1997.
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Shares Options at Fiscal Year-End(#) at Fiscal Year-End($)
Acquired on Value ----------------------------- ---------------------
Name Exercise(#) Realized($)(1) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Raymond C. Lin ................. 221,354 $3,497,619 173,253 285,393 $1,735,539 $1,658,552
Riley R. Willcox ............... 37,200 1,279,708 57,203 165,597 610,938 1,164,537
William J. Smith ............... -- -- 83,539 137,155 941,952 802,788
Boris J. Auerbuch .............. 123,412 859,137 67,802 165,908 541,374 1,027,766
Antonio Flores ................. 10,250 494,850 22,708 97,930 157,389 519,353
<FN>
- ----------
(1) "Value Realized" represents the fair market value of the shares of Common
Stock underlying the option on the date of exercise less the aggregate
exercise price of the option.
</FN>
</TABLE>
EMPLOYMENT AGREEMENTS
On March 12, 1992, Premisys Holdings Communications Inc. ("Premisys
Holdings") entered into a Founders Agreement with Raymond C. Lin and Boris J.
Auerbuch, which replaced earlier agreements dated September 10, 1990 between
Messrs. Lin and Auerbuch and Premisys Communications, Inc., a California
corporation. This Founders Agreement established salaries for Messrs. Lin and
Auerbuch as officers of the Company and provided for a bonus pool for those
founders and other key employees through fiscal 1995. In connection with this
Founders Agreement, Premisys Holdings granted options to each of Messrs. Lin and
Boris Auerbuch to purchase 525,000 shares, each with an exercise price of $.10
per share. Vesting for the options commenced on the officers' initial dates of
employment with the Company. Such options are fully vested and have been
exercised in full. Finally, the Founders Agreement provides for three months'
severance pay at full salary except in limited instances and prohibits them for
three years following termination of employment from interfering with any of the
Company's supply relationships and from soliciting any employees of the Company
to leave.
In February 1994, the Company hired Riley R. Willcox as Senior Vice
President, Finance, Chief Financial Officer and Secretary of the Company,
commencing on April 11, 1994. Mr. Willcox's employment agreement provided for
the payment of an annual base salary through fiscal 1995, participation in the
management incentive bonus program commencing in fiscal 1995 at 30% of his
salary, and comprehensive medical, dental, life, accident and disability
insurance for him and his family. In addition, it provided for the grant of
certain stock options that vested 25% after his first year of service and
monthly thereafter until fully vested after four years. The Company has agreed
to provide Mr. Willcox with a nine month salary extension and to accelerate
vesting of his stock options in the event his employment with the Company is
terminated due to an acquisition unless such acceleration is precluded by
certain accounting requirements.
17
<PAGE>
In September 1996, the Company hired Andrew Aczel as Senior Vice President,
Engineering of the Company, commencing on October 21, 1996. Mr. Aczel's
employment agreement provided for the payment of an annual base salary of
$160,000 through fiscal 1997, payment of a signing bonus of $25,000,
participation in the management incentive bonus program commencing in fiscal
1997 at 40% of his salary contingent upon the Company meeting its fiscal 1997
objectives and Mr. Aczel meeting his individual goals. With respect to this
bonus program participation, $32,000 of the bonus was guaranteed and paid in
January 1997. Mr. Aczel's employment agreement also included payment of various
expenses associated with his relocation to California, including $75,000 in
mortgage assistance to Mr. Aczel over three years. Mr. Aczel is also entitled to
participate in the other employee benefit programs offered by the Company. The
Company has agreed to provide Mr. Aczel with a nine month salary extension in
the event his employment with the Company is terminated without cause. In
connection with his initial employment, Mr. Aczel was also granted certain stock
options, as contemplated by the agreement.
In April 1997, the Company hired Nicholas J. Williams as President and
Chief Operating Officer of the Company, commencing on April 21, 1997. Mr.
William's employment agreement provided for the payment of an annual base salary
of $225,000 through fiscal 1997 and participation in the management incentive
bonus program commencing in fiscal 1998 at 40% of his base salary contingent
upon the Company achieving its goals for fiscal 1998. Mr. Williams' employment
agreement also included payment of various expenses associated with his
relocation to California, including $162,500 of mortgage assistance over four
years. Mr. Williams is also entitled to participate in the other employee
benefit programs offered by the Company. In addition, the Company has agreed to
pay Mr. Williams a total of $1,300,000 on a quarterly basis over four years
($81,250 per quarter) as compensation for relinquishing certain unvested stock
options granted to Mr. Williams by his prior employer so long as he remains
employed with the Company. In connection with his initial employment, Mr.
Williams was also granted certain stock options, as contemplated by the
agreement.
In September 1997, the Company entered into a part-time employment
agreement with William J. Smith in connection with his resignation as the
Company's Senior Vice President, Sales and Marketing. The agreement provides
that Mr. Smith will work part-time as a sales and marketing advisor to the
Company beginning November 1, 1997 for an annual salary of $42,500 and will be
entitled to a pro rated portion of the bonus and commissions earned during the
first half of fiscal 1998 during which he was fully employed by the Company. The
agreement provides that Mr. Smith remains entitled to certain employee benefits,
including the continued vesting of his outstanding stock options. The agreement
restricts Mr. Smith from taking consulting arrangements with or serving on the
Board of Directors of competitors of the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of Messrs. Morgenthaler and Tan. For a
description of transactions between the Company and members of the Compensation
Committee and entities affiliated with such members, see the discussion under
"Certain Relationships and Related Transactions" below.
18
<PAGE>
REPORT ON EXECUTIVE COMPENSATION
This Report of the Compensation Committee is required by the Securities and
Exchange Commission and shall not be deemed to be incorporated by reference by
any general statement incorporating by reference this Proxy Statement into any
filing under the Securities Act of 1933, as amended, or under the Securities
Exchange Act of 1934, as amended, except to the extent that the Company
specifically incorporates this information by reference, and shall not otherwise
be deemed soliciting material or filed under such Acts.
Final decisions regarding executive compensation and stock option grants to
executives are made by the Compensation Committee of the Board of Directors (the
"Committee"). The Committee is composed of two independent non-employee
directors, neither of whom have any interlocking relationships as defined by the
Securities and Exchange Commission. Although Mr. Lin and Mr. Willcox attend the
meetings of the Committee, they do not participate in deliberations that relate
to their own compensation.
General Compensation Policy
The Committee acts on behalf of the Board to establish the general
compensation policy of the Company for all employees of the Company. The
Committee typically reviews base salary levels and target bonuses for the Chief
Executive Officer ("CEO"), other executive officers and certain other employees
of the Company at or about the beginning of each fiscal year. The Committee
administers the Company's incentive and equity plans, including the 1992 Stock
Option Plan, the 1994 Stock Option Plan, the Management Incentive Plan (the
"Incentive Plan"), the Profit Sharing Plan and the 1995 Employee Stock Purchase
Plan. The Company no longer grants options under the 1992 Stock Option Plan.
The Committee's philosophy in compensating executive officers, including
the CEO, is to relate compensation directly to corporate performance. Thus, the
Company's compensation policy, which applies to executive officers and other key
employees of the Company, relates a portion of each individual's total
compensation to the Company profit objectives and individual objectives set
forth at the beginning of the Company's fiscal year. Consistent with this
policy, a designated portion of the compensation of the executive officers of
the Company is contingent on corporate performance and, in the case of certain
executive officers, is also based on the individual officer's performance as
measured against individual objectives established under the Incentive Plan, as
determined by the Committee in its discretion. Long-term equity incentives for
executive officers are effected through the granting of stock options under the
1994 Stock Option Plan. Stock options have value for the executive only if the
price of the Company's stock increases above the fair market value on the grant
date and the executive remains in the Company's employ for the period required
for the shares to vest.
The base salaries, incentive compensation and stock option grants of the
executive officers are determined in part by the Committee reviewing data on
prevailing compensation practices in technology companies with whom the Company
competes for executive talent and by their evaluating such information in
connection with the Company's corporate goals. To this end, the Committee
attempts to compare the compensation of the Company's executive officers with
the compensation practices of comparable companies to determine base salary,
target bonuses and target total cash compensation. In addition to their base
salaries, the Company's executive officers, including the CEO, are each eligible
to receive cash bonuses under the Incentive Plan and to participate in the 1994
Stock Option Plan.
In preparing the performance graph for this Proxy Statement, the Company
used the H&Q Technology Index ("H&Q Index") as its published line of business
index as the Company believes that the H&Q Index is a good indicator of stock
price performance with respect to the Company's industry. The Company further
believes that the data reviewed on prevailing compensation practices of
19
<PAGE>
comparable companies, which include certain companies on the H&Q Index, is a
good benchmark with respect to executive compensation practices in the Company's
industry.
Fiscal 1997 Executive Compensation
Base Compensation. The Committee reviewed the recommendations and
performance and market data outlined above and established a base salary level
to be effective July 1, 1996 for each executive officer, including the CEO.
Incentive Compensation. Under the Incentive Plan, cash bonuses are awarded
to the extent that an executive officer achieved predetermined individual
objectives and the Company met predetermined profit objectives set by the Board
at the beginning of the year. The CEO's subjective judgment of executives'
performance (other than his own) is taken into account in determining whether
those objectives have been satisfied. Cash bonuses to individuals are limited to
twice the amount of the relevant individual's target cash bonus. Performance is
measured at the end of the first half and the second half of the fiscal year.
For fiscal 1997, the bases of incentive compensation were Company operating
profits, which represented between 33% and 100% of an individual's target
incentive compensation, with the balance, if any, based on individual
objectives, depending on the individual executive. The targets and actual bonus
payments are determined by the Committee, in its discretion. Bonuses were paid
to the Company's officers for the first half of fiscal 1997 as corporate
operating profit objectives were attained. However, no bonuses were paid for the
second half of fiscal 1997 as Company operating profit objectives were not
achieved.
Stock Options. Stock options typically have been granted to executive
officers when the executive first joins the Company, in connection with a
significant change in responsibilities, to provide greater incentives to
continue their employment with the Company and to strive to increase the value
of the Company's Common Stock and, occasionally, to achieve equity within a peer
group. The Committee may, however, grant additional stock options to executives
for other reasons. The number of shares subject to each stock option granted is
within the discretion of the Committee and is based on anticipated future
contribution and ability to impact corporate and/or business unit results, past
performance or consistency within the executive's peer group. The stock options
generally become exercisable over a four-year period, with initial grants
vesting 25% after the first year and monthly thereafter. Subsequent grants vest
monthly for 48 months beginning one month from the date of the grant. Stock
options are generally granted at a price that is equal to the fair market value
of the Company's Common Stock on the date of grant. All options granted to date
have been granted pursuant to the above guidelines.
In early fiscal 1997, the Company granted stock options to executive
officers based largely upon targeted stock option grants for the satisfaction of
fiscal 1996 objectives. The Committee considered the factors described above, as
well as the number of options held by such executive officers that would remain
unvested at the end of fiscal 1997, in determining the targeted number of
options to grant, and the actual number of options granted, to executive
officers upon achievement of corporate and individual performance objectives for
fiscal 1996. The Company also granted stock options to its then executive
officers (other than Mr. Aczel and Mr. Williams) in April 1997 after a decline
in the fair market value of the Company's Common Stock due to a significant
revenue shortfall in the third quarter of fiscal 1997. As a result of the
decline in the Company's stock price, the options which had been granted earlier
in fiscal 1997 to the Company's executive officers had exercise prices
significantly in excess of the Company's stock price at that time. In addition,
none of the options held by executive officers had been repriced. As a result,
the options which had been granted earlier in fiscal 1997 to the Company's
executive officers were not providing the meaningful incentives for continued
employment with the Company or motivation toward increasing the value of the
Company's Common Stock which the Compensation Committee had intended when the
grants were made. The grant of options in April 1997 was designed to provide
this incentive and motivation. In the cases of Messrs. Lin, Smith, Willcox and
20
<PAGE>
Auerbuch, the number of options granted in April 1997 were half or less than
half of the number of options granted earlier in fiscal 1997 in connection with
the satisfaction of fiscal 1996 objectives. The shares subject to options
granted to Messrs. Flores and Dilfer were approximately the same number of
shares subject to options as had been granted earlier in fiscal 1997. Such
greater number of options was due in large part to the lower level of options
remaining unvested held by such executive officers at such time. In addition, in
connection with their commencement of employment, initial grants of options were
made to Andy Aczel, the Company's Senior Vice President, Engineering, in October
1996 (80,000 shares at $51.00 per share) and Nicholas Williams, the Company's
President and Chief Operating Officer, in April 1997 (300,000 shares at $8.875
per share). Mr. Aczel was also granted an option to purchase 150,000 shares on
March 31, 1997 at $8.00 per share. This option grant was made to Mr. Aczel in
part because the Committee determined that, given the significant decline in the
price of the Company's Common Stock since October 1996, the options initially
granted to Mr. Aczel at such time did not provide a meaningful incentive for
continued employment with the Company or motivation toward increasing the value
of the Company's Common Stock. This subsequent option grant was designed to
provide such incentive and motivation. In addition, this option grant was made
to recognize the significant responsibilities assumed by Mr. Aczel with respect
to the Company's research and development efforts.
Company Performance and CEO Compensation. Mr. Lin's base salary was
increased from $200,000 to $275,000 commencing July 1, 1996. The Committee
recommended this increase to better align Mr. Lin's compensation with that paid
by companies comparable to Premisys, based upon the Committee's review of data
on the compensation practices of such companies, as discussed above.
Notwithstanding such increase, Mr. Lin's salary remained in the last third of
the companies reviewed by the Committee. Based upon the criteria set forth for
fiscal 1997 under the discussion of Incentive Compensation above, the Committee
awarded Mr. Lin incentive compensation of $110,213 for fiscal 1997. All of Mr.
Lin's incentive compensation was based upon attaining corporate operating profit
objectives for the first half of the 1997 fiscal year. No incentive compensation
was awarded to Mr. Lin for the second half of the 1997 fiscal year as Company
profit objectives were not achieved. Mr. Lin's targeted incentive compensation
was also based upon the Committee's review of the compensation practices of
comparable companies, as discussed above. The Committee also granted Mr. Lin
options to purchase 160,000 shares of Common Stock in August 1996 in connection
in large part with the satisfaction of fiscal 1996 objectives. As with the
Company's other executive officers, Mr. Lin was granted an option to purchase
70,000 shares of Common Stock in April 1997. As indicated above, this option was
granted to respond to the decline in the Company's stock price, whereby the
options which had been granted earlier in fiscal 1997 to Mr. Lin had exercise
prices significantly in excess of the Company's stock price at that time. In
addition, none of the options held by Mr. Lin had been repriced. As a result,
the options which had been granted earlier in fiscal 1997 to Mr. Lin were not
providing the meaningful incentives for continued employment with the Company or
motivation toward increasing the value of the Company's Common Stock which the
Compensation Committee had intended when the grants were made. The grant of
options to Mr. Lin in April 1997 was designed to provide this incentive and
motivation.
Compliance with Section 162(m) of the Internal Revenue Code of 1986. The
Company intends to comply with the requirements of Section 162(m) of the
Internal Revenue Code of 1986 for fiscal 1998. The 1994 Plan is already in
compliance with Section 162(m) by limiting stock awards to named executive
officers. The Company does not expect cash compensation for 1998 to be in excess
of $1,000,000 or consequently affected by the requirements of Section 162(m).
Stock Option Repricing. In April 1997, the Board of Directors offered to
all employees (except the then executive officers of the Company) the
opportunity to amend outstanding options granted under the 1994 Plan to adjust
the exercise price of such options to the closing price of the Company's Common
Stock on April 22, 1997 ($8.1875 per share) and to restart the vesting of such
options as of April 23, 1997, with vesting thereafter at the rate of 1/48th per
month. The options remained otherwise unchanged.
21
<PAGE>
The option amendment was an acknowledgment of the importance to the Company of
providing adequate equity incentives to its employees. Stock options whose
exercise prices are significantly above the trading prices of the Company's
Common Stock do not provide any particular compensatory incentive if a key
employee is considering alternative employment opportunities. The renewed
vesting period included in the option amendment was viewed as a means of
retaining the services of valued employees for a longer period of time and as a
way for the Company to receive something in exchange for the repricing of the
options.
COMPENSATION COMMITTEE
Gary J. Morgenthaler
Lip-Bu Tan
22
<PAGE>
COMPANY STOCK PRICE PERFORMANCE
The stock price performance graph below is required by the Securities and
Exchange Commission ("SEC") and shall not be deemed to be incorporated by
reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act of 1933, as amended, or under
the Securities Exchange Act of 1934, as amended, except to the extent that the
Company specifically incorporates this information by reference, and shall not
otherwise be deemed soliciting material or filed under such Acts.
<TABLE>
The graph below compares the cumulative total stockholder return on the
Common Stock of the Company on the effective date of the Company's Registration
Statement with respect to the Company's initial public offering (April 5, 1995)
to June 30, 1995, June 28, 1996 and June 27, 1997 with the cumulative total
return on the Nasdaq Stock Market and the Hambrecht & Quist Technology Index
(assuming the investment of $100 in the Company's Common Stock and in each of
the indexes on the date of the Company's initial public offering, reinvestment
of all dividends and adjustment for the 100% stock dividend effected by the
Company in December 1995).
[The following descriptive data is supplied in accordance with Rule 304(d) of Regulation S-T]
<CAPTION>
Premisys Communications, Inc. Nasdaq Stock Market - US Index H&Q Technology Index
----------------------------- ------------------------------ --------------------
Market Price Investment Value Index Investment Value Index Investment Value
------------ ---------------- ----- ---------------- ----- ----------------
<S> <C> <C> <C> <C> <C> <C>
4/5/95 $ 8.00 $ 100.00 261.644 $ 100.00 569.95 $ 100.00
6/30/95 $ 32.28 $ 403.52 299.244 $ 114.37 696.94 $ 122.28
6/28/96 $ 61.00 $ 762.50 391.360 $ 149.58 826.80 $ 145.06
6/27/97 $ 15.75 $ 196.88 462.031 $ 182.00 1,141.24 $ 200.23
</TABLE>
23
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since July 1, 1995, there has not been, nor is there currently proposed,
any transaction or series of transactions to which the Company (or any of its
predecessor corporations) was or is to be a party in which the amount involved
exceeds $60,000 and in which any director, executive officer, or holder of more
than 5% of the Company's Common Stock had or will have a direct or indirect
material interest other than normal compensation arrangements, which are
described under "Executive Compensation" and "Employment Agreements" above and
the transactions described below.
STOCKHOLDER PROPOSALS AND REPORT ON FORM 10-K
Proposals of Stockholders intended to be presented at the Company's 1998
Annual Meeting of Stockholders must be received by the Company at its principal
executive offices no later than July 11, 1998 in order to be included in the
Company's Proxy Statement and form of proxy relating to the meeting.
The Company's Annual Report on Form 10-K as filed with the Securities and
Exchange Commission for the year ended June 27, 1997 is available without charge
by writing to or calling the Company's headquarters. Requests should be directed
to the Company's Investor Relations Department at 48664 Milmont Drive, Fremont,
California 94538.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16 of the Securities Exchange Act of 1934, as amended, requires the
Company's directors and executive officers, and persons who own more than 10% of
the Company's Common Stock, to file initial reports of ownership and reports of
changes in ownership with the SEC and the Nasdaq National Market. Such persons
are required by SEC regulation to furnish the Company with copies of all Section
16(a) forms that they file.
Based solely on its review of the copies of such forms furnished to the
Company and written representations from the executive officers and directors,
the Company believes that all Section 16(a) filing requirements were met.
OTHER BUSINESS
The Board does not presently intend to bring any other business before the
Meeting, and, so far as is known to the Board, no matters are to be brought
before the Meeting except as specified in the Notice of the Meeting. As to any
business that may properly come before the Meeting, however, it is intended that
proxies, in the form enclosed, will be voted in respect thereof in accordance
with the judgment of the persons voting such proxies.
WHETHEROR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE,
DATE, SIGN AND PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE
ENCLOSED POSTAGE PAID ENVELOPE SO THAT YOUR SHARES MAY BE
REPRESENTED AT THE MEETING.
24
<PAGE>
Appendix A
PREMISYS COMMUNICATIONS, INC.
1994 STOCK OPTION PLAN
As Adopted November 16, 1994
As Amended September 13, 1995
As Amended October 13, 1997
1. PURPOSE. This 1994 Stock Option Plan (this "Plan") is established as a
compensatory plan to attract, retain and provide equity incentives to selected
persons to promote the financial success of Premisys Communications, Inc., a
Delaware corporation, (the "Company"). Capitalized terms not previously defined
herein are defined in Section 21 of this Plan.
2. TYPES OF OPTIONS AND SHARES. Options granted under this Plan (the
"Options") may be either (a) incentive stock options ("ISOs") within the meaning
of Section 422 of the Internal Revenue Code of 1986, as amended (the "Revenue
Code"), or (b) nonqualified stock options ("NQSOs"), as designated at the time
of grant. The shares of stock that may be purchased upon exercise of Options
granted under this Plan (the "Shares") are shares of the common stock of the
Company $0.01 par value per share.
3. NUMBER OF SHARES. The aggregate number of Shares that may be issued
pursuant to Options granted under this Plan is 5,200,000.* Shares, subject to
adjustment as provided in this Plan. If any Option expires or is terminated
without being exercised in whole or in part, the unexercised or released Shares
from such Options shall be available for future grant and purchase under this
Plan. At all times during the term of this Plan, the Company shall reserve and
keep available such number of Shares as shall be required to satisfy the
requirements of outstanding Options under this Plan.
4. ELIGIBILITY. Options may be granted to employees, officers, directors,
consultants and advisers (provided such consultants and advisers render bona
fide services not in connection with the offer and sale of securities in a
capital-raising transaction) of the Company or any Parent, Subsidiary or
Affiliate of the Company. ISOs may be granted only to employees (including
officers and directors who are also employees) of the Company or a Parent or
Subsidiary of the Company. The Committee (as defined in Section 16) in its sole
discretion shall select the recipients of Options ("Optionees"). An Optionee may
be granted more than one Option under this Plan. No Optionee shall be eligible
to receive more than 1,000,000** Shares at any time during the term of this Plan
pursuant to the grant of Options hereunder. The Company may also, from time to
time, assume outstanding options granted by another company, whether in
connection with an acquisition of such other company or otherwise, by either (i)
granting an Option under this Plan in replacement of the option assumed by the
Company, or (ii) treating the assumed option as if it had been granted under
this Plan if the terms of such assumed option could be applied to an Option
granted under this Plan. Such assumption shall be permissible if the holder of
the assumed option would have been eligible to be granted an Option hereunder if
the other company had applied the rules of this Plan to such grant.
5. TERMS AND CONDITIONS OF OPTIONS. The Committee shall determine whether
each Option is to be an ISO or an NQSO, the number of Shares subject to the
Option, the exercise price of the
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* On March 13, 1995 a one-for-four reverse split of the Company's outstanding
Common Stock (the "Reverse Split") was effected, reducing the number of
shares reserved for issuance under the Plan to 1,000,000. On September 13,
1995, the Board approved an increase in the number of shares reserved for
issuance under the Plan to 2,000,000, which increase was later approved by
the Company's stockholders. On December 12, 1995, a two-for-one stock split
in the form of a 100% stock dividend was paid to the Company's stockholders
of record as of November 22, 1995, increasing the number of shares reserved
for issuance under the Plan to 4,000,000. On October 13, 1997, the Board
approved an increase in the number of shares reserved for issuance under
the Plan to 5,200,000.
** Due to the one-for-four Reverse Split and the 100% Stock Dividend, the
number of shares an Optionee shall be eligible to receive is no more than
1,000,000.
<PAGE>
Option, the period during which the Option may be exercised, and all other terms
and conditions of the Option, subject to the following:
(a) Form of Option Grant. Each Option granted under this Plan shall be
evidenced by a written Stock Option Grant (the "Grant") in such form (which need
not be the same for each Optionee) as the Committee shall from time to time
approve, which Grant shall comply with and be subject to the terms and
conditions of this Plan.
(b) Date of Grant. The date of grant of an Option shall be the date on
which the Committee makes the determination to grant such Option unless
otherwise specified by the Committee. The Grant representing the Option will be
delivered to each Optionee with a copy of this Plan within a reasonable time
after the granting of the Option.
(c) Exercise Price. The exercise price of an NQSO shall be not less
than 85% of the Fair Market Value of the Shares on the date the Option is
granted. The exercise price of an ISO shall be not less than 100% of the Fair
Market Value of the Shares on the date the Option is granted. The exercise price
of any Option granted to a person owning more than l0% of the total combined
voting power of all classes of stock of the Company or any Parent or Subsidiary
of the Company ("Ten Percent Stockholder") shall not be less than 110% of the
Fair Market Value of the Shares on the date the Option is granted.
Notwithstanding any section of this Plan, the exercise price of an Option shall
not be less than the par value of the Shares.
(d) Exercise Period. Options shall be exercisable within the times or
upon the events determined by the Committee as set forth in the Grant; provided,
however, that no Option shall be exercisable after the expiration of ten (10)
years from the date the Option is granted, and provided further that no Option
granted to a Ten Percent Stockholder shall be exercisable after the expiration
of five (5) years from the date the Option is granted. The Committee also may
provide for the exercise of Options to become exercisable at one time or from
time to time, periodically or otherwise, in such number or percentage as the
Committee determines.
(e) Limitations on ISOs. The aggregate Fair Market Value (determined as
of the time an Option is granted) of stock with respect to which ISOs are
exercisable for the first time by an Optionee during any calendar year (under
this Plan or under any other incentive stock option plan of the Company or any
Parent or Subsidiary of the Company) shall not exceed $100,000. If the Fair
Market Value of Shares with respect to which ISOs are exercisable for the first
time by an Optionee during any calendar year exceeds $100,000, the Options for
the first $100,000 worth of Shares to become exercisable in such year shall be
ISOs and the Options for the amount in excess of $100,000 that becomes
exercisable in that year shall be NQSOs. In the event that the Revenue Code or
the regulations promulgated thereunder are amended after the effective date of
this Plan to provide for a different limit on the Fair Market Value of Shares
permitted to be subject to ISOs, such different limit shall be incorporated
herein and shall apply to any Options granted after the effective date of such
amendment.
(f) Options Non-Transferable. Options granted under this Plan, and any
interest therein, shall not be transferable or assignable by Optionee, and may
not be made subject to execution, attachment or similar process, otherwise than
by will or by the laws of descent and distribution, or as consistent with the
specific Plan and Grant provisions relating thereto. During the lifetime of the
Optionee an Option shall be exercisable only by Optionee and any elections with
respect to an Option, may be made only by the Optionee.
(g) Assumed Options. In the event the Company assumes an option granted
by another company, the terms and conditions of such option shall remain
unchanged (except the exercise price and the number and nature of shares
issuable upon exercise, which will be adjusted appropriately pursuant to Section
424(c) of the Revenue Code). In the event the Company elects to grant a new
option rather than assuming an existing option (as specified in Section 4), such
new option need not be granted at Fair Market Value on the date of grant and may
instead be granted with a similarly adjusted exercise price.
6. EXERCISE OF OPTIONS.
(a) Notice. Options may be exercised only by delivery to the Company of
a written stock option exercise agreement (the "Exercise Agreement") in a form
approved by the Committee (which need not be the
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<PAGE>
same for each Optionee), stating the number of Shares being purchased, the
restrictions imposed on the Shares, if any, and such representations and
agreements regarding Optionee's investment intent and access to information, if
any, as may be required by the Company to comply with applicable securities
laws, together with payment in full of the exercise price for the number of
Shares being purchased.
(b) Payment. Payment for the Shares may be made in cash (by check) or,
where approved by the Committee in its sole discretion at the time of grant and
where permitted by law: (i) by cancellation of indebtedness of the Company to
the Optionee; (ii) by surrender of shares of common stock of the Company having
a Fair Market Value equal to the applicable exercise price of the Options, that
have been owned by Optionee for more than six (6) months (and which have been
paid for within the meaning of the Securities and Exchange Commission ("SEC")
Rule 144 and, if such shares were purchased from the Company by use of a
promissory note, such note has been fully paid with respect to such shares), or
were obtained by Optionee in the open public market; (iii) by tender of a full
recourse promissory note having such terms as may be approved by the Committee
and bearing interest at a rate sufficient to avoid imputation of income under
Sections 483 and 1274 of the Revenue Code; provided, however, that Optionees who
are not employees of the Company shall not be entitled to purchase Shares with a
promissory note unless the note is adequately secured by collateral other than
the Shares; provided, further, that the portion of the Purchase Price equal to
the par value of the Shares must be paid in cash; (iv) by waiver of compensation
due or accrued to Optionee for services rendered; (v) provided that a public
market for the Company's stock exists, through a "same day sale" commitment from
Optionee and a broker-dealer that is a member of the National Association of
Securities Dealers (an "NASD Dealer") whereby Optionee irrevocably elects to
exercise the Option and to sell a portion of the Shares so purchased to pay for
the exercise price and whereby the NASD Dealer irrevocably commits upon receipt
of such Shares to forward the exercise price directly to the Company; (vi)
provided that a public market for the Company's stock exists, through a "margin"
commitment from Optionee and an NASD Dealer whereby Optionee irrevocably elects
to exercise the Option and to pledge the Shares so purchased to the NASD Dealer
in a margin account as security for a loan from the NASD Dealer in the amount of
the exercise price, and whereby the NASD Dealer irrevocably commits upon receipt
of such Shares to forward the exercise price directly to the Company; or (vii)
by any combination of the foregoing. Optionees who are not employees or
directors of the Company shall not be entitled to purchase Shares with a
promissory note unless the note is adequately secured by collateral other than
the Shares.
(c) Withholding Taxes. Prior to issuance of the Shares upon exercise of
an Option, Optionee shall pay or make adequate provision for any federal or
state withholding obligations of the Company, if applicable. Where approved by
the Committee in its sole discretion, Optionee may provide for payment of
withholding taxes upon exercise of the Option by requesting that the Company
retain Shares with a Fair Market Value equal to the minimum amount of taxes
required to be withheld. In such case, the Company shall issue the net number of
Shares to Optionee by deducting the Shares retained from the Shares exercised.
The Fair Market Value of the Shares to be withheld shall be determined on the
date that the amount of tax to be withheld is to be determined in accordance
with Section 83 of the Revenue Code (the "Tax Date"). All elections by Optionees
to have Shares withheld for this purpose shall be made in writing in a form
acceptable to the Committee.
(d) Limitations on Exercise. Notwithstanding the exercise periods set
forth in the Grant, exercise of an Option shall always be subject to the
following:
(i) If Optionee is Terminated for any reason except death or
permanent, partial or total disability, as determined by the Committee
("Disability"), Optionee may exercise such Optionee's Options to the extent (and
only to the extent) that such Options would have been exercisable upon the
Termination Date, within three (3) months after the Termination Date (or such
shorter time period as may be specified in the Grant), but in any event no later
than the expiration date of the Options.
(ii) If Optionee is Terminated because of the death of Optionee or
Disability of Optionee (or the Optionee dies within three (3) months of such
Termination), then Optionee's Options may be exercised to the extent (and only
to the extent) that such Options would have been exercisable by Optionee on the
Termination Date, by Optionee (or Optionee's legal representative) within twelve
(12) months after the Termination Date (or such shorter time period as may be
specified in the Grant), but in any event no later than the expiration date of
the Options; provided, however, that in the event of Termination due to
Disability other than as defined in
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<PAGE>
Section 22(e)(3) of the Revenue Code, any ISO, or portion thereof, that remains
exercisable after three (3) months after the Termination Date shall be deemed an
NQSO.
(iii) The Committee shall have discretion to determine whether
Optionee has ceased to be employed by the Company or any Parent, Subsidiary or
Affiliate of the Company and the effective date on which such employment
terminated.
(iv) In the case of an Optionee who is a director, independent
consultant, contractor or adviser, the Committee will have the discretion to
determine whether Optionee is "employed by the Company or any Parent, Subsidiary
or Affiliate of the Company" pursuant to the foregoing Sections.
(v) The Committee may specify a reasonable minimum number of Shares
that may be purchased on any exercise of an Option, provided that such minimum
number will not prevent Optionee from exercising the full number of Shares as to
which the Option is then exercisable.
(vi) An Option shall not be exercisable unless such exercise is in
compliance with the Securities Act of 1933, as amended (the "Securities Act"),
all applicable state securities laws and the requirements of any stock exchange
or national market system upon which the Shares may then be listed, as they are
in effect on the date of grant or on the date of exercise or other issuance.
Notwithstanding any other provision in the Plan, the Company shall have no
obligation to issue or deliver certificates for Shares under the Plan prior to
(a) obtaining any approvals from governmental agencies that the Company
determines are necessary or advisable, and/or (b) completion of any registration
or other qualification of such shares under any state or federal law or ruling
of any governmental body that the Company determines to be necessary or
advisable. The Company shall be under no obligation to register the Shares with
the SEC or to effect compliance with the registration, qualification or listing
requirements of any state securities laws, stock exchange or national market
system, and the Company shall have no liability for any inability or failure to
do so.
7. CERTIFICATES. All certificates for Shares or other securities delivered
under the Plan shall be subject to such stock transfer orders, legends and other
restrictions as the Committee may deem necessary or advisable, including
restrictions under any applicable federal, state or foreign securities law, or
any rules, regulations and other requirements of the SEC or any stock exchange
or automated quotation system upon which the Shares may be listed.
8. RESTRICTIONS ON SHARES. At the discretion of the Committee, the Company
may reserve to itself and/or its assignee(s) in the Grant a right to repurchase
a portion of or all Shares that are not "vested" (as defined in the Grant) held
by an Optionee following such Optionee's Termination at any time within ninety
(90) days after the later of Optionee's Termination Date and the date Optionee
purchases Shares under the Plan, for cash or cancellation of purchase money
indebtedness, at the Optionee's original purchase price.
9. ESCROW; PLEDGE OF SHARES. To enforce any restrictions on an Optionee's
Shares, the Committee may require the Optionee to deposit all certificates
representing Shares, together with stock powers or other instruments of transfer
approved by the Committee, appropriately endorsed in blank, with the Company or
an agent designated by the Company to hold in escrow until such restrictions
have lapsed or terminated, and the Committee may cause a legend or legends
referencing such restrictions to be placed on the certificates. Any Optionee who
is permitted to execute a promissory note as partial or full consideration for
the purchase of Shares under the Plan shall be required to pledge and deposit
with the Company all or part of the Shares so purchased as collateral to secure
the payment of Optionee's obligation to the Company under the promissory note;
provided, however, that the Committee may require or accept other or additional
forms of collateral to secure the payment of such obligation and, in any event,
the Company shall have full recourse against the Optionee under the promissory
note notwithstanding any pledge of the Optionee's Shares or other collateral. In
connection with any pledge of the Shares, Optionee shall be required to execute
and deliver a written pledge agreement in such form as the Committee shall from
time to time approve. The Shares purchased with the promissory note may be
released from the pledge on a prorata basis as the promissory note is paid.
10. MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS. The Committee shall
have the power to modify, extend or renew outstanding Options and to authorize
the grant of new Options in
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<PAGE>
substitution therefor, provided that any such action may not, without the
written consent of Optionee, impair any rights under any Option previously
granted. Any outstanding ISO that is modified, extended, renewed or otherwise
altered shall be treated in accordance with Section 424(h) of the Revenue Code.
The Committee shall have the power to reduce the exercise price of outstanding
Options without the consent of Optionees by a written notice to the Optionees
affected; provided, however, that the exercise price per Share may not be
reduced below the minimum exercise price that would be permitted under Section
5(c) of this Plan for Options granted on the date the action is taken to reduce
the exercise price.
11. PRIVILEGES OF STOCK OWNERSHIP. No Optionee shall have any of the rights
of a stockholder with respect to any Shares subject to an Option until such
Option is properly exercised. After Shares are issued to the Optionee, the
Optionee shall be a stockholder and have all the rights of a stockholder with
respect to such Shares, including the rights to vote and receive all dividends
made or paid with respect to such Shares; provided, that the Optionee shall have
no right to retain such stock dividends on stock distributions with respect to
Shares that are repurchased at the Optionee's original Purchase Price pursuant
to Section 8. No adjustment shall be made for dividends or distributions or
other rights for which the record date is prior to such date of exercise, except
as provided in this Plan. The Company shall provide to each Optionee a copy of
the annual financial statements of the Company at such time after the close of
each fiscal year of the Company as such statements are released by the Company
to its common stockholders generally.
12. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Option granted
under this Plan shall confer on any Optionee any right to continue in the employ
of, or other relationship with, the Company or any Parent, Subsidiary or
Affiliate of the Company or limit in any way the right of the Company or any
Parent, Subsidiary or Affiliate of the Company to terminate Optionee's
employment or other relationship at any time, with or without cause.
13. ADJUSTMENT OF OPTION SHARES. In the event that the number of
outstanding shares of common stock of the Company is changed by a stock
dividend, stock split, reverse stock split, combination, reclassification or
similar change in the capital structure of the Company without consideration, or
if a substantial portion of the assets of the Company are distributed, without
consideration in a spin-off or similar transaction, to the stockholders of the
Company, the number of Shares available under this Plan and the number of Shares
subject to outstanding Options and the exercise price per Share of such Options
shall be proportionately adjusted, subject to any required action by the Board
of Directors of the Company (the "Board") or stockholders of the Company and
compliance with applicable securities laws; provided, however, that a fractional
share shall not be issued upon exercise of any Option and any fractions of a
Share that would have resulted shall either be cashed out at Fair Market Value
or the number of Shares issuable under the Option shall be rounded up to the
nearest whole number, as determined by the Committee; and provided further that
the exercise price may not be decreased to below the par value for the Shares.
14. ASSUMPTION OF OPTIONS BY SUCCESSORS.
(a) In the event of (i) a merger or consolidation in which the Company
is not the surviving corporation (other than a merger or consolidation with a
wholly owned subsidiary, a reincorporation, or other transaction in which there
is no substantial change in the stockholders of the corporation and the Options
granted under this Plan are assumed by the successor corporation, which
assumption shall be binding on all Optionees), (ii) a dissolution or liquidation
of the Company, (iii) the sale of substantially all of the assets of the
Company, or (iv) any other transaction which qualifies as a "corporate
transaction" under Section 424(a) of the Revenue Code wherein the stockholders
of the Company give up all of their equity interest in the Company (except for
the acquisition of all or substantially all of the outstanding shares of the
Company), any or all outstanding Options may be assumed by the successor
corporation, which assumption shall be binding on all Optionees. In the
alternative, the successor corporation may substitute an equivalent option or
provide substantially similar consideration to Optionees as was provided to
stockholders (after taking into account the existing provisions of Optionee's
options, such as the exercise price and the vesting schedule). The successor
corporation may also issue, in place of outstanding shares of the Company held
by Optionee as a result of the exercise of an Option that is subject to
repurchase, substantially similar shares or other property subject to similar
repurchase restrictions no less favorable to Optionee.
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<PAGE>
(b) In the event such successor corporation, if any, refuses to assume
or substitute Options, as provided above, pursuant to a transaction described in
Subsections 14(a)(ii), (iii) or (iv) above, or there is no successor
corporation, and if the Company is ceasing to exist as a separate corporate
entity, the Options shall, notwithstanding any contrary terms in the Grant,
expire on a date at least twenty (20) days after the Board gives written notice
to Optionees specifying the terms and conditions of such termination.
(c) In the event such successor corporation refuses to assume or
substitute Options, as provided above, pursuant to a transaction described in
Subsection 14(a)(i) above, such Options shall expire on (and, if the Company has
reserved to itself a right to repurchase Shares issued on exercise of Options at
the original purchase price of such Shares, such right shall terminate on), the
consummation of such transaction at such time and on such conditions as the
Board shall determine.
(d) Subject the foregoing provisions of this Section 14, in the event
of the occurrence of any transaction described in Section 14(a), any outstanding
Option shall be treated as provided in the applicable agreement or plan of
merger, consolidation, dissolution, liquidation, sale of assets or other
"corporate transaction," provided that under no circumstances shall unvested
options be accelerated.
15. ADOPTION AND STOCKHOLDER APPROVAL. This Plan shall become effective on
the date that it is adopted by the Board. This Plan shall be approved by the
stockholders of the Company, in any manner permitted by applicable corporate
law, within twelve (12) months before or after the date this Plan is adopted by
the Board. Upon the effective date of the Plan, the Board may grant Options
pursuant to this Plan; provided that, in the event that stockholder approval is
not obtained within the time period provided herein, all Options granted
hereunder shall terminate. No Option that is issued as a result of any increase
in the number of shares authorized to be issued under this Plan shall be
exercised prior to the time such increase has been approved by the stockholders
of the Company and all such Options granted pursuant to such increase shall
similarly terminate if such stockholder approval is not obtained.
16. ADMINISTRATION. This Plan may be administered by the Board or a
committee appointed by the Board (the "Committee"). As used in this Plan,
references to the "Committee" shall mean either the committee appointed by the
Board to administer this Plan or the Board if no committee has been established.
If, at the time the Company registers under the Securities Exchange Act of 1934,
as amended, two or more members of the Board are Outside Directors, the
Committee shall be comprised of at least two members of the Board, all of whom
are Outside Directors. The interpretation by the Committee of any of the
provisions of this Plan or any Option granted under this Plan shall be final and
binding upon the Company and all persons having an interest in any Option or any
Shares purchased pursuant to an Option. The Committee may delegate to officers
of the Company the authority to grant Options under this Plan to Optionees who
are not Insiders of the Company.
17. TERM OF PLAN. Options may be granted pursuant to this Plan from time to
time within a period of ten (10) years from the date on which this Plan is
adopted by the Board.
18. AMENDMENT OR TERMINATION OF PLAN. The Committee may at any time
terminate or amend this Plan in any respect including (but not limited to)
amendment of any form of Grant, Exercise Agreement or instrument to be executed
pursuant to this Plan; provided, however, that the Committee shall not, without
the approval of the stockholders of the Company, amend this Plan in any manner
that requires such stockholder approval pursuant to the Revenue Code or the
regulations promulgated thereunder as such provisions apply to ISO plans.
19. NONEXCLUSIVITY OF THE PLAN. Neither the adoption of the Plan by the
Board, the submission of the Plan to the stockholders of the Company for
approval, nor any provision of the Plan shall be construed as creating any
limitations on the power of the Board to adopt such additional compensation
arrangements as it may deem desirable, including, without limitation, the
granting of stock options and bonuses otherwise than under the Plan, and such
arrangements may be either generally applicable or applicable only in specific
cases.
20. GOVERNING LAW. The Plan and all agreements, documents and instruments
entered into pursuant to the Plan shall be governed by and construed in
accordance with the internal laws of the State of California, excluding that
body of law pertaining to conflict of laws.
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<PAGE>
21. CERTAIN DEFINITIONS. As used in this Plan, the following terms shall
have the following meanings:
(a) "Parent" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company if, at the time of the
granting of the Option, each of such corporations other than the Company owns
stock possessing 50% or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain.
(b) "Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if, at the time of
granting of the Option, each of the corporations other than the last corporation
in the unbroken chain owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in such
chain.
(c) "Affiliate" means any corporation that directly, or indirectly
through one or more intermediaries, controls or is controlled by, or is under
common control with, another corporation, where "control" (including the terms
"controlled by" and "under common control with") means the possession, direct or
indirect, of the power to cause the direction of the management and policies of
the corporation, whether through the ownership of voting securities, by contract
or otherwise.
(d) "Fair Market Value" shall mean the fair market value of the Shares
as determined by the Committee from time to time in good faith. If a public
market exists for the Shares, the Fair Market Value shall be the average of the
last reported bid and asked prices for common stock of the Company on the last
trading day prior to the date of determination (or the average closing price
over the number of consecutive working days preceding the date of determination
as the Committee shall deem appropriate) or, in the event the common stock of
the Company is listed on a stock exchange or on the Nasdaq National Market, the
Fair Market Value shall be the closing price on such exchange or quotation
system on the last trading day prior to the date of determination (or the
average closing price over the number of consecutive working days preceding the
date of determination as the Committee shall deem appropriate).
(e) "Outside Director" shall mean any director who is not (i) a current
employee of the Company or any Parent, Subsidiary or Affiliate of the Company,
(ii) a former employee of the Company or any Parent, Subsidiary or Affiliate of
the Company who is receiving compensation for prior services (other than
benefits under a tax-qualified pension plan), (iii) a current or former officer
of the Company or any Parent, Subsidiary or Affiliate of the Company or (iv)
currently receiving compensation for personal services in any capacity, other
than as a director, from the Company or any Parent, Subsidiary or Affiliate of
the Company; provided, however, that at such time as the term "Outside
Director", as used in Section 162(m) of the Revenue Code, is defined in
regulations promulgated under Section 162(m), "Outside Director" shall have the
meaning set forth in such regulations, as amended from time to time and as
interpreted by the Internal Revenue Service.
(f) "Termination" or "Terminated" shall mean, for purposes of the Plan
with respect to an Optionee, that the Optionee ceased to provide services as an
employee, officer, director, consultant, independent contractor or adviser to
the Company or a Parent, Subsidiary or Affiliate of the Company, except in the
case of sick leave, military leave, or any other leave of absence approved by
the Committee, provided, that such leave is for a period of not more than ninety
(90) days, or reinstatement upon the expiration of such leave is guaranteed by
contract or statute. The Committee shall have the sole discretion to determine
whether an Optionee has ceased to provide services and the effective date on
which the Optionee ceased to provide services (the "Termination Date").
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<PAGE>
Appendix B
PREMISYS COMMUNICATIONS, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
December 10, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE
COMPANY.
The undersigned hereby appoints Raymond C. Lin and Riley R. Willcox, or either
of them, as proxies, each with full power of substitution, and hereby authorizes
them to represent and to vote, as designated below, all shares of Common Stock,
$0.01 par value, of Premisys Communications, Inc. (the "Company"), held of
record by the undersigned on October 14, 1997, at the Annual Meeting of
Stockholders of the Company to be held at 48664 Milmont Drive, Fremont,
California 94538, on Wednesday, December 10, 1997, at 1:00 p.m. Pacific Standard
Time, and at any adjournments or postponements thereof.
1. ELECTION OF DIRECTORS.
[ ] FOR all nominees listed [ ] WITHHOLDING AUTHORITY
below (except as indicated to vote for all nominees
to the contrary below) listed below
Nominees: Boris J. Auerbuch, Robert C. Hawk, Edward A. Keible, Jr., Raymond
C. Lin, Gary J. Morgenthaler, Marino R. Polestra and Lip-Bu Tan.
Instruction: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.
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2. TO APPROVE THE AMENDMENT TO THE PREMISYS COMMUNICATIONS, INC. 1994 STOCK
OPTION PLAN TO INCREASE THE NUMBER OF SHARES AUTHORIZED FOR ISSUANCE
THEREUNDER TO 5,200,000
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. TO RATIFY THE SELECTION OF PRICE WATERHOUSE LLP AS THE COMPANY'S
INDEPENDENT ACCOUNTANTS FOR THE CURRENT FISCAL YEAR.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. The transaction of such other business as may properly come before the
meeting or any adjournments or postponements of the Meeting.
The Board of Directors recommends that you vote FOR the election of all
nominees listed in Proposal 1 and FOR Proposals 2 and 3.
(Continued and to be signed on reverse side)
<PAGE>
(Continued from other side)
THIS PROXY WILL BE VOTED AS DIRECTED ABOVE. WHEN NO CHOICE IS INDICATED,
THIS PROXY WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES LISTED IN PROPOSAL 1
and FOR PROPOSALS 2 and 3. In their discretion, the proxy holders are authorized
to vote upon such other business as may properly come before the meeting or any
adjournments or postponements thereof to the extent authorized by Rule 14a-4(c)
promulgated under the Securities Exchange Act of 1934, as amended.
-------------------------------------------
(Print Stockholder(s) name)
-------------------------------------------
(Signature(s) of Stockholder or Authorized
Signatory)
-------------------------------------------
Dated: __________, 1997
Please sign exactly as your name(s) appear(s) on your stock certificate. If
shares of stock stand of record in the names of two or more persons or in the
name of husband and wife, whether as joint tenants or otherwise, both or all of
such persons should sign the proxy. If shares of stock are held of record by a
corporation, the proxy should be executed by the president or vice president and
the secretary or assistant secretary. Executors, administrators or other
fiduciaries who execute the above proxy for a deceased stockholder should give
their full title. Please date the proxy.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO
COMPLETE, DATE, SIGN AND PROMPTLY MAIL THIS PROXY IN THE ENCLOSED RETURN
ENVELOPE SO THAT YOUR SHARES MAY BE REPRESENTED AT THE MEETING.
