<PAGE> 1
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:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
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ACT NETWORKS, INC.
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
Board of Directors of Registrant
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies: 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
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: N/A
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.: N/A
- --------------------------------------------------------------------------------
(3) Filing Party: N/A
- --------------------------------------------------------------------------------
(4) Date Filed: N/A
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<PAGE> 2
[actnetworks 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 Tuesday, November 23, 1999 at
2:00 p.m. local time. The Annual Meeting will be held at the Warner Center
Marriott, 21850 Oxnard Street, Woodland Hills, California 91367.
At the meeting, you will be asked to consider and vote upon the following
proposals: (i) the approval of a 200,000 share increase to the Company's 1997
Stock Incentive Plan; (ii) the election of one (1) individual to serve as
director of the Company until the 2002 Annual Meeting (iii) the ratification of
Ernst & Young LLP as the Company's independent auditors for the fiscal year
ending June 30, 2000.
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 postage-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.
We look forward to seeing you at the Annual Meeting.
November 1, 1999 YOUR VOTE IS IMPORTANT.
/s/ ANDRE DE FUSCO
ANDRE DE FUSCO
President and Chief Executive Officer
<PAGE> 3
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
OF
ACT NETWORKS, INC.
NOVEMBER 23, 1999
------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Annual
Meeting") of ACT Networks, Inc., a Delaware corporation (the "Company"), will be
held at the Warner Center Marriott, 21850 Oxnard Street, Woodland Hills,
California 91367, on Tuesday, November 23, 1999 at 2:00 p.m. local time for the
purpose of considering and voting on the following matters:
1. To approve a 200,000 share increase to the Company's 1997 Stock
Incentive Plan;
2. To elect one (1) individual, Archibald J. McGill, to the Company's Board
of Directors to serve as director until the 2002 Annual Meeting and
until his successor has been elected.
3. To ratify the selection of Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending June 30, 2000; and
4. To transact such other business as may properly come before the Annual
Meeting or any adjustments or postponements thereof.
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 30,
1999 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
/s/ ANDRE DE FUSCO
ANDRE DE FUSCO
President and Chief Executive Officer
Calabasas, California
November 1, 1999
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.
26707 WEST AGOURA ROAD
CALABASAS, CALIFORNIA 91302
------------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
These proxy materials 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 Tuesday, November 23, 1999 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 November 1, 1999 to all stockholders entitled to vote at the Annual
Meeting. ACT's principal executive offices are located at 26707 West Agoura
Road, Calabasas, California 91302. The telephone number at that address is (818)
871-6400.
VOTING
Only stockholders of record at the close of business on September 30, 1999
are entitled to notice of, and to vote at, the Annual Meeting. As of September
30, 1999, 10,240,058 shares of the Company's Common Stock were 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 30, 1999. Pursuant to Delaware
law, directors are elected by plurality vote of the stockholders. 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 the
nominee; votes that are withheld will be excluded 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.
VOTING ELECTRONICALLY
A large number of banks and brokerage firms are participating in the ADP
Investor Communication Services online program. This program provides eligible
stockholders who receive a paper copy of the annual report and proxy statement
the opportunity to vote via the Internet or by telephone. If your bank or
brokerage firm is participating in ADP's program, your voting form will provide
instructions. If your voting form does not reference Internet or telephone
information, please complete and return the paper proxy card in the self-
addressed, postage paid envelope provided.
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
<PAGE> 5
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.
SOLICITATION
ACT will bear the entire cost of proxy solicitation, including the costs of
preparing, assembling, printing and mailing this Proxy Statement, the proxy card
and any additional material furnished to stockholders. 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 A 200,000 SHARE INCREASE TO THE 1997 STOCK INCENTIVE PLAN
The Company's stockholders are being asked to approve a 200,000 share
increase to the Company's 1997 Stock Incentive Plan (the "1997 Plan"). The
continued availability of options under the 1997 Plan is necessary for the
Company to attract and retain the services of key individuals essential to the
Company's long-term growth and success. No other changes to the 1997 Plan are
being made.
The 1997 Plan was adopted by the Board of Directors on September 23, 1997
and was approved by the stockholders at the 1997 Annual Meeting. If approved by
the stockholders at the Annual Meeting, the 200,000 share increase to the 1997
Plan will become effectively immediately.
The following is a summary of the principal features of the 1997 Plan. The
summary, however, does not purport to be a complete description of all the
provisions of the 1997 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 Calabasas,
California.
EQUITY INCENTIVE PROGRAMS
The 1997 Plan is comprised of three 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 individuals may, in the Plan Administrator's
discretion, be issued stock directly through the purchase of such shares or as a
bonus award 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 administers 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 Board of Directors of the
Company has appointed Andre de Fusco as the Secondary Compensation Committee
with the authority to grant options under the 1997 Plan to non-executive officer
employees and consultants, subject to certain limitations. The term "Plan
Administrator" as used in this summary will mean the Compensation Committee, the
Secondary Compensation Committee and any other appointed committee acting within
the scope of its administrative authority under the 1997 Plan. Administration of
the Automatic Option Grant Program is self-executing in accordance with the
express provisions of that program, and no Plan Administrator exercises any
discretion with respect to such program.
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<PAGE> 6
SHARE RESERVE
A total of 460,000 shares of Common Stock were originally reserved for
issuance over the term of the 1997 Plan. The share reserve under the 1997 Plan
supplements the 2,280,844 shares authorized for issuance under the Company's
1995 Stock Option/Stock Issuance Plan (the "1995 Plan"), and the 950,000(1)
shares authorized for issuance under the Company's 1997 Non-Executive Officer
Stock Option/Stock Issuance Plan (the "Non-Executive Officer Plan").
Share issuance under the 1995 Plan and the Non-Executive Officer Plan have
no effect upon the number of shares of Common Stock which remain available for
issuance under the 1997 Plan.
In no event may any one participant in the 1997 Plan be granted stock
options, separately exercisable stock appreciation rights and direct stock
issuance for more than 200,000 shares in the aggregate per calendar year.
Stockholder approval of this Proposal will also constitute re-approval of that
limit for purposes of Internal Revenue Code Section 162(m).
As of August 31, 1999, options for 496,584 shares were outstanding under
the 1997 Incentive Plan, and a total of 205,158 shares remained available for
future grant under the 1997 Incentive Plan, assuming stockholder approval of the
200,000 share increase which is the subject of this Proposal; options for
1,305,716 shares were outstanding under the 1995 Plan, and 55,439 shares
remained available for future grant; and options for 848,006 shares were
outstanding under the Non-Executive Officer Plan, and 32,615 shares remained
available for future grant under the Non-Executive Officer Plan.
Should an outstanding option under the 1997 Plan 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 1997 Plan.
Unvested shares issued under the 1997 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 1997 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 are eligible to participate in the Discretionary
Option Grant and Stock Issuance Programs. Non-employee members of the Board are
also eligible to participate in the Automatic Option Grant Program.
As of August 31, 1999, approximately 5 executive officers and 225 other
employees were eligible to participate in the Discretionary Option Grant and
Stock Issuance Programs, together with 4 non-employee Board members who were
also eligible to participate in the Automatic Option Grant Program.
VALUATION
The fair market value per share of Common Stock on any relevant date under
the 1997 Plan is deemed equal to the closing selling price per share on that
date, as reported on the Nasdaq National Market. On August 31, 1999, the closing
selling price per share was $9.6250.
- ---------------
(1) The shares reserve includes the 250,000 share increase to the Non-Executive
Officer Plan authorized by the Board of Directors in January 1999.
3
<PAGE> 7
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 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 of his or her outstanding options to the extent those
options are 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:
Tandem stock appreciation rights provide the holders with the right to
surrender their options for an appreciation distribution from the Company
equal in amount to the excess of (a) the fair market value of the vested
shares of Common Stock subject to the surrendered option over (b) the
aggregate exercise price payable for those shares. Such appreciation
distribution may, at the discretion of the Plan Administrator, be made in
cash or in shares of Common Stock.
Limited stock appreciation rights may be 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 paid per share over (b) the exercise
price payable for such share.
The Plan Administrator has 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. Pursuant to that authority, the Plan
Administrator implemented an option cancellation/regrant program on August 3,
1998 for certain non-employee Board members, executive officers and other
employees holding stock options with an exercise price per share in excess of
the $6.75 per share market price of the Company's Common Stock on that date.
Accordingly, outstanding options for 1,733,278 shares with an exercise price in
excess of $6.75 per share were canceled on August 3, 1998, and new options for
the same aggregate number of shares were granted with an exercise price of $6.75
per share. Each of the new lower-priced options was structured so no vesting
would occur under that option unless the optionee remained in the Company's
employ or service through February 2, 1999. Upon satisfaction of such six (6)-
month employment requirement, the new option immediately vested as to the same
number of option shares for which the cancelled higher-priced option would have
been vested at that time had it remained outstanding, and the new option will
vest as to the remaining shares at the same time those shares would have vested
under the cancelled higher-priced option. Under the program, the following
directors and executive officers had their outstanding options cancelled in
exchange for new options for the same number of shares but with an exercise
price of $6.75 per share: Mr. de Fusco: 374,000 shares with a weighted average
exercise price of $9.03 per share; Mr. Zeile: 90,000 shares with a weighted
average exercise price of $8.75 per share; Mr. Gravel: 42,000 shares with a
weighted average exercise price of $9.42 per share; and Mr. Gluck: 21,000 shares
with a weighted average exercise price of $19.69 per share.
AUTOMATIC OPTION GRANT PROGRAM
The Automatic Option Grant Program under the 1997 Plan replaced the
automatic option grant program for non-employee Board members which was
previously in effect under the 1995 Plan. Stockholder approval of this Proposal
will also constitute approval of each option granted under the Automatic Option
Grant Program
4
<PAGE> 8
on or after the date of the Annual Meeting and the subsequent exercise of that
option in accordance with the terms of such Program.
Under the Automatic Option Grant Program in effect under the 1997 Plan,
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 is automatically 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 is 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 been in the
Company's employ are eligible for one or more 7,000 share option grants. In no
event, however, will any non-employee Board member receive any option grants
under the Automatic Option Grant Program if such individual owns (directly or
indirectly) securities possessing more than five percent (5%) of the total
combined voting power of all classes of stock of the Company (or any parent or
subsidiary) or such person is otherwise affiliated with, or a representative of,
a person or entity that is such a greater than five percent (5%) stockholder.
Each option granted pursuant to the Automatic Option Grant Program 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 such date, subject to earlier termination upon the optionee's
cessation of Board service. Each option granted pursuant to the Automatic Option
Grant Program is immediately exercisable for all the option shares, but any
purchased shares are subject to repurchase by the Company at the exercise price
paid per share upon the optionee's cessation of Board service prior to vesting
in those shares. The shares subject to each initial option grant will vest (and
the Company's repurchase rights will lapse) in thirty-six (36) successive 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 grant date. Each annual option grant will vest (and the
Company's repurchase rights will lapse) on the day immediately preceding the
date of the Annual Stockholders Meeting held in the year immediately following
the year of that 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 for
Board membership. In addition, upon the successful completion of a hostile
tender offer for more than 50% of the Company's 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 paid per share over (b) the exercise price payable for such
share.
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.
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, however, has the discretionary
authority at any time to accelerate the vesting of any outstanding shares under
the Stock Issuance Program.
5
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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 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 in connection with such acquisition will immediately accelerate,
and any unvested shares which do not vest at the time of such acquisition will
vest in full, in the event the individual's service is subsequently terminated
within eighteen (18) months following the acquisition. The Plan Administrator
has 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 eighteen (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.
The acceleration of vesting in the event of a change in ownership or
control of the Company may be seen as an anti-takeover provision and may have
the effect of discouraging a merger proposal, a takeover attempt or other effort
to gain control of the Company.
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 1997 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 withholding
tax liability incurred 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 withholding 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
1997 Plan, (ii) the maximum number and/or class of securities for which any one
person may be granted stock options, separately exercisable stock appreciation
rights and direct stock issuance under the 1997 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 1997 Plan at any time, subject to any
required stockholder approval. The 1997 Plan will terminate on the earliest of
(i) September 22, 2007, (ii) the date on which all shares
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<PAGE> 10
available for issuance under the 1997 Plan have been issued as fully-vested
shares or (iii) the termination of all outstanding options in connection with
certain changes in control or ownership of the Company.
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
November 13, 1997 and August 31, 1999 under the 1995 Plan, the Non-Executive
Officer Plan and the 1997 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
Andre de Fusco.............................................. 694,286 7.48
President and Chief Executive Officer
Martin A. Woll.............................................. 120,000 12.94
Chief Financial Officer
Alain Gravel................................................ 102,000 6.28
Vice President, Engineering
Mario A. Uribe.............................................. 150,000 11.13
Vice President, Sales
Mike T. Zeile............................................... 180,000 7.75
Vice President, Marketing
All current executive officers as a group (5 persons)....... 1,246,286 8.38
DIRECTORS
Frederick W. Gluck.......................................... 71,000 6.84
Director
Archibald J. McGill......................................... 20,000 9.12
Director
Brig. Gen. Harold R. Johnson................................ 20,000 9.12
Director
William W. Ambrose.......................................... 20,000 9.12
Director
All non-employee directors as a group (4 persons)........... 131,000 7.88
All employees, including current officers who are not
executive officers as a group (225 persons)............... 3,169,950 8.91
</TABLE>
NEW PLAN BENEFITS
As of August 31, 1999, no options have been granted, and no direct stock
issuances have been made, on the basis of the 200,000-share increase for which
stockholder approval is sought under this Proposal. At the 1999 Annual Meeting,
each of the following non-employee Board members will, in connection with his
continuation on the Board, receive an option grant for 7,000 shares of Common
Stock: Messrs. Gluck, Ambrose and McGill.
7
<PAGE> 11
FEDERAL INCOME TAX CONSEQUENCES
OPTION GRANTS
Options granted under the 1997 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. The optionee recognizes no taxable income 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 made the subject of
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 of the shares is made more than two
years after the date the option for those shares is granted and more than one
year after the date the option is exercised for those shares. If either of these
two requirements is not satisfied, then a disqualifying disposition will result.
Upon a qualifying disposition, the optionee will recognize long-term
capital gain in an amount equal to the excess of (i) the amount realized upon
the sale or other disposition of the purchased shares over (ii) the exercise
price paid for the shares. If there is a disqualifying disposition of the
shares, then the excess of (i) of the fair market value of those shares on the
exercise date over (ii) the exercise price paid for those shares will be taxable
as ordinary income to the optionee. Any additional gain or loss recognized upon
the disposition will be treated as a capital gain or loss by the optionee.
If the optionee makes a disqualifying disposition of the purchased shares,
then the Company will be entitled to an income tax deduction, for the taxable
year in which such disposition occurs, equal to the excess of (i) the fair
market value of such shares on the option exercise date over (ii) the exercise
price paid for the shares. 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. An optionee upon the grant of a non-statutory option
recognizes no taxable income. 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
shares vest over (ii) the exercise price paid for those 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.
8
<PAGE> 12
DIRECT STOCK ISSUANCE
The tax principles applicable to direct stock issuance under the 1997 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
Under current accounting rules, 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 result in a direct 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 with exercise or
issue prices equal to the fair market value of the shares on the grant or issue
date will not result in any direct charge to the Company's earnings. However,
the fair value of those options is required to be disclosed in the notes to the
Company's financial statements, and the Company must also 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 may be a factor in determining the
Company's earnings per share on a fully diluted basis.
In September 1999, the Financial Accounting Standards Board issued an
exposure draft of a proposed interpretation of the current accounting principles
applicable to equity incentive plans. Under the proposed interpretation, option
grants made to independent consultants (but not non-employee Board members)
after December 15, 1998 will result in a direct charge to the Company's reported
earnings based upon the fair value of the option measured initially as of the
grant date of that option and then subsequently on the vesting date of each
installment of the underlying option shares. If the proposed interpretation is
adopted, then such charge will accordingly include the appreciation in the value
of the option shares over the period between the grant date of the option (or,
if later, the effective date of the final interpretation) and the vesting date
of each installment of the option shares. In addition, if the proposed
interpretation is adopted, any options which are repriced after December 15,
1998 will also trigger a direct charge to the Company's reported earnings
measured by the appreciation in value of the underlying shares between the grant
date of the option (or, if later, the effective date of the final
interpretation) and the date the option is exercised for those shares.
Should one or more individuals be granted tandem stock appreciation rights
under the plan, then such rights would result in a compensation expense to be
charged against the Company's reported earnings. Accordingly, at the end of each
fiscal quarter, the amount (if any) by which the fair market value of the shares
of Common Stock subject to such outstanding stock appreciation rights has
increased from the prior quarter-end would be accrued as compensation expense,
to the extent such fair market value is in excess of the aggregate exercise
price in effect for those rights.
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 Annual Meeting is
required for approval of the 200,000 share increase to the 1997
9
<PAGE> 13
Plan. Should such stockholder approval not be obtained, then the 200,000 share
increase will not become effective.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors recommends that the stockholders vote FOR the
approval of the 200,000 share increase to the 1997 Plan. The Board believes that
it is in the best interests of the Company to maintain an 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.
PROPOSAL NO. 2
ELECTION OF DIRECTORS -- NOMINEE
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. As there are two vacancies
on the Company's Board of Directors in the class of directors whose term expires
at this Annual Meeting, Mr. McGill, an incumbent director, was reclassified, and
will stand for election.
Proxyholders will vote all proxies received by them FOR the nominee listed
below unless otherwise instructed in writing on such proxy. The candidate
receiving the highest number of affirmative votes of shares entitled to vote at
the Annual Meeting will be elected director 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 NOMINEE
INFORMATION WITH RESPECT TO NOMINEE
The following table sets forth certain information concerning the nominee
for director of ACT as of September 30, 1999.
NOMINEE FOR ELECTION
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Archibald J. McGill(1).............................. 68 Director
</TABLE>
- ---------------
(1) Member of the Compensation Committee and the Audit Committee.
ARCHIBALD 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
1985. 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. Mr. McGill is presently a member of the Board
of Directors of Disc, Inc., Ciber, Inc. and Carlton Corporation.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors recommends a vote FOR the nominee named above.
10
<PAGE> 14
CONTINUING DIRECTORS
DIRECTOR CONTINUING TO SERVE UNTIL 2000
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
William W. Ambrose (1).............................. 42 Director
</TABLE>
- ---------------
(1) Member of the Compensation Committee and the Audit Committee.
WILLIAM W. AMBROSE has served as a member of the Board of Directors since
1993. Mr. Ambrose is currently an independent consultant for several private
companies. Prior to 1998, Mr. Ambrose was the President of Pyramid Research,
Inc. a telecommunications market research organization that he founded in 1986.
Mr. Ambrose was initially 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 a former stockholder. Mr. Ambrose is presently a member of the
Board of Directors of CGLA Infrastructure.
DIRECTORS CONTINUING TO SERVE UNTIL 2001
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Andre de Fusco............. 41 Director, Chief Executive Officer and
President
Frederick W. Gluck......... 64 Director
</TABLE>
ANDRE DE FUSCO was appointed as a member of the Board of Directors,
President and Chief Executive Officer in July 1998. Previously Mr. de Fusco held
the positions of Vice President and General Manager of the Company's Broadband
Network Services subsidiary since August 1997, concurrent with 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 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. Mr. de Fusco is
presently a member of the Board of Directors of Isocor.
FREDERICK W. GLUCK has served as a member of the Board of Directors since
March 1997. Mr. Gluck is currently of counsel to McKinsey and Company. Mr. Gluck
was Vice-Chairman and a director of the Bechtel Group from 1995 through July
1998. Previously, Mr. Gluck was at McKinsey and Company for 27 years and led the
firm from 1988 until his retirement in 1995. Mr. Gluck is presently a member of
the Board of Directors of Amgen, Columbia HCA, Thinking Tools, Inc. and several
other private companies.
RESIGNING DIRECTOR
Brig. Gen. (ret.) Johnson will resign from the Board of Directors,
effective November 22, 1999.
BOARD MEETINGS
The Board of Directors met 13 times during the fiscal year ending June 30,
1999. 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. Messrs. William W. Ambrose and Archibald J. McGill
are the members of the Audit Committee. The Audit Committee held two meetings
during the fiscal year ended June 30, 1999.
The Board of Directors has a Compensation Committee, which administers the
Company's stock option plans. The members of the Compensation Committee are
Messrs. William W. Ambrose and Archibald J. McGill. The Compensation Committee
held one meetings during the fiscal year ending June 30, 1999.
The Company's stock option plans also provide that the Board may delegate
the administration of such stock option plans, with respect to the Company's
non-executive officers and employees, to a Secondary
11
<PAGE> 15
Compensation Committee. Andre de Fusco is currently the only member of the
Secondary Compensation Committee. The Secondary Compensation Committee held 54
meetings during the fiscal year ended June 30, 1999.
DIRECTOR COMPENSATION
Each non-employee director (other than a director who serves as
representative of a stockholder owning 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 1999 fiscal year, certain non-employee directors were eligible
to receive option grants under the Automatic Option Grant Program in effect
under the Company's 1997 Plan. Accordingly, at the 1998 Annual Stockholders
Meeting held on November 30, 1998, 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 $10.25 per share: Messrs.
Ambrose, McGill, Gluck and Brig. Gen. (ret.) Johnson. Brig. Gen. Johnson no
longer serves on the Company's Board of Directors. In addition, on October 19,
1998, each of the above named directors also received an option grant under the
Discretionary Option Grant Program under the Company's 1997 Plan for 3,000
shares with an exercise price of $7.5625 per share. 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 and 3,000 share grant will vest on the
day immediately preceding the date of the 1999 Annual Meeting, provided the
optionee continues in Board service through that date.
Mr. Gluck also participated in the August 3, 1998 option
cancellation/regrant program, pursuant to which his outstanding options for
21,000 shares with an exercise price in excess of $6.75 per share were cancelled
and replaced with new options for the same number of shares but with an exercise
price of $6.75 per share, the fair market value of the Common Stock on the grant
date of those new options.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee of the Company's Board of
Directors are Messrs. William W. Ambrose and Archibald J. McGill. No member of
the Committee was at any time during the 1999 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
12
<PAGE> 16
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. 3
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, 1999. 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, 2000 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 have any material relationship with ACT or 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, 2000. 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, 2000.
13
<PAGE> 17
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, 1999 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
OWNED(1)
DIRECTORS, FIVE PERCENT STOCKHOLDERS, NAMED EXECUTIVE --------------------
OFFICERS AND DIRECTORS AND OFFICERS AS A GROUP NUMBER PERCENT
----------------------------------------------------- --------- -------
<S> <C> <C>
Gilder Gagnon Howe & Co. LLC(2)(3).......................... 1,104,275 10.8%
1775 Broadway, 26th Floor, New York, NY 10019
Paul Tudor Jones, II(2)(4).................................. 729,400 7.1
600 Steamboat Road, Greenwich, CT 06830
Dimensional Fund Advisors Inc.(2)(5)........................ 579,600 5.7
1299 Ocean Avenue, 11th Floor, Santa Monica, CA 90401
Andre de Fusco(6)........................................... 407,504 4.0
Martin A. Woll(7)........................................... 120,736 1.2
Alain Gravel(8)............................................. 76,321 *
Mario Uribe(9).............................................. 20,000 *
Mike T. Zeile(10)........................................... 91,792 *
Brig. Gen. H. R. Johnson(11)................................ 17,000 *
William W. Ambrose(12)...................................... 59,155 *
Archibald J. McGill(13)..................................... 66,857 *
Frederick W. Gluck(14)...................................... 92,000 *
All directors and executive officers as a group (9
persons)(15)(16).......................................... 951,365 9.3%
</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 and except as indicated
in the other footnotes to this table. Beneficial ownership is determined in
accordance with the rules of the Commission. In computing the number of
shares beneficially owned by a person and the percentage ownership of that
person, shares of Common Stock subject to options or warrants held by that
person that are currently exercisable or exercisable within 60 days after
August 31, 1999 are deemed outstanding. Such shares, however, are not
deemed outstanding for the purpose of computing the percentage ownership of
any other person.
(2) Based upon information obtained from Forms 13G supplied to the Company by
Gilder as of June 30, 1999, Dimensional as of February 11, 1999 and Tudor
Investment Corporation ("TIC") as of July 29, 1999.
(3) Gilder Gagnon Howe & Co. LLC have shared dispositive power over the shares.
(4) Paul Tudor Jones, II refers to the following persons with shared voting and
dispositive power: The shares of Common Stock reported herein as
beneficially owned are owned directly by Tudor BVI (182,500 shares), TPT
(41,800 shares), Raptor L.P. (83,000 shares), Raptor Ltd. (382,200 shares)
and Upper Mill (39,900 shares). Because TIC is the sole general partner of
Raptor L.P. and provides investment advisory services to Raptor Ltd.,
Raptor L.P., Tudor BVI and Upper Mill, TIC may be deemed to beneficially
own the shares of Common Stock owned by each of such Reporting Persons. TIC
expressly disclaims such beneficial ownership. In addition, because Mr.
Jones is the controlling shareholder of TIC and the indirect controlling
equity holder of TPT, Mr. Jones may be deemed to
14
<PAGE> 18
beneficially own the shares of Common Stock deemed beneficially owned by
TIC and TPT. Mr. Jones expressly disclaims such beneficial ownership.
(5) Dimensional Fund Advisors Inc. ("Dimensional"), an investment advisor
registered under Section 203 of the Investment Advisors Act of 1940,
furnishes investment advice to four investment companies registered under
the Investment Company Act of 1940, and serves as investment manager to
certain other investment vehicles, including commingled group trusts.
(These investment companies and investment vehicles are the "Portfolios").
In its role as investment advisor and investment manager, Dimensional
possesses both voting and investment power over the securities of the
Issuer described in this schedule that are owned by the Portfolios. All
securities reported in this schedule are owned by the Portfolios, and
Dimensional disclaims beneficial ownership of such securities.
(6) Includes 401,000 shares issuable upon exercise of immediately exercisable
options, of which 178,760 shares will be vested within 60 days from August
31, 1999.
(7) Includes 120,000 shares issuable upon exercise of immediately exercisable
options, of which no shares will be vested within 60 days from August 31,
1999.
(8) Includes 76,200 shares issuable upon exercise of immediately exercisable
options, of which 42,900 shares will be vested within 60 days from August
31, 1999.
(9) Mr. Uribe owns 20,000 shares, which were acquired by him prior to his
employment with the Company. No shares will be vested within 60 days from
August 31, 1999.
(10) Includes 90,000 shares issuable upon exercise of immediately exercisable
options, of which 27,000 shares will be vested within 60 days from August
31, 1999.
(11) Includes 17,000 shares issuable upon exercise of immediately exercisable
options, of which 10,000 shares will be vested within 60 days from August
31, 1999.
(12) Includes 25,155 shares beneficially owned by Stone Silo Investments. Mr.
Ambrose, as sole owner of Stone Silo Investments, may be deemed to have
beneficial ownership of these shares. Also includes 34,000 shares issuable
upon exercise of immediately exercisable options, of which 27,000 shares
will be vested within 60 days from August 31, 1999.
(13) Includes 66,857 shares issuable upon exercise of immediately exercisable
options, of which 59,857 shares will be vested within 60 days from August
31, 1999.
(14) Includes 92,000 shares issuable upon exercise of immediately exercisable
options of which 46,840 shares will be vested within 60 days from August
31, 1999.
(15) Includes 25,155 shares owned by Stone Silo Investments and 20,000 owned by
Mr. Uribe. Also includes an aggregate of 897,057 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
392,357 shares will be vested within 60 days from August 31, 1999.
(16) The business address for the Company's directors and executive officers is
as follows: c/o ACT Networks, Inc., 26707 West Agoura Road, Calabasas,
California 91302.
15
<PAGE> 19
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, 1999.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Andre de Fusco................... 41 President, Chief Executive Officer and Director
Martin A. Woll................... 49 Chief Financial Officer and Vice President, Finance
Alain Gravel..................... 40 Vice President, Engineering
Mike T. Zeile.................... 35 Vice President, Marketing
Mario Uribe...................... 51 Vice President, Sales
Brig. Gen. Harold R. 76 Director
Johnson(1)(2)..................
William W. Ambrose(1)(2)......... 42 Director
Archibald J. McGill(1)(2)........ 68 Director
Frederick W. Gluck............... 64 Director
</TABLE>
- ---------------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
ANDRE DE FUSCO was appointed as a member of the Board of Directors and
President and Chief Executive Officer in July 1998. Previously Mr. de Fusco held
several positions with the Company, including the position of Vice President and
General Manager of the Company's Broadband Network Services subsidiary from
August 1997 to June 1998, Vice President, Strategic Planning and Business
Development from December 1995 to June 1998 and Vice President of Marketing from
December 1994 to 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. Mr. de Fusco is
presently a member of the Board of Directors of Isocor.
MARTIN A. WOLL has served as Chief Financial Officer and Vice President of
Finance since December 1998. Prior to joining the Company, Mr. Woll was a
partner with Coopers & Lybrand L.L.P. from 1984 to 1998. Mr. Woll is a certified
public accountant.
ALAIN GRAVEL was appointed Vice President, Engineering in July 1998. From
November 1995 to July 1998, Mr. Gravel served as Vice President of Research &
Development, Data Products, of the Company's Enterprise Network Systems
division. Mr. Gravel served as Vice President of Research & Development of
Presticom until the Company acquired Presticom in November 1995. Mr. Gravel was
a co-founder of Presticom and was responsible for the development of the
NetPerformer product line. He also served on the Board of Directors of
Presticom. Mr. Gravel was employed as the Software Development Manager for
Memotec from 1988 to 1989 and for Datagram, a developer of statistical
multiplexers, from 1984 to 1988.
MIKE T. ZEILE was appointed Vice President, Marketing in July 1998. Mr.
Zeile held the position of Vice President of Marketing at ComCore Semiconductor
from July 1997 to July 1998 where he managed all aspects of the Company's
marketing business as well as product management. Prior to joining ComCore, Mr.
Zeile worked at Sourcecom Corporation, where he led the definition of the
product platform that became the basis for ACT's new ServiceXchange product
family. Mr. Zeile has also held various senior management and marketing
positions at ADC Telecommunications from 1987 to 1997.
MARIO URIBE was appointed Vice President, Sales in March 1999. Mr. Uribe
held the position of Vice President and General Manager of the U.S. Eastern
Region and Israel at Newbridge Networks from 1994 to March 1999 where he was
responsible for sales and support of all Newbridge products in the region. Mr.
Uribe has also held various management and sales positions at Newbridge,
Timeplex Inc. and Xerox Corporation from 1974 to 1994.
BRIG. GEN. (RETIRED) HAROLD R. JOHNSON has served as a member of the Board
of Directors of the Company since 1988. Brig. Gen. Johnson retired in 1999 as
Senior Vice President of Business Development at
16
<PAGE> 20
The Fairchild Corporation, an aerospace and communications company, where he had
served 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 telecommunications equipment. Brig. Gen. Johnson presently
serves as a member of the Board of Directors of several companies, including
KLT, Telecoms, ORAMIR Semi Conductor Equipment Corporation, Celtronix, Radio
Connect and Accelerated Networks.
WILLIAM W. AMBROSE has served as a member of the Board of Directors since
1993. Mr. Ambrose is currently an independent consultant for several private
companies. Prior to 1998, Mr. Ambrose was the President of Pyramid Research,
Inc., a telecommunications market research organization that he founded in 1986.
Mr. Ambrose was initially 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 a former stockholder. Mr. Ambrose is presently a member of the
Board of Directors of CGLA Infrastructure.
ARCHIBALD 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
1985. 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. Mr. McGill is presently a member of the Board
of Directors of Disc, Inc., Ciber, Inc. and Carlton Corporation.
FREDERICK W. GLUCK has served as a member of the Board of Directors since
March 1997. Mr. Gluck is currently of counsel to McKinsey and Company. Mr. Gluck
was Vice Chairman and a director of the Bechtel Group from 1995 through July
1998. Previously, Mr. Gluck was at McKinsey and Company for 27 years and led the
firm from 1988 until his retirement in 1995. Mr. Gluck is presently a member of
the Board of Directors of Amgen, Columbia HCA, Thinking Tools, Inc. and several
other private companies.
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
director in Class I (Mr. de Fusco and Mr. Gluck) serves for a term ending on the
date of the annual meeting of stockholders held in 2001; each director in Class
II (Mr. Ambrose) serves for a term ending on the date of the annual meeting of
stockholders held in 2000 and each director in Class III (Mr. McGill) serves for
a term ending on the date of the annual meeting of stockholders held in 1999.
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 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 there has been compliance with all filing requirements applicable to the
Company's executive officers, directors and more than 10% stockholders.
17
<PAGE> 21
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, 1999, assuming $100 invested on May 3, 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 the S&P 500 provide an appropriate measure of the
Company's stock price performance as the NTI and the S&P 500 listed companies
are comparable to the Company in size and/or industry focus.
PERFORMANCE GRAPH FOR ACT NETWORKS, INC.
AMONG ACT NETWORKS, INC., THE S&P 500 INDEX AND
THE NASDAQ TELECOMMUNICATIONS INDEX
COMPARISON OF 50 MONTH CUMULATIVE TOTAL RETURN*
AMONG ACT NETWORKS, INC., THE S & P 500 INDEX
AND THE NASDAQ TELECOMMUNICATIONS INDEX
[GRAPH]
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
----------------------------------------------------
5/03/95 6/95 6/96 6/97 6/98 6/99
------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
ACT NETWORKS, INC............................. 100 133 250 98 67 131
S & P 500..................................... 100 105 132 178 232 284
NASDAQ TELECOMMUNICATIONS..................... 100 109 135 149 251 406
</TABLE>
- ---------------
* $100 invested on 5/3/95 in stock or index -- including reinvestment of
dividends. Fiscal year ending June 30.
18
<PAGE> 22
EXECUTIVE COMPENSATION AND RELATED INFORMATION
COMPENSATION COMMITTEE REPORT(2)
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"), the 1997 Stock Incentive Plan (the "1997
Incentive Plan") and the 1997 Non-Executive Officer Stock Option/Stock Issuance
Plan. Equity incentives may be granted under the 1995 Plan or 1997 Incentive
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 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, 1999, 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. In setting the base salaries of the executive officers for
the 1999 fiscal year, the Committee took a number of factors into account: the
experience and personal performance of the officer, the salary levels in effect
for 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 officer's 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.
- 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 1999, other than commissions, certain executive officers earned
bonuses for the first and third quarters because certain of the performance
targets tied to the Company's revenues and/or earnings per share were attained
for those quarters. No bonuses were earned for the second and fourth quarters of
fiscal 1999.
- LONG-TERM INCENTIVE COMPENSATION. Each option grant to executive officers
under the 1995 Plan and the 1997 Incentive Plan is designed to align the
interests of the executive officers with those of the stockholders and provide
each such optionee 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
- ---------------
(2) The material in this report is not "soliciting material," is not deemed
filed with 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").
19
<PAGE> 23
number of shares subject to each option grant takes into account 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).
In fiscal 1999, the Committee granted options to its executive officers as
detailed in the table below under the heading "Option Grants." 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.
- CEO COMPENSATION. The base salary established for the Company's Chief
Executive Officer, Mr. de Fusco, for the year ended June 30, 1999 reflects the
Committee's decision to maintain a level of stability and certainty with respect
to this component of the CEO's 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. de Fusco's incentive compensation for the 1999 fiscal year was to
have a significant portion of that compensation based on the Company's
performance. Mr. de Fusco was eligible for an $81,000 performance bonus, which
was tied to targets based on the Company's revenues and earnings. However,
because certain targets were met for the first and third quarters, Mr. de Fusco
earned a bonus of $19,035 for the 1999 fiscal year, and no bonuses were earned
for the second and fourth quarters of that year.
OPTION CANCELLATION/REGRANT PROGRAM. During the 1999 fiscal year, the
Committee implemented an option cancellation/regrant program for certain
non-employee Board members, executive officers and other employees holding stock
options with an exercise price per share in excess of the market price of the
Company's Common Stock at the time the cancellation/regrant occurred. The
cancellation/regrant was effected on August 3, 1998, and a number of outstanding
options with an exercise price in excess of $6.75 per share were canceled and
new options for the same aggregate number of shares were granted with an
exercise price of $6.75 per share. The Committee felt that such an option
cancellation/regrant program was necessary in order to retain the services of
individuals essential to Company's future growth and financial success.
Accordingly, to assure that the program would serve as such a retention vehicle,
each of the new lower-priced options was structured so no vesting would occur
under that option unless the optionee remained in the Company's employ through
February 4, 1999. Upon satisfaction of such six (6)-month employment
requirement, the new option immediately vested as to the same number of option
shares for which the cancelled higher-priced option would have been vested at
that time had it remained outstanding, and the new option will vest as to the
remaining shares at the same time those shares would have vested under the
cancelled higher-priced option.
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, 1999 did not, and the compensation to be
paid for the year ending June 30, 2000 is not expected to, exceed the $1 million
limit per officer. In addition, the 1995 and 1997 Plans 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
20
<PAGE> 24
executive officers. The Committee will reconsider this decision should the
individual compensation of any executive officer ever approach the $1 million
level.
Compensation Committee
Archibald J. McGill
William W. Ambrose
EXECUTIVE COMPENSATION
The following table sets forth the aggregate compensation earned, by the
Chief Executive Officer and each of the four additional most highly compensated
executive officers for the fiscal year ended June 30, 1999 (the "Named Executive
Officers"), for services rendered in all capacities to the Company for the
fiscal years ended June 30, 1997, 1998 and 1999. Except as indicated below,
during fiscal years 1997, 1998 and 1999, no Named Executive Officer received
other compensation in excess of the lesser of $50,000 or 10% of such
individual's base salary and bonus for the applicable fiscal year, nor did any
such individual receive any restricted stock award, stock appreciation right or
payment under any long term incentive plan for the applicable fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION --------------
-------------------------------------------- SECURITIES
FISCAL OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITIONS YEAR SALARY($)(1) BONUS($)(2) COMPENSATION($) OPTIONS(#)(10)
---------------------------- ------ ------------ ----------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Andre de Fusco.................... 1999 270,000 19,035 674,286(5)
President and CEO 1998 140,000 27,740 20,000(6)
1997 140,000 -- --
Martin A. Woll.................... 1999 90,000 3,038 120,000
CFO and Vice President, Finance 1998 -- -- --
1997 -- -- --
Alain Gravel...................... 1999 134,756 9,870 44,600(4) 87,000(7)
Vice President, Engineering 1998 76,230 -- 45,000(8)
1997 65,782 366 --
Mike T. Zeile..................... 1999 135,782 9,870 180,000(9)
Vice President, Marketing 1998 -- -- --
1997 -- -- --
Mario Uribe....................... 1999 57,283 12,832(3) 150,000
Vice President, Sales 1998 -- -- --
1997 -- -- --
</TABLE>
- ---------------
(1) Includes amounts deferred under the Company's 401(k) Plan.
(2) Includes bonuses earned in the indicated year and paid in the subsequent
year. Excludes bonuses paid in the indicated year but earned in the
preceding year.
(3) Represents amounts paid in commissions.
(4) Amounts paid by the Company as reimbursement for relocation, immigration
and tax planning expenses.
(5) Mr. de Fusco was granted (i) options for 2,286 shares on August 1, 1995,
(ii) options for 52,000 shares on September 19, 1995, (iii) options for
20,000 shares on December 3, 1997 and (iv) options for 300,000 shares on
July 1, 1998 at exercise prices of $16.50, $13.00, $7.69 and $8.38,
respectively. In connection with the Company's cancellation/regrant program
on August 3, 1998, all such options were cancelled and regranted with an
exercise price of $6.75 per share, the closing price of the Company's
21
<PAGE> 25
Common Stock. Accordingly, the net number of shares for which Mr. de Fusco
was granted options during the 1999 fiscal year was 374,286 shares.
(6) As indicated in footnote (5) of this table, these options were originally
granted on December 3, 1997 with an exercise price of $7.69 per share and
were cancelled and regranted on August 3, 1998 with an exercise price of
$6.75 per share, the closing price of the Company's Common Stock.
(7) Mr. Gravel was granted (i) options for 30,000 shares on December 5, 1995
and (ii) options for 15,000 shares on December 3, 1997 at exercise prices
of $10.38 and $7.69, respectively. In connection with the Company's
cancellation/regrant program on August 3, 1998, his pre-1998 options
covering a total of 42,000 shares were cancelled and regranted with an
exercise price of $6.75 per share, the closing price of the Company's
common stock.
(8) As indicated in footnote (7) of this table, these options were originally
granted on December 3, 1997 with an exercise price of $7.69 per share and
were cancelled and regranted on August 3, 1998 with an exercise price of
$6.75 per share, the closing price of the Company's Common Stock.
(9) Mr. Zeile was granted options for 90,000 shares on July 13, 1998 with an
exercise price of $8.75. In connection with the Company's
cancellation/regrant program on August 3, 1998, such options were cancelled
and regranted with an exercise price of $6.75 per share, the closing price
of the Company's common stock. Accordingly, the net number of shares for
which Mr. Zeile was granted options during fiscal year 1999 was 90,000
shares.
(10) The options are immediately exercisable (except Mr. Uribe's options, which
are installment options) with any unvested shares acquired under such
option to be subject to repurchase by the Company, at the exercise price
paid per share, upon termination of the optionee's service with the Company
prior to vesting in those shares. The shares will vest according to the
following schedule ("Standard Vesting Schedule"): twenty-four percent (24%)
of the shares vest upon completion of one year following the vesting
commencement date and the balance will vest at a rate of two percent (2%)
per full month of employment thereafter. Mr. Uribe's options will become
exercisable in installments in accordance with the Standard Vesting
Schedule.
22
<PAGE> 26
OPTION GRANTS
The following table sets forth, for the fiscal year ended June 30, 1999,
information concerning the grant of options to purchase shares of Common Stock
under the Company's 1995 Plan or 1997 Incentive Plan to the Named Executive
Officers. No stock appreciation rights were granted to any of the Named
Executive Officers during fiscal year 1999.
OPTION GRANTS IN YEAR ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
NUMBER OF PERCENT OF RATES OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(7)
OPTIONS EMPLOYEES IN PRICE EXPIRATION ------------------------
NAME GRANTED(#)(1) FISCAL 1999(5) ($/SH)(6) DATE 5%($) 10%($)
---- ------------- -------------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Andre de Fusco.......... 2,286(2) 0.06% 6.75 8/1/05 9,705 24,594
52,000(2) 1.38% 6.75 9/18/05 220,742 559,404
20,000(2) 0.53% 6.75 12/3/07 84,901 215,155
300,000(2) 7.99% 8.38 7/1/08 1,581,041 4,006,669(8)
300,000(2) 7.99% 6.75 7/1/08 1,273,512 3,227,328
Mario Uribe............. 150,000 3.99% 11.13 2/23/09 1,049,940 2,660,753
Martin A. Woll.......... 120,000 3.20% 12.94 12/28/08 978,502 2,477,876
Mike T. Zeile........... 90,000(3) 2.40% 8.75 7/13/08 495,255 1,255,072(8)
90,000(3) 2.40% 6.75 7/13/08 382,053 968,199
Alain Gravel............ 27,000(4) 0.72% 6.75 12/4/05 114,616 290,460
15,000(4) 0.40% 6.75 12/3/07 63,676 161,366
45,000 1.20% 5.38 9/10/08 152,255 385,845
</TABLE>
- ---------------
(1) The options granted to the Named Executive Officers have a maximum term of
10 years measured from the option grant or, for any option granted in
cancellation of a higher-priced option, measured from the original grant
date of the cancelled higher-priced option, subject to earlier termination
in the event of the optionee's cessation of service with the Company. The
options are immediately exercisable (except for Mr. Uribe's options, which
are installment options) with any unvested shares acquired under such option
to be subject to repurchase by the Company, at the exercise price paid per
share, upon termination of the optionee's service with the Company prior to
vesting in those shares. The shares will vest according to the following
schedule ("Standard Vesting Schedule"): 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. Mr. Uribe's options will become exercisable in
installments in accordance with the Standard Vesting Schedule. All of 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.
(2) Mr. de Fusco was granted (i) options for 2,286 shares on August 1, 1995,
(ii) options for 52,000 shares on September 19, 1995, (iii) options for
20,000 shares on December 3, 1997 and (iv) options for 300,000 shares on
July 1, 1998 at exercise prices of $16.50, $13.00, $7.69 and $8.38,
respectively. In connection with the Company's cancellation/regrant program
on August 3, 1998, all such options were cancelled and regranted with an
exercise price of $6.75 per share, the closing price of the Company's Common
Stock. Accordingly, the net number of shares for which Mr. de Fusco was
granted options during the 1999 fiscal year was 374,286 shares.
(3) Mr. Zeile was granted options for 90,000 shares on July 13, 1998 with at an
exercise price of $8.75. In connection with the Company's
cancellation/regrant program on August 3, 1998, such options were cancelled
and regranted with an exercise price of $6.75 per share, the closing price
of the Company's Common Stock. Accordingly, the net number of shares for
which Mr. Zeile was granted options during fiscal year 1999 was 90,000
shares.
(4) Mr. Gravel was granted (i) options for 30,000 shares on December 5, 1995 and
(ii) options for 15,000 shares on December 3, 1997 and (iii) options for
45,000 shares on September 10, 1998 at exercise prices of $10.38 and $7.69
and $5.38, respectively. In connection with the Company's cancellation/
23
<PAGE> 27
regrant program on August 3, 1998, his pre-1998 options covering a total of
42,000 shares were cancelled and regranted with an exercise price of $6.75
per share, the closing price of the Company's Common Stock.
(5) The Company granted new stock options for 2,021,858 shares and options for
1,733,278 shares were cancelled and regranted in connection with the
cancellation/regrant program, for a total of 3,755,136 stock option grants
in fiscal 1999. The percentages in the table above are based on 3,755,136
stock options granted in fiscal 1999.
(6) 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 in loaning the
optionee sufficient funds to pay the exercise price for the purchased
shares.
(7) 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.
(8) This option was cancelled in connection with the August 3, 1998
cancellation/regrant program and is no longer outstanding.
OPTION REPRICING
In order to reincentivize the company's employees, the board of directors,
upon recommendation of the compensation committee, in august 1998 approved an
option cancellation/regrant program pursuant to which employees could surrender
for cancellation options granted by the company having exercise prices greater
than $6.75 per share and receive in the place of such surrendered options new
options having an exercise price of $6.75 per share, the fair market value of
the company's common stock on the date of board approval and date of grant. The
new options issued pursuant to this cancellation/regrant program were subject to
the same vesting provisions as the surrendered options, except each employee
participating in the cancellation/regrant program had to remain in the Company's
employ for a period of six (6) months following August 3, 1998 to be entitled to
any vesting which may have occurred. The following table sets forth certain
information as of June 30, 1999 with respect to the repricing of certain stock
options held by the company's named Executive Officers since the Company's
initial public offering.
TEN-YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
NUMBER OF MARKET LENGTH OF
SECURITIES PRICE OF EXERCISE ORIGINAL
UNDERLYING STOCK AT PRICE AT NEW OPTION TERM
DATE OF OPTIONS TIME OF TIME OF EXERCISE DATE OF
NAME REPRICING(1) REPRICED(#) REPRICING($) REPRICING($) PRICE($) REPRICING
---- ------------ ----------- ------------ ------------ -------- --------------
<S> <C> <C> <C> <C> <C> <C>
Andre de Fusco.................. 8/3/98 2,286 6.75 16.50 6.75 7 yrs. 0 mos.
President and CEO 8/3/98 52,000 6.75 13.00 6.75 7 yrs. 2 mos.
8/3/98 20,000 6.75 7.69 6.75 9 yrs. 4 mos.
8/3/98 300,000 6.75 8.38 6.75 9 yrs. 11 mos.
Alain Gravel.................... 8/3/98 27,000 6.75 10.38 6.75 7 yrs. 4 mos.
Vice President, Engineering 8/3/98 15,000 6.75 7.69 6.75 9 yrs. 4 mos.
Mike T. Zeile................... 8/3/98 90,000 6.75 8.75 6.75 9 yrs. 11 mos.
Vice President, Marketing
</TABLE>
- ---------------
(1) The Company implemented an option cancellation/regrant program for
directors, executive officers and other employees holding stock options with
an exercise price per share in excess of the market price of the Company's
Common Stock at the time the cancellation/regrant occurred. The
cancellation/regrant was effected on August 3, 1998, and outstanding options
for 1,733,278 shares with exercise prices in excess of $ 6.75 per share were
cancelled and new options for the same aggregate number of shares were
granted with an exercise price of $ 6.75 per share. Andre de Fusco,
Frederick W. Gluck (an outside director of the Company), Alain Gravel and
Mike T. Zeile received lower priced options for 374,286, 21,000, 42,000
24
<PAGE> 28
and 90,000 shares, respectively, in cancellation of their higher priced
options for the same number of shares.
OPTION EXERCISES AND HOLDINGS
No Named Executive Officers exercised options during the fiscal year ended
June 30, 1999 and no stock appreciation rights were exercised during fiscal year
1999 or outstanding as of June 30, 1999.
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 June 30, 2000. Such proposals may be
included in next year's Proxy Statement if they comply with certain rules and
regulations promulgated by the SEC.
In addition, the proxy solicited by the Board of Directors for next year's
Annual Meeting of Stockholders will confer discretionary authority to vote on
any stockholder proposal presented at that meeting, unless the Company is
provided with notice of such proposal no later than August 30, 2000.
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, 1999,
including audited financial statements, is being sent with this Proxy Statement
to all stockholders of record as of September 30, 1999. 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, 1999 AS FILED WITH THE SEC WILL BE PROVIDED TO STOCKHOLDERS
WITHOUT CHARGE UPON WRITTEN REQUEST TO THE CHIEF FINANCIAL OFFICER, ACT
NETWORKS, INC., 26707 WEST AGOURA ROAD, CALABASAS, CALIFORNIA 91302.
25
<PAGE> 29
ACT NETWORKS, INC.
PROXY ANNUAL MEETING OF STOCKHOLDERS, NOVEMBER 23, 1999
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 23, 1999 and the
proxy statement and appoints Andre de Fusco and Martin A. Woll, 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 Tuesday, November 23, 1999 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, nor related to, your vote on any of the other matters.
1. Approve the 200,000 share increase to the ACT 1997 Stock Incentive Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. Election of Archibald J. McGill as Director.
[ ] FOR NOMINEE [ ] WITHHOLD AUTHORITY TO VOTE [ ] EXCEPTIONS
INSTRUCTION: To withhold authority to vote for any individual nominee, mark the
"EXCEPTIONS" box.
3. Ratify Ernst & Young, LLP as independent auditors for the year ending June
30, 2000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
<PAGE> 30
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 and 3 if no specification is made. This
proxy will also be voted at the discretion of the proxy holders on such matters
other than the three specific matters as may come before the meeting.
Please print the name(s) appearing on each stock 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 stock
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.
