ACT NETWORKS INC, PRE 14A, 1996-10-04

ACT NETWORKS INC
PRE 14A, 1996-10-04
COMPUTER COMMUNICATIONS EQUIPMENT

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<PAGE> 1
PRELIMINARY COPY

SCHEDULE 14A

(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934

Filed by the registrant \X\
Filed by a party other than the registrant \ \
Check the appropriate box:
\X\ Preliminary proxy statement

\ \Confidential, for Use of the Com-
mission Only (as permitted by
Rule 14a-6(e)(2)

\ \ Definitive proxy statement
\ \ Definitive additional materials
\ \ Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12

ACT NETWORKS, INC.
(Name of Registrant as Specified in Its Charter)

BOARD OF DIRECTORS OF REGISTRANT
(Name of Person(s) Filing Proxy Statement)

Payment of filing fee (Check the appropriate box):

\X\ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
\ \ $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
\ \ Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

(1) Title of each class of securities to which transaction applies: N/A

(2) Aggregate number of securities to which transaction applies: N/A

(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:
N/A

(4) Proposed maximum aggregate value of transaction: N/A

(5) Total fee paid: N/A

\ \ 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 filling.

(1) Amount previously paid: N/A

(2) Form, Schedule or Registration Statement No.: N/A

(3) Filing Party: N/A

(4) Date Filed: N/A

<PAGE> 2

[ACT NETWORKS, INC.
LOGO]

TO THE STOCKHOLDERS OF ACT NETWORKS, INC.

You are cordially invited to attend the Annual Meeting of Stockholders of
Act Networks, Inc. ("ACT" or the "Company") on Monday, November 4, 1996 at 2:00
p.m. local time. The Annual Meeting will be held at the Courtyard at Marriott,
4994 Verdugo Way, Camarillo, California 93012.

At the meeting, you will be asked to consider and vote upon the following
proposals: (i) the approval of certain amendments to the Company's 1995 Stock
Option/Stock Issuance Plan; (ii) the approval of an amendment to the Company's
Certificate of Incorporation granting the Board of Directors the right to amend
the Company's By-Laws without stockholder approval to the extent permissible
under Delaware law; (iii) the approval of an amendment to the Company's
Certificate of Incorporation to authorize 5,000,000 shares of a class of
Preferred Stock, with a par value of $0.001 per share; (iv) the approval of an
amendment to the Company's Certificate of Incorporation and Bylaws eliminating
stockholders' rights to call special meetings of stockholders; (v) the election
of two (2) individuals to serve as directors of the Company until the 1999
Annual Meeting; and (vi) the ratification of Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending June 30, 1997.

You are cordially invited to attend the Annual Meeting in person. Even if
you plan to attend the Annual Meeting, PLEASE PROMPTLY MARK, SIGN, DATE AND
RETURN THE ENCLOSED PROXY CARD in the accompanying post-prepaid reply envelope.
By returning the proxy, you can help ACT avoid the expense of duplicate proxy
solicitations and possibly having to reschedule the Annual Meeting if a quorum
of the outstanding shares is not present or represented by proxy. If you decide
to attend the Annual Meeting and wish to change your proxy vote, you may do so
simply by voting in person at the Annual Meeting.

YOUR VOTE IS IMPORTANT.

October 14, 1996

MARTIN SHUM
President and Chief Executive Officer

<PAGE> 3
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

OF
ACT NETWORKS, INC.

November 4, 1996

-------------

NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Annual Meeting") of Act Networks, Inc., a Delaware corporation ("ACT" or the
"Company"), will be held at the Courtyard at Marriott, 4994 Verdugo Way,
Camarillo, California 93012, on Monday, November 4, 1996 at 2:00 p.m. local time
for the purpose of considering and voting on the following matters:

1. To approve certain amendments to the Company's 1995 Stock Option/Stock
Issuance Plan;

2. To approve an amendment to the Company's Certificate of Incorporation
granting the Board of Directors the right to amend any or all of the Company's
By-Laws without prior stockholder approval to the extent permissible under
Delaware law;

3. To approve an amendment to the Company's Certificate of Incorporation
to authorize 5,000,000 shares of a class of Preferred Stock, with a par value of
$.001 per share;

4. To approve an amendment to the Company's Certificate of Incorporation
eliminating stockholders' right to call special meetings of stockholders.

5. To elect two (2) members to the Company's Board of Directors to serve
as directors until the 1999 Annual Meeting from the following nominees: Mr.
Martin Shum and Brig. General Harold R. Johnson, U.S.A.F. (Retired);

6. To ratify the selection of Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending June 30, 1997; and

7. To transact such other business as may properly come before the Annual
Meeting.

The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.

The Board of Directors has fixed the close of business on September 23,
1996 as the record date for the determination of stockholders entitled to notice
of, and to vote at, this Annual Meeting and at any continuation or adjournment
thereof.

By Order of the Board of Directors

-------------------------------------
MARTIN SHUM
President and Chief Executive Officer

Camarillo, California
October 14, 1996

ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. WHETHER OR
NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR
REPRESENTATION AT THE ANNUAL MEETING. A POSTAGE-PREPAID ENVELOPE IS ENCLOSED FOR
THAT PURPOSE. EVEN IF YOU HAVE GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF
YOU ATTEND THE ANNUAL MEETING.

<PAGE> 4
PROXY STATEMENT

------------

ACT NETWORKS, INC.
188 CAMINO RUIZ
CAMARILLO, CALIFORNIA 93012

-----------

INFORMATION CONCERNING SOLICITATION AND VOTING

GENERAL

This Proxy Statement and the enclosed proxy are furnished to stockholders
of ACT Networks, Inc. ("ACT" or the "Company") in connection with the
solicitation of proxies by the Board of Directors for use at the Annual Meeting
of Stockholders (the "Annual Meeting") to be held on Monday, November 4, 1996 at
2:00 p.m. local time, and at any and all adjournments or postponements thereof
for the purposes set forth in the Notice of Annual Meeting accompanying this
Proxy Statement.

ACT intends to mail this Proxy Statement and the accompanying proxy card
on or about October 14, 1996 to all stockholders entitled to vote at the Annual
Meeting. ACT's principal executive offices are located at 188 Camino Ruiz,
Camarillo, California 93012. The telephone number at that address is (805)
388-2474.

VOTING

Only stockholders of record at the close of business on September 23, 1996
are entitled to notice of, and to vote, at the Annual Meeting. As of September
23, 1996, 9,130,516 shares of the Company's Common Stock were issued and
outstanding. On each matter to be considered at the Annual Meeting, each holder
of Common Stock will be entitled to cast one vote for each share of the
Company's Common Stock held of record by such stockholder on September 23, 1996.
Pursuant to Delaware law, directors are elected by plurality vote of the
stockholders and the proposed amendments to the Company's Certificate of
Incorporation require an affirmative vote of a majority of the Company's shares
outstanding and entitled to vote at the Annual Meeting. All other matters
submitted for stockholder approval at the Annual Meeting will be decided by the
affirmative vote of a majority of shares present in person or represented by
proxy at the Annual Meeting and entitled to vote on each matter. With regard to
the election of directors, votes may be cast in favor of or withheld for each
nominee; votes that are withheld will be excluded entirely from the vote and
will have no effect.

A majority of the Company's Common Stock entitled to vote will constitute
a quorum for the transaction of business at the Annual Meeting. Abstentions may
be specified on all proposals except the election of directors. Abstentions and
broker non-votes are counted as being present for purposes of determining a
quorum. If shares are not voted by the broker who is the record holder of the
shares, or if shares are not voted in other circumstances in which proxy
authority is defective or has been withheld with respect to any matter, these
non- voted shares are not deemed to be present or represented for purposes of
determining whether stockholder approval of that matter has been obtained.

REVOCABILITY OF PROXIES

Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by the holder of
record by filing with the Secretary of ACT, at ACT's principal executive office,
a written notice of revocation or a new duly executed proxy bearing a date later
than the date indicated on the previous proxy, or it may be revoked by the
holder of record attending the meeting and voting in person. Attendance at the
meeting will not, by itself, revoke a proxy.

<PAGE> 5
SOLICITATION

ACT will bear the entire cost of proxy solicitation, including costs of
preparing, assembling, printing and mailing this Proxy Statement, the proxy card
and any additional material furnished to stockholders. The Company engaged the
firm of Georgeson & Company Inc. in furtherance of the solicitation of proxies
for the Annual Meeting. The fee for this service is estimated at $3,500 plus
reasonable out-of-pocket expenses, which costs and expenses will be borne by the
Company. Copies of the solicitation materials will be furnished to brokerage
houses, fiduciaries and custodians holding in their names shares of Common Stock
beneficially owned by others, to forward to such beneficial owners. ACT may
reimburse persons representing beneficial owners of shares for their expenses in
forwarding solicitation materials to such beneficial owners. Original
solicitation of proxies by mail may be supplemented by telephone, telegram or
personal solicitation by directors, officers or other regular employees of ACT.
No additional compensation will be paid to directors, officers or other regular
employees for such services.

PROPOSAL NO. 1

APPROVAL OF THE AMENDMENT TO THE COMPANY'S
1995 STOCK OPTION/STOCK ISSUANCE PLAN

The Company's stockholders are being asked to approve an amendment to the
Company's 1995 Stock Option/Stock Issuance Plan (the "1995 Plan") to (i)
increase the number of shares of Common Stock authorized for issuance under the
1995 Plan from 1,780,844 shares to 2,280,844 shares; (ii) decrease the maximum
discount applicable to options granted under the Discretionary Option Grant
Program and the Stock Issuance Program from 50% to 15% of the fair market value
per share of Common Stock on the option grant or stock issuance date; (iii)
allow Board members serving on the Compensation Committee to participate in the
Discretionary Option Grant and Stock Issuance Programs; and (iv) effect a number
of additional changes to the administrative provisions and stockholder approval
requirements of the 1995 Plan to take advantage of recent amendments authorized
by the Securities and Exchange Commission ("SEC") to the short-swing trading
exemptions available for transactions effected under the 1995 Plan by the
Company's executive officers and Board members.

The 1995 Plan is the successor to the Company's 1987 Stock Option Plan and
the 1993 Stock Option Plan (the "Predecessor Plans"). The 1995 Plan was
originally adopted by the Board of Directors on September 6, 1995 and approved
by the Company's stockholders on December 4, 1995. The purpose of the new
amendment is to (i) assure that the Company will continue to have a sufficient
reserve of Common Stock available under the 1995 Plan to attract and retain the
services of key individuals essential to the Company's long-term growth and
success, (ii) reduce the Plan Administrator's discretion in granting discounted
options; (iii) remove the restrictions on the eligibility of the Company's
non-employee Board members to receive option grants under the Discretionary
Option Grant and Stock Issuance Programs as such restrictions are no longer
required by the SEC's new rules; and (iv) facilitate the administration of the
1995 Plan. The amendment was adopted by the Board of Directors on September 17,
1996, subject to stockholder approval at the 1996 Annual Meeting.

The following is a summary of the principal features of the 1995 Plan, as
most recently amended. The summary, however, does not purport to be a complete
description of all the provisions of the 1995 Plan. Any stockholder of the
Company who wishes to obtain a copy of the actual plan document may do so upon
written request to the Chief Financial Officer at the Company's principal
executive offices in Camarillo, California.

EQUITY INCENTIVE PROGRAMS

The 1995 Plan contains three (3) separate equity incentive programs:
(i) a Discretionary Option Grant Program under which eligible individuals in the
Company's employ or service may, at the discretion of the Plan Administrator, be
granted options to purchase shares of Common Stock, (ii) a Stock Issuance
Program under which such

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<PAGE> 6
individuals may, in the Plan Administrator's discretion, be issued stock
directly through the purchase of such shares or as a bonus tied to the
performance of services or the attainment of financial milestones and (iii) an
Automatic Option Grant Program under which eligible non-employee Board members
will automatically receive option grants to purchase shares of Common Stock at
designated intervals over their period of Board service.

ADMINISTRATION The Compensation Committee of the Board (the "Committee") will
administer the Discretionary Option Grant and Stock Issuance Programs. However,
one or more additional Board committees may be appointed to administer those
programs with respect to certain designated classes of individuals in the
Company's service. The term "Plan Administrator" as used in this summary will
mean the Compensation Committee and any other appointed committee acting within
the scope of its administrative authority under the 1995 Plan. Administration of
the Automatic Option Grant Program will be self-executing in accordance with the
express provisions of that program, and no Plan Administrator will exercise any
discretion with respect to such program.

SHARE RESERVE

A total of 2,280,844 shares of Common Stock has been reserved for issuance
over the ten year term of the 1995 Plan, including the 500,000-share increase
for which stockholder approval is sought as part of this Proposal. In no event
may any one participant in the 1995 Plan be granted stock options, separately
exercisable stock appreciation rights and direct stock issuances for more than
750,000 shares in the aggregate per calendar year.

Should an option expire or terminate prior to exercise in full, the shares
subject to the portion of the option not so exercised will be available for
subsequent issuance under the 1995 Plan. Unvested shares issued under the 1995
Plan and subsequently repurchased by the Company at the original option or issue
price paid per share will be added back to the share reserve and will
accordingly be available for subsequent issuance under the Plan. However, shares
subject to any options surrendered in connection with outstanding stock
appreciation rights under the 1995 Plan will not be available for subsequent
issuance.

ELIGIBILITY

Officers and other employees of the Company and its parent or subsidiaries
(whether now existing or subsequently established), non-employee members of the
Board or the board of directors of any parent or subsidiary corporation and
consultants and independent advisors in the service of the Company or any parent
and subsidiary corporation will be eligible to participate in the Discretionary
Option Grant and Stock Issuance Programs. Non-employee members of the Board will
also be eligible to participate in the Automatic Option Grant Program.

As of August 31, 1996, approximately 9 executive officers and 156 other
employees were eligible to participate in the 1995 Plan, 5 non-employee Board
members were eligible to participate in the Discretionary Option Grant Program
and 3 non-employee Board members were eligible to participate in the Automatic
Option Grant Program.

VALUATION

The fair market value per share of Common Stock on any relevant date under
the 1995 Plan will be the closing selling price per share on that date on the
Nasdaq National Market. On September 17, 1996, the closing selling price per
share was $31.50.

DISCRETIONARY OPTION GRANT PROGRAM

Options may be granted under the Discretionary Option Grant Program at
an exercise price per share not less than eighty-five percent (85%) of the fair
market value per share of Common Stock on the option grant date. No granted
option will have a term in excess of ten years.

Upon cessation of service, the optionee will have a limited period of time
in which to exercise any outstanding option to the extent such option is
exercisable for vested shares. The Plan Administrator will have complete
discretion to extend the period following the optionee's cessation of service
during which his or her outstanding options may be exercised and/or to
accelerate the exercisability or vesting of such options in whole or in part.
Such discretion may be exercised at any time while the options remain
outstanding, whether before or after the optionee's actual cessation of service.

The Plan Administrator is authorized to issue two types of stock
appreciation rights in connection with option grants made under the
Discretionary Option Grant Program:

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<PAGE> 7
Tandem stock appreciation rights provide the holders with the
right to surrender their options for an appreciation distribution from
the Company equal in amount to the excess of (a) the fair market value
of the vested shares of Common Stock subject to the surrendered option
over (b) the aggregate exercise price payable for such shares. Such
appreciation distribution may, at the discretion of the Plan
Administrator, be made in cash or in shares of Common Stock.

Limited stock appreciation rights may be granted to officers
of the Company as part of their option grants. Any option with such a
limited stock appreciation right may be surrendered to the Company upon
the successful completion of a hostile take-over of the Company. In
return for the surrendered option, the officer will be entitled to a
cash distribution from the Company in an amount per surrendered option
share equal to the excess of (a) the take-over price per share over (b)
the exercise price payable for such share.

The Plan Administrator will have the authority to effect the cancellation
of outstanding options under the Discretionary Option Grant Program which have
exercise prices in excess of the then current market price of Common Stock and
to issue replacement options with an exercise price based on the market price of
Common Stock at the time of the new grant.

AUTOMATIC OPTION GRANT PROGRAM

Under the Automatic Option Grant Program, each individual who first
becomes a non-employee Board member, whether through appointment by the Board or
election by the stockholders, will automatically be granted at the time of such
initial appointment or election an option grant for 21,000 shares of Common
Stock, provided such individual has not previously been in the Company's employ.
In addition, on the date of each Annual Stockholders Meeting each individual who
is to continue to serve as a non-employee Board member will automatically be
granted an option to purchase 7,000 shares of Common Stock, provided such
individual has served as a non-employee Board member for at least six (6)
months. There will be no limit on the number of such 7,000 share options which
any one non-employee Board member may receive over the period of Board service,
and non-employee Board members who have previously served in the Company's
employ will be eligible for one or more 7,000 share option grants. However, no
non-employee Board member will receive any option grants under the Automatic
Option Grant Program if such individual owns (directly or indirectly) more than
five percent (5%) of the total combined voting power of all classes of stock or
such person is affiliated with, or a representative of, a person or entity that
is such a five percent (5%) stockholder.

Each option will have an exercise price per share equal to 100% of the
fair market value per share of Common Stock on the option grant date and a
maximum term of ten years measured from the option grant date.

Each option will be immediately exercisable for all the option shares, but
any purchased shares will be subject to repurchase by the Company, at the
exercise price paid per share, upon the optionee's cessation of Board service
prior to vesting in those shares. The shares subject to each initial option
grant will vest in thirty-six (36) equal monthly installments over the
optionee's period of Board service, with the first such installment to
vest upon the completion of one month of Board service measured from the option
grant date. The shares subject to each annual option grant will vest on the day
immediately preceding the date of the Annual Stockholders Meeting held in the
year following the year of the option grant, provided the optionee continues in
Board service through such date.

The shares subject to each automatic option grant will immediately vest
should the optionee die or become permanently disabled while a Board member or
should any of the following events occur while the optionee continues in Board
service: an acquisition of the Company by merger or asset sale or a change in
control of the Company effected through a successful tender or exchange offer
for more than 50% of the outstanding voting stock or through a change in a
majority of the Board members by reason of one or more contested elections of
Board membership. In addition, upon the successful completion of a hostile
tender offer for more than 50% of the outstanding voting stock, each automatic
option grant may be surrendered to the Company for a cash distribution per
surrendered option share in an amount equal to the excess of (a) the take-over
price per share over (b) the exercise price payable for such share. The exercise
of such surrender right will be pre-approved by the Board at the time the
automatic option grant is made.

STOCK ISSUANCE PROGRAM

Shares may be sold under the Stock Issuance Program at a price per share
not less than eighty-five percent (85%) of fair market value, payable in cash or
through a promissory note payable to the Company. Shares may also be issued
solely as a bonus for past services.

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<PAGE> 8
The issued shares may either be immediately vested upon issuance or
subject to a vesting schedule tied to the performance of service or the
attainment of performance goals. The Plan Administrator will, however, have the
discretionary authority at any time to accelerate the vesting of any unvested
shares.

GENERAL PROVISIONS

ACCELERATION

In the event that the Company is acquired by merger or asset sale, each
outstanding option under the Discretionary Option Grant Program which is not to
be assumed by the successor corporation or replaced with a comparable option to
purchase shares of the capital stock of the successor corporation will
automatically accelerate and vest in full, and all unvested shares under the
Stock Issuance Program will immediately vest, except to the extent the Company's
repurchase rights with respect to those shares are to be assigned to the
successor corporation. Any options assumed or replaced in connection with such
acquisition will be subject to immediate acceleration, and any unvested shares
which do not vest at the time of such acquisition will be subject to full and
immediate vesting, in the event the individual's service is subsequently
terminated within 18 months following the acquisition. The Plan Administrator
will have the discretionary authority to provide for automatic acceleration of
outstanding options under the Discretionary Grant Program and the automatic
vesting of outstanding shares under the Stock Issuance Program upon the
subsequent termination of an individual's service within 18 months following a
change in control or ownership of the Company effected through a successful
tender or exchange offer for more than 50% of the outstanding voting stock or
through a change in the majority of the Board by reason of one or more contested
elections for Board membership.

FINANCIAL ASSISTANCE

The Plan Administrator may permit one or more participants to pay the
exercise price of outstanding options or the purchase price of issued shares
under the 1995 Plan by delivering a full-recourse, interest-bearing promissory
note payable in installments. The maximum amount of financing provided any
participant may not exceed the cash consideration payable for the issued shares
plus all applicable taxes incurred in connection with the acquisition of the
shares. Any such promissory note may be subject to forgiveness in whole or in
part, at the discretion of the Plan Administrator, over the participant's period
of service.

SPECIAL TAX ELECTION

The Plan Administrator may provide one or more holders of options or
unvested shares with the right to have the Company withhold a portion of the
shares otherwise issuable to such individuals in satisfaction of the tax
liability incurred by such individuals in connection with the exercise of those
options or the vesting of those shares. Alternatively, the Plan Administrator
may allow such individuals to deliver previously acquired shares of Common Stock
in payment of such tax liability.

CHANGES IN CAPITALIZATION.

In the event any change is made to the outstanding shares of Common Stock by
reason of any recapitalization, stock dividend, stock split, combination of
shares, exchange of shares or other change in corporate structure effected
without the Company's receipt of consideration, appropriate adjustments will be
made to (i) the maximum number and/or class of securities issuable under the
1995 Plan, (ii) the number and/or class of securities for which any one person
may be granted stock options, separately exercisable stock appreciation rights
and direct stock issuances under the 1995 Plan per calendar year, (iii) the
number and/or class of securities for which grants are subsequently to be made
under the Automatic Option Grant Program to new and continuing non-employee
Board members and (iv) the number and/or class of securities and the exercise
price per share in effect under each outstanding option in order to prevent the
dilution or enlargement of benefits thereunder.

AMENDMENT AND TERMINATION

The Board may amend or modify the 1995 Plan in any or all respects
whatsoever subject to any required stockholder approval. The Board may terminate
the 1995 Plan at any time, and the 1995 Plan will in all events terminate on
September 5, 2005.

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<PAGE> 9
STOCK AWARDS

The table below shows, as to each of the Company's executive officers
named in the Summary Compensation Table and the various indicated individuals
and groups, the number of shares of Common Stock subject to options granted
between July 1, 1995 and August 31, 1996 under the 1995 Plan (or the Predecessor
1993 Plan), together with the weighted average exercise price payable per share.

<TABLE>
<CAPTION>
Weighted
Number of Average
Name Option Shares Exercise Price
---- ------------- --------------
<S> <C> <C>
EXECUTIVE OFFICERS

Martin Shum................................................ 251,500 $13.33
President and Chief Executive Officer

Melvin L. Flowers.......................................... 68,429 13.18
Vice President, Finance and Administration, and
Chief Financial Officer

Suresh Nihalani............................................ 54,857 13.18
Vice President, Product Marketing

John W. Tucker............................................. 67,286 13.12
Vice President, Sales and Marketing

Shaun Manesh............................................... 47,000 13.15
Vice President, Manufacturing

Andre de Fusco............................................. 54,286 13.15
Vice President, Strategic Planning and Business
Development

Linda Carlson.............................................. 38,429 13.13
Vice President, Worldwide Sales

Peter Staab................................................ 55,000 13.00
Vice President, Engineering

Jean-Guy Lacombe........................................... 60,000 10.38
Vice President, Operations

All current executive officers as a group.................... 696,787 12.97
(9 persons)

DIRECTORS

Arch J. McGill............................................. 7,000 12.00
Director

Brig. Gen. Harold R. Johnson............................... 7,000 12.00
Director

Dr. Michael Feuer.......................................... -0- -0-
Director
</TABLE>

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<PAGE> 10
<TABLE>
<S> <C> <C>
Carlos M. Siffert.......................................... -0- -0-
Director

William Ambrose............................................ 7,000 12.00
Director

All non-employee directors as a group........................ 21,000 12.00
(5 persons)

All employees, including current officers.................... 309,812 17.05
who are not executive officers as a group
(138 persons)
</TABLE>

FEDERAL INCOME TAX CONSEQUENCES

OPTION GRANTS

Options granted under the 1995 Plan may be either incentive stock options
which satisfy the requirements of Section 422 of the Internal Revenue Code or
non-statutory options which are not intended to meet such requirements. The
Federal income tax treatment for the two types of options differs as follows:

Incentive Options. No taxable income is recognized by the optionee at the
time of the option grant, and no taxable income is generally recognized at the
time the option is exercised. The optionee will, however, recognize taxable
income in the year in which the purchased shares are sold or otherwise make the
subject of a disposition. For Federal tax purposes, dispositions are divided
into two categories: (i) qualifying and (ii) disqualifying. A qualifying
disposition occurs if the sale or other disposition is made after the optionee
has held the shares for more than two years after the option grant date and more
than one year after the exercise date. If either of these two holding periods is
not satisfied, then a disqualifying disposition will result.

If the optionee makes a disqualifying disposition of the purchased shares,
then the Company will be entitled to an income tax deduction, for the taxable
year in which such disposition occurs, equal to the excess of (i) the fair
market value of such shares on the option exercise date over (ii) the exercise
price paid for the shares. In no other instance will the Company be allowed a
deduction with respect to the optionee's disposition of the purchased shares.

Non-Statutory Options. No taxable income is recognized by an optionee upon
the grant of a non-statutory option. The optionee will in general recognize
ordinary income, in the year in which the option is exercised, equal to the
excess of the fair market value of the purchased shares on the exercise date
over the exercise price paid for the shares, and the optionee will be required
to satisfy the tax withholding requirements applicable to such income.

If the shares acquired upon exercise of the non-statutory option are
unvested and subject to repurchase by the Company in the event of the optionee's
termination of service prior to vesting in those shares, then the optionee will
not recognize any taxable income at the time of exercise but will have to report
as ordinary income, as and when the Company's repurchase right lapses, an amount
equal to the excess of (i) the fair market value of the shares on the date the
repurchase right lapses over (ii) the exercise price paid for the shares. The
optionee may, however, elect under Section 83(b) of the Internal Revenue Code to
include as ordinary income in the year of exercise of the option an amount equal
to the excess of (i) the fair market value of the purchased shares on the
exercise date over (ii) the exercise price paid for such shares. If the Section
83(b) election is made, the optionee will not recognize any additional income as
and when the repurchase right lapses.

The Company will be entitled to an income tax deduction equal to the
amount of ordinary income recognized by the optionee with respect to the
exercised non-statutory option. The deduction will in general be allowed for the
taxable year of the Company in which such ordinary income is recognized by the
optionee.

STOCK APPRECIATION RIGHTS

An optionee who is granted a stock appreciation right will recognize
ordinary income in the year of exercise equal to the amount of the appreciation
distribution. The Company will be entitled to an income tax deduction equal to
the appreciation distribution for the taxable year in which the ordinary income
is recognized by the optionee.

7
<PAGE> 11

DIRECT STOCK ISSUANCE

The tax principles applicable to direct stock issuances under the 1995
Plan will be substantially the same as those summarized above for the exercise
of non-statutory option grants.

DEDUCTIBILITY OF EXECUTIVE COMPENSATION

The Company anticipates that any compensation deemed paid by it in
connection with disqualifying dispositions of incentive stock option shares or
exercises of non-statutory options granted with exercise prices equal to the
fair market value of the option shares on the grant date will qualify as
performance-based compensation for purposes of Code Section 162(m) and will not
have to be taken into account for purposes of the $1 million limitation per
covered individual on the deductibility of the compensation paid to certain
executive officers of the Company. Accordingly, all compensation deemed paid
with respect to those options will remain deductible by the Company without
limitation under Code Section 162(m).

ACCOUNTING TREATMENT

Option grants or stock issuances with exercise or issue prices less than
the fair market value of the shares on the grant or issue date will generally
result in a compensation expense to the Company's earnings equal to the
difference between the exercise or issue price and the fair market value of the
shares on the grant or issue date. Such expense will be accruable by the Company
over the period that the option shares or issued shares are to vest. Option
grants or stock issuances at 100% of fair market value will generally not result
in any charge to the Company's earnings, but the Company must disclose, in
pro-forma statements to the Company's financial statements, the impact those
options would have upon the Company's reported earnings were the value of those
options at the time of grant treated as compensation expense. Whether or not
granted at a discount, the number of outstanding options is a factor used in
determining the Company's earnings per share.

Should one or more optionees be granted stock appreciation rights which
have no conditions upon exercisability other than a service or employment
requirement, then such rights will result in compensation expense to the
Company's earnings.

STOCKHOLDER APPROVAL

The affirmative vote of a majority of the outstanding voting shares of the
Company present or represented and entitled to vote at the 1996 Meeting is
required for approval of the amendment to the 1995 Plan. Should such stockholder
approval not be obtained, then any options granted on the basis of the
500,000-share increase which forms part of this Proposal will terminate without
ever becoming exercisable for those shares, and no further option grants will be
made on the basis of that share increase. In addition, the 1995 Plan will
terminate once the available reserve of Common Stock under the 1995 Plan is
issued. Finally, the non-employee Board members serving on the Compensation
Committee will remain ineligible to participate in the Discretionary Option
Grant and Stock Issuance Programs.

RECOMMENDATION OF THE BOARD OF DIRECTORS

The Board of Directors recommends that the stockholders vote FOR the
approval of the amendment to the 1995 Plan. The Board believes that it is in the
best interests of the Company to maintain a comprehensive equity incentive
program for the Company which will provide a meaningful opportunity for
officers, employees and non-employee Board members to acquire a substantial
proprietary interest in the enterprise and thereby encourage such individuals to
remain in the Company's service and more closely align their interests with
those of the stockholders.

NEW PLAN BENEFITS

No option grants or direct stock issuances have to date been made on the
basis of the 500,000-shares increase which forms part of this Proposal.

PROPOSAL NO. 2

APPROVAL OF AMENDMENT TO CERTIFICATE OF INCORPORATION
TO GRANT THE BOARD THE RIGHT TO AMEND THE COMPANY'S BYLAWS

8
<PAGE> 12

The stockholders are also being asked to vote on a proposal to amend the
Company's Certificate of Incorporation to approve the addition of a new Article
Fourteenth granting the Board of Directors the authority to make, repeal, alter,
amend and rescind the Company's Bylaws without stockholder approval to the
extent permissible under Delaware law (the "Bylaws Proposal"). The Board of
Directors, on September 17, 1996, unanimously approved the Bylaws Proposal. The
Board of Directors believes that the Bylaws Proposal will provide the Board with
greater flexibility in governing its internal affairs and its relationships with
stockholders and other parties. In addition, the power to amend the Bylaws
without the necessity of waiting for the next annual meeting of stockholders or
the delay and expense in calling a special meeting of stockholders will enhance
the Board's ability to manage the Company and more effectively deal with changed
circumstances or requirements with which it may be presented. Stockholders are
urged to read carefully the following sections of this Proxy Statement before
voting on the Bylaws Proposal. The discussion set forth below is qualified in
its entirety by reference to the Company's Certificate of Incorporation.

Under the General Corporation Law ("GCL") of the State of Delaware, the
board of directors may amend the corporation's bylaws if the certificate of
incorporation confers such authority on the board of directors. Notwithstanding
whether the Board of Directors has such power, the stockholders will maintain
the power to amend the Company's Bylaws. The GCL specifically provides that
conferring such power upon the directors shall not divest or otherwise limit the
power of the stockholders to amend the bylaws.

Bylaws typically provide rules and procedures for managing the business
and affairs of the corporation, such as calling and noticing meetings of
stockholders, quorum and voting requirements, voting and inspection procedures,
number and term of directors, nomination procedures for election of persons to
the board of directors, filling of vacancies on the board and the appointment of
officers and officers' duties. From time to time, it may be desirable, or even
necessary, to add to or change bylaw provisions to reflect changes in the
corporation's practices or to reflect changes in applicable law. In addition,
the Board of Directors may from time to time decide that a change to the Bylaws
is desirable, for example, to change the number of directors or to establish or
change the duties of a committee of the Board or officers of the Company.
Granting the Company's Board of Directors the power to amend the Company's
Bylaws will allow the Board of Directors to effect such changes in a more
efficient, cost-effective manner without the necessity of incurring the expense
and time delay of a stockholder meeting.

Certain effects of the Bylaws Proposal may be considered to have
anti-takeover implications. Delaware law permits a corporation to adopt a number
of measures designed to reduce a corporation's vulnerability to hostile takeover
attempts. Many of these measures or certain other changes altering the rights of
stockholders and powers of management could be implemented in the future by
amendment of the Company's Bylaws. For example, the Bylaws could be amended to
include a provision requiring a supermajority vote of the Board of Directors
to amend any Bylaw provision designed to reduce the Company's vulnerability to
hostile takeover attempts; to provide that directors may only be removed for
cause; to provide for a supermajority vote of the stockholders or directors to
increase the size of the Board or fill vacancies on the Board; or to provide for
advance notice to the Board in the case of stockholder action by written
consent.

The Bylaws Proposal is not being proposed in order to prevent a change in
control, nor is it in response to any present attempt known to the Board of
Directors to acquire control of the Company, obtain representation on the Board
of Directors or take significant action which affects the Company. However, in
discharge of its fiduciary obligations to its stockholders, the Board of
Directors may consider and adopt certain amendments, including the defensive
strategies discussed above, to enhance the Board's ability to negotiate with an
unsolicited bidder.

STOCKHOLDER APPROVAL

The affirmative vote of a majority of the Company's outstanding stock
entitled to vote at the Annual Meeting is required to approve the proposal to
amend the Company's Certificate of Incorporation.

RECOMMENDATION OF THE BOARD

The Board of Directors recommends that the stockholders vote FOR the
approval of the amendment of the Company's Certificate of Incorporation granting
the Board of Directors the power to make, repeal, alter, amend and rescind the
Company's Bylaws.

9
<PAGE> 13
PROPOSAL NO. 3

APPROVAL OF AMENDMENT TO CERTIFICATE OF INCORPORATION
TO AUTHORIZE PREFERRED STOCK

The Board of Directors, on September 17, 1996, unanimously approved an
amendment to the Company's Certificate of Incorporation (the "Preferred Stock
Proposal") to authorize a class of undesignated Preferred Stock consisting of
5,000,000 shares, $0.001 par value (the "Preferred Stock"). The Preferred Stock
Proposal, if adopted, would grant authority to the Company's Board of Directors
to authorize the issuance of the Preferred Stock from time to time in one or
more series. The Board will determine by resolution the powers, designations,
preferences and relative participating, optional or other rights, or the
qualifications, limitations or restrictions granted to or imposed upon any
series of Preferred Stock. The Board of Directors believes that the Preferred
Stock Proposal will provide the Board with greater flexibility in corporate
planning as the Preferred Stock will be available for equity financings,
acquisitions, stock dividends, anti-takeover measures or for other corporate
purposes for which the issuance of Preferred Stock may be appropriate.
Stockholders are urged to read carefully the following sections of this Proxy
Statement before voting on the Preferred Stock Proposal. The discussion set
forth below is qualified in its entirety by reference to the Company's
Certificate of Incorporation.

Currently, the Company is authorized to issue only Common Stock. The
purpose of the Preferred Stock Proposal is to give the Board of Directors the
flexibility and authority to provide for the issuance of Preferred Stock without
delay and without the need for further action by the stockholders, except in
connection with transactions for which Delaware law requires stockholder
approval. The Preferred would be available for issuance from time to time,
without further stockholder approval, for any proper corporate purpose including
but not limited to issuance in public or private transactions in connection with
future financings, acquisitions, or stock distributions. As the need to raise
additional capital or the opportunity to effect an acquisition can arise when it
would be inconvenient to hold a stockholders' meeting or when there would not be
time for such a meeting, the Company believes that prudent business planning
suggests that the Preferred Stock be authorized at this time.

The precise effect of the authorization of the Preferred Stock upon the
rights of the Company's stockholders cannot be quantified until the Board of
Directors determines the respective preferences, limitations and relative rights
of the holders of one or more series of the Preferred Stock, including dividend
rights, conversion rights, voting rights, redemption rights and liquidation
preferences. The amendment will give the Board of Directors broad discretion to
set the terms of any shares of Preferred Stock that are issued. For example, the
Preferred Stock may be entitled to a separate class vote to approve certain
extraordinary transactions or might be given a disproportionately high number of
votes. Moreover, the Preferred Stock may be convertible into a large number of
shares of Common Stock or enjoy certain purchase rights, either of which could
have a dilutive effect on the Common Stock and make a takeover attempt or bid
for a controlling interest harder and more costly.

The Preferred Stock Proposal may be viewed as having anti-takeover
implications which may delay or prevent unsolicited attempts to obtain control
of the Company. Preferred Stock issuances are often used as an anti-takeover
mechanism when they include provisions which give added conversion or voting
rights upon the threat of a takeover which is not supported by the board of
directors. Such Preferred Stock can be issued and placed in friendly hands to
impede a takeover, can be used for an acquisition as a defensive tactic, or can
be used as part of a Shareholders Rights Plan. A "Shareholder Rights Plan"
(sometimes called a "poison pill") involves the issuance of Preferred Stock to
existing stockholders which have certain rights when another stockholder
acquires a stated percentage of the Company's stock, which may have the effect
of making the acquisition of such stock by the other stockholder less
attractive, or under other circumstances could make it more difficult, and
thereby discourage attempts to acquire control of the Company. The potential for
ACT to issue Preferred Stock with purchase, voting, or other rights that may
discourage a takeover attempt, may make ACT less likely to become a takeover
candidate and may inhibit takeover attempts not approved by the Board of
Directors. The Company is not aware of any current proposal by any party to
acquire control of the Company.

STOCKHOLDER APPROVAL

The affirmative vote of a majority of the Company's outstanding stock
entitled to vote at the Annual Meeting is required to approve the proposal to
amend the Company's Certificate of Incorporation to authorize 5,000,000 shares
of Preferred Stock.

10
<PAGE> 14

RECOMMENDATION OF THE BOARD

The Board of Directors recommends that the stockholders vote FOR the
approval of the amendment of the Company's Certificate of Incorporation to
authorize a class of Preferred Stock consisting of 5,000,000 shares, with a
$0.001 par value, that the Board of Directors may issue from time to time in one
or more series, for which the Board of Directors may fix or alter the rights,
preferences, privileges, and restrictions granted to or imposed thereon.

PROPOSAL NO. 4

APPROVAL OF AMENDMENT TO CERTIFICATE OF INCORPORATION AND
BYLAWS ELIMINATING STOCKHOLDERS' RIGHT TO CALL
SPECIAL MEETINGS OF STOCKHOLDERS

The Company's stockholders are being asked to approve a proposal to
amend Article Eighth of the Company's Certificate of Incorporation to eliminate
the power of the stockholders to call a special meeting of the stockholders and
to provide that the provision specifying who can call a special meeting can
only be amended or repealed with the affirmative vote of eighty percent (80%)
of the outstanding voting shares of the Company. The Board of Directors
approved the submission of the proposal to the Company's stockholders. The
Company's Certificate of Incorporation and Bylaws currently provide that, in
addition to the President, the Chief Executive Officer, the Chairman of the
Board and the majority of the Directors, any stockholder or group of
stockholders owning at least 10% of the Company's issued and outstanding
capital stock and entitled to vote can call for a special stockholders' meeting
by providing the Company with written notices. The proposal specifies that only
the Board of Directors by majority vote, the President, the Chief Executive
Officer or the Chairman of the Board of the Company may call a special meeting
of the stockholders of the Company. If this Proposal is approved by the
stockholders, the Company's Bylaws will be amended to conform to this
provision of the Certificate of Incorporation. The Board of Directors believes
that this Proposal, if approved, will encourage potential acquirors to
negotiate with the Board and will allow the Board to preserve control of the
process in the event of a sale of the Company.

The elimination of the right of stockholders to call a special meeting
would mean that a stockholder could not force stockholder consideration of a
proposal over the opposition of management or the Board of Directors by calling
a special meeting prior to such time as management or the Board believe such
consideration to be appropriate or until the next annual meeting. The proposal
could have the effect of discouraging or delaying a third party from making a
tender offer or otherwise attempting to obtain control of the Company.

In order to support and prevent circumvention of the proposed amendment
to the Certificate of Incorporation, Article Eighth would also be amended to
permit stockholders to alter, amend or repeal Article Eighth only upon the
affirmative vote of the holders of at least 80% of the outstanding voting
shares, rather than by a majority vote.

STOCKHOLDER APPROVAL

The affirmative vote of a majority of the Company's outstanding stock
entitled to vote at the Annual Meeting is required for approval of the
amendment of the Company's Certificate of Incorporation. If the Proposal is
approved, the Bylaws of the Company will also be amended to comport with the
Certificate of Incorporation.

RECOMMENDATION OF THE BOARD

The Board of Directors recommends that the stockholders vote FOR the
approval of the amendment of the Company's Certificate of Incorporation to
provide that only the Board of Directors by majority vote, the President, the
Chief Executive Officer or the Chairman of the Board of the Company have the
power to call a special meeting of the stockholders and that the stockholders
may alter, amend or repeal such provision only upon the affirmative vote of at
least 80% of the Company's outstanding voting stock entitled to vote.

<PAGE> 15

PROPOSAL NO. 5

ELECTION OF DIRECTORS - NOMINEES

The Certificate of Incorporation of the Company provides for the division
of the Board of Directors into three classes, each class serving for a period of
three years. The foregoing notwithstanding, directors serve until their
successors have been duly elected and qualified or until they resign, become
disqualified or disabled, or are otherwise removed. The class of directors whose
term expires as of the Annual Meeting includes incumbent directors Martin Shum
and Brig. Gen. (retired) Harold R. Johnson.

Proxyholders will vote all proxies received by them FOR THE NOMINEES
LISTED BELOW UNLESS OTHERWISE INSTRUCTED IN WRITING ON SUCH PROXY. The two (2)
candidates receiving the highest number of affirmative votes of shares entitled
to vote at the Annual Meeting will be elected directors of ACT. Stockholders of
ACT are not entitled to cumulative voting rights. In the event any nominee is
unable or declines to serve as a director at the time of the Annual Meeting, the
proxies will be voted for an additional nominee who shall be designated by the
current Board of Directors to fill the vacancy. As of the date of this Proxy
Statement, the Board of Directors is not aware of any nominee who is unable or
will decline to serve as director.

DIRECTORS AND NOMINEES

INFORMATION WITH RESPECT TO NOMINEES

The following table sets forth certain information concerning the nominees
for director of ACT as of August 31, 1996.

NOMINEES FOR ELECTION

<TABLE>
<CAPTION>
NAME Age Position
- - - ---- --- --------
<S> <C> <C>
Martin Shum 48 Chairman of the Board of
Directors, President and Chief Executive
Officer

Brig. Gen. Harold R. Johnson (1) 73 Director
</TABLE>

- - - -----------

(1) Member of the Compensation Committee.

Martin Shum founded the Company in May 1987 and has served as Chairman of
the Board of Directors, President and Chief Executive Officer since that time.
Prior to founding ACT, Mr. Shum was employed in various capacities by several
telecommunications companies, including Vice President of Marketing and
Development at Micom Communications Corp., Director of Business Planning and
Director of Engineering at General DataComm, and senior member of the technical
staff at Plessey Telecommunications Research.

Brig. Gen. (retired) Harold R. Johnson has served as a member of the Board
of Directors of the Company since 1988. Brig. Gen. Johnson is currently the
Senior Vice President of Business Development at The Fairchild Corporation, an
aerospace and communications company, and has been with Fairchild in various
capacities since 1988. From 1980 to 1988, Brig. Gen. Johnson was founder,
President and Chief Executive Officer of Telebit Corporation, a manufacturer of
modems.

RECOMMENDATION OF THE BOARD OF DIRECTORS

The Board of Directors recommends a vote FOR each of the two nominees
named above.

12
<PAGE> 16

CONTINUING DIRECTORS

DIRECTORS CONTINUING TO SERVE UNTIL 1997

<TABLE>
<CAPTION>
NAME Age Position
- - - ---- --- --------
<S> <C> <C>
William Ambrose (1) 39 Director
Archie J. McGill (1)(2) 65 Director
</TABLE>

- - - -----------

William W. Ambrose has served as a member of the Board of Directors since
1993. Mr. Ambrose is the President of Pyramid Research, Inc., a
telecommunications market research organization which he founded in 1986. Mr.
Ambrose was elected as a director of the Company pursuant to a voting agreement
entered into in connection with investment in the Company by a subsidiary of
Promon Ltda.

Archie J. McGill has served as a member of the Board of Directors since
1994. Mr. McGill is the President and Chief Executive Officer of Chardonnay
Inc., an investment management company, and has served in such position since
1986. Mr. McGill served as President of Rothschild, Inc., a venture capital
investment firm, from 1983 to 1986. Mr. McGill was previously President of the
AIS/American Bell division of AT&T and a Vice President of Marketing for
International Business Machines.

DIRECTORS CONTINUING TO SERVE UNTIL 1998

<TABLE>
<CAPTION>
NAME Age Position
- - - ---- --- --------
<S> <C> <C>
Dr. Michael Feuer (2) 54 Director
Carlos M. Siffert (2) 58 Director
</TABLE>

- - - -----------

Dr. Michael Feuer has served as a member of the Board of Directors since
1992. Dr. Feuer is a general partner of Pacific Technology Fund, a venture
capital firm with which he has been associated since 1992, and the President of
Santa Clara Associates, Inc., an investment management company and an affiliate
of Pacific Technology Fund with which Dr. Feuer has been associated since 1987.
Since 1991, Dr. Feuer has been a director of Fiberstars, Inc., a manufacturer of
specialized lighting equipment. Dr. Feuer was elected as a director of the
Company in connection with an investment in the Company by Pacific Technology
Fund.

Carlos M. Siffert has served as a member of the Board of Directors since
1993. Mr. Siffert is a Director of Promon Ltda., a large Brazilian
telecommunications and engineering services company. Mr. Siffert is also the
Chief Executive Officer of Promon Tecnologia, S.A., an entity controlled by
Promon, and has been associated with Promon Tecnologia, S.A. for over 30 years.
Mr. Siffert was elected as a director of the Company pursuant to a voting
agreement entered into in connection with Promon International's investment in
the Company.

BOARD MEETINGS

The Board of Directors met ten (10) times during the fiscal year ending
June 30, 1996. Each director attended at least 85% of the aggregate of (i) the
total number of meetings of the Board of Directors and (ii) the total number of
meetings held by all committees of the Board on which such director served.

The Board of Directors has an Audit Committee which supervises and makes
recommendations and decisions with respect to the periodic audits of the
Company's financial results. The members of the Audit Committee are Dr. Michael
Feuer, Mr. Carlos M. Siffert and Mr. Archie J. McGill. The Audit Committee held
one (1) meeting during the fiscal year ended June 30, 1996.

The Board of Directors has a Compensation Committee (the "Compensation
Committee"), which administers the Company's stock option plans. The members of
the Compensation Committee are Mr. William Ambrose, Brig. Gen. (ret.) Harold R.
Johnson and Mr. Archie J. McGill. The Compensation Committee held eight (8)
meetings during the fiscal year ending June 30, 1996.

DIRECTOR COMPENSATION

13
<PAGE> 17

Each non-employee director (which does not include any director who serves
as representative of a stockholder who owns more than 5% of the Company's voting
securities) receives $6,000 annually for services as a member of the Board of
Directors. Non-employee directors are reimbursed for their out-of-pocket
expenses in serving on the Board of Directors. There are no family relationships
among any of the executive officers or directors of the Company.

During the 1996 fiscal year, certain non-employee directors were
eligible to receive option grants under the Automatic Option Grant Program in
effect under the Company's 1995 Stock Option/Stock Issuance Plan. Accordingly,
at the 1995 Annual Shareholders Meeting held on December 4, 1995, each of the
following non-employee directors received an option grant under the Automatic
Option Grant Program for 7,000 shares of Common Stock with an exercise price of
$12.00 per share: Messrs. Ambrose and McGill and Brig. Gen. (ret.) Johnson. The
exercise price in effect for each option is equal to the fair market value per
share of Common Stock on the grant date. Each option has a maximum term of ten
(10) years measured from the grant date, subject to earlier termination
following the optionee's cessation of Board service. Each option is immediately
exercisable for all of the option shares; however, any shares purchased under
the option will be subject to repurchase by the Company, at the option exercise
price paid per share, upon the optionee's cessation of Board service prior to
vesting in those shares. The shares subject to each 7,000-share grant will vest
on the day immediately preceding the date of the 1996 Annual Meeting, provided
the optionee continues in Board service through that date.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The members of the Compensation Committee of the Company's Board of
Directors are Mr. William Ambrose, Brig. Gen. (ret.) Harold R. Johnson and Mr.
Archie J. McGill. No member of the Committee was at any time during the 1996
fiscal year or at any other time an officer or employee of the Company.

No executive officer of the Company served on the board of directors or
compensation committee of any entity that has one or more executive officers
serving as a member of the Company's Board of Directors or Compensation
Committee.

INDEMNIFICATION OF DIRECTORS AND OFFICERS

Under Section 145 of the Delaware General Corporation Law, the Company can
indemnify its directors and officers against liabilities they may incur in such
capacities, including liabilities under the Securities Act of 1933, as amended
(the "Securities Act"). The Company's Bylaws provide that the Company will
indemnify its directors and officers to the fullest extent permitted by law and
require the Company to advance litigation expenses upon receipt by the Company
of an undertaking by the director or officer to repay such advances if it is
ultimately determined that the director or officer is not entitled to
indemnification. The Bylaws further provide that rights conferred under such
Bylaws do not exclude any other right such persons may have or acquire under any
bylaw, agreement, vote of stockholders or disinterested directors or otherwise.

The Company's Certificate of Incorporation provides that, pursuant to
Delaware Law, its directors shall not be liable for monetary damages for breach
of the directors fiduciary duty of care to the Company and its stockholders.
This provision in the Certificate of Incorporation does not eliminate the duty
of care, and in appropriate circumstances equitable remedies such as injunctive
or other forms of non-monetary relief will remain available under Delaware Law.
In addition, each director will continue to be subject to liability for breach
of the director's duty of loyalty to the Company or its stockholders, for acts
or omissions not in good faith or involving intentional misconduct or knowing
violations of law, for actions leading to improper personal benefit to the
director, and for payment of dividends or approval of stock repurchases or
redemptions that are unlawful under Delaware law. The provision also does not
affect a director's responsibilities under any other law, such as the federal
securities laws or state or federal environmental laws.

The Company has entered into agreements to indemnify its directors and
certain of its officers in addition to the indemnification provided for in the
Certificate of Incorporation and Bylaws. These agreements, among other things,
indemnify the Company's directors and certain of its officers for certain
expenses (including attorneys' fees), judgments, fines and settlement amounts
incurred by such person in any action or proceeding, including any action by or
in the right of the Company, on account of services as a director or officer of
the Company, or as a director or officer of any other company or enterprise to
which the person provides services at the request of the Company.

PROPOSAL NO. 5

14
<PAGE> 18

PROPOSAL NO. 6

RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS

The accounting firm of Ernst & Young LLP served as independent auditors
for ACT for the fiscal year ended June 30, 1996. The Board of Directors, on the
recommendation of ACT's management, has selected that firm to continue in this
capacity for the current fiscal year. ACT is asking the stockholders to ratify
the selection by the Board of Directors of Ernst & Young LLP as independent
auditors to audit the consolidated financial statements of ACT for the fiscal
year ending June 30, 1997 and to perform other appropriate services. A
representative of Ernst & Young LLP is expected to be present at the Annual
Meeting to respond to stockholders' questions, and that representative will be
given an opportunity to make a brief presentation to the stockholders if he or
she so desires and will be available to respond to appropriate questions. ACT
has been advised by Ernst & Young LLP that neither that firm nor any of its
associates has any material relationship with ACT nor any affiliate of ACT.

STOCKHOLDER APPROVAL

The affirmative vote of a majority of the outstanding shares of the
Company present or represented and entitled to vote at the Annual Meeting is
required for ratification of the selection of Ernst & Young LLP to serve as the
Company's independent auditors for the fiscal year ended June 30, 1997. Should
such stockholder approval not be obtained, then the Board of Directors will
reconsider such selection. Under all circumstances, the Board retains the
corporate authority to change the auditors at a later date.

RECOMMENDATION OF THE BOARD OF DIRECTORS

The Board of Directors recommends that the stockholders vote FOR the
proposal to ratify the selection of Ernst & Young LLP as independent auditors
for the year ending June 30, 1997.

15
<PAGE> 19

GENERAL

STOCK OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS

The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of August 31, 1996 by (i)
each person known by the Company to beneficially own more than 5% of the
outstanding shares of Common Stock, (ii) each of the Company's directors, (iii)
each of the Named Executive Officers, and (iv) all directors and executive
officers of the Company as a group:

<TABLE>
<CAPTION>
Shares Beneficially
Directors, Five Percent Stockholders, Owned(1)
Named Executive Officers and --------------------------------
Directors and Officers as a Group Number PERCENT
- - - ---------------------------------------- ---------------- ------------
<S> <C> <C>
PROMON Ltda
AVE Pres. Juscelino Kubitschek, 1830
04543 Sao Paulo, SP, Brazil(1) 784,768 8.6%
Pacific Technology Fund
P.O. Box 1704
Palo Alto, CA 94302-1704 638,751 7.0
AIM Management Group Inc.
11 Greenway Plaza, Suite 1919
Houston, Texas 77046(2) 929,100 10.2
Martin Shum(3) 440,030 4.6
William W. Ambrose (4) 32,155 *
Dr. Michael Feuer (5) 638,751 7.0
Brig. Gen. H. R. Johnson (6) 12,716 *
Carlos M. Siffert (7) 784,768 8.6
Archie J. McGill (8) 39,857 *
Melvin L. Flowers (9) 86,216 1.0
Suresh Nihalani (10) 81,493 *
John Tucker (11) 92,809 1.0
Andre de Fusco (12) 82,000 *
Shaun Manesh (13) 78,047 *
Peter Staab (14) 74,359 *
Linda Carlson(15) 42,762 *
Jean-Guy Lacombe(16) 137,853 1.5
All directors and executive officers as a
group (14 persons)(17) 2,604,977 25.9
</TABLE>

- - - -----------

* Less than 1%.

(1) Unless otherwise indicated, the persons 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.

(2) The shares are owned beneficially and of record by FIQ-Trading,
Marketing, Servicos e Consultores Lda. ("FIQ"), a company controlled by
Promon Ltda. As such, Promon Ltda may be deemed to have beneficial
ownership of such shares.

(3) Based upon information contained in a Statement on Schedule 13G, dated
July 10, 1996, filed with the SEC by AIM Management Group Inc. ("AIM").
AIM is the parent holding company of the recordholders of the shares,
AIM Advisors, Inc. and AIM Capital Management, Inc., both registered
Investment Advisors under Section 203 of the Investor Advisors Act.

(4) Includes 38,735 shares held by members of Mr. Shum's family and 81
shares held by Helen Shum and Martin Shum as Trustees of the Shum
Trust, dated April 15, 1994. Also includes 400,641 shares issuable upon
exercise

16
<PAGE> 20

of immediately exercisable options (including 1,978 shares issuable
upon exercise of options held by Mr. Shum's spouse) of which 208,366
shares will be vested within 60 days from August 31, 1996.

(5) Includes 25,155 shares owned by Pyramid Research, Inc. Mr. Ambrose, as
President of Pyramid Research, Inc., may be deemed to have beneficial
ownership of these shares. Also includes 7,000 shares issuable upon
exercise of immediately exercisable options, which options will vest on
November 3, 1996.

(6) Includes 638,751 shares owned by Pacific Technology Fund. Dr. Feuer and
Belfield Services, Inc., as general partners of Pacific Technology
Fund, may be deemed to have beneficial ownership of these shares. Dr.
Feuer disclaims beneficial ownership of these shares.

(7) Includes 7,000 shares issuable upon exercise of immediately exercisable
options, which options will vest on November 3, 1996.

(8) Includes 784,765 shares beneficially owned by Promon Ltda. and FIQ. Mr.
Siffert, as Director of Promon Ltda., may be deemed to have beneficial
ownership of these shares. Mr. Siffert disclaims beneficial ownership
of these shares.

(9) Includes 39,857 shares issuable upon exercise of immediately
exercisable options. All such options will be vested on November 3,
1996.

(10) Includes 72,715 shares issuable upon exercise of immediately
exercisable options of which 20,650 shares will be vested within 60
days from August 31, 1996.

(11) Includes 2,285 shares held by members of Mr. Nihalani's family. Also
includes 59,280 shares issuable upon exercise of immediately
exercisable options (including 1,429 shares issuable upon exercise of
options held by Mr. Nihalani's spouse) of which 17,978 shares will be
vested within 60 days from August 31, 1996.

(12) Includes 86,500 shares issuable upon exercise of immediately
exercisable options of which 19,444 shares will be vested within 60
days from August 31, 1996. Excludes shares beneficially owned by Mr.
Tucker's spouse, Ms. Linda Carlson, an executive officer of the
Company.

(13) Includes 81,000 shares issuable upon exercise of immediately
exercisable options of which 21,240 shares will be vested within 60
days from August 31, 1996.

(14) Includes 53,857 shares issuable upon exercise of immediately
exercisable options of which 18,129 shares will be vested within 60
days from August 31, 1996.

(15) Includes 74,000 shares issuable upon exercise of immediately
exercisable options of which 12,400 shares will be vested within 60
days from August 31, 1996.

(16) Includes 42,643 shares issuable upon exercise of immediately
exercisable options of which 6,806 shares will be vested within 60 days
from August 31, 1996. Excludes shares beneficially owned by Ms.
Carlson's spouse, Mr. John Tucker, an executive officer of the Company.

(17) Includes 519 shares held by Michi Technical Services, Inc. ("Michi").
Mr. Lacombe is the sole shareholder of Michi. Includes 60,000 shares
issuable upon exercise of immediately exercisable options of which no
shares will be vested within 60 days from August 31, 1996.

(18) Includes 25,155 shares owned by Pyramid Research, Inc., 638,751 shares
owned by Pacific Technology Fund and 784,768 shares owned by Promon
Ltda. Also includes an aggregate of 963,493 shares issuable to the
Company's directors and executive officers upon the exercise of
immediately exercisable options held by such directors and executive
officers of which 378,870 shares will be vested within 60 days from
August 31, 1996.

17
<PAGE> 21

DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT

The following table sets forth certain information concerning the
executive officers and directors of the Company as of August 31, 1996.

<TABLE>
<CAPTION>
NAME Age Position
- - - ---- --- --------
<S> <C> <C>
Martin Shum 48 Chairman of the Board of Directors, President and
Chief Executive Officer
Suresh Nihalani 43 Vice President, Product Marketing
Shaun Manesh 41 Vice President, Manufacturing
John W. Tucker 51 Vice President, Sales and Marketing
Melvin L. Flowers 43 Vice President, Finance and Administration, and Chief
Financial Officer
Andre de Fusco 38 Vice President, Strategic Planning and Business
Development
Peter Staab 49 Vice President, Engineering
Linda Carlson 51 Vice President, Worldwide Sales
Jean-Guy Lacombe 39 Vice President, Operations
Brig. Gen. Harold R. Johnson (1) 73 Director
Dr. Michael Feuer (2) 54 Director
Carlos M. Siffert (2) 58 Director
William Ambrose (1) 38 Director
Archie J. McGill (1)(2) 65 Director
</TABLE>

- - - -----------

(1) Member of the Compensation Committee.

(2) Member of the Audit Committee.

Martin Shum founded the Company in May 1987 and has served as Chairman
of the Board of Directors, President and Chief Executive Officer since that
time. Prior to founding ACT, Mr. Shum was employed in various capacities by
several telecommunications companies, including Vice President of Marketing and
Development at Micom Communications Corp., Director of Business Planning and
Director of Engineering at General DataComm, and senior member of the technical
staff at Plessey Telecommunications Research.

Suresh Nihalani has served as Vice President, Product Marketing since
December 1995. Mr. Nihalani served as the Company's Senior Vice President of
Business Development from July 1995 to December 1995, Senior Vice President of
Operations from April 1993 to June 1995, Vice President of Business Planning
from 1990 to 1993 and Vice President of Engineering from 1987 to 1990. Before
joining the Company in 1987, Mr. Nihalani was employed as Director of Product
Development at MICOM.

Shaun Manesh has served as Vice President, Manufacturing since 1990.
Mr. Manesh was the Company's Director of Operations from 1988 to 1990. Prior to
June 1988, Mr. Manesh was employed in various capacities with Tekelec and MICOM.

John W. Tucker has served as Vice President, Sales and Marketing since
December 1995, and served as the Company's Vice President of Sales from June
1990 until December 1995. Mr. Tucker was employed as a marketing consultant from
1988 to 1990, as Assistant Vice President of North American Sales at MICOM from
1985 to 1988 and as Director of Sales at Interlan, a local area network
component manufacturer, from 1984 to 1985.

Melvin L. Flowers has served as Chief Financial Officer and Vice
President of Finance since July 1993 and as Vice President, Finance and
Administration since December 1995. Prior to joining the Company, Mr. Flowers
served as President and Chief Financial Officer of Pacific Earth Resources, an
ornamental horticultural company, from 1991 to 1993 and from 1989 to 1991,
respectively, and as Vice President and Chief Financial Officer of Spectramed
Incorporated, a medical device manufacturing company, from 1986 to 1989.

Andre de Fusco has served as Vice President, Strategic Planning and
Business Development since December 1995. Mr. de Fusco joined the Company in
December 1994 and served as its Vice President of Marketing

18
<PAGE> 22

until December 1995. Mr. de Fusco was employed as Director of International
Accounts and Director of Business Development for Northern Telecom from 1991 to
1994 and as Vice President of Marketing and President of MaxCom, a developer of
electronic mail systems, from 1984 to 1991.

Peter Staab joined the Company in June 1995 as its Vice President of
Engineering. Before joining the Company, Mr. Staab was employed at General
DataComm as Director of Network Management and Systems from 1992 to 1995 and
Director of Transmission Products from 1985 to 1992.

Linda Carlson has served as Vice President, Worldwide Sales since
December 1995. Ms. Carlson served as the Company's Assistant Vice President of
Sales--Americas from January 1991 to December 1995. Prior to January 1991, Ms.
Carlson was employed at various telecommunication companies, including RED-SAC
and MICOM.

Jean-Guy Lacombe has served as Vice President, Operations of the
Company and the General Manager of Presticom since December 1995. Mr. Lacombe
was the Chairman of the Board and Chief Executive Officer of Presticom from
February 1988 until November 1995.

Brig. Gen. (retired) Harold R. Johnson has served as a member of the
Board of Directors of the Company since 1988. Brig. Gen. Johnson is currently
the Senior Vice President of Business Development at The Fairchild Corporation,
an aerospace and communications company, and has been with Fairchild in various
capacities since 1988. From 1980 to 1988, Brig. Gen. Johnson was founder,
President and Chief Executive Officer of Telebit Corporation, a manufacturer of
modems.

Dr. Michael Feuer has served as a member of the Board of Directors
since 1992. Dr. Feuer is a general partner of Pacific Technology Fund, a venture
capital firm with which he has been associated since 1992, and the President of
Santa Clara Associates, Inc., an investment management company and an affiliate
of Pacific Technology Fund with which Dr. Feuer has been associated since 1987.
Since 1991, Dr. Feuer has been a director of Fiberstars, Inc., a manufacturer of
specialized lighting equipment. Dr. Feuer was elected as a director of the
Company in connection with an investment in the Company by Pacific Technology
Fund.

Carlos M. Siffert has served as a member of the Board of Directors
since 1993. Mr. Siffert is a Director of Promon Ltda., a large Brazilian
telecommunications and engineering services company. Mr. Siffert is also the
Chief Executive Officer of Promon Tecnologia, S.A., an entity controlled by
Promon Ltda., and has been associated with Promon Tecnologia, S.A. for over 30
years. Mr. Siffert was elected as a director of the Company pursuant to a voting
agreement entered into in connection with Promon International's investment in
the Company.

William W. Ambrose has served as a member of the Board of Directors
since 1993. Mr. Ambrose is the President of Pyramid Research, Inc., a
telecommunications market research organization which he founded in 1986. Mr.
Ambrose was elected as a director of the Company pursuant to a voting agreement
entered into in connection with investment in the Company by a subsidiary of
Promon Ltda.

The Board of Directors of the Company is divided into three classes,
designated "Class I," "Class II" and "Class III," respectively. Each director
serves for a term ending on the date of the third annual meeting of stockholders
following the annual meeting at which such director was elected. However, each
initial director in Class I (Mr. Siffert and Dr. Feuer) serves for a term ending
on the date of the annual meeting of stockholders held in 1998; each initial
director in Class II (Mr. Ambrose and Mr. McGill) serves for a term ending on
the date of the annual meeting of stockholders held in 1997 and each initial
director in Class III (Mr. Shum and Brig. Gen. Johnson) serves for a term ending
on the date of the annual meeting of stockholders held in 1996.

COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934

Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers, directors and persons who beneficially own more
than 10% of the Company's Common Stock to file initial reports of ownership and

19
<PAGE> 23
reports of changes in ownership with the Securities and Exchange Commission
("SEC"). Such persons are required by SEC regulations to furnish the Company
with copies of all Section 16(a) forms filed by such person.

Based solely on the Company's review of such forms furnished to the
Company and written representations from certain reporting persons, the Company
believes that all filing requirements applicable to the Company's executive
officers, directors and more than 10% stockholders were complied with, except
for the following transactions which were reported late: the purchase of 1,000
shares in May 1995 and the exercise and sale of 2,000 shares in April, 1996 by
Mr. Flowers, the grant of 40,000 stock options in September 1995 to Mr. Staab,
the issuance of 519 shares in December 1995 to an affiliate of Mr. Lacombe, the
exercise of a warrant to purchase 7,788 shares and sale of 7,788 shares by an
affiliate of Pacific Technology Fund in February 1996 and the exercise of a
stock option to purchase 4,286 shares by General Johnson in March 1996.

20
<PAGE> 24
STOCK PERFORMANCE GRAPH

The graph depicted below shows ACT's stock price as an index for the
period commencing May 3, 1995 to June 30, 1996, assuming $100 invested on May 2,
1995 (the date of ACT's initial public offering) and reinvestment of dividends,
along with the composite prices of companies listed on the National Association
of Securities Dealers Automated Quotation ("Nasdaq") Telecommunication Index
("NTI") and the Standard and Poor's 500 Stock Index ("S&P 500"). The Company
believes that the NTI and S&P 500 provide an appropriate measure of the
Company's stock price performance as the NTI and S&P 500 listed companies are
comparable to the Company in size and/or industry focus.

COMPARISON OF 14 MONTH CUMULATIVE TOTAL RETURN*
AMONG ACT NETWORKS, INC., THE S & P 500 INDEX
AND THE NASDAQ TELECOMMUNICATIONS INDEX

<TABLE>
<CAPTION>
5/03/96 6/30/95 6/30/96
------- ------- -------
<S> <C> <C> <C>
ACT NETWORKS, INC. 100 133 250
S & P 500 100 105 132
NASDAQ TELECOMMUNICATIONS 100 109 135
</TABLE>

*$100 INVESTED ON 5/03/95 IN STOCK OR INDEX-
INCLUDING REINVESTMENT OF DIVIDENDS,
FISCAL YEAR ENDING JUNE 30.

21
<PAGE> 25

EXECUTIVE COMPENSATION AND RELATED INFORMATION

COMPENSATION COMMITTEE REPORT1

It is the responsibility of the Compensation Committee (the
"Committee") of the ACT Board of Directors to make recommendations to the Board
of Directors regarding the salary and bonuses to be paid to the Company's
executive officers each fiscal year. The Committee also administers the 1995
Stock Option/Stock Issuance Plan (the "1995 Plan"). Equity incentives may be
granted under the 1995 Plan to executive officers as part of their long-term
compensation package. The following is a summary of the policies of the
Committee which affect the compensation paid to executive officers, as reflected
in the tables and text set forth elsewhere in this Proxy Statement.

GENERAL COMPENSATION POLICY. Under the supervision of the Committee,
ACT has developed a compensation policy which is designed to attract, retain and
reward qualified key executives critical to the Company's success and to provide
such executives with performance-based incentives tied to the financial
performance of ACT. One of the Committee's primary objectives is to have a
substantial portion of each officer's compensation contingent upon the Company's
performance as well as upon the individual's contribution to the success of ACT
as measured by his or her personal performance. Accordingly, each executive
officer's compensation package is fundamentally comprised of three elements: (i)
base salary which reflects individual experience, expertise and responsibility
and is designed to be competitive with salary levels in the industry; (ii)
annual incentive compensation which reflects individual and Company performance
for the year; and (iii) long-term stock-based incentive awards which strengthen
the mutuality of interests between the executive officers and the ACT
stockholders.

FACTORS. The principal factors which were considered in establishing
the components of each executive officer's compensation package for the year
ended June 30, 1996 are summarized below. However, the Committee may in its
discretion apply entirely different factors, particularly different measures of
financial performance, in setting executive compensation for future fiscal
years.

- BASE SALARY. For the 1996 fiscal year, the Committee has set the base
salary of the executive officers within the range of salaries of executive
officers with comparable qualifications, experience and responsibilities at
other companies comparable in size, which provide telecommunication services or
which compete with the Company for executive talent. The base salary for each
officer is determined on the basis of various factors including: the salary
levels in effect for similar positions at comparable companies, the experience
and personal performance of the officer, the ability to develop and maintain the
skills necessary to work in a high-growth company, the ability to initiate
strategies to enhance the Company's growth, profitability and business
opportunities and internal comparability considerations. The weight given to
each of these factors differs from individual to individual, as the Committee
deems appropriate In pursuing its objective to have a substantial portion of
each officer's compensation contingent on the Company's performance, the
Committee set base salaries for fiscal 1996 in the low- to mid-range level of
competitive compensation.

- ANNUAL INCENTIVE COMPENSATION. Annual bonuses are earned by each
executive officer primarily on the basis of the Company's achievement of certain
corporate financial performance targets established for each fiscal year. For
fiscal year 1996, no bonuses, other than commissions, were earned by the
Company's executive officers as the criteria the Board determined for awarding
cash bonuses were not met. The performance criteria for fiscal 1996 were based
on targets for the Company's revenues and earnings per share.

- LONG-TERM INCENTIVE COMPENSATION. Each option grant under the 1995
Plan is designed to align the interests of the executive officers with those of
the stockholders and provide each individual with a significant incentive to
manage the Company from the perspective of an owner with an equity stake in the
business and to remain in the service of the Company. The number of shares
subject to each option grant is based upon an officer's existing equity holdings
(including the number of unvested shares), the officer's tenure, level of
responsibility and relative position in the Company. However, the Committee will
vary the size of the option grant made to each executive officer as it feels the
circumstances warrant. Each grant allows the officer to acquire shares of the
Company's Common Stock at a fixed price per share over a specified period of
time (up to 10 years).

- - - --------

1 The material in this report is not "soliciting material," is not
deemed filed with the Securities and Exchange Commission (the "SEC") and is not
to be incorporated by reference in any filing of the Company under the
Securities Act of 1933 as amended (the "1933 Act") or the Securities Exchange
Act of 1934, as amended (the "1934 Act").

22
<PAGE> 26

In fiscal 1996, the Committee reviewed the equity incentives
in place for each of the Company's executive officers. The Committee determined
that it was important to provide the Company's executive officers with increased
equity incentives. In reaching this decision, the Committee reviewed numerous
relevant factors including, without limitation, the cash compensation for ACT's
executives, the equity and cash incentives in place for executives at comparable
companies and the number and value of vested options and shares held by ACT's
executive officers. To further align the executive officers' long-term interests
with the stockholders and to encourage achievement of superior results over an
extended period, the Committee granted options to purchase 696,787 shares of
Common Stock to the executive officers during the 1996 fiscal year. These
options are all immediately exercisable but are subject to a repurchase right at
the executives' cost which right lapses as to 24% of the grant one year
following the date of grant and as to an additional 2% of the grant at the end
of each of the 38 months thereafter.

- CEO COMPENSATION. The base salary established for the Company's Chief
Executive Officer, Mr. Martin Shum, for the year ended June 30, 1996 reflects
the Committee's decision to maintain a level of stability and certainty with
respect to this component of his compensation from year to year, and there was
no intent to have this particular component of compensation affected to any
significant degree by the Company's performance. The Committee's intent in
setting Mr. Shum's compensation for the 1996 fiscal year was to have a greater
emphasis on long-term equity incentive compensation than cash compensation. Mr.
Shum's base salary was maintained at the low range of the base salaries paid to
other chief executive officers at comparable companies. Mr. Shum was, however,
awarded an option during fiscal 1996 to acquire 227,500 shares of the Company's
Common Stock on the terms discussed in the preceding paragraph. In addition, Mr.
Shum was eligible for a $50,000 performance bonus which was tied to targets for
the Company's revenues and earnings. As discussed above, the targets were not
met and Mr. Shum did not receive a bonus for fiscal year 1996.

TAX LIMITATION. As a result of federal tax legislation enacted in 1993,
a publicly-held company such as ACT will not be allowed a federal income tax
deduction for compensation paid to certain executive officers, to the extent
that compensation exceeds $1 million per officer in any year. This limitation
will apply to all compensation paid to the covered executive officers which is
not considered to be performance-based. However, compensation which does qualify
as performance-based compensation will not have to be taken into account for
purposes of this limitation. The compensation paid to the Company's executive
officers for the year ended June 30, 1996 did not, and the compensation to be
paid for the year ending June 30, 1997 is not expected to, exceed the $1 million
limit per officer. In addition, the 1995 Plan have been structured so that any
compensation deemed paid to an executive officer in connection with the exercise
of options granted under those plans with an exercise price equal to the fair
market value of the option shares on the grant date will qualify as
performance-based compensation which will not be subject to the $1 million
limitation. Because it is very unlikely that the cash compensation payable to
any of the Company's executive officers in the foreseeable future will approach
the $1 million limitation, the Committee has decided not to take any other
action to limit or restructure the elements of cash compensation payable to the
Company's executive officers. The Committee will reconsider this decision should
the individual compensation of any executive officer ever approach the $1
million level.

Compensation Committee

Brig. Gen. Harold R. Johnson, USAF (Ret.)
Arch J. McGill
William Ambrose

23
<PAGE> 27

EXECUTIVE COMPENSATION

The following table sets forth the compensation awarded or earned, by
the Company's Chief Executive Officer and the Company's four most highly
compensated executive officers in the 1996 fiscal year for, services rendered in
all capacities to the Company and its subsidiaries for each of the last three
fiscal years. No executive officer who would have otherwise been includable in
such table on the basis of salary and bonus earned for the 1996 fiscal year has
been excluded by reason of his or her termination of employment or change in
executive status during that fiscal year. The individuals included in the table
will be collectively referred to as the "Named Executive Officers."

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
Annual Compensation COMPENSATION
--------------------------------------- ---------------------
SECURITIES
Fiscal Bonus / UNDERLYING
Year Salary ($) Commission ($) OPTIONS(#)
NAME AND PRINCIPAL POSITIONS (1) ------- ----------- ------------------ ---------------------
- - - --------------------------------
<S> <C> <C> <C> <C>
Martin Shum......................................... 1996 190,000 - 251,500(3)(4)
1995 175,000 - 57,143(2)
1994 150,000 - -
Linda Carlson ...................................... 1996 117,553 87,200 38,429(3)(4)(5)
1995 92,000 55,000 4,571(2)
1994 149,000 - -
John W. Tucker...................................... 1996 102,510 65,714 67,286(3)(4)
1995 115,000 - 4,571(2)
1994 100,000 - -
Suresh Nihalani..................................... 1996 115,000 11,222 54,857(3)(4)
1995 120,000 5,000 5,714(2)
1994 120,000 - -
Andre de Fusco...................................... 1996 123,335 7,677 54,286(3)(4)
1995 100,000 - 6,857(2)
1994 94,000 - -
</TABLE>

- - - -----------

(1) See "Directors and Executive Officers of Registrant" for the complete title
of the position held by each Named Executive Officer.

(2) These options were granted on July 18, 1994 pursuant to the Company's 1994
Stock Option Bonus Program.

See "Stock Option Bonus Program" below.

(3) Each of the Named Executive Officers were granted the following stock
options on August 1, 1995 pursuant to the Company's 1995 Option Bonus Program at
an exercise price of $16.50: Mr. Shum, 24,000; Ms. Carlson, 1,429; Mr. Tucker,
2,286; Mr. Nihalani, 2,857; and Mr. de Fusco, 2,286. The options are immediately
exercisable with any unvested shares acquired under such option being subject to
repurchase by the Company, at the exercise price, upon termination of the
optionee's service with the Company, and vest according to the following
schedule ("Standard Vesting"): twenty-four percent (24%) of the shares vest upon
completion of one year following the vesting commencement date and the balance
will vest at a rate of two percent (2%) per full month of employment thereafter.

(4) Each of the Named Executive Officers were granted the following Stock
Options on September 19, 1995 at an exercise price of $13.00: Mr. Shum, 227,500;
Ms. Carlson, 7,000; Mr. Tucker, 65,000; Mr. Nihalani, 52,000; and Mr. de Fusco,
52,000. The options were immediately exercisable with any unvested shares
acquired under such option being subject to repurchase by the Company, at the
exercise price, upon termination of the optionee's service with the Company, and
is subject to the Company's Standard Vesting.

(5) Ms. Carlson was elected to serve as the Company's Vice President, Worldwide
Sales on December 11, 1995 and granted a stock option to purchase 30,000 shares
of the Company's Common Stock. The option is immediately

24
<PAGE> 28

exercisable with any unvested shares acquired under such option being subject to
repurchase by the Company, at the exercise price, upon termination of the
Optionee's service with the Company and is subject to the Company's Standard
Vesting.

25
<PAGE> 29

OPTION GRANTS

The following table sets forth, for the fiscal year ended June 30,
1996, information concerning the grant of options to purchase shares of Common
Stock under the Company's 1995 Plan (or the Predecessor 1993 Plan) to the Named
Executive Officers. No stock appreciation rights were granted to any of the
Named Executive Officers during fiscal year 1996.

OPTION GRANTS IN YEAR ENDED JUNE 30, 1996
INDIVIDUAL GRANTS

<TABLE>
<CAPTION>
POTENTIAL REALIZATION
VALUE AT ASSUMED ANNUAL
PERCENT OF RATES OF STOCK PRICE
NUMBER OF TOTAL APPRECIATION FOR OPTION
SECURITIES OPTIONS TERM(4)
UNDERLYING GRANTED TO EXERCISE ----------------------------
OPTIONS EMPLOYEES IN OF BASE EXPIRATION
NAME GRANTED (1)(2) FISCAL 1996 PRICE(3) DATE 5% 10%
- - - ---- -------------- ----------- -------- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Martin Shum 24,000 2.33% $16.50 07/31/05 $ 198,000 $ 396,000
227,500 22.14% $13.00 09/18/05 1,478,750 2,957,500
Linda Carlson 1,429 0.14% $16.50 07/31/05 11,789 23,578
7,000 0.68% $13.00 09/18/05 45,500 91,000
30,000 2.92% $13.00 12/10/05 195,000 390,000
John W. Tucker 2,286 0.22% $16.50 07/31/05 18,860 37,719
65,000 6.33% $13.00 09/18/05 422,500 845,000
Suresh Nihalani 2,857 0.28% $16.50 07/31/05 23,570 47,140
52,000 5.06% $13.00 09/18/05 338,000 676,000
Andre de Fusco 2,286 0.22% $16.50 07/31/05 18,860 37,719
52,000 5.06% $13.00 09/18/05 338,000 676,000
</TABLE>

- - - ---------------

(1) The options granted to the Named Executive Officers were granted on
August 1, 1995 and September 19, 1995 and have a maximum term of 10
years, subject to earlier termination in the event of the optionee's
cessation of service with the Company.

(2) The options are immediately exercisable with any unvested shares
acquired under such option being subject to repurchase by the Company,
at the exercise price, upon termination of the optionee's service with
the Company, and vest according to the following schedule: twenty-four
percent (24%) of the shares vest upon completion of one year following
the vesting commencement date or grant date, as applicable, and the
balance will vest at a rate of two percent (2%) per full month of
employment thereafter. However, the option shares will immediately vest
in the event the Company is acquired by a merger or asset sale, unless
the options are assumed by the acquiring entity.

(3) The exercise price may be paid in cash, in shares of Common Stock
valued at fair market value on the exercise date or pursuant to a
cashless exercise procedure. The Company may also finance the option
exercise by loaning the optionee sufficient funds to pay the exercise
price for the purchased shares.

(4) There is no assurance provided to any executive officer or any other
holder of the Company's securities that the actual stock price
appreciation over the 10-year option term will be at the assumed 5% and
10% levels or at any other defined level. Unless the market price of
the Common Stock does in fact appreciate over the option term, no value
will be realized from the option grants.

26
<PAGE> 30

OPTION EXERCISES AND HOLDINGS

The following table sets forth information concerning the number and
value of shares acquired on exercise of options held by each of the Named
Executive Officers during the fiscal year ended June 30, 1996 and the number and
value of unexercised options held by each of the Named Executive Officers as of
June 30, 1996. No stock appreciation rights were exercised during fiscal year
1996, and no such appreciation rights were outstanding as of June 30, 1995.

AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1996
AND OPTION VALUES FOR FISCAL YEAR ENDED JUNE 30, 1996

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
NUMBER OF UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS IN-THE MONEY OPTIONS
ACQUIRED ON VALUE AT JUNE 30, 1995(1) AT JUNE 30, 1995(2)
NAME EXERCISE (#) REALIZED(3) -------------------------- ----------------------------
- - - ---- ------------ ----------- EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Martin Shum.................... 29,980 $1,118,254 398,663 - $9,440,033 -
Linda Carlson.................. 16,500 513,100 42,643 - 877,469 -
John W. Tucker................. 32,500 999,018 86,500 - 1,930,263 -
Suresh Nihalani................ 37,029 541,302 57,828 - 1,151,910 -
Andre de Fusco................. 9,000 266,494 81,000 - 1,787,882 -
</TABLE>

- - - -----------

(1) All of the options of the Named Executive Officers are immediately
exercisable, with any unvested shares acquired under such option being
subject to repurchase by the Company, at the exercise price, upon
termination of the optionee's service with the Company, and vest
according to the following schedule: twenty-four percent (24%) of the
shares vest upon completion of one year following the vesting
commencement date or grant date, as applicable, and the balance will
vest at a rate of two percent (2%) per full month of employment
thereafter. At June 30, 1996, the options held by each of the Named
Executive Officers were exercisable for the following number of vested
shares: Mr. Shum, 140,374; Ms. Carlson, 4,728; Mr. Tucker, 18,724; Mr.
Nihalani, 2,342; and Mr. de Fusco, 4,681.

(2) Calculated based on the closing sale price at June 28, 1996 of $32.50
per share, less the applicable exercise price. All of the options of
these Named Executive Officers are immediately exercisable, with any
unvested shares acquired under such option being subject to repurchase
by the Company, at the exercise price, upon termination of the
optionee's service with the Company. The value of vested shares
issuable upon exercise of "in-the-money" options at June 30, 1995 for
each of the Named Executive Officers was as follows: Mr. Shum,
$2,106,632; Ms. Carlson, $112,717; Mr. Tucker, $595,423; Mr. Nihalani,
$53,235; and Mr. de Fusco, $119,649.

(3) Calculated on the excess of the fair market value of the purchased
shares on the exercise date over the exercise price paid for those
shares.

27
<PAGE> 31

STOCK OPTION BONUS PROGRAM

On October 10, 1994, the Company adopted a Fiscal Year 1995 Employee
Stock Option Bonus Program (the "1995 Option Bonus Program"). Each full-time
exempt employee of the Company on July 1, 1994 was eligible to receive stock
options under the 1995 Option Bonus Program. The Board could also include in the
1995 Option Bonus Program other employees who commenced employment with the
Company after July 1, 1994. Individuals not employed with the Company on the
date of grant of such options were not eligible to receive any options. In
addition, the receipt of options and the number of shares underlying such
options was dependent on, and subject to, the individual's job performance.

The 1995 Option Bonus Program was administered under the Company's 1993
Stock Option Plan and was subject to the terms and conditions thereof. A total
of 63,999 options under the program were granted on August 1, 1995 at an
exercise price of $16.50, the fair market value of the Company's Common Stock on
August 1, 1995, to 53 employees, including 24,571 options to Martin Shum
(including 571 options to Mr. Shum's spouse, who is an employee of the Company),
3,429 options to Melvin Flowers, 2,286 options to John Tucker, 1,429 options to
Linda Carlson, 3,428 options to Suresh Nihalani (including 571 options to Mr.
Nihalani's spouse, who is an employee of the Company), and 2,000 options to
Shaun Manesh. Options granted under the 1995 Option Bonus Program vest, in
general, over approximately three years from the grant date.

The Company operated a similar stock option bonus plan for the 1994
fiscal year. An aggregate of 131,694 options to purchase common stock of the
Company at an exercise price of $1.75 per share were granted in July 1994 to 36
employees, including 58,570 options to Martin Shum (including 1,428 options to
Mr. Shum's spouse, who is an employee of the Company), 10,857 options to Melvin
Flowers, 4,571 options to John Tucker, 2,857 options to Linda Carlson, 6,316
options to Suresh Nihalani (including 1,142 options to Mr. Nihalani's spouse,
who is an employee of the Company) and 6,857 options to Shaun Manesh.

28
<PAGE> 32

DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS

Under the present rules of the SEC, the deadline for stockholders to
submit proposals to be considered for inclusion in ACT's Proxy Statement for
next year's Annual Meeting of Stockholders is May 31, 1997. Such proposals may
be included in next year's Proxy Statement if they comply with certain rules and
regulations promulgated by the Commission.

OTHER BUSINESS

The Board of Directors is not aware of any other matter which may be
presented for action at the Annual Meeting. Should any other matter requiring a
vote of the stockholders arise, it is intended that the proxy holders will vote
on such matters in accordance with their best judgment.

The Company's Annual Report for the fiscal year ended June 30, 1996,
including audited financial statements, is being sent with this Proxy Statement
to all stockholders of record as of September 23, 1996. The Annual Report is not
incorporated into this Proxy Statement and is not considered proxy soliciting
material.

Copies of the Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1996 as filed with the SEC will be provided to stockholders
without charge upon written request to the Chief Financial Officer, ACT
Networks, Inc., 188 Camino Ruiz, Camarillo, California 93012.

29
<PAGE> 33
ACT NETWORKS, INC.
1995 STOCK OPTION/STOCK ISSUANCE PLAN
(Amended and Restated through September 17, 1996)

ARTICLE ONE

GENERAL PROVISIONS

I. PURPOSE OF THE PLAN

This 1995 Stock Option/Stock Issuance Plan is intended to
promote the interests of ACT Networks, Inc., a Delaware corporation, by
providing eligible persons with the opportunity to acquire a proprietary
interest, or otherwise increase their proprietary interest, in the Corporation
as an incentive for them to remain in the service of the Corporation.

Capitalized terms shall have the meanings assigned to such
terms in the attached Appendix.

II. STRUCTURE OF THE PLAN

A. The Plan shall be divided into three separate equity
programs:

(i) the Discretionary Option Grant
Program under which eligible persons may, at the discretion of the Plan
Administrator, be granted options to purchase shares of Common Stock,

(ii) the Stock Issuance Program under
which eligible persons may, at the discretion of the Plan Administrator, be
issued shares of Common Stock directly, either through the immediate purchase of
such shares or as a bonus for services rendered the Corporation (or any Parent
or Subsidiary), and

(iii) the Automatic Option Grant Program
under which Eligible Directors shall automatically receive option grants at
periodic intervals to purchase shares of Common Stock.

B. The provisions of Articles One and Five shall apply
to all equity programs under the Plan and shall accordingly govern the interests
of all persons under the Plan.
<PAGE> 34
III. ADMINISTRATION OF THE PLAN

A. The Primary Committee shall have sole and exclusive
authority to administer the Discretionary Option Grant and Stock Issuance
Programs with respect to all eligible individuals.

B. Administration of the Discretionary Option Grant and
Stock Issuance Programs with respect to all other persons eligible to
participate in those programs may, at the Board's discretion, be vested in the
Primary Committee or a Secondary Committee, or the Board may retain the power to
administer those programs with respect to all such persons. The members of the
Secondary Committee may be Board members who are Employees eligible to receive
discretionary option grants or direct stock issuances under the Plan or any
other stock option, stock appreciation, stock bonus or other stock plan of the
Corporation (or any Parent or Subsidiary).

C. Members of the Primary Committee or any Secondary
Committee shall serve for such period of time as the Board may determine and may
be removed by the Board at any time. The Board may also at any time terminate
the functions of any Secondary Committee and reassume all powers and authority
previously delegated to such committee.

D. Each Plan Administrator shall, within the scope of
its administrative functions under the Plan, have full power and authority
(subject to the provisions of the Plan) to establish such rules and regulations
as it may deem appropriate for proper administration of the Discretionary Option
Grant and Stock Issuance Programs and to make such determinations under, and
issue such interpretations of, the provisions of such programs and any
outstanding options or stock issuances thereunder as it may deem necessary or
advisable. Decisions of the Plan Administrator within the scope of its
administrative functions under the Plan shall be final and binding on all
parties who have an interest in the Discretionary Option Grant or Stock Issuance
Program under its jurisdiction or any option or stock issuance thereunder.

E. Service on the Primary Committee or the Secondary
Committee shall constitute service as a Board member, and members of each such
committee shall accordingly be entitled to full indemnification and
reimbursement as Board members for their service on such committee. No member of
the Primary Committee or the Secondary Committee shall be liable for any act or
omission made in good faith with respect to the Plan or any option grants or
stock issuances under the Plan.

F. Administration of the Automatic Option Grant Program
shall be self- executing in accordance with the terms of that program, and no
Plan Administrator shall exercise any discretionary functions with respect to
option grants made thereunder.

2.
<PAGE> 35
IV. ELIGIBILITY

A. The persons eligible to participate in the
Discretionary Option Grant and Stock Issuance Programs are as follows:

(i) Employees,

(ii) non-employee members of the Board or
the board of directors of any Parent or Subsidiary, and

(iii) consultants and other independent
advisors who provide services to the Corporation (or any Parent or
Subsidiary).

B. Each Plan Administrator shall, within the scope of
its administrative jurisdiction under the Plan, have full authority (subject to
the provisions of the Plan) to determine, (i) with respect to the option grants
under the Discretionary Option Grant Program, which eligible persons are to
receive option grants, the time or times when such option grants are to be made,
the number of shares to be covered by each such grant, the status of the granted
option as either an Incentive Option or a Non-Statutory Option, the time or
times when each option is to become exercisable, the vesting schedule (if any)
applicable to the option shares and the maximum term for which the option is to
remain outstanding and (ii) with respect to stock issuances under the Stock
Issuance Program, which eligible persons are to receive stock issuances, the
time or times when such issuances are to be made, the number of shares to be
issued to each Participant, the vesting schedule (if any) applicable to the
issued shares and the consideration to be paid for such shares.

C. The Plan Administrator shall have the absolute
discretion either to grant options in accordance with the Discretionary Option
Grant Program or to effect stock issuances in accordance with the Stock Issuance
Program.

D. The individuals eligible to participate in the
Automatic Option Grant Program shall be limited to (i) those individuals who are
first elected or appointed as non-employee Board members after the Effective
Date, whether through appointment by the Board or election by the Corporation's
stockholders, and (ii) those individuals who continue to serve as non-employee
Board members after one or more Annual Stockholders Meetings held after the
Effective Date. A non-employee Board member who has previously been in the
employ of the Corporation (or any Parent or Subsidiary) shall not be eligible to
receive an option grant under the Automatic Option Grant Program at the time he
or she first becomes a non-employee Board member, but shall be eligible to
receive periodic option grants under the Automatic Option Grant Program while he
or she continues to serve as a

3.
<PAGE> 36
non-employee Board member. A non-employee Board member who, directly or
indirectly, is a 5% Stockholder or is affiliated with, or a representative of, a
5% Stockholder shall not be eligible to receive any option grants under the
Automatic Option Grant Program.

V. STOCK SUBJECT TO THE PLAN

A. The stock issuable under the Plan shall be shares of
authorized but unissued or reacquired Common Stock, including shares repurchased
by the Corporation on the open market. The maximum number of shares of Common
Stock initially reserved for issuance over the term of the Plan shall not exceed
2,280,844 shares.

B. No one person participating in the Plan may receive
options, separately exercisable stock appreciation rights and direct stock
issuances for more than 750,000 shares of Common Stock in the aggregate per
calendar year, beginning with the 1995 calendar year.

C. Shares of Common Stock subject to outstanding options
(including any options incorporated from the Predecessor Plans) shall be
available for subsequent issuance under the Plan to the extent those options
expire or terminate for any reason prior to exercise in full. Unvested shares
issued under the Plan and subsequently cancelled or repurchased by the
Corporation, at the original issue price paid per share, pursuant to the
Corporation's repurchase rights under the Plan, shall be added back to the
number of shares of Common Stock reserved for issuance under the Plan and shall
accordingly be available for reissuance through one or more subsequent option
grants or direct stock issuances under the Plan. However, should the exercise
price of an option under the Plan be paid with shares of Common Stock or should
shares of Common Stock otherwise issuable under the Plan be withheld by the
Corporation in satisfaction of the withholding taxes incurred in connection with
the exercise of an option or the vesting of a stock issuance under the Plan,
then the number of shares of Common Stock available for issuance under the Plan
shall be reduced by the gross number of shares for which the option is exercised
or which vest under the stock issuance, and not by the net number of shares of
Common Stock issued to the holder of such option or stock issuance.

D. Should any change be made to the Common Stock by
reason of any stock split, stock dividend, recapitalization, combination of
shares, exchange of shares or other change affecting the outstanding Common
Stock as a class without the Corporation's receipt of consideration, appropriate
adjustments shall be made to (i) the maximum number and/or class of securities
issuable under the Plan, (ii) the number and/or class of securities for which
any one person may be granted stock options, separately exercisable stock
appreciation rights and direct stock issuances under this Plan per calendar
year, (iii) the number and/or class of securities for which automatic option
grants are to be subsequently made per Eligible Director under the Automatic
Option Grant Program and (iv) the number and/or class of securities and the
exercise price per share in effect under each

4.
<PAGE> 37
outstanding option (including any option incorporated from the Predecessor
Plans) in order to prevent the dilution or enlargement of benefits thereunder.
The adjustments determined by the Plan Administrator shall be final, binding and
conclusive.

5.
<PAGE> 38
ARTICLE TWO

DISCRETIONARY OPTION GRANT PROGRAM

I. OPTION TERMS

Each option shall be evidenced by one or more documents in the
form approved by the Plan Administrator; provided, however, that each such
document shall comply with the terms specified below. Each document evidencing
an Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.

A. Exercise Price.

1. The exercise price per share shall be fixed
by the Plan Administrator but shall not be less than eighty-five percent (85%)
of the Fair Market Value per share of Common Stock on the option grant date.

2. The exercise price shall become immediately
due upon exercise of the option and shall, subject to the provisions of Section
I of Article Five and the documents evidencing the option, be payable in one or
more of the forms specified below:

(i) cash or check made payable to the
Corporation,

(ii) shares of Common Stock held for the
requisite period necessary to avoid a charge to the Corporation's
earnings for financial reporting purposes and valued at Fair Market
Value on the Exercise Date, or

(iii) to the extent the option is
exercised for vested shares, through a special sale and remittance
procedure pursuant to which the Optionee shall concurrently provide
irrevocable written instructions to (a) a Corporation-designated
brokerage firm to effect the immediate sale of the purchased shares and
remit to the Corporation, out of the sale proceeds available on the
settlement date, sufficient funds to cover the aggregate exercise price
payable for the purchased shares plus all applicable Federal, state and
local income and employment taxes required to be withheld by the
Corporation by reason of such exercise and (b) the Corporation to
deliver the certificates for the purchased shares directly to such
brokerage firm in order to complete the sale transaction.

Except to the extent such sale and remittance procedure is
utilized, payment of the exercise price for the purchased shares must be made on
the Exercise Date.

6.
<PAGE> 39
B. Exercise and Term of Options. Each option shall be
exercisable at such time or times, during such period and for such number of
shares as shall be determined by the Plan Administrator and set forth in the
documents evidencing the option. However, no option shall have a term in excess
of ten (10) years measured from the option grant date.

C. Effect of Termination of Service.

1. The following provisions shall govern the
exercise of any options held by the Optionee at the time of cessation of Service
or death:

(i) Any option outstanding at the time
of the Optionee's cessation of Service for any reason shall remain
exercisable for such period of time thereafter as shall be determined
by the Plan Administrator and set forth in the documents evidencing the
option, but no such option shall be exercisable after the expiration of
the option term.

(ii) Any option exercisable in whole or
in part by the Optionee at the time of death may be subsequently
exercised by the personal representative of the Optionee's estate or by
the person or persons to whom the option is transferred pursuant to the
Optionee's will or in accordance with the laws of descent and
distribution.

(iii) During the applicable post-Service
exercise period, the option may not be exercised in the aggregate for
more than the number of vested shares for which the option is
exercisable on the date of the Optionee's cessation of Service. Upon
the expiration of the applicable exercise period or (if earlier) upon
the expiration of the option term, the option shall terminate and cease
to be outstanding for any vested shares for which the option has not
been exercised. However, the option shall, immediately upon the
Optionee's cessation of Service, terminate and cease to be outstanding
to the extent it is not exercisable for vested shares on the date of
such cessation of Service.

(iv) Should the Optionee's Service be
terminated for Misconduct, then all outstanding options held by the
Optionee shall terminate immediately and cease to be outstanding.

(v) In the event of an Involuntary
Termination following a Corporate Transaction, the provisions of
Section III of this Article Two shall govern the period for which the
outstanding options are to remain exercisable following the Optionee's
cessation of Service and shall supersede any provisions to the contrary
in this section.

7.
<PAGE> 40
2. The Plan Administrator shall have the
discretion, exercisable either at the time an option is granted or at any time
while the option remains outstanding, to:

(i) extend the period of time for which
the option is to remain exercisable following the Optionee's cessation
of Service from the period otherwise in effect for that option to such
greater period of time as the Plan Administrator shall deem
appropriate, but in no event beyond the expiration of the option term,
and/or

(ii) permit the option to be exercised,
during the applicable post-Service exercise period, not only with
respect to the number of vested shares of Common Stock for which such
option is exercisable at the time of the Optionee's cessation of
Service but also with respect to one or more additional installments in
which the Optionee would have vested under the option had the Optionee
continued in Service.

D. Stockholder Rights. The holder of an option shall
have no stockholder rights with respect to the shares subject to the option
until such person shall have exercised the option, paid the exercise price and
become a holder of record of the purchased shares.

E. Repurchase Rights. The Plan Administrator shall have
the discretion to grant options which are exercisable for unvested shares of
Common Stock. Should the Optionee cease Service while holding such unvested
shares, the Corporation shall have the right to repurchase, at the exercise
price paid per share, any or all of those unvested shares. The terms upon which
such repurchase right shall be exercisable (including the period and procedure
for exercise and the appropriate vesting schedule for the purchased shares)
shall be established by the Plan Administrator and set forth in the document
evidencing such repurchase right.

Limited Transferability of Options. During the
lifetime of the Optionee, Incentive Options shall be exercisable only by the
Optionee and shall not be assignable or transferable other than by will or by
the laws of descent and distribution following the Optionee's death. However, a
Non-Statutory Option may, in connection with the Optionee's estate plan, be
assigned in whole or in part during the Optionee's lifetime to one or more
members of the Optionee's immediate family or to a trust established exclusively
for one or more such family members. The assigned portion may only be exercised
by the person or persons who acquire a proprietary interest in the option
pursuant to the assignment. The terms applicable to the assigned portion shall
be the same as those in effect for the option immediately prior to such
assignment and shall be set forth in such documents issued to the assignee as
the Plan Administrator may deem appropriate.

8.
<PAGE> 41
II. INCENTIVE OPTIONS

The terms specified below shall be applicable to all Incentive
Options. Except as modified by the provisions of this Section II, all the
provisions of Articles One, Two and Five shall be applicable to Incentive
Options. Options which are specifically designated as Non-Statutory Options when
issued under the Plan shall not be subject to the terms of this Section II.

A. Eligibility. Incentive Options may only be granted to
Employees.

B. Exercise Price. The exercise price per share shall
not be less than one hundred percent (100%) of the Fair Market Value per share
of Common Stock on the option grant date.

C. Dollar Limitation. The aggregate Fair Market Value of
the shares of Common Stock (determined as of the respective date or dates of
grant) for which one or more options granted to any Employee under the Plan (or
any other option plan of the Corporation or any Parent or Subsidiary) may for
the first time become exercisable as Incentive Options during any one (1)
calendar year shall not exceed the sum of One Hundred Thousand Dollars
($100,000). To the extent the Employee holds two (2) or more such options which
become exercisable for the first time in the same calendar year, the foregoing
limitation on the exercisability of such options as Incentive Options shall be
applied on the basis of the order in which such options are granted.

D. 10% Stockholder. If any Employee to whom an Incentive
Option is granted is a 10% Stockholder, then the exercise price per share shall
not be less than one hundred ten percent (110%) of the Fair Market Value per
share of Common Stock on the option grant date, and the option term shall not
exceed five (5) years measured from the option grant date.

III. CORPORATE TRANSACTION/CHANGE IN CONTROL

A. In the event of any Corporate Transaction, each
outstanding option shall automatically accelerate so that each such option
shall, immediately prior to the effective date of the Corporate Transaction,
become fully exercisable for all of the shares of Common Stock at the time
subject to such option and may be exercised for any or all of those shares as
fully-vested shares of Common Stock. However, an outstanding option shall NOT so
accelerate if and to the extent: (i) such option is, in connection with the
Corporate Transaction, either to be assumed by the successor corporation (or
parent thereof) or to be replaced with a comparable option to purchase shares of
the capital stock of the successor corporation (or parent thereof), (ii) such
option is to be replaced with a cash incentive program of the successor
corporation which preserves the spread existing on the unvested

9.
<PAGE> 42
option shares at the time of the Corporate Transaction and provides for
subsequent payout in accordance with the same vesting schedule applicable to
such option or (iii) the acceleration of such option is subject to other
limitations imposed by the Plan Administrator at the time of the option grant.
The determination of option comparability under clause (i) above shall be made
by the Plan Administrator, and its determination shall be final, binding and
conclusive.

B. All outstanding repurchase rights shall also
terminate automatically, and the shares of Common Stock subject to those
terminated rights shall immediately vest in full, in the event of any Corporate
Transaction, except to the extent: (i) those repurchase rights are to be
assigned to the successor corporation (or parent thereof) in connection with
such Corporate Transaction or (ii) such accelerated vesting is precluded by
other limitations imposed by the Plan Administrator at the time the repurchase
right is issued.

C. Immediately following the consummation of the
Corporate Transaction, all outstanding options shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof).

D. Each option which is assumed in connection with a
Corporate Transaction shall be appropriately adjusted, immediately after such
Corporate Transaction, to apply to the number and class of securities which
would have been issuable to the Optionee in consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction. Appropriate adjustments shall also be made to (i) the number and
class of securities available for issuance under the Plan on both an aggregate
and per Optionee basis following the consummation of such Corporate Transaction
and (ii) the exercise price payable per share under each outstanding option,
provided the aggregate exercise price payable for such securities shall remain
the same.

E. Any options which are assumed or replaced in the
Corporate Transaction and do not otherwise accelerate at that time shall
automatically accelerate (and any of the Corporation's outstanding repurchase
rights which do not otherwise terminate at the time of the Corporate Transaction
shall automatically terminate and the shares of Common Stock subject to those
terminated rights shall immediately vest in full) in the event the Optionee's
Service should subsequently terminate by reason of an Involuntary Termination
within eighteen (18) months following the effective date of such Corporate
Transaction. Any options so accelerated shall remain exercisable for
fully-vested shares until the earlier of (i) the expiration of the option term
or (ii) the expiration of the one (1)- year period measured from the effective
date of the Involuntary Termination.

F. The Plan Administrator shall have the discretion,
exercisable either at the time the option is granted or at any time while the
option remains outstanding, to (i) provide for the automatic acceleration of one
or more outstanding options (and the

10.
<PAGE> 43
automatic termination of one or more outstanding repurchase rights with the
immediate vesting of the shares of Common Stock subject to those rights) upon
the Involuntary Termination of the Optionee's Service within a specified period
(not to exceed eighteen (18) months) following the effective date of a Change in
Control. Any options so accelerated shall remain fully exercisable until the
expiration or sooner termination of the option term.

G. The portion of any Incentive Option accelerated in
connection with a Corporate Transaction or Change in Control shall remain
exercisable as an Incentive Option only to the extent the applicable One Hundred
Thousand Dollar limitation is not exceeded. To the extent such dollar limitation
is exceeded, the accelerated portion of such option shall be exercisable as a
Non-Statutory Option under the Federal tax laws.

H. The grant of options under the Discretionary Option
Grant Program shall in no way affect the right of the Corporation to adjust,
reclassify, reorganize or otherwise change its capital or business structure or
to merge, consolidate, dissolve, liquidate or sell or transfer all or any part
of its business or assets.

IV. CANCELLATION AND REGRANT OF OPTIONS

The Plan Administrator shall have the authority to effect, at
any time and from time to time, with the consent of the affected option holders,
the cancellation of any or all outstanding options under the Discretionary
Option Grant Program (including outstanding options incorporated from the
Predecessor Plans) and to grant in substitution new options covering the same or
different number of shares of Common Stock but with an exercise price per share
based on the Fair Market Value per share of Common Stock on the new option grant
date.

V. STOCK APPRECIATION RIGHTS

A. The Plan Administrator shall have full power and
authority to grant to selected Optionees tandem stock appreciation rights and/or
limited stock appreciation rights.

B. The following terms shall govern the grant and
exercise of tandem stock appreciation rights:

(i) One or more Optionees may be granted
the right, exercisable upon such terms as the Plan Administrator may
establish, to elect between the exercise of the underlying option for
shares of Common Stock and the surrender of that option in exchange for
a distribution from the Corporation in an amount equal to the excess of
(a) the Fair Market Value

11.

<PAGE> 44
(on the option surrender date) of the number of shares in which the
Optionee is at the time vested under the surrendered option (or
surrendered portion thereof) over (b) the aggregate exercise price
payable for such shares.

(ii) No such option surrender shall be
effective unless it is approved by the Plan Administrator, either at
the time of the option surrender or at any earlier time. If the
surrender is so approved, then the distribution to which the Optionee
shall be entitled may be made in shares of Common Stock valued at Fair
Market Value on the option surrender date, in cash, or partly in shares
and partly in cash, as the Plan Administrator shall in its sole
discretion deem appropriate.

(iii) If the surrender of an option is
rejected by the Plan Administrator, then the Optionee shall retain
whatever rights the Optionee had under the surrendered option (or
surrendered portion thereof) on the option surrender date and may
exercise such rights at any time prior to the later of (a) five (5)
business days after the receipt of the rejection notice or (b) the last
day on which the option is otherwise exercisable in accordance with the
terms of the documents evidencing such option, but in no event may such
rights be exercised more than ten (10) years after the option grant
date.

C. The following terms shall govern the grant and
exercise of limited stock appreciation rights:

(i) One or more Section 16 Insiders may
be granted limited stock appreciation rights with respect to their
outstanding options.

(ii) Upon the occurrence of a Hostile
Take-Over, each such individual holding one or more options with such a
limited stock appreciation right shall have the unconditional right
(exercisable for a thirty (30)-day period following such Hostile
Take-Over) to surrender each such option to the Corporation, to the
extent the option is at the time exercisable for vested shares of
Common Stock. In return for the surrendered option, the Optionee shall
receive a cash distribution from the Corporation in an amount equal to
the excess of (A) the Take-Over Price of the shares of Common Stock
which are at the time vested under each surrendered option (or
surrendered portion thereof) over (B) the aggregate exercise price
payable for such shares. Such cash distribution shall be paid within
five (5) days following the option surrender date.

12.
<PAGE> 45
(iii) The grant of such limited stock
appreciation right shall automatically constitute the pre-approval by
the Plan Administrator of the any subsequent exercise of that right in
accordance with the terms of this Paragraph C. Accordingly, no further
approval of the Plan Administrator or the Board shall be required in
connection with the actual surrender of such option and the cash
distribution to which the optionee shall thereupon become entitled.

(iv) The balance of the option (if any)
shall continue in full force and effect in accordance with the
documents evidencing such option.

13.
<PAGE> 46
ARTICLE THREE

STOCK ISSUANCE PROGRAM

I. STOCK ISSUANCE TERMS

Shares of Common Stock may be issued under the Stock Issuance
Program through direct and immediate issuances without any intervening option
grants. Each such stock issuance shall be evidenced by a Stock Issuance
Agreement which complies with the terms specified below.

A. Purchase Price.

1. The purchase price per share shall be fixed
by the Plan Administrator, but shall not be less than eighty five percent (85%)
of the Fair Market Value per share of Common Stock on the issuance date.

2. Subject to the provisions of Section I of
Article Five, shares of Common Stock may be issued under the Stock Issuance
Program for any of the following items of consideration which the Plan
Administrator may deem appropriate in each individual instance:

(i) cash or check made payable to the
Corporation,
or
(ii) past services rendered to the
Corporation (or any Parent or Subsidiary).

B. Vesting Provisions.

1. Shares of Common Stock issued under the
Stock Issuance Program may, in the discretion of the Plan Administrator, be
fully and immediately vested upon issuance or may vest in one or more
installments over the Participant's period of Service or upon attainment of
specified performance objectives. The elements of the vesting schedule
applicable to any unvested shares of Common Stock issued under the Stock
Issuance Program, namely:

(i) the Service period to be completed
by the Participant or the performance objectives to be attained,

14.
<PAGE> 47
(ii) the number of installments in which
the shares are to vest,

(iii) the interval or intervals (if any)
which are to lapse between installments, and

(iv) the effect which death, Permanent
Disability or other event designated by the Plan Administrator is to
have upon the vesting schedule,

shall be determined by the Plan Administrator and incorporated into the Stock
Issuance Agreement.

2. Any new, substituted or additional
securities or other property (including money paid other than as a regular cash
dividend) which the Participant may have the right to receive with respect to
the Participant's unvested shares of Common Stock by reason of any stock
dividend, stock split, recapitalization, combination of shares, exchange of
shares or other change affecting the outstanding Common Stock as a class without
the Corporation's receipt of consideration shall be issued subject to (i) the
same vesting requirements applicable to the Participant's unvested shares of
Common Stock and (ii) such escrow arrangements as the Plan Administrator shall
deem appropriate.

3. The Participant shall have full stockholder
rights with respect to any shares of Common Stock issued to the Participant
under the Stock Issuance Program, whether or not the Participant's interest in
those shares is vested. Accordingly, the Participant shall have the right to
vote such shares and to receive any regular cash dividends paid on such shares.

4. Should the Participant cease to remain in
Service while holding one or more unvested shares of Common Stock issued under
the Stock Issuance Program or should the performance objectives not be attained
with respect to one or more such unvested shares of Common Stock, then those
shares shall be immediately surrendered to the Corporation for cancellation, and
the Participant shall have no further stockholder rights with respect to those
shares. To the extent the surrendered shares were previously issued to the
Participant for consideration paid in cash or cash equivalent (including the
Participant's purchase-money indebtedness), the Corporation shall repay to the
Participant the cash consideration paid for the surrendered shares and shall
cancel the unpaid principal balance of any outstanding purchase-money note of
the Participant attributable to such surrendered shares.

15.
<PAGE> 48
5. The Plan Administrator may in its discretion
waive the surrender and cancellation of one or more unvested shares of Common
Stock (or other assets attributable thereto) which would otherwise occur upon
the cessation of the Participant's Service or the non-completion of the vesting
schedule applicable to such shares. Such waiver shall result in the immediate
vesting of the Participant's interest in the shares of Common Stock as to which
the waiver applies. Such waiver may be effected at any time, whether before or
after the Participant's cessation of Service or the attainment or non-
attainment of the applicable performance objectives.

II. CORPORATE TRANSACTION/CHANGE IN CONTROL

A. All of the outstanding repurchase rights under the
Stock Issuance Program shall terminate automatically, and all the shares of
Common Stock subject to those terminated rights shall immediately vest in full,
in the event of any Corporate Transaction, except to the extent (i) those
repurchase rights are assigned to the successor corporation (or parent thereof)
in connection with such Corporate Transaction or (ii) such accelerated vesting
is precluded by other limitations imposed in the Stock Issuance Agreement.

B. Any repurchase rights that are assigned in the
Corporate Transaction shall automatically terminate, and all the shares of
Common Stock subject to those terminated rights shall immediately vest in full,
in the event the Participant's Service should subsequently terminate by reason
of an Involuntary Termination within eighteen (18) months following the
effective date of such Corporate Transaction.

C. The Plan Administrator shall have the discretion,
exercisable either at the time the unvested shares are issued or at any time
while the Corporation's repurchase right remains outstanding, to provide for the
automatic termination of one or more outstanding repurchase rights and the
immediate vesting of the shares of Common Stock subject to those rights upon the
Involuntary Termination of the Participant's Service within a specified period
(not to exceed eighteen (18) months) following the effective date of any Change
in Control.

III. SHARE ESCROW/LEGENDS

Unvested shares may, in the Plan Administrator's discretion,
be held in escrow by the Corporation until the Participant's interest in such
shares vests or may be issued directly to the Participant with restrictive
legends on the certificates evidencing those unvested shares.

16.
<PAGE> 49
ARTICLE FOUR

AUTOMATIC OPTION GRANT PROGRAM

I. OPTION TERMS

A. GRANT DATES. Option grants shall be made on the dates
specified below:

1. Each Eligible Director who is first elected
or appointed as a non-employee Board member after the Effective Date shall
automatically be granted, on the date of such initial election or appointment, a
Non-Statutory Option to purchase 21,000 shares of Common Stock.

2. On the date of each Annual Stockholders
Meeting, beginning with the 1995 Annual Meeting, each individual who is to
continue to serve as an Eligible Director after such meeting, shall
automatically be granted, whether or not such individual is standing for
re-election as a Board member at that Annual Meeting, a Non-Statutory Option to
purchase an additional 7,000 shares of Common Stock, provided such individual
has served as a non-employee Board member for at least six (6) months prior to
the date of such Annual Meeting. There shall be no limit on the number of such
7,000-share option grants any one Eligible Director may receive over his or her
period of Board service.

B. EXERCISE PRICE.

1. The exercise price per share shall be equal
to one hundred percent (100%) of the Fair Market Value per share of Common Stock
on the option grant date.

2. The exercise price shall be payable in one
or more of the alternative forms authorized under the Discretionary Option Grant
Program. Except to the extent the sale and remittance procedure specified
thereunder is utilized, payment of the exercise price for the purchased shares
must be made on the Exercise Date.

C. OPTION TERM. Each option shall have a term of ten
(10) years measured from the option grant date.

D. EXERCISE AND VESTING OF OPTIONS. Each option shall be
immediately exercisable for any or all of the option shares. However, any shares
purchased under the option shall be subject to repurchase by the Corporation, at
the exercise price paid per

17.
<PAGE> 50
share, upon the Optionee's cessation of Board service prior to vesting in those
shares. The shares subject to each initial grant shall vest, and the
Corporation's repurchase right with respect to those shares shall lapse, in a
series of thirty-six (36) successive equal monthly installments over the
Optionee's period of continued service as a Board member, with the first such
installment to vest upon the Optionee's completion of one (1) month of Board
service measured from the option grant date. The shares subject to each annual
grant shall vest, and the Corporation's repurchase right with respect to those
shares shall lapse, on the day immediately preceding the date of the next Annual
Stockholders Meeting following the grant date, provided the Optionee continues
in Board service through such day.

E. EFFECT OF TERMINATION OF BOARD SERVICE. The following
provisions shall govern the exercise of any options held by the Optionee at the
time the Optionee ceases to serve as a Board member:

(i) The Optionee (or, in the event of
Optionee's death, the personal representative of the Optionee's estate
or the person or persons to whom the option is transferred pursuant to
the Optionee's will or in accordance with the laws of descent and
distribution) shall have a twelve (12)-month period following the date
of such cessation of Board service in which to exercise each such
option.

(ii) During the twelve (12)-month
exercise period, the option may not be exercised in the aggregate for
more than the number of vested shares of Common Stock for which the
option is exercisable at the time of the Optionee's cessation of Board
service.

(iii) Should the Optionee cease to serve
as a Board member by reason of death or Permanent Disability, then all
shares at the time subject to the option shall immediately vest so that
such option may, during the twelve (12)-month exercise period following
such cessation of Board service, be exercised for all or any portion of
such shares as fully-vested shares of Common Stock.

(iv) In no event shall the option remain
exercisable after the expiration of the option term. Upon the
expiration of the twelve (12)-month exercise period or (if earlier)
upon the expiration of the option term, the option shall terminate and
cease to be outstanding for any vested shares for which the option has
not been exercised. However, the option shall, immediately upon the
Optionee's cessation of Board service, terminate and cease to be
outstanding to the extent it is not exercisable for vested shares on
the date of such cessation of Board service.

18.
<PAGE> 51
II. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER

A. In the event of any Corporate Transaction, the shares
of Common Stock at the time subject to each outstanding option but not otherwise
vested shall automatically vest in full so that each such option shall,
immediately prior to the effective date of the Corporate Transaction, become
fully exercisable for all of the shares of Common Stock at the time subject to
such option and may be exercised for all or any portion of such shares as
fully-vested shares of Common Stock. Immediately following the consummation of
the Corporate Transaction, each automatic option grant shall terminate and cease
to be outstanding, except to the extent assumed by the successor corporation (or
parent thereof).

B. bn the event of any Change in Control, the shares of
Common Stock at the time subject to each outstanding option but not otherwise
vested shall automatically vest in full so that each such option shall,
immediately prior to the effective date of the Change in Control, become fully
exercisable for all of the shares of Common Stock at the time subject to such
option and may be exercised for all or any portion of such shares as
fully-vested shares of Common Stock. Each such option shall remain exercisable
for such fully-vested option shares until the expiration or sooner termination
of the option term or the surrender of the option in connection with a Hostile
Take-Over.

C. Upon the occurrence of a Hostile Take-Over, the
Optionee shall have a thirty (30)-day period in which to surrender to the
Corporation each option grant held by him or her under this Automatic Option
Grant Program. The Optionee shall in return be entitled to a cash distribution
from the Corporation in an amount equal to the excess of (i) the Take-Over Price
of the shares of Common Stock at the time subject to the surrendered option
(whether or not the Optionee is otherwise at the time vested in those shares)
over (ii) the aggregate exercise price payable for such shares. Such cash
distribution shall be paid within five (5) days following the surrender of the
option to the Corporation. The option surrender right shall form a part of each
option grant made under this Automatic Option Grant Program, and the subsequent
exercise of that right in accordance with the provisions of this Paragraph C. is
hereby expressly approved in advance by the Board. Accordingly, no further
approval of the Board shall be required in connection with the actual option
surrender and the cash distribution to which the optionee shall thereupon become
entitled.

D. The grant of options under the Automatic Option Grant
Program shall in no way affect the right of the Corporation to adjust,
reclassify, reorganize or otherwise change its capital or business structure or
to merge, consolidate, dissolve, liquidate or sell or transfer all or any part
of its business or assets.

19.
<PAGE> 52
III. REMAINING TERMS

The remaining terms of each option granted under the Automatic
Option Grant Program shall be the same as the terms in effect for option grants
made under the Discretionary Option Grant Program.

20.
<PAGE> 53
ARTICLE FIVE

MISCELLANEOUS

I. FINANCING

A. The Plan Administrator may permit any Optionee or
Participant to pay the option exercise price under the Discretionary Option
Grant Program or the purchase price for shares issued under the Stock Issuance
Program by delivering a promissory note payable in one or more installments. The
terms of any such promissory note (including the interest rate and the terms of
repayment) shall be established by the Plan Administrator in its sole
discretion. Promissory notes may be authorized with or without security or
collateral. In all events, the maximum credit available to the Optionee or
Participant may not exceed the sum of (i) the aggregate option exercise price or
purchase price payable for the purchased shares plus (ii) any Federal, state and
local income and employment tax liability incurred by the Optionee or the
Participant in connection with the option exercise or share purchase.

B. The Plan Administrator may, in its discretion,
determine that one or more such promissory notes shall be subject to forgiveness
by the Corporation in whole or in part upon such terms as the Plan Administrator
may deem appropriate.

II. TAX WITHHOLDING

A. The Corporation's obligation to deliver shares of
Common Stock upon the exercise of options or stock appreciation rights or upon
the issuance or vesting of such shares under the Plan shall be subject to the
satisfaction of all applicable Federal, state and local income and employment
tax withholding requirements.

B. The Plan Administrator may, in its discretion,
provide any or all holders of Non-Statutory Options or unvested shares of Common
Stock under the Plan (other than the options granted or the shares issued under
the Automatic Option Grant Program) with the right to use shares of Common Stock
in satisfaction of all or part of the Taxes incurred by such holders in
connection with the exercise of their options or the vesting of their shares.
Such right may be provided to any such holder in either or both of the following
formats:

(i) Stock Withholding: The election to
have the Corporation withhold, from the shares of Common Stock otherwise
issuable upon the exercise of such Non-Statutory Option or the vesting of such
shares,

21.
<PAGE> 54
a portion of those shares with an aggregate Fair Market Value equal to
the percentage of the Taxes (not to exceed one hundred percent (100%))
designated by the holder.

(ii) Stock Delivery: The election to
deliver to the Corporation, at the time the Non-Statutory Option is exercised or
the shares vest, one or more shares of Common Stock previously acquired by such
holder (other than in connection with the option exercise or share vesting
triggering the Taxes) with an aggregate Fair Market Value equal to the
percentage of the Taxes (not to exceed one hundred percent (100%)) designated by
the holder.

III. EFFECTIVE DATE AND TERM OF THE PLAN

A. The Plan became effective on the Effective Date.
However, no options granted under the Plan may be exercised, and no shares shall
be issued under the Plan, until the Plan is approved by the Corporation's
stockholders. If such stockholder approval is not obtained within twelve (12)
months after the Effective Date, then all options previously granted under this
Plan shall terminate and cease to be outstanding, and no further options shall
be granted and no shares shall be issued under the Plan.

B. The Plan shall serve as the successor to the
Predecessor Plans, and no further option grants shall be made under the
Predecessor Plans after the Effective Date. All options outstanding under the
Predecessor Plans as of such date shall, immediately upon approval of the Plan
by the Corporations's stockholders, be incorporated into the Plan and treated as
outstanding options under the Plan. However, each outstanding option so
incorporated shall continue to be governed solely by the terms of the documents
evidencing such option, and no provision of the Plan shall be deemed to affect
or otherwise modify the rights or obligations of the holders of such
incorporated options with respect to their acquisition of shares of Common
Stock.

C. One or more provisions of the Plan, including (without
limitation) the option/vesting acceleration provisions of Article Two relating
to Corporate Transactions and Changes in Control, may, in the Plan
Administrator's discretion, be extended to one or more options incorporated from
the Predecessor Plans which do not otherwise contain such provisions.

D. The Plan shall terminate upon the earliest of (i) September
5, 2005, (ii) the date on which all shares available for issuance under the Plan
shall have been issued pursuant to the exercise of the options or the issuance
of shares (whether vested or unvested) under the Plan or (iii) the termination
of all outstanding options in connection

22.

BPHPA1\ZP\0145342.04
09/10/96

<PAGE> 55

with a Corporate Transaction. Upon such Plan termination, all options and
unvested stock issuances outstanding on such date shall thereafter continue to
have force and effect in accordance with the provisions of the documents
evidencing such options or issuances.

IV. AMENDMENT OF THE PLAN

A. The Board shall have complete and exclusive power and
authority to amend or modify the Plan in any or all respects. However, no such
amendment or modification shall adversely affect the rights and obligations with
respect to stock options, stock appreciation rights or unvested stock issuances
at the time outstanding under the Plan unless the Optionee or the Participant
consents to such amendment or modification. In addition, certain amendments may
require stockholder approval pursuant to applicable law or regulations.

B. Options to purchase shares of Common Stock may be granted
under the Discretionary Option Grant Program and shares of Common Stock may be
issued under the Stock Issuance Program that are in each instance in excess of
the number of shares then available for issuance under the Plan, provided any
excess shares actually issued under those programs are held in escrow until
there is obtained stockholder approval of an amendment sufficiently increasing
the number of shares of Common Stock available for issuance under the Plan. If
such stockholder approval is not obtained within twelve (12) months after the
date the first such excess issuances are made, then (i) any unexercised options
granted on the basis of such excess shares shall terminate and cease to be
outstanding and (ii) the Corporation shall promptly refund to the Optionees and
the Participants the exercise or purchase price paid for any excess shares
issued under the Plan and held in escrow, together with interest (at the
applicable Short Term Federal Rate) for the period the shares were held in
escrow, and such shares shall thereupon be automatically cancelled and cease to
be outstanding.

23.
<PAGE> 56
unless such stockholder approval is obtained and shall terminate without ever
becoming exercisable for any of those shares should such stockholder approval
not be obtained.

V. USE OF PROCEEDS

Any cash proceeds received by the Corporation from the sale of
shares of Common Stock under the Plan shall be used for general corporate
purposes.

VI. REGULATORY APPROVALS

A. The implementation of the Plan, the granting of any
option or stock appreciation right under the Plan and the issuance of any shares
of Common Stock (i) upon the exercise of any option or stock appreciation right
or (ii) under the Stock Issuance Program shall be subject to the Corporation's
procurement of all approvals and permits required by regulatory authorities
having jurisdiction over the Plan, the options and stock appreciation rights
granted under it and the shares of Common Stock issued pursuant to it.

B. No shares of Common Stock or other assets shall be
issued or delivered under the Plan unless and until there shall have been
compliance with all applicable requirements of Federal and state securities
laws, including the filing and effectiveness of the Form S-8 registration
statement for the shares of Common Stock issuable under the Plan, and all
applicable listing requirements of any stock exchange (or the Nasdaq National
Market, if applicable) on which Common Stock is then listed for trading.

VII. NO EMPLOYMENT/SERVICE RIGHTS

Nothing in the Plan shall confer upon the Optionee or the
Participant any right to continue in Service for any period of specific duration
or interfere with or otherwise restrict in any way the rights of the Corporation
(or any Parent or Subsidiary employing or retaining such person) or of the
Optionee or the Participant, which rights are hereby expressly reserved by each,
to terminate such person's Service at any time for any reason, with or without
cause.

24.
<PAGE> 57
APPENDIX

The following definitions shall be in effect under the Plan:

A. AUTOMATIC OPTION GRANT PROGRAM shall mean the automatic option
grant program in effect under the Plan.

B. BOARD shall mean the Corporation's Board of Directors.

C. CHANGE IN CONTROL shall mean a change in ownership or control
of the Corporation effected through either of the following transactions:

(i) the acquisition, directly or indirectly, by any
person or related group of persons (other than the Corporation or a
person that directly or indirectly controls, is controlled by, or is
under common control with, the Corporation), of beneficial ownership
(within the meaning of Rule 13d-3 of the 1934 Act) of securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities pursuant to a tender
or exchange offer made directly to the Corporation's stockholders, or

(ii) a change in the composition of the Board over a
period of thirty-six (36) consecutive months or less such that a
majority of the Board members ceases, by reason of one or more
contested elections for Board membership, to be comprised of
individuals who either (A) have been Board members continuously since
the beginning of such period or (B) have been elected or nominated for
election as Board members during such period by at least a majority of
the Board members described in clause (A) who were still in office at
the time the Board approved such election or nomination.

D. CODE shall mean the Internal Revenue Code of 1986, as amended.

E. COMMON STOCK shall mean the Corporation's common stock.

F. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:

(i) a merger or consolidation in which
securities possessing more than fifty percent (50%) of the total
combined voting power of the Corporation's outstanding securities are
transferred to a person or persons different from the per sons holding
those securities immediately prior to such transaction; or

A-1.
<PAGE> 58
(ii) the sale, transfer or other disposition of
all or substantially all of the Corporation's assets in complete
liquidation or dissolution of the Corporation.

G. CORPORATION shall mean ACT Networks, Inc., a Delaware
corporation.

H. DISCRETIONARY OPTION GRANT PROGRAM shall mean the
discretionary option grant program in effect under the Plan.

I. EFFECTIVE DATE shall mean September 6, 1995, the date on which
the Plan was adopted by the Board.

J. ELIGIBLE DIRECTOR shall mean a non-employee Board member
eligible to participate in the Automatic Option Grant Program in accordance with
the eligibility provisions of Article One.

K. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.

L. EXERCISE DATE shall mean the date on which the Corporation
shall have received written notice of the option exercise.

M. FAIR MARKET VALUE per share of Common Stock on any relevant
date shall be determined in accordance with the following provisions:

(i) If the Common Stock is at the time traded on
the Nasdaq National Market, then the Fair Market Value shall be the
closing selling price per share of Common Stock on the date in
question, as such price is reported by the National Association of
Securities Dealers on the Nasdaq National Market or any successor
system. If there is no closing selling price for the Common Stock on
the date in question, then the Fair Market Value shall be the closing
selling price on the last preceding date for which such quotation
exists.

(ii) If the Common Stock is at the time listed on
any Stock Exchange, then the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in question on the
Stock Exchange determined by the Plan Administrator to be the primary
market for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no closing
selling price for the

A-2.
<PAGE> 59
Common Stock on the date in question, then the Fair Market Value shall
be the closing selling price on the last preceding date for which such
quotation exists.

N. 5% STOCKHOLDER shall mean the owner of stock (as determined
under Code Section 424(d)) possessing more than five percent (5%) of the total
combined voting power of the outstanding securities of the Corporation (or any
Parent or Subsidiary).

O. HOSTILE TAKE-OVER shall mean the acquisition, directly or
indirectly, by any person or related group of persons (other than the
Corporation or a person that directly or indirectly controls, is controlled by,
or is under common control with, the Corporation) of beneficial ownership
(within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing more
than fifty percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made directly to
the Corporation's stockholders which the Board does not recommend such
stockholders to accept.

P. INCENTIVE OPTION shall mean an option which satisfies the
requirements of Code Section 422.

Q. INVOLUNTARY TERMINATION shall mean the termination of the
Service of any individual which occurs by reason of:

(i) such individual's involuntary dismissal or
discharge by the Corporation for reasons other than Misconduct, or

(ii) such individual's voluntary resignation
following (A) a change in his or her position with the Corporation
which materially reduces his or her level of responsibility, (B) a
reduction in his or her level of compensation (including base salary,
fringe benefits and target bonuses under any corporate-performance
based bonus or incentive programs) by more than fifteen percent (15%)
or (C) a relocation of such individual's place of employment by more
than fifty (50) miles, provided and only if such change, reduction or
relocation is effected by the Corporation without the individual's
consent.

R. MISCONDUCT shall mean the commission of any act of fraud,
embezzlement or dishonesty by the Optionee or Participant, any unauthorized use
or disclosure by such person of confidential information or trade secrets of the
Corporation (or any Parent or Subsidiary), or any other intentional misconduct
by such person adversely affecting the business or affairs of the Corporation
(or any Parent or Subsidiary) in a material manner. The foregoing definition
shall not be deemed to be inclusive of all the acts or omissions

A-3.
<PAGE> 60
which the Corporation (or any Parent or Subsidiary) may consider as grounds for
the dismissal or discharge of any Optionee, Participant or other person in the
Service of the Corporation (or any Parent or Subsidiary).

S. 1934 ACT shall mean the Securities Exchange Act of 1934, as
amended.

T. NON-STATUTORY OPTION shall mean an option not intended to
satisfy the requirements of Code Section 422.

U. OPTIONEE shall mean any person to whom an option is granted
under the Discretionary Option Grant or Automatic Option Grant Program.

PARENT shall mean any corporation (other than the Corporation)
in an unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.

W. PARTICIPANT shall mean any person who is issued shares of
Common Stock under the Stock Issuance Program.

X. PERMANENT DISABILITY OR PERMANENTLY DISABLED shall mean the
inability of the Optionee or the Participant to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment expected to result in death or to be of continuous duration of twelve
(12) months or more. However, solely for the purposes of the Automatic Option
Grant Program, Permanent Disability or Permanently Disabled shall mean the
inability of the non-employee Board member to perform his or her usual duties as
a Board member by reason of any medically determinable physical or mental
impairment expected to result in death or to be of continuous duration of twelve
(12) months or more.

Y. PLAN shall mean the Corporation's 1995 Stock Option/Stock
Issuance Plan, as set forth in this document.

Z. PLAN ADMINISTRATOR shall mean the particular entity, whether
the Primary Committee, the Board or the Secondary Committee, which is authorized
to administer the Discretionary Option Grant and Stock Issuance Programs with
respect to one or more classes of eligible persons, to the extent such entity is
carrying out its administrative functions under those programs with respect to
the persons under its jurisdiction.

AA. REDECESSOR PLANS shall mean the Corporation's existing 1987
Stock Option Plan and 1993 Stock Option Plan.

A-4.
<PAGE> 61
AB. PRIMARY COMMITTEE shall mean the committee of two (2) or more
non-employee Board members appointed by the Board to administer the
Discretionary Option Grant and Stock Issuance Programs with respect to Section
16 Insiders.

AC. SECONDARY COMMITTEE shall mean a committee of two (2) or more
Board members appointed by the Board to administer the Discretionary Option
Grant and Stock Issuance Programs with respect to eligible persons other than
Section 16 Insiders.

AD. SECTION 16 INSIDER shall mean an officer or director of the
Corporation subject to the short-swing profit liabilities of Section 16 of the
1934 Act.

AE. SECTION 12(G) REGISTRATION DATE shall mean the first date on
which the Common Stock is registered under Section 12(g) of the 1934 Act.

AF. SERVICE shall mean the performance of services for the
Corporation (or any Parent or Subsidiary) by a person in the capacity of an
Employee, a non-employee member of the board of directors or a consultant or
independent advisor, except to the extent otherwise specifically provided in the
documents evidencing the option grant or stock issuance.

AG. STOCK EXCHANGE shall mean either the American Stock Exchange
or the New York Stock Exchange.

AH. STOCK ISSUANCE AGREEMENT shall mean the agreement entered into
by the Corporation and the Participant at the time of issuance of shares of
Common Stock under the Stock Issuance Program.

AI. STOCK ISSUANCE PROGRAM shall mean the stock issuance program
in effect under the Plan.

AJ. SUBSIDIARY shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in the
unbroken chain owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain. For purposes of the grant of
Non-Statutory Options and stock appreciation rights under the Discretionary
Option Grant Program and direct stock issuances under the Stock Issuance
Program, the term Subsidiary shall also include any corporation, partnership,
joint venture or other business entity in which the Corporation owns, directly
or indirectly, stock or a capital or profit interest.

A-5.
<PAGE> 62
AK. TAKE-OVER PRICE shall mean the greater of (i) the Fair Market
Value per share of Common Stock on the date the option is surrendered to the
Corporation in connection with a Hostile Take-Over or (ii) the highest reported
price per share of Common Stock paid by the tender offeror in effecting such
Hostile Take-Over. However, if the surrendered option is an Incentive Option,
the Take-Over Price shall not exceed the clause (i) price per share.

AL. TAXES shall mean the Federal, state and local income and
employment tax liabilities incurred by the holder of Non-Statutory Options or
unvested shares of Common Stock in connection with the exercise of those options
or the vesting of those shares.

AM. 10% STOCKHOLDER shall mean the owner of stock (as determined
under Code Section 424(d)) possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation (or any Parent
or Subsidiary).

A-6.
<PAGE> 63
APPENDIX B

FORM OF AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
ACT NETWORKS, INC.
a Delaware Corporation

*****

The undersigned, Martin Shum and Frederic A. Randall, Jr., certify
that:

1. They are the duly elected and acting President and Secretary,
respectively, of ACT Networks, Inc., a Delaware corporation (the "corporation").

2. The original Certificate of Incorporation of ACT Networks, Inc.
was filed with the Secretary of State of Delaware on March 2, 1995.

3. The Amended and Restated Certificate of Incorporation of ACT
Networks, Inc. has been duly adopted in accordance with Sections 242 and 245 of
the Delaware General Corporation Law by the directors and stockholders of the
corporation.

4. The Amended and Restated Certificate of Incorporation be amended
and restated in its entirety to read as follows:

ARTICLE I

The name of the corporation is ACT NETWORKS, INC. (hereinafter
referred to as the "corporation").

ARTICLE II

The address of the corporation's registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of its registered agent at such
address is The Corporation Trust Company.

ARTICLE III

The nature of the business or purposes to be conducted or promoted
by the corporation is to engage in any lawful act or activity for which
corporations may be organized under the Delaware General Corporation Law.

ARTICLE IV

The corporation is authorized to issue two classes of stock to be
designated "Common Stock" and "Preferred Stock," respectively. The total number
of shares of capital

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<PAGE> 64
stock which the corporation shall have authority to issue is forty-five million
(45,000,000) shares, of which forty million (40,000,000) shares shall be Common
Stock, $0.001 par value per share, and five million (5,000,000) shares shall be
Preferred Stock, par value $.001 per share.

The Board of Directors is hereby authorized to cause shares of
Common Stock to be issued from time to time for such consideration as may be
fixed from time to time by the Board of Directors, or by way of stock split pro
rata to the holders of Common Stock. The Board of Directors may also determine
the proportion of the proceeds received from the sale of such stock which shall
be credited upon the books of the corporation to capital or capital surplus.
Each share of Common Stock shall be equal in all respects to every other share
of Common Stock. The shares of Common Stock shall entitle the holders thereof to
one vote for each share upon all matters upon which stockholders shall have the
right to vote. No holder of shares of Common Stock shall be entitled as such as
a matter of right to subscribe for or purchase any part of any new or additional
issues of stock, or securities convertible into stock, of any class whatsoever,
whether now or hereafter authorized, and whether issued for cash, property,
services or otherwise. The holders of Common Stock shall be entitled to receive
dividends when, if and as declared from time to time by the Board of Directors,
ratably in proportion to the number of shares of Common Stock held by each such
holder. Subject to the rights, privileges and preferences of any present or
future class or series of Preferred Stock, in the event of voluntary or
involuntary liquidation, distribution or sale of assets, dissolution or winding
up of the corporation, the holders of Common Stock shall be entitled to receive
all the remaining assets of the corporation, tangible and intangible, of
whatever kind available for distribution to stockholders, ratably in proportion
to the number of shares of Common Stock held by each such holder.

The Preferred Stock authorized by this Certificate of Incorporation
may be issued from time to time in one or more series without further
stockholder approval. The Board of Directors of the corporation is hereby
authorized to fix or alter, by resolution or resolutions adopted by the Board of
Directors, the powers, designations, preferences and relative, participating,
optional or other rights, if any, or the qualifications, limitations or
restrictions thereof (including dividend rights, dividend rate, conversion
rights, voting rights, rights and terms of redemption (including sinking fund
provisions), the redemption price or prices, and the liquidation preferences)
granted to or imposed upon the Preferred Stock and the number of shares
constituting any such series and the designation thereof, or of any of them. The
Board of Directors is also authorized to increase or decrease the number of
shares of any series, prior or subsequent to the issuance of that series, but
not below the number of shares of such series then outstanding. In case the
number of shares of any series shall be so decreased, the shares constituting
such decrease shall resume the status which they had prior to the adoption of
the resolution originally fixing the number of shares of such series.

ARTICLE V

The corporation is to have perpetual existence.

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<PAGE> 65
ARTICLE VI

The business of the corporation shall be managed by a Board of
Directors. The number of directors of the corporation shall be fixed from time
to time by or pursuant to the By-Laws of the corporation. The directors shall be
classified, with respect to the time for which they severally hold office, into
three classes, as nearly equal in number as is reasonably possible, as shall be
provided in the manner specified in the By-Laws of the corporation. Except as
otherwise required by law (i) newly created directorships resulting from any
increase in the number of directors and any vacancies on the Board of Directors
resulting from death, resignation, disqualification, removal or other cause
shall be filled by the affirmative vote of a majority of the remaining directors
then in office, even though less than a quorum of the Board of Directors, or by
a sole remaining director; (ii) any director elected in accordance with the
preceding clause (i) shall hold office for the remainder of the full term of the
class of directors in which the new directorship was created or the vacancy
occurred and until such director's successor shall have been elected and
qualified; and (iii) no decrease in the number of directors constituting the
Board of Directors shall shorten the term of any incumbent director. The manner
by which a director of the corporation may be removed from office shall be as
provided in the By-Laws of the corporation. Advance notice of stockholder
nominations for the election of directors and advance notice of business to be
brought by stockholders before an annual meeting of stockholders, shall be given
in the manner provided in the By-Laws of the corporation. Elections of directors
need not be by written ballot unless the By-Laws of the corporation shall so
provide.

ARTICLE VII

Meetings of stockholders may be held within or without the State of
Delaware, as the By-Laws may provide. The books of the corporation may be kept
(subject to any provision contained in the By-Laws) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the By-Laws of the corporation.

ARTICLE VIII

Except as otherwise required by law, special meetings of
stockholders, for any purpose or purposes, may be called only by the Chairman of
the Board on his or her own initiative, by the President on his or her own
initiative, by the Chief Executive Officer on his or her own initiative or by
the Board of Directors pursuant to a resolution approved by a majority of the
entire Board of Directors.

ARTICLE IX

The corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter

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prescribed by law, and all rights conferred upon the stockholders herein are
granted subject to this reservation.

ARTICLE X

The corporation may, to the fullest extent to which it is empowered
to do so and under the circumstances permitted by the Delaware General
Corporation Law or any other applicable laws, as they may from time to time be
in effect, indemnify any person who was made or is threatened to be made party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that he
or she is or was a director or officer of the corporation, or is or was serving
at the specific request of the corporation as a director or officer of another
corporation, partnership, joint venture, trust or other enterprise (including,
without limitation, any employee benefit plan), against all expenses (including
attorneys' fees), judgments, fines and amounts incurred by him or her in
connection with such action, suit or proceeding, and may take such steps as may
be deemed appropriate by the Board of Directors, including purchasing and
maintaining insurance, entering into contracts (including, without limitation,
contracts of indemnification between the corporation and its directors and
officers), creating a trust fund, granting security interests or using other
means (including, without limitation, a letter of credit) to ensure the payment
of such amounts as may be necessary to effect such indemnification.

ARTICLE XI

The liability of the directors of the corporation for monetary
damages shall be eliminated to the fullest extent permitted under Delaware law;
provided that in no event will the liability of any director of the corporation
be eliminated or otherwise limited (i) for any breach of the director's duty of
loyalty to the corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv)
for any transaction from which the director derived any improper personal
benefit. If the Delaware General Corporation Law is amended to authorize
corporate action further eliminating or limiting the personal liability of
directors, then the liability of a director of the corporation shall be
eliminated or limited to the fullest extent permitted by the Delaware General
Corporation Law, as so amended.

Any repeal or modification of the foregoing paragraph by the
stockholders of the corporation shall not adversely affect any right or
protection of a director of the corporation existing at the time of such repeal
or modification.

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<PAGE> 67
ARTICLE XII

The name and mailing address of the sole incorporator is:

Martin Shum
188 Camino Ruiz
Camarillo, California 93012

ARTICLE XIII

The provisions of Section 203 of the Delaware General Corporation
Law shall be applicable to this corporation.

ARTICLE XIV

Except as otherwise provided in this Certificate of Incorporation,
in furtherance and not in limitation of the powers conferred by statute, the
Board of Directors is expressly authorized to make, repeal, alter, amend and
rescind any or all of the By-Laws of the corporation.

THE UNDERSIGNED have signed this Amended and Restated Certificate of
Incorporation this _____ day of __________, 1996.

By:___________________________
Martin Shum,
President

Attest: _________________________
Frederic A. Randall, Jr.
Secretary

<PAGE> 68

ACT NETWORKS, INC.

PROXY

Annual Meeting of Stockholders, November 4, 1996

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned revokes all previous proxies, acknowledges receipt of
the Notice of Annual Meeting of Stockholders to be held on November 4, 1996 and
the proxy statement and appoints Martin Shum and Melvin L. Flowers, or either of
them, the proxy of the undersigned, with full power of substitution, to vote all
shares of Common Stock of ACT Networks, Inc. ("ACT") which the undersigned is
entitled to vote, either on his or her own behalf or on behalf of an entity or
entities, at the Annual Meeting of Stockholders (the "Annual meeting") of ACT to
be held on Monday, November 4, 1996 at 2:00 p.m. local time, and at any
adjournment or postponement thereof, and to vote in their discretion on such
other business as may properly come before the Annual Meeting and any
postponement or adjournment thereof.

The following matters are proposed by ACT. Your vote on each matter is
neither conditioned on, or related to, your vote on any of the other matters.

1. APPROVE THE AMENDMENTS TO ACT'S 1995 STOCK OPTION/STOCK ISSUANCE PLAN.

FOR AGAINST ABSTAIN
/ / / / / /

2. APPROVE THE AMENDMENT TO ACT'S CERTIFICATE OF INCORPORATION TO GRANT
THE BOARD OF DIRECTORS THE POWER TO AMEND THE COMPANY'S BYLAWS.

FOR AGAINST ABSTAIN
/ / / / / /

3. APPROVE THE AMENDMENT TO ACT'S CERTIFICATE OF INCORPORATION TO
AUTHORIZE 5,000,000 SHARES OF PREFERRED STOCK, PAR VALUE $0.001.

FOR AGAINST ABSTAIN
/ / / / / /

4. ELECTION OF DIRECTORS.

/ / FOR ALL NOMINEES / / WITHHOLD AUTHORITY TO VOTE / / EXCEPTIONS
LISTED BELOW FOR ALL NOMINEES

INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK THE
"EXCEPTIONS" BOX, AND STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST
BELOW:

- MARTIN SHUM
- BRIG. GEN HAROLD R. JOHNSON

5. RATIFY ERNST & YOUNG, LLP AS INDEPENDENT AUDITORS FOR THE YEAR ENDING
JUNE 30, 1997.

FOR AGAINST ABSTAIN
/ / / / / /

The Board of Directors recommends a vote FOR the proposals set forth
above. This Proxy, when properly executed will be voted as specified above. This
Proxy will be voted FOR Proposals No. 1, 2, 3, 4 and 5 if no specification is
made. THIS PROXY WILL ALSO BE VOTED AT THE DISCRETION OF THE PROXY HOLDERS ON
SUCH MATTERS OTHER THAN THE FIVE SPECIFIC MATTERS AS MAY COME BEFORE THE
MEETING.

<PAGE> 69

Please print the name(s) appearing on each share certificate(s) over which you
have voting authority:___________________________________ Dated:_______________
(Print name(s) as it (they) appear on certificate)

Please sign exactly as your name(s) is (are) shown on the share certificate to
which the Proxy applies. When shares are held by joint tenants, both should
sign. When signing as an attorney, executor, administrator, trustee or guardian,
please give full title, as such. If a corporation, please sign in full corporate
name by the President or another authorized officer. If a partnership, please
sign in the partnership name by an authorized person.

__________________________________________________
(Authorized Signature(s))

PLEASE RETURN YOUR EXECUTED PROXY TO ACT'S TRANSFER AGENT IN THE ENCLOSED
ENVELOPE, OR, IF NECESSARY, DELIVER IT TO ACT'S ATTENTION: CHIEF FINANCIAL
OFFICER.