SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
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Filed by a Party other than the Registrant / /
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VYYO INC.
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(Name of registrant as Specified In Its Charter)
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VYYO INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 8, 2001
To our Stockholders:
NOTICE IS HEREBY GIVEN that the 2001 annual meeting of stockholders
of Vyyo Inc., a Delaware corporation, will be held at Vyyo's principal
executive office located at 20400 Stevens Creek Boulevard, 8th Floor,
Cupertino, California 95014, on Tuesday, May 8, 2001, at 10:00 a.m., local
time, for the following purposes:
1. ELECTION OF DIRECTORS. To elect three Class I directors to serve
until the 2004 annual meeting of stockholders or until their respective
successors are elected and qualified;
2. OPTION PLAN AMENDMENT. To approve an amendment to the Vyyo Inc.
Amended and Restated 2000 Employee and Consultant Equity Incentive Plan to
increase the number of shares reserved for issuance thereunder;
3. SELECTION OF INDEPENDENT AUDITORS. To ratify the appointment of
Ernst & Young LLP as the independent auditors for Vyyo for the year ending
December 31, 2001; and
4. To transact such other business as may properly come before the
annual meeting and any adjournment or postponement thereof.
The foregoing items of business are more fully described in the proxy
statement that is attached and made a part hereof.
The board of directors has fixed the close of business on Thursday,
March 22, 2001 as the record date for determining the stockholders entitled
to notice of and to vote at the annual meeting and any adjournment or
postponement thereof.
Whether or not you expect to attend the annual meeting in person, you
are urged to mark, sign, date and return the enclosed proxy card as
promptly as possible in the postage-prepaid envelope provided to ensure
your representation and the presence of a quorum at the annual meeting. If
you send in your proxy card and then decide to attend the annual meeting to
vote your shares in person, you may still do so. Your proxy is revocable in
accordance with the procedures set forth in the proxy statement.
By Order of the Board of Directors
/s/ Davidi Gilo
Davidi Gilo,
Chairman of the Board
Cupertino, California
March 27, 2001
VYYO INC.
20400 STEVENS CREEK BLVD., 8TH FLOOR, CUPERTINO, CALIFORNIA 95014
PROXY STATEMENT
GENERAL INFORMATION
This proxy statement is furnished to stockholders of Vyyo Inc., a
Delaware corporation, in connection with the solicitation by the board of
directors of Vyyo of proxies in the accompanying form for use in voting at
the 2001 annual meeting of stockholders to be held on Tuesday, May 8, 2001
at 10:00 a.m., local time, at Vyyo's principal executive office located at
20400 Stevens Creek Boulevard, 8th Floor, Cupertino, California 95014, and
any adjournment or postponement thereof. The shares represented by the
proxies received, properly marked, dated, executed and not revoked will be
voted at the annual meeting. This proxy statement is being mailed to
stockholders on or about April 3, 2001.
REVOCABILITY OF PROXY
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before it is exercised by: (1) delivering to
Vyyo (to the attention of Stephen P. Pezzola, Vyyo's Secretary) a written
notice of revocation or a duly executed proxy bearing a later date; or (2)
attending the annual meeting and voting in person.
SOLICITATION AND VOTING PROCEDURES
The solicitation of proxies will be conducted by mail and Vyyo will
bear all attendant costs. These costs will include the expense of preparing
and mailing proxy materials for the annual meeting and reimbursements paid
to brokerage firms and others for their expenses incurred in forwarding
solicitation material regarding the annual meeting to beneficial owners of
Vyyo's common stock. Vyyo may conduct further solicitation personally,
telephonically or by facsimile through its officers, directors and regular
employees, none of whom will receive additional compensation for assisting
with the solicitation.
The close of business on Thursday, March 22, 2001 has been fixed as
the record date for determining the holders of shares of Vyyo's common
stock entitled to notice of and to vote at the annual meeting. As of the
close of business on the record date, Vyyo had 36,864,614 shares of common
stock outstanding and entitled to vote at the annual meeting. The presence
at the annual meeting of a majority, or 18,432,308 of these shares of
common stock, either in person or by proxy, will constitute a quorum for
the transaction of business at the annual meeting. Each outstanding share
of common stock on the record date is entitled to one vote on all matters.
Directors shall be elected by a plurality of the votes cast.
An automated system administered by Vyyo's transfer agent will
tabulate votes cast by proxy and an employee of the transfer agent will
tabulate votes cast in person at the annual meeting. Abstentions and broker
non-votes are each included in the determination of the number of shares
present and voting, and each is tabulated separately. However, broker
non-votes are not counted for purposes of determining the number of votes
cast with respect to a particular proposal. In determining whether a
proposal has been approved, abstentions are counted as votes against the
proposal and broker non-votes are not counted as votes for or against the
proposal. If no specific instructions are given with respect to matters to
be acted upon at the annual meeting, shares of common stock represented by
a properly executed proxy will be voted (1) FOR the election of
management's nominees for Class I directors listed in Proposal No. 1, (2)
FOR the amendment to the 2000 Employee and Consultant Equity Incentive
Plan, and (3) FOR the ratification of the selection of Ernst & Young LLP as
the independent auditors for Vyyo for fiscal year 2001.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Vyyo's Certificate of Incorporation authorizes the number of
directors to be not less than one, nor more than ten. The number of
directors on the board is currently fixed at seven. Vyyo's board of
directors is divided into three classes: Class I, Class II and Class III.
The members of each class of directors serve staggered three-year terms.
The board is currently composed of three Class I directors (Messrs. Gilo,
Fischer and Griffin) whose terms will expire at the annual meeting and who
have been nominated by management to continue to serve as Class I directors
for three year terms following the annual meeting; two Class II directors
(Messrs. Broad and Brownstein) whose terms will expire upon the election
and qualification of directors at the annual meeting of stockholders to be
held in 2002; and two Class III directors (Messrs. Kaplan and Zimmerman)
whose terms will expire upon the election and qualification of directors at
the annual meeting of stockholders to be held in 2003. At each annual
meeting of stockholders, directors will be elected for a full term of three
years to succeed those directors whose terms are expiring.
At the annual meeting, the stockholders will elect three Class I
directors, each of whom will serve a three-year term until the annual
meeting of stockholders to be held in 2004 or until a successor is elected
or appointed and qualified or until the director's earlier resignation or
removal. The board of directors has no reason to believe that any of the
persons named below will be unable or unwilling to serve as a nominee or as
a director if elected.
Certain information about Messrs. Gilo, Fischer and Griffin, the
Class I nominees, is furnished below:
DAVIDI GILO has served as Vyyo's Chairman of the Board of directors
since 1996. Mr. Gilo served as Chief Executive Officer of Vyyo from April
1999 until October 2000. From October 1998 until November 1999, Mr. Gilo
also served as Chairman of the Board of DSP Communications, Inc., a
developer of chip sets for wireless personal communication applications,
and from June 1999 until November 1999, he served as DSP Communications'
Chief Executive Officer. Mr. Gilo also served as the Chairman of the Board
of DSP Communications from its founding in 1987 through November 1997. Mr.
Gilo also served as Chairman of the Board of Zen Research N.V., a developer
of technology and intellectual property for use in CD and DVD optical
storage devices, between July 1995 and December 1999, and was appointed as
Zen Research plc's Chairman in April 2000. Between 1987 and 1993, he was
the President and Chief Executive Officer of DSP Group, Inc., a developer
of telephony and speech compression components, and he served as Chairman
of the Board of DSP Group from 1987 until April 1995.
AVRAHAM FISCHER has been a member of the board of directors since
April 1996. Mr. Fischer is a managing partner in the law firm of Fischer,
Behar, Chen & Co., of Tel Aviv, Israel, where he has served since 1982.
Since January 1998, Mr. Fischer has served as co-Chairman of the Board of
Isra-Air Aviation and Tourism, and since January 1997, he has been
co-Chairman of the Board of Ganden Investment Ltd., which has holdings in a
group of Israeli tourism and aviation companies. From January 1995 until
October 2000, Mr. Fischer served as a director on the board of Nogatech,
Inc., a developer of computer chips for telecommunications, and from 1996
until November 1999, he served as a director of DSP Communications.
JOHN P. GRIFFIN has been a member of the board of directors since
November 1999. Since December 2000, Mr. Griffin has served as the President
and Chief Executive Officer of LightPointe Communications, Inc., a
manufacturer of free space optical telecommunications equipment. From May
1999 to December 2000, he served as President of the Broadband Wireless
Group of ADC Telecommunications, Inc., and from April 1998 until May 1999,
he was General Manager of the Loop Transport Division of ADC
Telecommunications. From September 1996 through April 1998, Mr. Griffin
served as Vice President of Marketing for the Network Services Division of
ADC Telecommunications. From March 1995 through September 1996, Mr. Griffin
served as Vice President of Marketing of RSI Systems, a manufacturer of
desktop video conferencing equipment. Prior to that, he served for nine
years with ADC Telecommunications, the first year as Manager of Technical
Support and the remaining eight years in various marketing positions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
ELECTION OF THE NOMINEES NAMED ABOVE.
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to
Vyyo's directors and executive officers:
Directors and Executive Officers
NAME AGE POSITION
Davidi Gilo 44 Chairman of the Board of Directors
Lewis S. Broad (1)(2) 43 Director
Neill H. Brownstein(1) 56 Director
John P. Griffin 50 Director
Avraham Fischer 44 Director
Samuel L. Kaplan(1) 64 Director
Alan L. Zimmerman(2) 58 Director
John R. O'Connell 43 Chief Executive Officer
Menashe Shahar 50 Chief Technical Officer
Eran Pilovsky 40 Chief Financial Officer
Arnon Kohavi 36 Senior Vice President, Strategic
Relations
Stephen P. Pezzola 44 General Counsel and Secretary
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(1) Member of the Audit Committee
(2) Member of the Compensation Committee
LEWIS S. BROAD has been a member of the board of directors since
November 1999. Since May 1, 2000, Mr. Broad has served as Chief Executive
Officer of Portfab LLC, a manufacturer of heating enclosures. He is also a
member of the board of directors of Vesta Corp., a company specializing in
payment processing and fraud prevention for telephone and internet
transactions. From November 1994 until November 1999, Mr. Broad also served
as a director of DSP Communications. Mr. Broad is also a private investor.
NEILL H. BROWNSTEIN was appointed as a member of the board or
directors in December 1999. Mr. Brownstein is President of Neill H.
Brownstein Corporation, a strategic investment management consulting firm
that he founded in 1976. From June 1970 to January 1995, Mr. Brownstein was
associated with Bessemer Securities Corporation and Bessemer Venture
Partners, and during that period he served as a founding general partner of
three affiliated venture capital funds. Mr. Brownstein also served on the
board of directors of Giga Information Group. From November 1994 until
November 1999, Mr. Brownstein also served as a director of DSP
Communications.
SAMUEL L. KAPLAN has been a member of the board of directors since
July 1999. Mr. Kaplan has been a partner in the law firm of Kaplan,
Strangis and Kaplan, P.A. of Minneapolis, Minnesota, since October 1978.
Mr. Kaplan also served as a director of USP Real Estate Investment Trust, a
real estate investment trust. From 1991 until June 1999, Mr. Kaplan also
served as a director of DSP Group.
ALAN L. ZIMMERMAN has been a member of the board of directors since
July 1999. Since November 1994, Mr. Zimmerman has served as President of
Law Finance Group, Inc., a provider of financing in connection with
anticipated awards in legal proceedings. From 1992 through December 1999,
he was Vice President of Inheritance Funding Company, LLC, a provider of
financing to heirs in connection with anticipated inheritance payments.
JOHN R. O'CONNELL joined Vyyo in October 2000 as our Chief Executive
Officer. From January 2000 until October 2000, Mr. O'Connell served as Vice
President of the Local Internet Portfolio group at Nortel Networks, Inc.,
and from January 1999 until January 2000, he served as General Manager of
Nortel Network's infrastructure business. From 1994 until January 1999, Mr.
O'Connell was responsible for Product Management and Product Development
for Nortel Matra Cellular, a joint venture between Nortel Networks and
Matra Communications. Prior to that, Mr. O'Connell served at Nortel
Networks since 1982 in various capacities in the area of research
development, product management, and marketing.
MENASHE SHAHAR has served as Vyyo's Vice President, Engineering since
July 1994 and as Vyyo's Chief Technical Officer since May 1999. Prior to
joining Vyyo, Mr. Shahar served as Chief Engineer for the Data
Communications Department of Tadiran Telecommunications Group, where he
spent five years in the development of products in the area of packet
switching, frame relay and ISDN. Prior to joining Tadiran, Mr. Shahar
served for eight years as a design engineer in the Israeli Defense Force,
where he was involved in designing modems and other data communication
products.
ERAN PILOVSKY joined Vyyo as Chief Financial Officer in January 2000.
Prior to joining Vyyo, Mr. Pilovsky spent over 14 years in various
positions with Ernst & Young LLP's advisory and assurance business service
group, and became a partner at Ernst & Young in October 1997. Mr. Pilovsky
is a Certified Public Accountant in California.
ARNON KOHAVI joined Vyyo in November 1999 as Senior Vice President,
Strategic Relations. From July 1994 until October 1995, he served as
director of Strategic Planning of DSP Communications, and from October 1995
until January 1999, he was Vice President of Business Development of DSP
Communications. From January 1999 until November 1999, he served as Senior
Vice President, Strategic Relations of DSP Communications. From May 1994
until July 1994, Mr. Kohavi was manager of Business Development of DSP
Group.
STEPHEN P. PEZZOLA joined Vyyo in September 1996 as General Counsel
and Secretary. From September 1996 until November 1999, Mr. Pezzola also
served as General Counsel and Corporate Secretary of DSP Communications.
From September 1996 until January 2000, he also served as General Counsel
and Secretary of Zen Research N.V., and from January through April 2000, he
served as Chairman of the Board of Zen Research N.V. In April 2000, Mr.
Pezzola became Executive Vice Chairman of the Board of Zen Research plc.
From May 1986 until September 1996, Mr. Pezzola was a founding shareholder
and President of the law firm of Pezzola & Reinke, APC, of Oakland,
California.
RELATIONSHIPS AMONG DIRECTORS OR EXECUTIVE OFFICERS
There are no family relationships among any of Vyyo's directors or
executive officers.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During 2000, the board met six times and acted by written consent
three times. No director attended fewer than 75% of the aggregate of the
total number of meetings of the board, plus the total number of all
meetings of committees of the board on which he served. The board currently
has two committees: the Compensation Committee and the Audit Committee.
The Compensation Committee currently consists of Messrs. Broad and
Zimmerman. Its function is to establish and apply Vyyo's compensation
policies with respect to Vyyo's executive officers. The Compensation
Committee held six meetings in 2000, and acted by written consent 11 times.
Vyyo has an Audit Committee composed of independent directors for
which information regarding the functions of the Committee, and its
membership, activities and number of meetings held during fiscal 2000 are
set forth below under the heading "Report of the Audit Committee."
REPORT OF THE AUDIT COMMITTEE
The following report of the Audit Committee does not constitute
soliciting material and shall not be deemed filed or incorporated by
reference into any other filing by Vyyo under the Securities Act of 1933 or
the Securities Exchange Act of 1934.
The Audit Committee of the board of directors is governed by a
written charter that was adopted by the Committee and approved by the full
board in 2000. A copy of the charter is included in this proxy statement as
Appendix A.
The Audit Committee oversees Vyyo's financial reporting process on
behalf of the board of directors. Management has the primary responsibility
for the financial statements and the reporting process including the
systems of internal controls. In fulfilling its oversight responsibilities,
the Committee reviewed the audited financial statements in the annual
report on Form 10-K for the year ended December 31, 2000, with management
including a discussion on the quality, not just the acceptability, of the
accounting principles, the reasonableness of significant judgments, and the
clarity of disclosures in the financial statements.
The Committee also reviewed with Vyyo's independent auditors, who are
responsible for expressing an opinion on the conformity of those audited
financial statements with generally accepted accounting principles, their
judgments as to the quality, not just the acceptability, of Vyyo's
accounting principles and such other matters as are required to be
discussed by Statement on Auditing Standards No. 61. In addition, the
Committee has discussed with the independent auditors the auditors'
independence from management and Vyyo, including the matters in the written
disclosures required by the Independence Standards Board Standard No. 1,
and considered the compatibility of non-audit services with the auditors'
independence.
The Committee discussed with the independent auditors the overall
scope and plans for their audit. The Committee meets with the independent
auditors, with and without management present, to discuss the results of
their examination, their evaluation of Vyyo's internal controls, and the
overall quality of Vyyo's financial reporting. To carry out its
responsibilities, the Audit Committee met five times in 2000.
In reliance on the reviews and discussion referred to above, the
Committee recommended to the board of directors, and the board has
approved, that the audited financial statements be included in Vyyo's
annual report on Form 10-K for the year ended December 31, 2000, for filing
with the Securities and Exchange Commission. The Committee and the board
have also recommended, subject to stockholder approval, the selection of
Vyyo's independent auditors.
Members of the Audit Committee
Neill H. Brownstein, Audit Committee Chairman
Lewis S. Broad, Member
Samuel L. Kaplan, Member
COMPENSATION OF DIRECTORS
Directors serving on the board of directors do not currently receive
any compensation for serving on the board. Directors are reimbursed for
their out-of-pocket expenses incurred in attending board and committee
meetings. In addition, all directors are eligible to participate in our
Amended and Restated 2000 Employee and Consultant Equity Incentive Plan.
In February 2000, the board of directors granted options to purchase
22,500 shares of our common stock to each of Messrs. Broad, Brownstein,
Fischer, Griffin, Kaplan and Zimmerman, in each case at an exercise price
of $1.87 per share.
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information known to us as of March
22, 2001, regarding the beneficial ownership of our common stock by:
o each person known to the board of directors to own beneficially 5% or
more of our common stock;
o each of our directors;
o the named executive officers identified below in "Executive
Compensation and Other Information"; and
o all of our directors and executive officers as a group.
Information with respect to beneficial ownership has been furnished
by each director, officer, or 5% or more stockholders, as the case may be.
Beneficial ownership is determined in accordance with the rules of
the Securities and Exchange Commission which generally attribute beneficial
ownership of securities to persons who possess sole or shared voting power
or investment power with respect to those securities, and includes shares
of common stock issuable pursuant to the exercise of stock options or
warrants that are immediately exercisable or exercisable within sixty days
after March 22, 2001. Unless otherwise indicated, the persons or entities
identified in this table have sole voting and investment power with respect
to all shares shown as beneficially owned by them, subject to applicable
community property laws.
NAME AND ADDRESS OF AMOUNT AND NATURE OF
BENEFICIAL OWNER . BENEFICIAL PERCENT OF
OWNERSHIP(1) CLASS(1)
Davidi Gilo(2) ....................... 15,437,478 41.9%
c/o Vyyo Inc.
20400 Stevens Creek Blvd., Ste.800
Cupertino, CA 95014
ADC Telecommunications, Inc.(3)....... 2,476,603 6.7%
P.O Box 1101
Minneapolis, MN 55440
Gilder, Gagnon, Howe & Co.,
LLC(4)............................. 2,410,156 6.5%
1775 Broadway, 26th Floor
New York, NY 10019
John R. O'Connell.................. 390,000 1.1%
Michael P. Corwin(5).............. 509,879 1.4%
Eran Pilovsky(6).................. 320,106 *
Stephen P. Pezzola(7)............. 285,788 *
Lewis Broad(8) ................... 132,665 *
Neill H. Brownstein(9)............ 226,645 *
Avraham Fischer(10)............... 355,266 *
John P. Griffin(11) .............. 82,500 *
Samuel L. Kaplan(12).............. 195,118 *
Alan L. Zimmerman(13)............. 271,928 *
All current directors and executive
officers as a group (12 Persons)(14).. 18,285,558 48.8%
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* Less than 1%.
(1) Number of shares and percentage ownership include shares issuable
pursuant to stock options held by the person in question exercisable
within 60 days after March 22, 2001. Percentages are based on
36,864,614 shares outstanding as of March 22, 2001.
(2) Includes (a) 14,362,995 shares held by the Gilo Family Trust, of
which Davidi Gilo and his wife Shamaya Gilo are the trustees; (b)
16,260 shares held by Harmony Management, Inc., of which Davidi and
Shamaya Gilo are the sole stockholders; (c) 3,223 shares held by the
Gilo Group, LLC, a limited liability company of which Mr. Gilo is a
principal owner; and (d) 1,020,000 shares held by the Gilo Family
Foundation, a private not-for-profit charitable foundation of which
Davidi and Shamaya Gilo are trustees. Excludes 244,947 shares held
in three trusts for the benefit of Mr. Gilo's children, Adi, Elad
and Yael Gilo, as to which Mr. Gilo has no voting or investment
power. Mr. Gilo disclaims beneficial ownership of such shares.
(3) Based on the Schedule 13G dated February 13, 2001 filed by ADC
Telecommunications, Inc. Pursuant to the Schedule 13G filing, ADC
Telecommunications has sole voting and dispositive power with
respect to all of the shares.
(4) Based on the Schedule 13G dated February 5, 2001 filed by Gilder,
Gagnon, Howe & Co., LLC. Pursuant to the Schedule 13G filing,
Gilder, Gagnon, Howe & Co. has no voting power with respect to these
shares and has shared investment power with respect to all of these
shares.
(5) Mr. Corwin resigned from Vyyo in March 2001. Includes 159,808 shares
issuable pursuant to stock options.
(6) Includes 51,332 shares issuable pursuant to stock options.
(7) Includes 50,203 shares held by the Pezzola-Foster Trust, of which
Mr. Pezzola and his wife Twila Foster are the trustees. Also
includes 34,416 shares issuable pursuant to stock options. Excludes
42,000 shares held in two trusts for the benefit of Mr. Pezzola's
children, Genevieve and David Pezzola, as to which Mr. Pezzola has
no voting or investment power. Mr. Pezzola disclaims beneficial
ownership of such shares.
(8) Includes 22,500 shares issuable pursuant to stock options.
(9) Includes 37,500 shares issuable pursuant to stock options.
(10) Includes 25,152 shares held by Rashifa Management and Holdings Ltd.,
of which Mr. Fischer and his wife Vered Fischer are the sole
stockholders. Also includes 247,500 shares issuable pursuant to
stock options.
(11) Includes 22,500 shares issuable pursuant to stock options.
(12) Includes 22,500 shares issuable pursuant to stock options.
(13) Includes 87,500 shares issuable pursuant to stock options.
(14) See footnote (2) and footnotes (6) through (13). Includes 636,581
shares issuable pursuant to stock options. Also includes shares held
by Menashe Shahar, our Chief Technical Officer, and Arnon Kohavi,
our Senior Vice President, Strategic Relations.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based upon a review of filings with the Securities and Exchange
Commission, we believe that all of our directors, officers and beneficial
holders of over ten percent of our common stock complied during fiscal 2000
with the reporting requirements of Section 16(a) of the Securities Exchange
Act of 1934.
PROPOSAL NO. 2
APPROVAL OF THE AMENDMENT
TO THE AMENDED AND RESTATED 2000 EMPLOYEE AND CONSULTANT
EQUITY INCENTIVE PLAN
At the annual meeting the stockholders are being requested to approve
an amendment to the Amended and Restated 2000 Employee and Consultant
Equity Incentive Plan (the "Plan") to increase the number of shares
reserved for issuance thereunder by 4,000,000 shares, plus automatic,
annual increases in the number of shares available thereunder equal to the
lesser of 2,000,000 shares, or five percent of the number of outstanding
shares on the last day of the immediately preceding fiscal year. The
increase would be in addition to the automatic increase of 1,350,000 shares
effected on January 1, 2001. The Plan was originally adopted by the board
of directors and Vyyo's stockholders on November 22, 1999, and was amended
and restated upon the approval of the board of directors and Vyyo's
stockholders on February 2, 2000.
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), generally provides that publicly held companies may not deduct
compensation paid to certain of its top executive officers to the extent
such compensation exceeds $1 million per officer in any year. However,
pursuant to regulations issued by the Treasury Department, certain limited
exemptions to Section 162(m) apply with respect to "performance-based
compensation." Awards granted under the Plan are intended to constitute
qualified performance-based compensation eligible for such exceptions, and
Vyyo will continue to monitor the applicability of Section 162(m) to its
ongoing compensation arrangements. Vyyo does not expect that amounts of
compensation paid to its executive officers will fail to be deductible on
account of Section 162(m). If the proposed amendment to the Plan set forth
in this Proposal No. 2 is adopted and approved by the stockholders of Vyyo,
the Plan will be in compliance with the requirements of Section 162(m) for
"performance-based compensation."
The board of directors believes that the availability of award grants
under the Plan enhances Vyyo's ability to attract, motivate and retain the
caliber of directors, officers and other employees necessary for Vyyo's
future growth and success. As a result of prior grants of stock options
under the Plan to directors, officers and other employees of Vyyo, the
number of shares of common stock available for future grants has been
reduced to 955,863 shares as of the record date. The board of directors has
determined that this number is insufficient to maintain the Plan as an
incentive device. The board of directors also believes that increasing the
number of shares of common stock available will help Vyyo achieve its goals
by keeping its incentive compensation program competitive with those of
comparable companies. At the annual meeting the stockholders are being
requested to approve an amendment to the Plan to increase the number of
shares of common stock available for issuance thereunder by 4,000,000
shares, from the currently available number (which includes all of the
currently outstanding options, and takes into account the automatic
increase of 1,350,000 shares on January 1, 2001 and all previously
exercised options) of 955,863 shares, to 4,955,863 shares, plus automatic,
annual increases in the number of shares available thereunder equal to the
lesser of (i) 2,000,000 shares, or (ii) 5% of the number of outstanding
shares on the last day of the immediately preceding fiscal year.
The following paragraphs summarize the more significant features of
the Plan. The summary is subject, in all respects, to the terms of the
Plan, the full text of which, as proposed to be amended, is set forth in
Appendix B attached hereto. In Appendix B, the materials that would be
deleted from the plan pursuant to the proposed amendment are stricken
through, and the material that would be added by such amendment are double
underlined. If the amendment is not approved by the stockholders, the Plan
will continue in effect under the present terms.
SUMMARY OF THE PLAN
The Plan was adopted by our board of directors and approved by our
stockholders on November 22, 1999 for the benefit of our officers,
directors, employees, advisors and consultants. The approximate numbers of
persons currently eligible to participate in the Plan are six officers,
seven directors, and 260 employees. The purpose of the Plan is to enable
Vyyo to attract and retain highly qualified personnel who will contribute
to Vyyo's success and to provide to participants incentives that are linked
directly to increases in stockholder value and will therefore inure to the
benefit of all stockholders of Vyyo. As such, the consideration received or
to be received by Vyyo for the granting or extension of options or rights
under the Plan is the provision of service by the grantee as an officer,
director, employee, advisor or consultant. The market value of the common
stock, $.0001 par value per share, underlying the options or rights was
$2.41 per share on March 26, 2001.
The Plan provides for the issuance of stock-based incentive awards,
including stock options, stock appreciation rights ("SARs"), limited SARs,
restricted stock, deferred stock, and performance shares. An award may
consist of one arrangement or benefit or two or more of them in tandem or
in the alternative. Under the Plan, awards covering no more than 80% of the
shares reserved for issuance under the plan may be granted to any
participant in any one year. An aggregate of 4,050,000 shares of common
stock was initially reserved for issuance under the Plan. On February 2,
2000, our board of directors approved an amendment to the Plan to increase
the total number of shares reserved for issuance under the plan from
4,050,000 shares to 7,500,000 shares, plus an annual increase to be added
automatically on the first day of each fiscal year, commencing in 2001,
equal to the lesser of (1) 1,350,000 shares or (2) 5% of the number of
outstanding shares on the last day of the immediately preceding fiscal
year. This amendment was approved by our stockholders on February 2, 2000.
Each of our non-employee directors elected to the board of directors
for the first time after February 2, 2000, will receive, upon such
election, an initial grant of options to purchase 75,000 shares of common
stock at fair market value on the date of grant. These options will have a
10-year term and will vest over a four-year period. In addition, each of
our non-employee directors will receive an annual grant of options to
purchase 22,500 shares for each year during such director's term. These
options will have a 10-year term and will vest immediately upon the date of
grant. The foregoing award of options will be granted automatically under
the Plan.
The Plan may be administered by either our board of directors or any
committee of our board of directors. The board or committee is sometimes
referred to as the plan administrator. The plan administrator may interpret
the Plan and may prescribe, amend and rescind rules and make all other
determinations necessary or desirable for the administration of the Plan.
The Plan permits the plan administrator to select the officers, directors,
employees, advisors and consultants, including directors who are also
employees, who will receive awards and generally to determine the terms and
conditions of those awards.
We may issue two types of stock options under the Plan: incentive
stock options ("ISOs") which are intended to qualify under Section 422 of
the Code, and non-qualified stock options ("NSOs"). The per share exercise
price of shares purchasable under an option shall be determined by the plan
administrator in its sole discretion at the time of grant but shall not,
(1) in the case of ISOs, be less than the fair market value of the common
stock on such date, (2) in the case of NSOs intended to qualify as
"performance-based compensation" within the meaning of Section 162(m) of
the Code, be less than the fair market value of the common stock on such
date and (3) in any event, be less than the par value of the common stock.
Furthermore, in the case of ISOs granted to a participant who owns or is
deemed to own (by reason of the attribution rules applicable under Section
424(d) of the Code) more than 10% of the combined voting power of all
classes of stock of Vyyo or of any parent or subsidiary, the per share
exercise price of such ISOs (to the extent required at the time of grant by
the Code) shall be no less than 110% of the fair market value of the common
stock on the date of grant.
The term of each option shall be fixed by the plan administrator, but
no option shall be exercisable more than ten years after the date such
option is granted; provided, however, that if an employee owns or is deemed
to own (by reason of the attribution rules of Section 424(d) of the Code)
more than 10% of the combined voting power of all classes of stock of Vyyo
or of any parent or subsidiary and an incentive stock option is granted to
such employee, the term of such ISO (to the extent required by the Code at
the time of grant) shall be no more than five years from the date of grant.
Options shall be exercisable at such time or times and subject to
such terms and conditions as shall be determined by the plan administrator
at or after the time of grant. The plan administrator may provide at the
time of grant, in its sole discretion, that any option shall be exercisable
only in installments, and the plan administrator may waive such installment
exercise provisions at any time, in whole or in part, based on such factors
as the plan administrator may determine, in its sole discretion, including
but not limited to in connection with any "change in control" of Vyyo (as
defined in the award agreement evidencing such option).
SARs and limited SARs may be granted under the Plan either alone or
in conjunction with all or part of any stock option granted under the Plan.
An SAR granted under the Plan entitles its holder to receive, at the time
of exercise, an amount per share equal to the excess of the fair market
value at the date of exercise of a share of common stock over a specified
price fixed by the plan administrator.
Free standing SARs shall be exercisable at such time or times and
subject to such terms and conditions as shall be determined by the plan
administrator at or after grant. Related SARs shall be exercisable only at
such time or times and to the extent that the options to which they relate
shall be exercisable; provided, however, that a related SAR granted in
connection with an ISO shall be exercisable only if and when the fair
market value of the common stock subject to the ISO exceeds the exercise
price of such option. Notwithstanding the above, free standing or related
SARs shall be exercisable during the first six months of its term, except
that this additional limitation shall not apply in the event of a
participant's death or disability prior to the expiration of such six-month
period.
A limited SAR granted under the Plan entitles its holder to receive,
at the time of exercise, an amount per share equal to the excess of the
change in control price of a share of common stock over a specified price
fixed by the plan administrator. A limited SAR may only be exercised within
the 30-day period following a change in control.
Restricted stock, deferred stock and performance shares may be
granted under the Plan. The plan administrator will determine the purchase
price, performance period and performance goals, if any, with respect to
the grant of restricted stock, deferred stock and performance shares.
Participants with restricted stock and performance shares generally have
all of the rights of a stockholder. With respect to deferred stock, during
the deferral period, subject to the terms and conditions imposed by the
plan administrator, the deferred stock units may be credited with dividend
equivalent rights. If the performance goals and other restrictions are not
attained, the participant will forfeit his or her shares of restricted
stock, deferred stock and/or performance shares.
In the event we merge or consolidate with another entity in which we
are not the surviving corporation, dissolve or liquidate or sell
substantially all of our assets, outstanding awards under the Plan may be
assumed or replaced by the successor corporation, if any, or its parent. If
the successor corporation or its parent does not assume outstanding awards
or substitute equivalent awards, such awards will automatically become
fully vested and exercisable and be released from any restrictions on
transfer and repurchase or forfeiture right.
The terms of the Plan provide that the plan administrator may amend,
suspend or terminate the Plan at any time, provided, however, that some
amendments require approval of our stockholders. Further, no action may be
taken which adversely affects any rights under outstanding awards without
the holder's consent. The Plan will terminate in November 2009.
CERTAIN FEDERAL INCOME TAX EFFECTS
The following discussion is for general information only and is based
on the U.S. Federal income tax laws now in effect, which are subject to
change, possibly retroactively. This summary does not discuss all aspects
of Federal income taxation that may be important to individual plan
participants. Moreover, this summary does not address specific state, local
or foreign tax consequences. This summary assumes that common stock
acquired under the Plan will be held as a "capital asset" (generally,
property held for investment) under the Code.
NONQUALIFIED STOCK OPTIONS
A participant will generally not be subject to Federal income
taxation upon the grant of an NSO. Rather, at the time of exercise of such
NSO, the participant will recognize ordinary income for Federal income tax
purposes in an amount equal to the excess of the fair market value of the
shares purchased over the option exercise price. Vyyo will generally be
entitled to a tax deduction at such time and in the same amount that the
participant recognizes ordinary income. If shares acquired upon exercise of
an NSO (or upon untimely exercise of an ISO as discussed below) are later
sold or exchanged, then the difference between the sales price and the fair
market value of such stock on the date that ordinary income was recognized
with respect thereto will generally be taxable as capital gain or loss.
INCENTIVE STOCK OPTIONS
A participant is generally not subject to Federal income taxation
upon the grant of an ISO or upon its timely exercise. However, a
participant may be subject to federal income taxation under the Alternative
Minimum Tax rules upon exercise of an ISO. Exercise of an ISO will be
timely if made during its term and if the participant remains an employee
of Vyyo or a subsidiary at all times during the period beginning on the
date of grant of the ISO and ending on the date three months before the
date of exercise (or one year before the date of exercise in the case of a
disabled employee). Exercise of an ISO will also be timely if made by the
legal representative of a participant who dies (1) while in the employ of
Vyyo or a subsidiary, or (2) within three months after termination of
employment (or one year in the case of a disabled employee). The tax
consequences of an untimely exercise of an ISO will be determined in
accordance with the rules applicable to NSOs. (See "Certain Federal Income
Tax Effects--Nonqualified Stock Options.")
If stock acquired pursuant to a timely exercised ISO is later
disposed of, the participant will, except as noted below with respect to a
"disqualifying disposition," recognize a capital gain or loss equal to the
difference between the amount realized upon such sale and the option
exercise price. Under these circumstances, Vyyo will not be entitled to any
deduction for Federal income tax purposes in connection with either the
exercise of the ISO or the sale of such stock by the participant. If,
however, a participant disposes of stock acquired pursuant to the exercise
of an ISO prior to the expiration of two years from the date of grant of
the ISO or within one year from the date such stock is transferred to him
upon exercise (a "disqualifying disposition"), generally (1) the
participant will realize ordinary income at the time of the disposition in
an amount equal to the excess, if any, of the fair market value of the
stock at the time of exercise (or, if less, the amount realized on such
disqualifying disposition) over the option exercise price, and (2) any
additional gain recognized by the participant will be subject to tax as
capital gain. In such case, Vyyo may claim a deduction for Federal income
tax purposes at the time of such disqualifying disposition for the amount
taxable to the participant as ordinary income.
The amount by which the fair market value of the stock on the
exercise date of an ISO exceeds the option exercise price will be an item
of adjustment for purposes of the "alternative minimum tax" imposed by
Section 55 of the Code.
STOCK APPRECIATION RIGHTS
A grant of SARs has no Federal income tax consequences at the time of
such grant. Upon the exercise of an SAR, the amount of any cash and the
fair market value as of the date of exercise of any shares of common stock
received is taxable to the participant as ordinary income. Vyyo will
generally be entitled to a deduction at the same time and equal to the
amount included in the participant's income. Upon the sale of the shares
acquired by the exercise of an SAR, the participant will recognize capital
gain or loss (assuming such stock was held as a capital asset) in an amount
equal to the difference between the amount realized upon such sale and the
fair market value of the stock on the date that governs the determination
of his ordinary income.
RESTRICTED AWARDS
In the case of a restricted award, a participant generally will not
be subject to Federal income tax upon the grant of such an award, but,
rather, the participant will recognize ordinary income in an amount equal
to (1) the fair market value of the common stock at the time the shares
become transferable or are otherwise no longer subject to a substantial
risk of forfeiture (as defined in the Code), minus (2) the price, if any,
paid by the participant to purchase such stock. Vyyo will be entitled to a
deduction at the time when, and in the amount that, the participant
recognizes ordinary income. However, a participant may elect (not later
than 30 days after acquiring such shares) to recognize ordinary income at
the time the restricted shares are awarded in an amount equal to their fair
market value at that time, notwithstanding the fact that such shares are
subject to restrictions and a substantial risk of forfeiture. If such an
election is made, no additional taxable income will be recognized by the
participant at the time the restrictions lapse. Vyyo will be entitled to a
tax deduction at the time when, and to the extent that, income is
recognized by the participant. If, however, shares in respect of which such
election was made are later forfeited, no tax deduction is allowable to the
participant for the forfeited shares, and Vyyo will be deemed to recognize
ordinary income equal to the amount of the deduction allowed to Vyyo at the
time of the election in respect of such forfeited shares.
CAPITAL GAIN OR LOSS
Net capital gain (i.e., generally, capital gain in excess of capital
losses) recognized by a participant upon the sale of shares held for more
than 12 months will generally be subject to tax at a rate not to exceed
20%. Net capital gain recognized from the sale of shares held for 12 months
or less will be subject to tax at ordinary income rates.
AMENDED PLAN BENEFITS
Each of Messrs. Fischer and Griffin, each a non-employee director and
a nominee for election as a director, received a grant of options to
purchase 22,500 shares in fiscal 2000, and will receive an annual grant to
purchase 22,500 for each subsequent year during his term as a director. Mr.
Gilo, also a nominee for election as a director, received a grant of
options to purchase 285,000 shares in fiscal 2000, which options were
cancelled in December 2000.
It is not possible to determine at this time the future awards that
will be granted under the Plan to each of the executive officers, the
executive officers as a group, or to employees who are not executive
officers as a group, if the amendment is approved by stockholders, and no
awards made under the Plan prior to the date of the annual meeting have
been made subject to such approval. Each of the directors who is not an
executive officer will receive annual grants of 22,500 options under the
Plan during his term as a director, for a total of 135,000 options per year
to the current group of directors who are not executive officers. Grants to
the named executive officers for fiscal 2000 are described in "Executive
Compensation and Other Information" below. The following table is provided
pursuant to requirements of the Commission and provides information
regarding options granted under the Plan in fiscal 2000.
WEIGHTED
AVERAGE
OPTIONS % OF TOTAL EXERCISE PRICE
IDENTITY OF GROUP GRANTED OPTIONS GRANTED PER SHARE
---------------------------------------------------------------------------
Executive officers as a group 3,729,000(1) 52% $14.35(1)
Employees that are not
executive officers, as a group 3,330,399 46% $12.36
Directors that are not
executive officers, as a group 135,000 2% $1.87
- ----------------
(1) The number of options granted to executive officers and the exercise
price include (a) 285,000 options granted to Mr. Gilo in October 2000
at an exercise price of $20.00 per share that were cancelled in
December 2000; and (b) 1,450,000 options granted to Mr. O'Connell in
October 2000 at an exercise price of $20.00 per share that were
cancelled in December 2000 in exchange for 870,000 repriced options.
See "--Report on Repricing of Options."
VOTE REQUIRED
The affirmative vote of a majority of all of the votes cast at the
annual meeting is required to approve the proposed amendment to the Plan
for purposes of Section 422 and 162(m) of the Internal Revenue Code of
1986, as amended.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL NO. 2
PROPOSAL NO. 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The board of directors has reappointed Ernst & Young LLP as independent
auditors to audit the financial statements of Vyyo for the current fiscal
year. Representatives of the firm of Ernst & Young LLP are expected to be
present at the annual meeting and will have an opportunity to make a
statement if they so desire and will be available to respond to appropriate
questions.
Fees billed by Ernst & Young for the fiscal year ended December 31,
2000 were as follows:
Audit Fees...................................................... $145,250
Audit Related Fees.............................................. $398,600
Financial Information Systems Design and Implementation Fees.... $0
All Other Fees.................................................. $102,616
The Audit Committee has considered whether the provision of non-audit
services by Ernst & Young is compatible with maintaining their
independence, and has determined that it is.
Stockholder ratification of the appointment of Ernst & Young as Vyyo's
independent auditors is not required by Vyyo's bylaws or any other
applicable legal document. However, the Board is submitting the appointment
of Ernst & Young to the stockholders as a matter of good corporate
practice. If the stockholders fail to ratify the selection, the Audit
Committee and the Board will reconsider the appointment. Even if the
selection is ratified, the Board at its discretion may direct the
appointment of a different independent auditing firm at any time.
THE AUDIT COMMITTEE AND BOARD OF DIRECTORS RECOMMENDS
A VOTE FOR RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE
COMPANY'S INDEPENDENT AUDITORS FOR THE YEAR ENDING DECEMBER 31, 2001
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY COMPENSATION TABLE
The following table sets forth all compensation earned for the years
ended December 31, 2000 and 1999, by Vyyo's current Chief Executive Officer
and each of Vyyo's four other most highly compensated executive officers
including its former Chief Executive Officer (collectively, the "named
executive officers").
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION AWARDS
NAME AND SECURITIES UNDERLYING
PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) OPTIONS (#)
------------------ ---- --------- ---------- ---------------------
Davidi Gilo 2000 $350,000 $304,000 285,000(2)
Chairman of the 1999 $175,000 -- 975,000
Board(3)
John O'Connell(4) 2000 $64,808 $656,800(5) 2,320,000(6)
Chief Executive 1999 -- -- --
Officer
Michael P. Corwin(7) 2000 $225,000 $195,000 197,000
Former Chief 1999 $72,500 -- 360,000
Operating Officer
Eran Pilovsky(8) 2000 $239,583 $217,000 468,000
Chief Financial 1999 -- -- --
Officer
Stephen P. Pezzola 2000 $201,500 $201,000(9) 109,000
General Counsel and 1999 $140,000(10) -- 193,500
Secretary
- -----------------
(1) Vyyo's executive officers are eligible for annual cash bonuses that
are specified in employment agreements. Such bonuses are based upon
achievement of corporate performance objectives. The executive
officers are also eligible for discretionary bonuses as may be
awarded by the Compensation Committee based upon individual, as
well as corporate performance. Vyyo generally pays bonuses in the
year following that in which the bonuses were earned.
(2) These options were cancelled in December 2000.
(3) Mr. Gilo also served as Vyyo's Chief Executive Officer until
October 2000. Mr. Gilo's salary for services performed in 1999 was
accrued and was paid to Mr. Gilo in 2000.
(4) Mr. O'Connell joined Vyyo in October 2000. Mr. O'Connell's salary
and bonus for services performed in 2000 was accrued and was paid
to Mr. O'Connell in 2001.
(5) Includes a signing bonus of $600,000 paid to Mr. O'Connell pursuant
to his employment agreement.
(6) Includes 1,450,000 options that were cancelled in December 2000.
(7) Mr. Corwin joined Vyyo in August 1999 and resigned from Vyyo in
March 2001.
(8) Mr. Pilovsky joined Vyyo in January 2000.
(9) Includes a $25,000 bonus paid to Mr. Pezzola upon the consummation
of Vyyo's initial public offering pursuant to his employment
agreement.
(10) $52,000 of this amount was paid to Mr. Pezzola in 1999, and $87,500
was accrued and was paid to Mr. Pezzola in 2000.
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information with respect to stock
options granted during 2000 to each of the named executive officers. In
accordance with the rules of the Securities and Exchange Commission, also
shown below is the potential realizable value over the term of the option
(the period from the grant date to the expiration date) based on assumed
rates of stock appreciation of 5% and 10%, compounded annually, calculated
based on the closing price of the common stock on the grant date, or, in
the case of stock options granted before our initial public offering, based
on the fair market value of the common stock on the grant date, as
determined by the board of directors. These amounts are based on certain
assumed rates of appreciation and do not represent our estimate of future
stock price. Actual gains, if any, on stock option exercises will be
dependent on the future performance of our common stock.
INDIVIDUAL GRANTS
--------------------------------
POTENTIAL REALIZABLE VALUE
% OF AT ASSUMED ANNUAL RATES OF
TOTAL STOCK PRICE APPRECIATION
NUMBER OF OPTIONS FOR OPTION TERM
SECURITIES GRANTED
UNDERLYING TO EXERCISE
OPTIONS EMPLOYEES PRICE EXPIRATION
NAME GRANTED (#) IN 2000 ($/SHARE) DATE 5% 10%
---- ----------- ---------- ---------- ----------- -- ---
Davidi Gilo 285,000(1) 4.0% $20.00 10/12/05 $1,574,805 $3,479,907
John R. 1,450,000(1) 20.5% $20.00 10/12/05 $8,012,166 $17,704,790
O'Connell 870,000 12.3% $7.66 12/31/01 $358,511 $718,286
Michael P. 117,000 1.7% $20.00 10/12/05 $646,499 $1,428,594
Corwin 80,000 1.1% $7.66 12/04/05 $169,306 $374,121
Eran Pilovsky 300,000 4.3% $0.83 01/16/05 $68,795 $152,017
88,000 1.3% $20.00 10/12/05 $486,256 $1,074,498
80,000 1.1% $7.66 12/04/05 $169,306 $374,121
Stephen P. 59,000 0.8% $20.00 10/12/05 $326,013 $720,402
Pezzola 50,000 0.7% $7.66 12/04/05 $105,816 $233,826
- -------------------------
(1) These options were cancelled in December 2000.
OPTION EXERCISES AND OPTION VALUES FOR FISCAL 2000
The following table describes for the named executive officers the
number and aggregate value of stock options exercised during fiscal 2000,
and the number and aggregate value of unexercised options held by each of
the named executive officers as of December 31, 2000:
AGGREGATED OPTION EXERCISES IN 2000
AND OPTION VALUES AT DECEMBER 31, 2000
NUMBER OF
SECURITIES
UNDERLYING
UNEXERCISED VALUE OF UNEXERCISED
AGGREGATE OPTION OPTIONS AT IN-THE-MONEY OPTIONS AT
EXERCISES IN 2000 DECEMBER 31, 2000 DECEMBER 31, 2000(1)
------------------ ----------------- ------------------------
SHARES VALUE
ACQUIRED ON REALIZED
NAME EXERCISE (#) ($)(2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ---------- ----------- ------------- ----------- -------------
Davidi Gilo -- -- -- -- -- --
John R. O'Connell 370,000 -- -- 500,000 -- --
Michael P. Corwin 150,000 $1,714,800 90,000 227,000 $496,800 $159,000
Eran Pilovsky 300,000 -- -- 168,000 -- --
Stephen P. Pezzola 73,500 $100,695 -- 109,000 -- --
- ------------------
(1) Calculated on the basis of the closing sale price of our common stock
as reported on the Nasdaq National Market on December 29, 2000, of
$6.13 per share, minus the per share exercise price, multiplied by the
number of shares underlying the options.
(2) With respect to options exercised after our initial public offering,
the value realized is calculated on the basis of the closing sale price
of our common stock as reported on the Nasdaq National Market on the
date of exercise, minus the per share exercise price, multiplied by the
number of shares underlying the options. With respect to options
exercised prior to our initial public offering, the value realized is
calculated on the basis of $1.87 per share, the fair market value of
our common stock as determined by our board of directors on the date of
exercise, minus the per share exercise price, multiplied by the number
of shares underlying the options.
EMPLOYMENT AGREEMENTS
We entered into an employment agreement with Davidi Gilo effective as
of January 1, 2000. The agreement provides for a three-year term that will
automatically renew for consecutive one-year extensions, unless terminated
by either party upon written notice. Under Mr. Gilo's agreement, he is
entitled to receive an annual base salary equal to $350,000 and an annual
bonus equal to 15%, 50% or 90% of his annual base salary if we meet 80%,
100% or 120% of our annual business plan, respectively, with the bonus pro
rated if our plan is met between 80% and 100% or between 100% and 120%. In
addition, Mr. Gilo will also be entitled to a discretionary bonus, as
determined by our board of directors or the compensation committee. Mr.
Gilo is required to devote at least 30 hours per week to the business of
Vyyo under his employment agreement.
If Mr. Gilo's employment is terminated by us without cause, he will
be entitled to a severance payment equal to the greater of (1) the full
amount of the cash compensation that he would have been paid under his
employment agreement or (2) 18 months of his then-current base salary. If
Mr. Gilo's employment is terminated by us with cause, in exchange for a
release of any claims Mr. Gilo may have against us, he will be entitled to
a severance payment equal to three months of his then-current base salary.
If Mr. Gilo terminates his employment with us, he will be entitled to a
severance payment equal to nine months of his then-current base salary. If
after the initial three-year term Mr. Gilo's employment is not renewed, he
will be entitled to severance payments equal to 18 months of his then
current base salary in exchange for a release of any claims he may have
against us. Mr. Gilo will remain as an employee during any period he is
receiving severance pay and his options will continue to vest during that
period.
We entered into an employment agreement with John O'Connell effective
as of October 12, 2000 and amended the agreement as of March 1, 2001. Mr.
O'Connell's agreement provides for a three-year term that will
automatically renew for consecutive one-year extensions, unless terminated
by either party upon written notice. Under Mr. O'Connell's agreement, he is
entitled to receive an annual base salary equal to $300,000, and an annual
bonus equal to 15%, 50% or 90% of his annual base salary if we meet 80%,
100% or 120% of our annual business plan, respectively, with the bonus pro
rated if our plan is met between 80% and 100% or between 100% and 120%. In
addition, Mr. O'Connell will also be entitled to a discretionary bonus, as
determined by our board of directors or the compensation committee. Mr.
O'Connell also received a signing bonus of $600,000 under his agreement.
We have agreed to loan Mr. O'Connell up to $1,000,000 under the
agreement. This loan shall bear interest at the lowest allowable rate under
tax and accounting laws; interest shall be due annually on December 15 of
each year; and the principal and any unpaid interest shall be due on the
earlier of October 31, 2003, or 90 days after his employment with us
terminates. The loan shall be unsecured.
If Mr. O'Connell's employment is terminated by us without cause, he
will be entitled to a severance payment equal to the greater of (1) the
full amount of the cash compensation that he would have been paid under his
employment agreement or (2) nine months of his then-current base salary. If
Mr. O'Connell's employment is terminated by us with cause, in exchange for
a release as to any and all claims Mr. O'Connell may have against us, he
will be entitled to a severance payment equal to three months of his
then-current base salary. If Mr. O'Connell terminates his employment with
us, he will be entitled to a severance payment equal to three months of his
then-current base salary in exchange for a release of any claims he may
have against us. If after the initial three-year term, Mr. O'Connell's
employment is not renewed, he will be entitled to a severance payment equal
to nine months of his then-current base salary in exchange for a release of
any claims he may have against us. Mr. O'Connell will remain as an employee
during any period he is receiving severance pay and his options will
continue to vest during such period.
We entered into an employment agreement with Eran Pilovsky effective
on January 15, 2000. Mr. Pilovsky's agreement provides for a three-year
term that will automatically renew for consecutive one-year extensions,
unless terminated by either party upon written notice. Under Mr. Pilovsky's
agreement, he is entitled to receive an annual base salary equal to
$250,000 effective January 15, 2000 and $260,000 effective January 1, 2001,
and an annual bonus equal to 15%, 50% or 90% of his annual base salary if
we meet 80%, 100% or 120% of our annual business plan, respectively, with
the bonus pro rated if our plan is met between 80% and 100% or between 100%
and 120%. In addition, Mr. Pilovsky will also be entitled to a
discretionary bonus, as determined by our board of directors or the
compensation committee.
If Mr. Pilovsky's employment is terminated by us without cause, he
will be entitled to a severance payment equal to the greater of (1) the
full amount of the cash compensation that he would have been paid under his
employment agreement or (2) six months of his then-current base salary. If
Mr. Pilovsky's employment is terminated by us with cause, in exchange for a
release as to any and all claims Mr. Pilovsky may have against us, he will
be entitled to a severance payment equal to three months of his
then-current base salary. If after the initial three-year term, Mr.
Pilovsky's employment is not renewed, he will be entitled to a severance
payment equal to six months of his then current base salary in exchange for
a release of any claims he may have against us. Mr. Pilovsky will remain as
an employee during any period he is receiving severance pay and his options
will continue to vest during that period.
We entered into an employment agreement with Stephen P. Pezzola
effective as of January 1, 2000. Mr. Pezzola's agreement provides for a
three-year term that will automatically renew for consecutive one-year
extensions, unless terminated by either party upon written notice. Under
Mr. Pezzola's agreement, he is entitled to receive an annual base salary
equal to $202,500 effective January 1, 2000 and $210,000 effective January
1, 2001, and an annual bonus equal to 15%, 50% or 90% of his annual base
salary if we meet 80%, 100% or 120% of our annual business plan,
respectively, with the bonus pro rated if our plan is met between 80% and
100% or between 100% and 120%. In addition, Mr. Pezzola will also be
entitled to a discretionary bonus, as determined by our board of directors
or the compensation committee. In 2000, Mr. Pezzola also received under the
agreement a bonus in the amount of $25,000 upon the completion of our
initial public offering. Mr. Pezzola is required to devote at least 30
hours per week to the business of Vyyo under his employment agreement.
If Mr. Pezzola's employment is terminated by us without cause, he
will be entitled to a severance payment equal to the greater of (1) the
full amount of the cash compensation that he would have been paid under his
employment agreement or (2) nine months of his then-current base salary. If
Mr. Pezzola's employment is terminated by us with cause, in exchange for a
release as to any and all claims Mr. Pezzola may have against us, he will
be entitled to a severance payment equal to three months of his
then-current base salary. If Mr. Pezzola terminates his employment with us,
he will be entitled to a severance payment equal to three months of his
then-current base salary. If after the initial three-year term, Mr.
Pezzola's employment is not renewed, he will be entitled to a severance
payment equal to nine months of his then current base salary in exchange
for a release of any claims he may have against us. Mr. Pezzola will remain
as an employee during any period he is receiving severance pay and his
options will continue to vest during that period.
Effective as of February 1, 2001, we entered into an employment
agreement with Menashe Shahar which replaces a prior employment agreement
dated January 1, 2000. Mr. Shahar's agreement provides for a two-year term
that will automatically renew for consecutive one-year extensions, unless
terminated by either party upon written notice. Under Mr. Shahar's
agreement, he is entitled to receive an annual base salary equal to
$225,000, and an annual bonus equal to 15%, 50% or 90% of his annual base
salary if we meet 80%, 100% or 120% of our annual business plan,
respectively, with the bonus pro rated if our plan is met between 80% and
100% or between 100% and 120%. In addition, Mr. Shahar will also be
entitled to a discretionary bonus, as determined by our board of directors
or the compensation committee.
In connection with Mr. Shahar's relocation from Israel to California
in 2001, we have agreed to pay the following amounts to Mr. Shahar: (1)
reimbursement of up to $8,000 per month of rental payments on a home in
California, until the earlier of November 14, 2002 or until Mr. Shahar
purchases a home in California, (2) reimbursement of up to $1,000 per month
for car lease payments until December 31, 2002, (3) closing costs on the
purchase of a home in California, if purchased prior to June 30, 2001, (4)
certain travel expenses for Mr. Shahar and his family, (5) a $25,000 moving
bonus and reasonable moving expenses of up to $20,000, (5) approximately
$20,000 for Israeli and United States tax planning and compliance advisors
for Mr. Shahar in connection with his relocation, and (6) reimbursement of
any taxes incurred by Mr. Shahar as a result of the above payments.
In addition, we have agreed to loan Mr. Shahar up to $1,000,000 to be
used for the purchase of a home in California. The amount of the loan shall
be equal to 50% of the home purchase price if purchased by June 30, 2001,
40% of the purchase price if purchased between July 1 and December 31,
2001, and 30% of the purchase price if purchased after January 1, 2002. The
loan shall bear interest at the lowest allowable rate under tax and
accounting laws, interest shall be due annually on December 15th of each
year, and the principal and any unpaid interest shall be due on the earlier
of 90 days after his employment with us terminates or upon the sale of the
home. The loan shall be secured by the home, with a security interest
junior to that of a bank mortgage lender on the home, if any.
If Mr. Shahar's employment is terminated by us without cause, he will
be entitled to a severance payment equal to the greater of (1) the full
amount of the cash compensation that he would have been paid under his
employment agreement or (2) six months of his then-current base salary. If
Mr. Shahar's employment is terminated by us with cause, in exchange for a
release as to any and all claims Mr. Shahar may have against us, he will be
entitled to a severance payment equal to three months of his then-current
base salary. If after the initial two-year term, Mr. Shahar's employment is
not renewed, he will be entitled to a severance payment equal to six months
of his then-current base salary in exchange for a release of any claims he
may have against us. Mr. Shahar will remain as an employee during any
period he is receiving severance pay and his options will continue to vest
during that period.
We entered into an employment agreement with Arnon Kohavi effective
on November 22, 1999. Mr. Kohavi's agreement provides for an 18 month term
that will automatically renew for consecutive six-month extensions, unless
terminated by either party by written notice. Under Mr. Kohavi's agreement,
he is entitled to receive an annual base salary equal to $155,000 effective
November 22, 1999, and $200,000 effective September 1, 2000, and an annual
bonus equal to 25%, 75% or 125% of his annual base salary if we meet 80%,
100% or 120% of our annual business plan, respectively, with the bonus pro
rated if our plan is met between 80% and 100% or between 100% and 120%. In
addition, Mr. Kohavi will also be entitled to participate in each bonus
plan adopted by our board of directors.
If Mr. Kohavi's employment is terminated by us without cause, he will
be entitled to a severance payment equal to the lesser of (1) the full
amount of the cash compensation that he would have been paid under his
employment agreement or (2) six months of his then-current base salary. If
after the initial 18-month term, Mr. Kohavi's employment is not renewed, he
will be entitled to a severance payment equal to six months of his then
current base salary in exchange for a release of any claims he may have
against us.
Our employment agreement with Michael Corwin was entered into
effective as of January 1, 2000 and was terminated pursuant to a
termination agreement dated effective as of March 21, 2001, upon Mr.
Corwin's resignation from Vyyo as our Chief Operating Officer. Under the
termination agreement, Vyyo paid to Mr. Corwin a $125,000 severance payment
and shall pay Mr. Corwin's health insurance premiums until December 31,
2001. In addition, a total of 148,000 options to purchase common stock held
by Mr. Corwin were accelerated to be vested and exercisable on the date of
the termination agreement and shall remain outstanding for one year after
the date of the termination agreement. Under his employment agreement prior
to its termination, Mr. Corwin received an annual base salary equal to
$225,000 effective January 1, 2000, and $250,000 effective January 1, 2001,
and also received a bonus of $195,000 for fiscal 2000 based on Vyyo meeting
a certain percentage of our annual business plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee currently consists of directors Broad and
Zimmerman.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The following report of the compensation committee and the
performance graph which follows do not constitute solicitation material,
and shall not be deemed filed or incorporated by reference into any other
filing by Vyyo under the Securities Act of 1933, or the Securities Exchange
Act of 1934.
Compensation Policy. Vyyo's Compensation Policy as established by the
compensation committee is that executive officers' total annual cash
compensation should vary with the performance of Vyyo, and that long-term
incentives awarded to such officers should be aligned with the interest of
our stockholders. Vyyo's executive compensation program is designed to
attract and retain executive officers who will contribute to our long-term
success, to reward executive officers who contribute to Vyyo's financial
performance and to link executive officer compensation and stockholder
interests through the grant of stock options.
Compensation of Vyyo's executive officers consists of three principal
components: salary, bonus, and long-term incentive compensation consisting
of stock option grants.
Salary. The minimum base salaries for our Chief Executive Officer and
each of the other executive officers are specified in employment
agreements, and are subject to annual increases by the Compensation
Committee in its discretion. The base salaries of all executive officers
are reviewed annually and, subject to minimum amounts specified in
employment agreements, are set by the Compensation Committee. When setting
base salary levels, in a manner consistent with the Compensation
Committee's policy outlined above, the Committee considers competitive
market conditions for executive compensation, Vyyo's performance and
individual performance.
Bonus. The bonuses of the Chief Executive Officer and each of the
other executive officers were specified in employment agreements and were
based on Vyyo achieving certain corporate performance objectives. The
Compensation Committee also evaluates the performance and sets
discretionary bonuses payable to the executive officers.
Long-term Incentive Compensation. We believe that option grants (1)
align executive interests with stockholder interests by creating a direct
link between compensation and stockholder return, (2) give executives a
significant, long-term interest in Vyyo's success, and (3) help retain key
executive officers in a competitive market for executive talent.
Our stock option plans authorize the Committee to grant stock options
to employees and consultants, including executive officers. Option grants
are made from time to time to executive officers whose contributions have
or will have a significant impact on Vyyo's long-term performance. Vyyo's
determination of whether option grants are appropriate each year is based
upon individual performance measures established for each individual.
Options are not necessarily granted to each executive officer during each
year. Options granted to the Chief Executive Officer in 2000, for 870,000
shares that were repriced in December 2000, vested as to 370,000 shares on
the date of grant, and will vest as to the remaining 500,000 shares on
October 1, 2001, and such options will terminate on December 31, 2001.
Options granted to other executive officers in 2000, vest as to 50% of the
options on the date that is six months after the date of grant, and
thereafter in equal monthly installments over a period of six months, and
expire five years from the date of grant. Details on stock options granted
to certain executive officers in 2000, are provided in "Option Grants in
Last Fiscal Year," and details regarding the option repricing in 2000, are
provided in "Report on Repricing of Options."
Compensation of Chairman of the Board and Chief Executive Officer. As
described above in "Employment Agreements," the minimum salary and bonus of
Davidi Gilo, the Chairman of the Board, and John R. O'Connell, the Chief
Executive Officer, are provided in their respective employment agreements
and are subject to increases as determined by the board of directors. The
base salaries specified in the employment agreements, and the long term
incentive compensation in the form of options granted to Mr. Gilo and Mr.
O'Connell, were established by negotiations with Mr. Gilo and Mr.
O'Connell, respectively, and in determining the amount of the salary and
other compensation paid to these persons, the Compensation Committee
considered factors including the performance of Mr. Gilo and Mr. O'Connell
and their contributions to Vyyo, the level of salary and long term
incentive compensation paid to persons in similar positions at other
companies in Vyyo's industry, and the considerable competition for
executive talent within the industry.
Mr. Gilo's and Mr. O'Connell's bonuses under each of their employment
agreements is based on Vyyo's performance each year. For fiscal 2000,
bonuses of $304,000 and $56,800 were paid to Mr. Gilo and Mr. O'Connell,
respectively, based on Vyyo meeting a certain percentage of our annual
business plan in 2000. Mr. O'Connell's bonus was pro rated to reflect that
he served as Chief Executive Officer commencing in October 2000. Mr.
O'Connell also received a signing bonus of $600,000 under his employment
agreement, in connection with his joining us as our Chief Executive
Officer.
Compensation Policy Regarding Deductibility. Vyyo is required to
disclose its policy regarding qualifying executive compensation for
deductibility under Section 162(m) of the Internal Revenue Code which
provides that, for purposes of the regular income tax and the alternative
minimum tax, the otherwise allowable deduction for compensation paid or
accrued with respect to a covered employee of a publicly-held corporation
is limited to $1 million per year. For the fiscal year ended December 31,
2000, none of our executive officers received $1 million. It is not
expected that the compensation to be paid to our executive officers for
fiscal 2001 will exceed the $1 million limit for any officer. Our option
plans are structured so that any compensation deemed paid to an executive
officer when he exercises an outstanding option under any of the option
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. The Compensation
Committee currently intends to limit the dollar amount of all other
compensation payable to Vyyo's executive officers to no more than $1
million.
Report on Repricing of Options
In December 2000, the board of directors repriced previously granted
options to John O'Connell, Vyyo's Chief Executive Officer. Between October
12, 2000, the date on which Mr. O'Connell joined Vyyo and was granted
options, and December 4, 2000, stock prices in the general market and the
price of our common stock declined dramatically. As a result of this
decline, the Compensation Committee believed that the relationship between
the exercise price of Mr. O'Connell's options and the current market price
of our common stock did not provide an effective equity incentive for the
newly retained Chief Executive Officer. Equity incentives are a significant
component of the total compensation package of Vyyo's employees and play a
substantial role in Vyyo's ability to retain the services of individuals
essential to our long-term success. The Compensation Committee felt that
Vyyo's ability to retain Mr. O'Connell would be significantly impaired
unless value was restored to his options. Accordingly, the Compensation
Committee determined it was necessary to reprice a portion of his options
to provide a realistic incentive.
Under the terms of the repricing, on December 4, 2000, Mr.
O'Connell's options to purchase 1,450,000 shares of our common stock, which
were previously granted at an exercise price of $20.00 per share, were
cancelled, and 870,000 new options were granted at an exercise price of
$7.66 per share, the closing price of our common stock on such date.
Notwithstanding the original vesting schedule of the cancelled options, the
vesting schedule of the new options was amended such that 370,000 of the
options vested on the date of the repricing, and the remaining 500,000
options vest on October 1, 2001. The repriced options will terminate on
December 31, 2001. In addition, Vyyo has agreed to grant 500,000 additional
options to Mr. O'Connell as soon as practicable after June 4, 2001, at an
exercise price equal to the fair market value of our common stock on the
date of grant.
The following table sets forth the number of options repriced for the
fiscal year ended December 31, 2000:
Length of
Number of Market Exercise Original
Securities Price at Price at New Option Term
Underlying Time of Time of Exercise Remaining at
Date of Options Repricing Repricing Price Date of
Name Repricing Repriced (#) ($/Sh) ($/Sh) ($/Sh) Repricing
---- --------- ------------ ---------- ---------- --------- -------------
John R. 12/4/00 870,000 $7.66 $20.00 $7.66 4.8 years(1)
O'Connell
Chief Executive
Officer
- ---------------------
(1) The replacement options have a term of 1.1 years after the date of grant.
The above Report on Executive Compensation is submitted by the
Compensation Committee:
Lewis S. Broad
Alan L. Zimmerman
STOCK PERFORMANCE GRAPH
The graph below compares the cumulative total stockholder return on
our common stock with the cumulative total return on the Nasdaq Stock
Market Index and the Nasdaq Telecommunications Index. The period shown
commences on April 5, 2000, the date that our common stock was registered
under Section 12 of the Securities Exchange Act of 1934, and ends on
December 31, 2000, the end of Vyyo's last fiscal year. The graph assumes an
investment of $100 on April 5, 2000, and the reinvestment of any dividends.
The comparisons in the graph below are based upon historical data and
are not indicative of, nor intended to forecast, future performance of our
common stock.
TOTAL RETURN TO STOCKHOLDERS
APRIL 5, 2000 TO DECEMBER 31, 2000
CUMULATIVE TOTAL RETURN*
-------------------------
04/05/00 12/31/00
-------- --------
Vyyo Inc. $100 $45.37
Nasdaq Stock Market Index $100 $53.61
Nasdaq Telecommunications Index $100 $40.46
- ----------------------------
*$100 invested on April 5, 2000 in stock or index - including reinvestment
of dividends. Fiscal year ending December 31.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since January 1, 2000, there has not been, nor is there currently
proposed, any transaction or series of similar transactions to which we
were or are to be a party in which the amount involved exceeds $60,000 and
in which any director, executive officer or holder of more than 5% of our
common stock, or an immediate family member of any of the foregoing, had or
will have a direct or indirect interest other than compensation
arrangements that are described where required under "Executive
Compensation and Other Information" and the transactions described below.
On December 4, 2000, in connection with an exercise of options to
purchase our common stock, we lent $2,834,163 to John O'Connell, our Chief
Executive Officer, in exchange for which Mr. O'Connell issued a full
recourse promissory note to us. The note bore interest at a variable rate
equal to the federal funds rate of the Federal Reserve Board as in effect
from time to time, plus 2% per annum. Interest was payable quarterly on the
last day of each calendar quarter commencing on March 31, 2001, and
principal was due on the earlier of December 4, 2003 or 20 business days
after Mr. O'Connell leaves Vyyo. If Mr. O'Connell sells any of the shares
purchased with the loan, he shall repay to Vyyo an amount equal to the
lesser of the sale proceeds and the exercise price for the shares. The note
was secured by the purchased shares and by a pledge of the assets held in a
brokerage account of Mr. O'Connell having an initial value of not less than
200% of the amount of the loan. The note was amended on March 1, 2001 such
that (1) commencing on March 1, 2001, the note bears interest at the rate
of 4.86% per annum, (2) principal and interest shall be due and payable on
December 4, 2003, and (3) the note is secured by the shares purchased and
our recourse in the event of non-payment of the note is limited to our
rights in such shares as collateral. We have agreed to reimburse Mr.
O'Connell up to $500,000 for any tax liability incurred by him as a result
of termination of the loan if the loan obligation exceeds the value of such
shares. As of December 31, 2000, Mr. O'Connell owed $2,852,032 in principal
and interest under the loan, which was the largest amount of indebtedness
under the loan during 2000.
In January 2000, in connection with an exercise of options to
purchase our common stock, we lent $249,980 to Eran Pilovsky, our Chief
Financial Officer, in exchange for which Mr. Pilovsky issued a
full-recourse promissory note to us. This note was due on the earlier of
January 16, 2003 or the time at which Mr. Pilovsky sells the shares
purchased with the loan, or leaves Vyyo, and bore interest at rate of 6%
per annum. The note was secured by the purchased shares. In June 2000, Mr.
Pilovsky repaid to us the full amount of $256,473 of principal and accrued
interest under this note.
In October 2000, the board of directors granted options to purchase
102,000 shares of our common stock to Menashe Shahar and options to
purchase 88,000 shares of our common stock to Arnon Kohavi, in each case at
an exercise price of $20.00 per share. In December 2000, the board of
directors granted options to purchase 80,000 shares of our common stock to
each of Mr. Shahar and Mr. Kohavi, in each case at an exercise price of
$7.66 per share.
Avraham Fischer, a director of Vyyo, is a senior partner of the law
firm of Fischer, Behar, Chen & Co., which represents us on matters relating
to Israeli law. We paid approximately $309,097 in legal fees to this firm
in 2000.
We have entered into indemnification agreements with our directors
and executive officers containing provisions that may require us, among
other things, to indemnify our directors and executive officers against
various liabilities that may arise by virtue of their status or service as
directors and executive officers, and to advance their expenses incurred as
a result of any proceeding against them as to which they could be
indemnified.
We sublease our headquarters office in Cupertino, California from Zen
Research, Inc. on a month-to-month basis. Mr. Gilo is a controlling
shareholder and the Chairman of the Board of Zen Research's parent
corporation. In addition, Mr. Pezzola is the Vice Chairman of the Board of
Zen Research's parent corporation. The average monthly payments we made to
Zen Research for rent and other reimbursed expenses under our sublease were
$44,250 during 2000. In addition, in April 2000, we purchased office
furniture and equipment from Zen Research in the amount of $115,000 in
cash.
STOCKHOLDER PROPOSALS
Under our bylaws, if you intend to present a proposal at Vyyo's 2002
annual stockholder meeting, you must deliver a copy of your proposal to our
Corporate Secretary, Stephen P. Pezzola, at Vyyo Inc., 20400 Stevens Creek
Boulevard, Suite 800, Cupertino, California 95014, not less than 60 nor
more than 90 days prior to the anniversary date of the 2001 annual
stockholder meeting, unless the date of Vyyo's 2002 annual stockholder
meeting is more than 30 calendar days before or after the date of our 2001
meeting, in which case your notice of a proposal will be timely if we
receive it by the close of business on the tenth day following the day we
publicly announce the date of the 2002 meeting or mail notice of the
meeting, whichever occurs first. These requirements are separate from and
in addition to the Securities and Exchange Commission's requirements for a
stockholder to have a proposal included in Vyyo's proxy statement.
Stockholders interested in submitting a proposal for inclusion in the
proxy materials for Vyyo's annual meeting of stockholders in 2002, may do
so by following the procedures prescribed in Securities and Exchange
Commission Rule 14a-8 and submitting such proposal to our Corporate
Secretary, Mr. Pezzola, at our address noted above. To be eligible for
inclusion, stockholder proposals must be received by the Corporate
Secretary no later than December 4, 2001.
OTHER MATTERS
The board of directors knows of no other business that will be
presented at the annual meeting. If any other business is properly brought
before the annual meeting, it is intended that proxies in the enclosed form
will be voted in respect thereof in accordance with the judgment of the
persons voting the proxies.
It is important that the proxies be returned promptly and that your
shares be represented. Stockholders are urged to mark, date, execute and
promptly return the accompanying proxy card in the enclosed envelope.
By Order of the Board of Directors,
/s/ Davidi Gilo
---------------------------------
Davidi Gilo
Chairman of the Board
March 27, 2001
Cupertino, California
APPENDIX A
CHARTER OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
OF VYYO INC.
(AS ADOPTED BY THE BOARD ON FEBRUARY 2, 2000)
I. AUTHORITY
The Audit Committee (the "Committee") of the Board of Directors (the
"Board") of Vyyo Inc. (the "Company") shall be subject to the bylaws of the
Company, as in effect from time to time, and Section 141 of the Delaware
General Corporation Law.
II. PURPOSE
The purpose of the Committee shall be to provide assistance to the
Board in fulfilling its legal and fiduciary obligations with respect to
matters involving the accounting, auditing, financial reporting and
internal control functions of the Company and its subsidiaries.
The Committee shall oversee the audit efforts of the Company's
independent accountants and, in that regard, shall take such actions as it
may deem necessary to satisfy itself that the Company's auditors are
independent of management. It is the objective of the Committee to maintain
free and open means of communications among the Board, the independent
accountants and the financial and senior management of the Company.
III. COMPOSITION
The Committee shall be comprised of at least three members of the
Board. The members of the Committee and its Chairperson (the "Committee
Chairperson") will be appointed by and serve at the discretion of the
Board.
Each member of the Committee shall be an "independent" director
within the meaning of the Nasdaq rules and, as such, shall be free from any
relationship that may interfere with the exercise of his or her independent
judgment as a member of the Committee. Notwithstanding the foregoing, as
permitted by the Nasdaq rules, under exceptional and limited circumstances,
one director who does not meet certain of the criteria for "independence"
may be appointed to the Committee if the Board determines in its business
judgment that membership on the Committee by such person is required by the
best interests of the Company and its stockholders and the Company
discloses in the annual proxy statement the nature of such person's
relationship and the reasons for the Board's determination. All members of
the Committee shall be financially literate at the time of their election
to the Committee or shall become financially literate within a reasonable
period of time after their appointment to the Committee. "Financial
literacy" shall be determined by the Board in the exercise of its business
judgment, and shall include a working familiarity with basic finance and
accounting practices and an ability to read and understand fundamental
financial statements. At least one member of the Committee shall have past
employment experience in finance or accounting, requisite professional
certification in accounting or any other comparable experience or
background which results in the individual's financial sophistication,
including being or having been a chief executive officer, chief financial
officer or senior officer with financial oversight responsibilities. Such
qualification shall be determined by the Board in the exercise of its
business judgement.
The Committee shall ensure that the Company provides the Nasdaq, on a
one-time basis and then upon any subsequent amendment to the Committee's
charter or upon a change in the composition of the Committee, with written
confirmation regarding:
(1) Any determination that the Board has made regarding the
independence of the Committee members;
(2) The financial literacy of the Committee members;
(3) The determination that at least one of the Committee members
has past employment experience in finance or accounting,
requisite professional certification in accounting or any other
comparable experience or background which results in the
individual's financial sophistication; and
(4) The annual review and reassessment of the adequacy of the
Committee's charter.
IV. MEETINGS
The Committee shall hold at least one regular meeting per year and
additional meetings as the Committee Chairperson or Committee deems
appropriate. The Committee shall also meet at least once per year with
management, the head of the internal auditing department and the Company's
independent accountants in separate executive sessions to discuss any
matters that the Committee or each of these groups or persons believe
should be discussed privately. In addition, the Committee (or the Chairman)
should meet or confer with the independent accountants and management
quarterly to review the Company's periodic financial statements prior to
their filing with the Securities and Exchange Commission (the "SEC"). The
Chairman should work with the Chief Financial Officer and management to
establish the agendas for Committee meetings. The Committee, in its
discretion, may ask members of management or others to attend its meetings
(or portions thereof) and to provide pertinent information as necessary.
V. MINUTES AND REPORTS
Minutes of each meeting of the Committee shall be kept and
distributed to each member of the Committee, members of the Board who are
not members of the Committee and the Secretary of the Company. The
Committee Chairperson shall report to the Board from time to time, or
whenever so requested by the Board.
VI. DUTIES AND RESPONSIBILITIES
In carrying out its duties and responsibilities, the Committee's
policies and procedures should remain flexible, so that it may be in a
position to best react or respond to changing circumstances or conditions.
The Committee should review and reassess annually the adequacy of the
Committee's charter. The charter must specify: (1) the scope of the
Committee's responsibilities and how it carries out those responsibilities,
(2) the ultimate accountability of the Company's independent auditors to
the Board and the Committee, (3) the responsibility of the Committee and
the Board for the selection, evaluation and replacement of the Company's
independent auditors, and (4) that the Committee is responsible for
ensuring that the Company's independent auditors submit on a periodic basis
to the Committee a formal written statement delineating all relationships
between the independent auditors and the Company and that the Committee is
responsible for actively engaging in a dialogue with the independent
auditors with respect to any disclosed relationships or services that may
impact the objectivity and independence of the independent auditors and for
recommending that the Board take appropriate action to ensure the
independence of the independent auditors.
While there is no "blueprint" to be followed by the Committee in
carrying out its duties and responsibilities, the Committee shall have full
power and authority to carry out the following:
SELECTION AND EVALUATION OF AUDITORS
1. Make recommendations to the Board as to the selection of the
firm of independent public accountants to audit the books and
accounts of the Company and its subsidiaries for each fiscal
year;
2. Review and approve the Company's independent auditors' annual
engagement letter, including the proposed fees contained
therein;
3. Review the performance of the Company's independent auditors
and make recommendations to the Board regarding the replacement
or termination of the independent auditors when circumstances
warrant;
4. Oversee the independence of the Company's independent auditors
by, among other things:
1. requiring the independent auditors to deliver to the
Committee on a periodic basis a formal written
statement delineating all relationships between the
independent auditors and the Company; and
2. actively engaging in a dialogue with the independent
auditors with respect to any disclosed relationships or
services that may impact the objectivity and
independence of the independent auditors and
recommending that the Board take appropriate action to
satisfy itself of the auditors' independence;
5. Instruct the Company's independent auditors that they are
ultimately accountable to the Committee and the Board, and that
the Committee and the Board are responsible for the selection
(subject to shareholder approval if determined by the Board),
evaluation and termination of the Company's independent
auditors;
OVERSIGHT OF ANNUAL AUDIT AND QUARTERLY REVIEWS
6. Review and accept, if appropriate, the annual audit plan of the
Company's independent auditors, including the scope of audit
activities, and monitor such plan's progress and results during
the year;
7. Confirm through private discussions with the Company's
independent auditors and the Company's management that no
management restrictions are being placed on the scope of the
independent auditors' work;
8. Review the results of the year-end audit of the Company,
including (as applicable):
1. the audit report, the published financial statements,
the management representation letter, the "Memorandum
Regarding Accounting Procedures and Internal Control"
or similar memorandum prepared by the Company's
independent auditors, any other pertinent reports and
management's responses concerning such memorandum;
2. the qualitative judgments of the independent auditors
about the appropriateness, not just the acceptability,
of accounting principle and financial disclosure
practices used or proposed to be adopted by the Company
and, particularly, about the degree of aggressiveness
or conservatism of its accounting principles and
underlying estimates;
3. the methods used to account for significant unusual
transactions;
4. the effect of significant accounting policies in
controversial or emerging areas for which there is a
lack of authoritative guidance or consensus;
5. management's process for formulating sensitive
accounting estimates and the reasonableness of these
estimates;
6. significant recorded and unrecorded audit adjustments;
7. any material accounting issues among management and the
independent auditors; and
8. other matters required to be communicated to the
Committee under generally accepted auditing standards,
as amended, by the independent auditors;
9. Review with management and the Company's independent auditors
such accounting policies (and changes therein) of the Company,
including any financial reporting issues which could have a
material impact on the Company's financial statements, as are
deemed appropriate for review by the Committee prior to any
interim or year-end filings with the SEC or other regulatory
body;
10. Confirm that the Company's interim financial statements
included in Quarterly Reports on Form 10-Q have been reviewed
by the Company's independent auditors;
OVERSIGHT OF FINANCIAL REPORTING PROCESS AND INTERNAL CONTROLS
11. Review the adequacy and effectiveness of the Company's
accounting and internal control policies and procedures through
inquiry and discussions with the Company's independent auditors
and management of the Company;
12. Review with management the Company's administrative,
operational and accounting internal controls, including
controls and security of the computerized information systems,
and evaluate whether the Company is operating in accordance
with its prescribed policies, procedures and codes of conduct;
13. Review with management and the independent auditors any
reportable conditions and material weaknesses, as defined by
the American Institute of Certified Public Accountants,
affecting internal control;
14. Receive periodic reports from the Company's independent
auditors and management of the Company to assess the impact on
the Company of significant accounting or financial reporting
developments proposed by the Financial Accounting Standards
Board or the SEC or other regulatory body, or any other
significant accounting or financial reporting related matters
that may have a bearing on the Company;
15. Establish and maintain free and open means of communication
between and among the Board, the Committee, the Company's
independent auditors and management;
OTHER MATTERS
16. Meet annually with the general counsel, and outside counsel
when appropriate, to review legal and regulatory matters,
including any matters that may have a material impact on the
financial statements of the Company;
17. Prepare a report to be included in each annual proxy statement
(or, if not previously provided during the fiscal year, any
other proxy statement or consent statement relating to the
election of directors) of the Company commencing after December
15, 2000 which states, among other things, whether:
1. the Committee has reviewed and discussed with
management the audited financial statements to be
included in the Company's Annual Report on Form 10-K;
2. the Committee has discussed with the Company's
independent auditors the matters that the auditors are
required to discuss with the Committee by Statements on
Auditing Standard No. 61, (as it may be modified or
supplemented);
3. the Committee has received the written disclosures and
the letter from the Company's independent auditors
required by Independence Standards Board Standard No.
1, as may be modified or supplemented, and has
discussed with the independent auditors their
independence; and
4. based on the review and discussions described in
subsections (a), (b) and (c) above, the Committee has
recommended to the Board that the audited financial
statements be included in the Company's Annual Report
on Form 10-K for the last fiscal year for filing with
the SEC;
18. Review the Company's policies relating to the avoidance of
conflicts of interest and review past or proposed transactions
between the Company and members of management as well as
policies and procedures with respect to officers' expense
accounts and perquisites, including the use of corporate
assets. The Committee shall consider the results of any review
of these policies and procedures by the Company's independent
auditors;
19. Obtain from the independent auditors any information pursuant
to Section 10A of the Securities Exchange Act of 1934;
20. Conduct or authorize investigations into any matters within the
Committee's scope of responsibilities, including retaining
outside counsel or other consultants or experts for this
purpose; and
21. Perform such other functions and have such other powers as may
be necessary or convenient in the efficient discharge of the
foregoing.
WITH RESPECT TO THE DUTIES AND RESPONSIBILITIES LISTED ABOVE, THE COMMITTEE
SHOULD:
22. Report regularly to the Board on its activities, as
appropriate;
23. Exercise reasonable diligence in gathering and considering all
material information;
24. Understand and weigh alternative courses of conduct that may be
available;
25. Focus on weighing the benefit versus harm to the Company and
its shareholders when considering alternative recommendations
or courses of action;
26. If the Committee deems it appropriate, secure independent
expert advice and understand the expert's findings and the
basis for such findings, including retaining independent
counsel, accountants or others to assist the Committee in
fulfilling its duties and responsibilities; and
27. Provide management and the Company's independent auditors with
appropriate opportunities to meet privately with the Committee.
* * *
While the Committee has the duties and responsibilities set forth in
this charter, the Committee is not responsible for planning or conducting
the audit or for determining whether the Company's financial statements are
complete and accurate and are in accordance with generally accepted
accounting principles. Similarly, it is not the responsibility of the
Committee to resolve disagreements, if any, between management and the
independent auditors or to ensure that the Company complies with all laws
and regulations.
*************
APPENDIX B
VYYO INC.
AMENDED AND RESTATED
2000 EMPLOYEE AND CONSULTANT EQUITY INCENTIVE PLAN
SECTION 1. GENERAL PURPOSE OF PLAN; DEFINITIONS.
The name of this plan is the Vyyo Inc. Amended and Restated
2000 Employee and Consultant Equity Incentive Plan (the "Plan"). The Plan
was adopted by the Board (defined below) and approved by the stockholders
of the Company (defined below) on November 22, 1999. The Board subsequently
amended and restated the Plan in its entirety on February 2, 2000 (the
"Amendment"), and such Amendment was approved by the stockholders of the
Company on the same date. The purpose of the Plan is to enable the Company
to attract and retain highly qualified personnel who will contribute to the
Company's success and to provide incentives to Participants (defined below)
that are linked directly to increases in stockholder value and will
therefore inure to the benefit of all stockholders of the Company. The
Company wishes the issuance of Awards (defined below) to its employees in
Israel to conform with the requirements of Section 3(9) of the Israeli
Income Tax Ordinance, and for this purpose the appended document Annex A
amends this Plan to so conform.
For purposes of the Plan, the following terms shall be defined
as set forth below:
(a) "Administrator" means the Board, or if and to the extent
the Board does not administer the Plan, the Committee in accordance with
Section 2 below.
(b) "Affiliate" means any corporation that directly, or
indirectly through one or more intermediaries, controls or is controlled
by, or is under common control with, another corporation, where "control"
(including the terms "controlled by" and "under common control with") means
the possession, direct or indirect, of the power to cause the direction of
the management and policies of the corporation, whether through the
ownership of voting securities, by contract or otherwise.
(c) "Award" means any award under the Plan.
(d) "Award Agreement" means, with respect to each Award, the
signed written agreement between the Company and the Participant setting
forth the terms and conditions of the Award.
(e) "Board" means the Board of Directors of the Company.
(f) "Code" means the Internal Revenue Code of 1986, as amended
from time to time, or any successor thereto.
(g) "Committee" means any committee the Board may appoint to
administer the Plan. To the extent necessary and desirable, the Committee
shall be composed entirely of individuals who meet the qualifications
referred to in Section 162(m) of the Code and Rule 16b-3 under the Exchange
Act. If at any time or to any extent the Board shall not administer the
Plan, then the functions of the Board specified in the Plan shall be
exercised by the Committee.
(h) "Common Stock" means the common stock, par value $0.0001
per share, of the Company.
(i) "Company" means Vyyo Inc., a Delaware corporation (or any
successor corporation).
(j) "Deferred Stock" means the right to receive Shares at the
end of a specified deferral period granted pursuant to Section 8 below.
(k) "Disability" means the inability of a Participant to
perform substantially his or her duties and responsibilities to the Company
or to any Parent or Subsidiary by reason of a physical or mental disability
or infirmity (i) for a continuous period of six months, or (ii) at such
earlier time as the Participant submits medical evidence satisfactory to
the Administrator that the Participant has a physical or mental disability
or infirmity that will likely prevent the Participant from returning to the
performance of the Participant's work duties for six months or longer. The
date of such Disability shall be the last day of such six-month period or
the day on which the Participant submits such satisfactory medical
evidence, as the case may be.
(l) "Eligible Recipient" means an officer, director, employee,
consultant or advisor of the Company or of any Parent or Subsidiary.
(m) "Employee Director" means any director of the Company who
is also an employee of the Company or of any Parent or Subsidiary.
(n) "Exchange Act" means the Securities Exchange Act of 1934,
as amended from time to time.
(o) "Exercise Price" means the per share price at which a
holder of an Award may purchase the Shares issuable upon exercise of the
Award.
(p) "Fair Market Value" as of a particular date shall mean the
fair market value of a share of Common Stock as determined by the
Administrator in its sole discretion; provided, however, that (i) if the
Common Stock is admitted to trading on a national securities exchange, fair
market value of a share of Common Stock on any date shall be the closing
sale price reported for such share on such exchange on such date or, if no
sale was reported on such date, on the last date preceding such date on
which a sale was reported, (ii) if the Common Stock is admitted to
quotation on the National Association of Securities Dealers Automated
Quotation ("Nasdaq") System or other comparable quotation system and has
been designated as a National Market System ("NMS") security, fair market
value of a share of Common Stock on any date shall be the closing sale
price reported for such share on such system on such date or, if no sale
was reported on such date, on the last date preceding such date on which a
sale was reported, (iii) if the Common Stock is admitted to quotation on
the Nasdaq System but has not been designated as an NMS security, fair
market value of a share of Common Stock on any date shall be the average of
the highest bid and lowest asked prices of such share on such system on
such date or, if no bid and ask prices were reported on such date, on the
last date preceding such date on which both bid and ask prices were
reported; (iv) in the case of a Limited Stock Appreciation Right, the fair
market value of a share of Common Stock shall be the "Change in Control
Price" (as defined in the Award Agreement evidencing such Limited Stock
Appreciation Right) of a share of Common Stock as of the date of exercise.
(q) "Incentive Stock Option" means any Option intended to be
designated as an "incentive stock option" within the meaning of Section 422
of the Code.
(r) "Limited Stock Appreciation Right" means a Stock
Appreciation Right that can be exercised only in the event of a "Change in
Control" (as defined in the Award Agreement evidencing such Limited Stock
Appreciation Right).
(s) "Non-Employee Director" means a director of the Company who
is not an employee of the Company or of any Parent or Subsidiary.
(t) "Non-Qualified Stock Option" means any Option that is not
an Incentive Stock Option, including any Option that provides (as of the
time such Option is granted) that it will not be treated as an Incentive
Stock Option.
(u) "Option" means an option to purchase Shares granted
pursuant to Section 6 below.
(v) "Parent" means any corporation (other than the Company) in
an unbroken chain of corporations ending with the Company, if each of the
corporations in the chain (other than the Company) owns stock possessing
50% or more of the combined voting power of all classes of stock in one of
the other corporations in the chain.
(w) "Participant" means (i) any Eligible Recipient selected by
the Administrator, pursuant to the Administrator's authority in Section 2
below, to receive grants of Options, Stock Appreciation Rights, Limited
Stock Appreciation Rights, awards of Restricted Stock, Deferred Stock, or
Performance Shares or any combination of the foregoing, or (ii) any
Non-Employee Director who is eligible to receive grants of Options pursuant
to Section 6(i) below.
(x) "Performance Shares" means Shares that are subject to
restrictions based upon the attainment of specified performance objectives
granted pursuant to Section 8 below.
(y) "Registration Statement" means the registration statement
on Form S-1 filed with the Securities and Exchange Commission for the
initial underwritten public offering of the Common Stock.
(z) "Restricted Stock" means Shares subject to certain
restrictions granted pursuant to Section 8 below.
(aa) "Shares" means shares of Common Stock reserved for
issuance under the Plan, as adjusted pursuant to Sections 3 and 4, and any
successor security.
(bb) "Stock Appreciation Right" means the right pursuant to an
Award granted under Section 7 below to receive an amount equal to the
excess, if any, of (i) the Fair Market Value, as of the date such Stock
Appreciation Right or portion thereof is surrendered, of the Shares covered
by such right or such portion thereof, over (ii) the aggregate Exercise
Price of such right or such portion thereof.
(cc) "Subsidiary" means any corporation (other than the
Company) in an unbroken chain of corporations beginning with the Company,
if each of the corporations (other than the last corporation) in the
unbroken chain owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in
the chain.
SECTION 2. ADMINISTRATION.
The Plan shall be administered in accordance with the
requirements of Section 162(m) of the Code (but only to the extent
necessary and desirable to maintain qualification of Awards under the Plan
under Section 162(m) of the Code) and, to the extent applicable, Rule 16b-3
under the Exchange Act ("Rule 16b-3"), by the Board or, at the Board's sole
discretion, by the Committee, which shall be appointed by the Board, and
which shall serve at the pleasure of the Board.
Pursuant to the terms of the Plan, the Administrator shall have
the power and authority to grant to Eligible Recipients Options, Stock
Appreciation Rights or Limited Stock Appreciation Rights, Awards of
Restricted Stock, Deferred Stock or Performance Shares or any combination
of the foregoing; provided, however, that automatic, nondiscretionary
grants of Options shall be made to Non-Employee Directors pursuant to and
in accordance with the terms of Section 6(i) below. Except as otherwise
provided in Section 6(i) below, the Administrator shall have the authority:
(a) to select those Eligible Recipients who shall be
Participants;
(b) to determine whether and to what extent Options, Stock
Appreciation Rights, Limited Stock Appreciation Rights, Awards of
Restricted Stock, Deferred Stock or Performance Shares or a combination of
any of the foregoing, are to be granted hereunder to Participants;
(c) to determine the number of Shares to be covered by each
Award granted hereunder;
(d) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of each Award granted hereunder (including, but
not limited to, (i) the restrictions applicable to Awards of Restricted
Stock or Deferred Stock and the conditions under which restrictions
applicable to such Awards of Restricted Stock or Deferred Stock shall
lapse, and (ii) the performance goals and periods applicable to Awards of
Performance Shares);
(e) to determine the terms and conditions, not inconsistent
with the terms of the Plan, which shall govern all written instruments
evidencing Options, Stock Appreciation Rights, Limited Stock Appreciation
Rights, Awards of Restricted Stock, Deferred Stock or Performance Shares or
any combination of the foregoing granted hereunder;
(f) to reduce the Exercise Price of any Option to the then
current Fair Market Value if the Fair Market Value of the Shares covered by
such Option has declined since the date such Option was granted; and
(g) the Committee may, at any time or from time to time,
authorize the Company, with the consent of the respective Participants, to
issue new Awards in exchange for the surrender and cancellation of any or
all outstanding Awards. The Committee may at any time buy from a
Participant an Award previously granted with payment in cash, Shares
(including Restricted Stock) or other consideration, based on such terms
and conditions as the Committee and the Participant shall agree.
The Administrator shall have the authority, in its sole
discretion, to adopt, alter and repeal such administrative rules,
guidelines and practices governing the Plan as it shall from time to time
deem advisable; to interpret the terms and provisions of the Plan and any
Award issued under the Plan (and any Award Agreement relating thereto); and
to otherwise supervise the administration of the Plan.
All decisions made by the Administrator pursuant to the
provisions of the Plan shall be final, conclusive and binding on all
persons, including the Company and the Participants.
SECTION 3. SHARES SUBJECT TO PLAN.
The total number of shares of Common Stock reserved and
available for issuance under the Plan shall be 12,850,000 shares, plus an
annual increase to be added on the first day of the Company's fiscal year
(beginning 2002) equal to the lesser of (i) 2,000,000 shares or (ii) five
percent (5%) of the number of outstanding shares of Common Stock on the
last day of the immediately preceding fiscal year. Such shares may consist,
in whole or in part, of authorized and unissued shares or treasury shares.
The aggregate number of Shares as to which Options, Stock Appreciation
Rights, and Awards of Restricted Stock, Deferred Stock and Performance
Shares may be granted to any Participant during any calendar year may not,
subject to adjustment as provided in this Section 3, exceed 80% of the
Shares reserved for the purposes of the Plan.
Consistent with the provisions of Section 162(m) of the Code,
as from time to time applicable, to the extent that (i) an Option expires
or is otherwise terminated without being exercised, or (ii) any Shares
subject to any Award of Restricted Stock, Deferred Stock or Performance
Shares granted hereunder are forfeited, such Shares shall again be
available for issuance in connection with future Awards granted under the
Plan. If any Shares have been pledged as collateral for indebtedness
incurred by a Participant in connection with the exercise of an Option and
such Shares are returned to the Company in satisfaction of such
indebtedness, such Shares shall again be available for issuance in
connection with future Awards granted under the Plan.
In the event of any stock dividend, recapitalization, stock
split, reverse stock split, subdivision, combination, reclassification or
similar change in the capital structure of the Company without
consideration, an equitable substitution or proportionate adjustment shall
be made in (i) the aggregate number of Shares reserved for issuance under
the Plan, (ii) the kind, number and Exercise Prices of Shares subject to
outstanding Options, and (iii) the kind, number and Exercise Prices of
Shares subject to outstanding Awards of Restricted Stock, Deferred Stock
and Performance Shares, in each case as may be determined by the
Administrator, in its sole discretion, subject to any required action by
the Board or the stockholders of the Company and in compliance with
applicable securities laws; provided, however, that fractions of a Share
shall not be issued but shall either be paid in cash at Fair Market Value
or shall be rounded up to the nearest whole share, as determined by the
Committee. An adjusted Exercise Price shall also be used to determine the
amount payable by the Company upon the exercise of any Stock Appreciation
Right or Limited Stock Appreciation Right related to any Option.
SECTION 4. CORPORATE TRANSACTIONS
(a) Assumption or Replacement of Awards by Successor. In the
event of (i) a merger or consolidation in which the Company is not the
surviving corporation (other than a merger or consolidation with a
wholly-owned subsidiary, a reincorporation of the Company in a different
jurisdiction, or other transaction in which there is no substantial change
in the stockholders of the Company and the Awards granted under the Plan
are assumed or replaced by the successor corporation, which assumption
shall be binding on all Participants); (ii) a dissolution or liquidation of
the Company; (iii) the sale of substantially all of the assets of the
Company; or (iv) any other transaction which qualifies as a "corporate
transaction" under Section 424(a) of the Code wherein the stockholders of
the Company give up all of their equity interest in the Company (except for
the acquisition, sale or transfer of all or substantially all of the
outstanding shares of the Company), any or all outstanding Awards may be
assumed or replaced by the successor corporation (if any) or Parent
thereof, which assumption or replacement shall be binding on all
Participants. In the alternative, the successor corporation or Parent
thereof may substitute equivalent awards or provide substantially similar
consideration to Participants as was provided to stockholders of the
Company (after taking into account the existing provisions of the Awards).
The successor corporation or Parent thereof may also issue, in place of
outstanding shares of the Company held by the Participant, substantially
similar shares or other property subject to repurchase restrictions no less
favorable to the Participant. In the event such successor corporation (if
any) or Parent thereof does not assume or substitute awards, as provided
above, pursuant to a transaction described in this Section 4(a), such
Awards shall automatically become fully vested and exercisable and be
released from any restrictions on transfer and repurchase or forfeiture
rights, immediately prior to the specified effective date of such
transaction, for all the Shares at the time represented by such Awards. In
such event, effective upon the consummation of the transaction, or at such
other time and on such conditions as the Board shall determine, all
outstanding Awards under the Plan shall terminate and cease to remain
outstanding, except to the extent assumed by the successor corporation or
its Parent.
(b) Other Treatment of Awards. Subject to any greater rights
granted to Participants under the foregoing provisions of this Section 4,
in the event of the occurrence of any transaction described in Section
4(a), any outstanding Awards shall be treated as provided in the applicable
Award Agreement or plan of merger, consolidation, dissolution, liquidation,
sale of assets or other "corporate transaction."
(c) Assumption of Awards by the Company. The Company, from time
to time, also may substitute or assume outstanding awards granted by
another company, whether in connection with an acquisition of such other
company or otherwise, by either (i) granting an Award under the Plan in
substitution of such other company's award; or (ii) assuming such award as
if it had been granted under the Plan if the terms of such assumed award
could be applied to an award granted under the Plan. Such substitution or
assumption shall be permissible if the holder of the substituted or assumed
award would have been eligible to be granted an Award under the Plan if the
other company had applied the rules of the Plan to such grant. In the event
the Company assumes an award granted by another company, the terms and
conditions of such award shall remain unchanged (except that the exercise
price and the number and nature of Shares issuable upon exercise of any
such option will be adjusted approximately pursuant to Section 424(a) of
the Code). In the event the Company elects to grant a new Option rather
than assuming an existing option, such new Option may be granted with a
similarly adjusted Exercise Price.
SECTION 5. ELIGIBILITY.
Eligible Recipients shall be eligible to be granted Options,
Stock Appreciation Rights, Limited Stock Appreciation Rights, Awards of
Restricted Stock, Deferred Stock or Performance Shares or any combination
of the foregoing hereunder. The Participants under the Plan shall be
selected from time to time by the Administrator, in its sole discretion,
from among the Eligible Recipients, and the Administrator shall determine,
in its sole discretion, the number of Shares covered by each such Award.
SECTION 6. OPTIONS.
Options may be granted alone or in addition to other Awards
granted under the Plan. Any Option granted under the Plan shall be in such
form as the Administrator may from time to time approve, and the provisions
of each Option need not be the same with respect to each Participant.
Participants who are granted Options shall enter into an Award Agreement
with the Company, in such form as the Administrator shall determine, which
Award Agreement shall set forth, among other things, the Exercise Price of
the Option, the term of the Option and provisions regarding exercisability
of the Option granted thereunder.
The Options granted under the Plan may be of two types: (i)
Incentive Stock Options and (ii) Non-Qualified Stock Options.
The Administrator shall have the authority to grant to any
officer or employee of the Company or of any Parent or Subsidiary
(including directors who are also officers of the Company) Incentive Stock
Options, Non-Qualified Stock Options, or both types of Options (in each
case with or without Stock Appreciation Rights or Limited Stock
Appreciation Rights). Directors who are not also officers of the Company or
of any Parent or Subsidiary, consultants or advisors to the Company or to
any Parent or Subsidiary may only be granted Non-Qualified Stock Options
(with or without Stock Appreciation Rights or Limited Stock Appreciation
Rights). To the extent that any Option does not qualify as an Incentive
Stock Option, it shall constitute a separate Non-Qualified Stock Option.
More than one Option may be granted to the same Participant and be
outstanding concurrently hereunder.
Options granted under the Plan shall be subject to the
following terms and conditions and shall contain such additional terms and
conditions, not inconsistent with the terms of the Plan, as the
Administrator shall deem desirable:
(a) Option Exercise Price. The per share Exercise Price of
Shares purchasable under an Option shall be determined by the Administrator
in its sole discretion at the time of grant but shall not, (i) in the case
of Incentive Stock Options, be less than 100% of the Fair Market Value of
the Common Stock on such date, (ii) in the case of Non-Qualified Stock
Options intended to qualify as "performance-based compensation" within the
meaning of Section 162(m) of the Code, be less than 100% of the Fair Market
Value of the Common Stock on such date and (iii) in any event, be less than
the par value (if any) of the Common Stock. If a Participant owns or is
deemed to own (by reason of the attribution rules applicable under Section
424(d) of the Code) more than 10% of the combined voting power of all
classes of stock of the Company or of any Parent or Subsidiary and an
Incentive Stock Option is granted to such Participant, the per share
Exercise Price of such Incentive Stock Option (to the extent required at
the time of grant by the Code shall be no less than 110% of the Fair Market
Value of the Common Stock on the date such Incentive Stock Option is
granted.
(b) Option Term. The term of each Option shall be fixed by the
Administrator, but no Option shall be exercisable more than ten years after
the date such Option is granted; provided, however, that if an employee
owns or is deemed to own (by reason of the attribution rules of Section
424(d) of the Code) more than 10% of the combined voting power of all
classes of stock of the Company or of any Parent or Subsidiary and an
Incentive Stock Option is granted to such employee, the term of such
Incentive Stock Option (to the extent required by the Code at the time of
grant) shall be no more than five years from the date of grant.
(c) Exercisability. Options shall be exercisable at such time
or times and subject to such terms and conditions as shall be determined by
the Administrator at or after the time of grant. The Administrator may
provide at the time of grant, in its sole discretion, that any Option shall
be exercisable only in installments, and the Administrator may waive such
installment exercise provisions at any time, in whole or in part, based on
such factors as the Administrator may determine, in its sole discretion,
including but not limited to in connection with any "change in control" of
the Company (as defined in the Award Agreement evidencing such Option).
(d) Method of Exercise. Subject to Section 6(c), Options may be
exercised in whole or in part at any time during the Option period, by
giving written notice of exercise to the Company specifying the number of
Shares to be purchased, accompanied by payment in full of the aggregate
Exercise Price of the Shares so purchased in cash or its equivalent, as
determined by the Administrator. In addition, payment for Shares purchased
pursuant to the Plan may be made, where expressly approved for the
Participant by the Committee and where permitted by law:
(i) by cancellation of indebtedness of the Company to the
Participant;
(ii) by surrender of shares of Common Stock that either
(1) have been owned by Participant for more than six (6) months and
have been paid for within the meaning of SEC Rule 144 (and, if such
shares were purchased from the Company by use of a promissory note,
such note has been fully paid with respect to such Shares); or (2)
were obtained by Participant in the public market;
(iii) by waiver of compensation due or accrued to
Participant for services rendered;
(iv) by tender of property;
(v) with respect only to purchases upon exercise of an
Option, and provided that a public market for the Common Stock
exists: (i) through a "same day sale" commitment from Participant and
a broker-dealer that is a member of the National Association of
Securities Dealers (an "NASD Dealer") whereby the Participant
irrevocably elects to exercise the Option and to sell a portion of
the Shares so purchased to pay for the aggregate Exercise Price of
the Shares so purchased, and whereby the NASD Dealer irrevocably
commits upon receipt of such Shares to forward such Exercise Price
directly to the Company; or (ii) through a "margin" commitment from
Participant and an NASD Dealer whereby Participant irrevocably elects
to exercise the Option and to pledge the Shares so purchased to the
NASD Dealer in a margin account as security for a loan from the NASD
Dealer in the amount of the aggregate Exercise Price of the Shares so
purchased, and whereby the NASD Dealer irrevocably commits upon
receipt of such Shares to forward such Exercise Price directly to the
Company;
(vi) in the case of the exercise of a Non-Qualified Stock
Option, in the form of Restricted Stock or Performance Shares subject
to an Award hereunder (based, in each case, on the Fair Market Value
of the Common Stock on the date the Option is exercised); provided,
however, that in the case of an Incentive Stock Option, the right to
make payment in the form of already owned shares of Common Stock may
be authorized only at the time of grant. If payment of the Exercise
Price of a Non-Qualified Stock Option is made in whole or in part in
the form of Restricted Stock or Performance Shares, the Shares
received upon the exercise of such Option shall be restricted in
accordance with the original terms of the Restricted Stock Award or
Performance Shares Award in question, except that the Administrator
may direct that such restrictions shall apply only to that number of
Shares equal to the number of shares surrendered upon the exercise of
such Option.
(vii) by any combination of the foregoing or
(viii) by any other form of consideration permitted by
applicable law.
A Participant shall generally have the rights to dividends and
any other rights of a stockholder with respect to the Shares subject to the
Option only after the Participant has given written notice of exercise, has
paid in full for such Shares, and, if requested, has given the
representation described in Section 11(b).
The Administrator may require the surrender of all or a portion
of any Option granted under the Plan as a condition precedent to the grant
of a new Option. Subject to the provisions of the Plan, such new Option
shall be exercisable at the Exercise Price, during such period and on such
other terms and conditions as are specified by the Administrator at the
time the new Option is granted. Consistent with the provisions of Section
162(m), to the extent applicable, upon their surrender, Options shall be
canceled and the Shares previously subject to such canceled Options shall
again be available for future grants of Options and other Awards hereunder.
(e) Loans. The Company or any Parent or Subsidiary may make
loans available to Option holders in connection with the exercise of
outstanding Options, as the Administrator, in its sole discretion, may
determine. Such loans shall (i) be evidenced by promissory notes entered
into by the Option holders in favor of the Company or any Parent or
Subsidiary, (ii) be subject to the terms and conditions set forth in this
Section 6(e) and such other terms and conditions, not inconsistent with the
Plan, as the Administrator shall determine, (iii) bear interest at the
applicable Federal interest rate or such other rate as the Administrator
shall determine, and (iv) be subject to Board approval (or to approval by
the Administrator to the extent the Board may delegate such authority). In
no event may the principal amount of any such loan exceed the sum of (x)
the aggregate Exercise Price less the par value (if any) of the Shares
covered by the Option, or portion thereof, exercised by the holder, and (y)
any Federal, state, and local income tax attributable to such exercise. The
initial term of the loan, the schedule of payments of principal and
interest under the loan, the extent to which the loan is to be with or
without recourse against the holder with respect to principal and/or
interest and the conditions upon which the loan will become payable in the
event of the holder's termination of service to the Company or to any
Parent or Subsidiary shall be determined by the Administrator. Unless the
Administrator determines otherwise, when a loan is made, Shares having an
aggregate Fair Market Value at least equal to the principal amount of the
loan shall be pledged by the holder to the Company as security for payment
of the unpaid balance of the loan, and such pledge shall be evidenced by a
pledge agreement, the terms of which shall be determined by the
Administrator, in its sole discretion; provided, however, that each loan
shall comply with all applicable laws, regulations and rules of the Board
of Governors of the Federal Reserve System and any other governmental
agency having jurisdiction.
(f) Non-Transferability of Options. Except under the laws of
descent and distribution, the Participant shall not be permitted to sell,
transfer, pledge or assign any Option, and all Options shall be
exercisable, during the Participant's lifetime, only by the Participant;
provided, however, that the Participant shall be permitted to transfer one
or more Non-Qualified Stock Options to a trust controlled by the
Participant during the Participant's lifetime for estate planning purposes.
(g) Termination of Employment or Service. If a Participant's
employment with or service as a director, consultant or advisor to the
Company or to any Parent or Subsidiary terminates by reason of his or her
death, Disability or for any other reason, the Option may thereafter be
exercised to the extent provided in the Award Agreement evidencing such
Option, or as otherwise determined by the Administrator.
(h) Annual Limit on Incentive Stock Options. To the extent that
the aggregate Fair Market Value (determined as of the date the Incentive
Stock Option is granted) of Shares with respect to which Incentive Stock
Options granted to a Participant under this Plan and all other option plans
of the Company or of any Parent or Subsidiary become exercisable for the
first time by the Participant during any calendar year exceeds $100,000 (as
determined in accordance with Section 422(d) of the Code), the portion of
such Incentive Stock Options in excess of $100,000 shall be treated as
Non-Qualified Stock Options.
(i) Automatic Grants of Options to Non-Employee Directors. The
Company shall grant Non-Qualified Stock Options to Non-Employee Directors
pursuant to this Section 6(i), which grants shall be automatic and
nondiscretionary and otherwise subject to the terms and conditions set
forth in this subsection (i) and the terms of the Plan (the "Automatic
Non-Employee Director Options"). Each Non-Employee Director who first
becomes a director of the Company following the Effective Date (as defined
in Section 12) shall be automatically granted a Non-Qualified Stock Option
to purchase 75,000 Shares (an "Initial Option"). Each Non-Employee Director
shall be automatically granted a Non-Qualified Stock Option to purchase
22,500 Shares (the "Annual Options") on the date immediately following the
Company's annual meeting of stockholders; provided, however, that he or she
is then a director of the Company and, provided, further, that as of such
date, such director shall have served on the Board for at least the
preceding six (6) months.
The term of each Automatic Non-Employee Director Option shall
be ten (10) years, and the Exercise Price purchasable under an Automatic
Non-Employee Director Option shall be no less than 100% of the Fair Market
Value of the Common Stock on the date of grant, provided, however, in no
event shall the Exercise Price purchasable under an Automatic Non-Employee
Director Option be less than the par value (if any) of the Common Stock.
The Initial Options shall vest and become exercisable in four equal annual
installments on each of the first four anniversaries of the date of grant.
The Annual Options shall be 100% vested and fully exercisable as of the
date of grant.
In the event that the number of Shares available for grant
under the Plan is not sufficient to accommodate the Automatic Non-Employee
Director Options, then the remaining Shares available for Automatic
Non-Employee Director Options shall be granted to Non-Employee Directors on
a pro-rata basis. No further grants shall be made until such time, if any,
as additional Shares become available for grant under the Plan through
action of the Board and/or the stockholders of the Company to increase the
number of Shares that may be issued under the Plan or through cancellation
or expiration of Awards previously granted hereunder.
SECTION 7. STOCK APPRECIATION RIGHTS AND LIMITED STOCK APPRECIATION RIGHTS.
Stock Appreciation Rights and Limited Stock Appreciation Rights
may be granted either alone ("Free Standing Rights") or in conjunction with
all or part of any Option granted under the Plan ("Related Rights"). In the
case of a Non-Qualified Stock Option, Related Rights may be granted either
at or after the time of the grant of such Option. In the case of an
Incentive Stock Option, Related Rights may be granted only at the time of
the grant of the Incentive Stock Option. The Administrator shall determine
the Eligible Recipients to whom, and the time or times at which, grants of
Stock Appreciation Rights or Limited Stock Appreciation Rights shall be
made; the number of Shares to be awarded, the Exercise Price (or, in the
case of a Limited Stock Appreciation Right, the "Change in Control" price),
and all other conditions of Stock Appreciation Rights and Limited Stock
Appreciation Rights. The provisions of Stock Appreciation Rights and
Limited Stock Appreciation Rights need not be the same with respect to each
Participant.
Stock Appreciation Rights and Limited Stock Appreciation Rights
granted under the Plan shall be subject to the following terms and
conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Administrator shall deem
desirable:
(a) Awards. The prospective recipient of a Stock Appreciation
Right or Limited Stock Appreciation Right shall not have any rights with
respect to such Award, unless and until such recipient has executed an
Award Agreement evidencing the Award (a "Stock Appreciation Right
Agreement" or "Limited Stock Appreciation Right Agreement," as appropriate)
and delivered a fully executed copy thereof to the Company, within a period
of sixty days (or such other period as the Administrator may specify) after
the award date. Participants who are granted Stock Appreciation Rights or
Limited Stock Appreciation Rights shall have no rights as stockholders of
the Company with respect to the grant or exercise of such rights.
(b) Exercisability.
(i) Stock Appreciation Rights that are Free Standing
Rights ("Free Standing Stock Appreciation Rights") shall be
exercisable at such time or times and subject to such terms and
conditions as shall be determined by the Administrator at or after
grant; provided, however, that no Free Standing Stock Appreciation
Right shall be exercisable during the first six months of its term,
except that this additional limitation shall not apply in the event
of a Participant's death or Disability prior to the expiration of
such six-month period.
(ii) Stock Appreciation Rights that are Related Rights
("Related Stock Appreciation Rights") shall be exercisable only at
such time or times and to the extent that the Options to which they
relate shall be exercisable in accordance with the provisions of
Section 6 above and this Section 7 of the Plan; provided, however,
that a Related Stock Appreciation Right granted in connection with an
Incentive Stock Option shall be exercisable only if and when the Fair
Market Value of the Common Stock subject to the Incentive Stock
Option exceeds the Exercise Price of such Option; provided, further,
that no Related Stock Appreciation Right shall be exercisable during
the first six months of its term, except that this additional
limitation shall not apply in the event of a Participant's death or
Disability prior to the expiration of such six-month period.
(iii) Limited Stock Appreciation Rights shall only be
exercised within the 30-day period following a "Change in Control"
(as defined by the Administrator in the Limited Stock Appreciation
Right Agreement evidencing such right) and, with respect to Limited
Stock Appreciation Rights that are Related Rights ("Related Limited
Stock Appreciation Rights"), only to the extent that the Options to
which they relate shall be exercisable in accordance with the
provisions of Section 6 above and this Section 7 of the Plan.
(c) Payment Upon Exercise.
(i) Upon the exercise of a Free Standing Stock
Appreciation Right, the Participant shall be entitled to receive up
to, but not more than, an amount in cash or that number of Shares (or
any combination of cash and Shares) equal in value to the excess of
the Fair Market Value as of the date of exercise over the per share
Exercise Price specified in the Free Standing Stock Appreciation
Right (which Exercise Price shall be no less than 100% of the Fair
Market Value of the Common Stock on the date of grant) multiplied by
the number of Shares in respect of which the Free Standing Stock
Appreciation Right is being exercised, with the Administrator having
the right to determine the form of payment.
(ii) A Related Right may be exercised by a Participant by
surrendering the applicable portion of the related Option. Upon such
exercise and surrender, the Participant shall be entitled to receive
up to, but not more than, an amount in cash or that number of Shares
(or any combination of cash and Shares) equal in value to the excess
of the Fair Market Value as of the date of exercise over the per
share Exercise Price specified in the related Option multiplied by
the number of Shares in respect of which the Related Stock
Appreciation Right is being exercised, with the Administrator having
the right to determine the form of payment. Options which have been
so surrendered, in whole or in part, shall no longer be exercisable
to the extent the Related Rights have been so exercised.
(iii) Upon the exercise of a Limited Stock Appreciation
Right, the Participant shall be entitled to receive an amount in cash
equal in value to the excess of the "Change in Control Price" (as
defined in the Award Agreement evidencing such Limited Stock
Appreciation Right) of a share of Common Stock Share as of the date
of exercise over (A) the per share Exercise Price specified in the
related Option, or (B) in the case of a Limited Stock Appreciation
Right which is a Free Standing Stock Appreciation Right, the per
share Exercise Price specified in the Free Standing Stock
Appreciation Right, such excess to be multiplied by the number of
Shares in respect of which the Limited Stock Appreciation Right shall
have been exercised.
(d) Non-Transferability.
(i) Free Standing Stock Appreciation Rights shall be
transferable only when and to the extent that an Option would be
transferable under Section 6(f) of the Plan.
(ii) Related Stock Appreciation Rights shall be
transferable only when and to the extent that the underlying Option
would be transferable under Section 6(f) of the Plan.
(iii) Limited Stock Appreciation Rights shall be
transferable only when and to the extent that an Option would be
transferable under Section 6(f) of the Plan.
(e) Termination of Employment or Service
(i) In the event of the termination of employment or
service of a Participant who has been granted one or more Free
Standing Stock Appreciation Rights, such rights shall be exercisable
at such time or times and subject to such terms and conditions as
shall be determined by the Administrator at or after grant.
(ii) In the event of the termination of employment or
service of a Participant who has been granted one or more Related
Stock Appreciation Rights, such rights shall be exercisable at such
time or times and subject to such terms and conditions as set forth
in the related Options.
(iii) In the event of the termination of employment or
service of a Participant who has been granted one or more Limited
Stock Appreciation Rights, such rights shall be exercisable at such
time or times and subject to such terms and conditions as shall be
determined by the Administrator at or after grant.
(f) Term.
(i) The term of each Free Standing Stock Appreciation
Right shall be fixed by the Administrator, but no Free Standing Stock
Appreciation Right shall be exercisable more than ten years after the
date such right is granted.
(ii) The term of each Related Stock Appreciation Right
shall be the term of the Option to which it relates, but no Related
Stock Appreciation Right shall be exercisable more than ten years
after the date such right is granted.
(iii) The term of each Limited Stock Appreciation Right
shall be fixed by the Administrator, but no Limited Stock
Appreciation Right shall be exercisable more than ten years after the
date such right is granted.
SECTION 8. RESTRICTED STOCK, DEFERRED STOCK AND PERFORMANCE SHARES.
Awards of Restricted Stock, Deferred Stock or Performance
Shares may be issued either alone or in addition to other Awards granted
under the Plan. The Administrator shall determine the Eligible Recipients
to whom, and the time or times at which, Awards of Restricted Stock,
Deferred Stock or Performance Shares shall be made; the number of Shares to
be awarded; the Exercise Price, if any, to be paid by the Participant for
the acquisition of Restricted Stock, Deferred Stock or Performance Shares;
the Restricted Period (as defined in Section 8(b)) applicable to Awards of
Restricted Stock or Deferred Stock; the performance objectives applicable
to Awards of Deferred Stock or Performance Shares; and all other conditions
of the Awards of Restricted Stock, Deferred Stock and Performance Shares.
Subject to the requirements of Section 162(m) of the Code, as applicable,
the Administrator may also condition the grant of the Award of Restricted
Stock, Deferred Stock or Performance Shares upon the exercise of Options,
or upon such other criteria as the Administrator may determine, in its sole
discretion. The provisions of the Awards of Restricted Stock, Deferred
Stock or Performance Shares need not be the same with respect to each
Participant. In the sole discretion of the Administrator, loans may be made
to Participants in connection with the purchase of Restricted Stock under
substantially the same terms and conditions as provided in Section 6(e) of
the Plan with respect to the exercise of Options.
(a) Awards and Certificates. The prospective recipient of
Awards of Restricted Stock, Deferred Stock or Performance Shares shall not
have any rights with respect to any such Award, unless and until such
recipient has executed an Award Agreement evidencing the Award (a
"Restricted Stock Award Agreement," "Deferred Stock Award Agreement" or
"Performance Shares Award Agreement," as appropriate) and delivered a fully
executed copy thereof to the Company, within a period of sixty days (or
such other period as the Administrator may specify) after the award date.
Except as otherwise provided below in Section 8(b), (i) each Participant
who is granted an Award of Restricted Stock or Performance Shares shall be
issued a stock certificate in respect of such shares of Restricted Stock or
Performance Shares; and (ii) such certificate shall be registered in the
name of the Participant, and shall bear an appropriate legend referring to
the terms, conditions, and restrictions applicable to any such Award.
The Company may require that the stock certificates evidencing
Restricted Stock or Performance Shares granted hereunder be held in the
custody of the Company until the restrictions thereon shall have lapsed,
and that, as a condition of any Award of Restricted Stock or Performance
Shares, the Participant shall have delivered a stock power, endorsed in
blank, relating to the Shares covered by such Award.
With respect to Awards of Deferred Stock, at the expiration of
the Restricted Period, stock certificates in respect of such Shares of
Deferred Stock shall be delivered to the Participant, or his legal
representative, in a number equal to the number of Shares covered by the
Deferred Stock Award.
(b) Restrictions and Conditions. The Awards of Restricted
Stock, Deferred Stock and Performance Shares granted pursuant to this
Section 8 shall be subject to the following restrictions and conditions:
(i) Subject to the provisions of the Plan and the
Restricted Stock Award Agreement, Deferred Stock Award Agreement or
Performance Shares Award Agreement, as appropriate, governing any
such Award, during such period as may be set by the Administrator
commencing on the date of grant (the "Restricted Period"), the
Participant shall not be permitted to sell, transfer, pledge or
assign shares of Restricted Stock, Deferred Stock or Performance
Shares awarded under the Plan; provided, however, that the
Administrator may, in its sole discretion, provide for the lapse of
such restrictions in installments and may accelerate or waive such
restrictions in whole or in part based on such factors and such
circumstances as the Administrator may determine, in its sole
discretion, including, but not limited to, the attainment of certain
performance related goals, the Participant's termination of
employment or service as a director, consultant or advisor to the
Company or any Parent or Subsidiary, the Participant's death or
Disability or the occurrence of a "change in control" as defined in
the Restricted Stock Award Agreement, Deferred Stock Award Agreement
or Performance Shares Award Agreement, as appropriate, evidencing
such Award.
(ii) Except as provided in Section 8(c)(i), the
Participant shall generally have the rights of a stockholder of the
Company with respect to Restricted Stock or Performance Shares during
the Restricted Period. The Participant shall generally not have the
rights of a stockholder with respect to Shares subject to Awards of
Deferred Stock during the Restricted Period; provided, however, that
dividends declared during the Restricted Period with respect to the
number of Shares covered by Awards of Deferred Stock shall be paid to
the Participant. Certificates for unrestricted Shares shall be
delivered to the Participant promptly after, and only after, the
Restricted Period shall expire without forfeiture in respect of such
Awards of Restricted Stock, Deferred Stock or Performance Shares
except as the Administrator, in its sole discretion, shall otherwise
determine.
(iii) The rights of Participants granted Awards of
Restricted Stock, Deferred Stock or Performance Shares upon
termination of employment or service as a director, consultant or
advisor to the Company or to any Parent or Subsidiary terminates for
any reason during the Restricted Period shall be set forth in the
Restricted Stock Award Agreement, Deferred Stock Award Agreement or
Performance Shares Award Agreement, as appropriate, governing such
Awards.
SECTION 9. AMENDMENT AND TERMINATION.
The Board may amend, alter or discontinue the Plan, but no
amendment, alteration, or discontinuation shall be made that would impair
the rights of a Participant under any Award theretofore granted without
such Participant's consent, or that, without the approval of the
stockholders (as described below), would:
(a) except as provided in Section 3 of the Plan, increase the
total number of Shares reserved for issuance under the Plan;
(b) change the class of officers, directors, employees,
consultants and advisors eligible to participate in the Plan; or
(c) extend the maximum Option period under Section 6(b) of the
Plan.
Notwithstanding the foregoing, stockholder approval under this
Section 9 shall only be required at such time and under such circumstances
as stockholder approval would be required under Section 162(m) of the Code
or other applicable law, rule or regulation with respect to any material
amendment to an employee benefit plan of the Company.
The Administrator may amend the terms of any Award theretofore
granted, prospectively or retroactively, but, subject to Section 3 of Plan,
no such amendment shall impair the rights of any Participant without his or
her consent.
SECTION 10. UNFUNDED STATUS OF PLAN.
The Plan is intended to constitute an "unfunded" plan for
incentive compensation. With respect to any payments not yet made to a
Participant by the Company, nothing contained herein shall give any such
Participant any rights that are greater than those of a general creditor of
the Company.
SECTION 11. GENERAL PROVISIONS.
(a) Shares shall not be issued pursuant to the exercise of any
Award granted hereunder unless the exercise of such Award and the issuance
and delivery of such Shares pursuant thereto shall comply with all relevant
provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act and the requirements of any stock
exchange upon which the Common Stock may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to
such compliance.
(b) The Administrator may require each person acquiring Shares
to represent to and agree with the Company in writing that such person is
acquiring the Shares without a view to distribution thereof. The
certificates for such Shares may include any legend which the Administrator
deems appropriate to reflect any restrictions on transfer.
All certificates for Shares delivered under the Plan shall be
subject to such stock-transfer orders and other restrictions as the
Administrator may deem advisable under the rules, regulations, and other
requirements of the Securities and Exchange Commission, any stock exchange
upon which the Common Stock is then listed, and any applicable Federal or
state securities law, and the Administrator may cause a legend or legends
to be placed on any such certificates to make appropriate reference to such
restrictions.
(c) Nothing contained in the Plan shall prevent the Board from
adopting other or additional compensation arrangements, subject to
stockholder approval, if such approval is required; and such arrangements
may be either generally applicable or applicable only in specific cases.
The adoption of the Plan shall not confer upon any Eligible Recipient any
right to continued employment or service with the Company or any Parent or
Subsidiary, as the case may be, nor shall it interfere in any way with the
right of the Company or any Parent or Subsidiary to terminate the
employment or service of any of its Eligible Recipients at any time.
(d) Each Participant shall, no later than the date as of which
the value of an Award first becomes includible in the gross income of the
Participant for Federal income tax purposes, pay to the Company, or make
arrangements satisfactory to the Administrator regarding payment of, any
Federal, state, or local taxes of any kind required by law to be withheld
with respect to such Award. The obligations of the Company under the Plan
shall be conditional on the making of such payments or arrangements, and
the Company shall, to the extent permitted by law, have the right to deduct
any such taxes from any payment of any kind otherwise due to the
Participant.
(e) No member of the Board or the Administrator, nor any
officer or employee of the Company acting on behalf of the Board or the
Administrator, shall be personally liable for any action, determination, or
interpretation taken or made in good faith with respect to the Plan, and
all members of the Board or the Administrator and each and any officer or
employee of the Company acting on their behalf shall, to the extent
permitted by law, be fully indemnified and protected by the Company in
respect of any such action, determination or interpretation.
SECTION 12. STOCKHOLDER APPROVAL; EFFECTIVE DATE OF PLAN; EFFECTIVE DATE OF
AMENDMENTS.
(a) The grant of any Award hereunder shall be contingent upon
stockholder approval of the Plan being obtained within 12 months before or
after the date the Board adopts the Plan.
(b) Subject to the approval of the Plan by the stockholders of
the Company within twelve (12) months before or after the date the Plan is
adopted by the Board, the Plan shall be effective as of November 22, 1999.
(c) Subject to the approval of the Amendments by the
stockholders of the Company within twelve (12) months before or after the
date the Amendments are adopted by the Board, the Amendments to the Plan
shall be effective as of the first trading day on or after the date on
which the Securities and Exchange Commission declares the Company's
Registration Statement effective (the "Effective Date").
SECTION 13. TERM OF PLAN.
No Option, Stock Appreciation Right, Limited Stock Appreciation
Right, or Awards of Restricted Stock, Deferred Stock or Performance Shares
shall be granted pursuant to the Plan on or after November 22, 2009, but
Awards theretofore granted may extend beyond that date.
ANNEX A TO
VYYO INC. AMENDED AND RESTATED 2000 EMPLOYEE AND CONSULTANT EQUITY
INCENTIVE PLAN ISRAELI SECTION 3(9) EQUITY INCENTIVE PLAN
1. DESIGNATION AND PURPOSE OF THE ISRAELI PLAN
This Annex A to the Vyyo Inc. Amended and Restated 2000 Employee
and Consultant Equity Incentive Plan (the "General Plan"), is the
Israeli Section 3(9) Equity Incentive Plan for key employees
(including directors who are employees) and consultants of Vyyo Ltd.
("Vyyo Ltd."), a wholly-owned Israeli subsidiary of Vyyo Inc. (the
"Company") in accordance with the terms and conditions set forth
below. For the purposes of this Annex A, the Israeli Section 3(9)
Equity Incentive Plan shall be referred to as such, or as the "Israeli
Plan."
The Israeli Plan is being instituted in order to ensure that
all issuances of options by the Company to employees, officers and
consultants of Vyyo Ltd. conform with the provisions of Section 3(9)
of the Israeli Income Tax Ordinance [New Version], 1961, the rules and
regulations promulgated thereunder, from time to time ("Section 3(9)")
and the Israeli Tax Authorities (the "Tax Authority") authorization,
received on June 14, 1998, to impose taxes on the options when
exercised (the "Tax Ruling"), a copy of which is attached as Exhibit
1.
2. GENERAL PLAN INCORPORATED BY REFERENCE
The provisions of the General Plan shall apply to the Israeli
Plan, mutatis mutandis, except that the General Plan shall be deemed
amended to incorporate the provisions herein and shall be interpreted
in such a way as to ensure conformity with Section 3(9). Any
provisions of the General Plan which are in violation of Section 3(9)
shall not apply to the Israeli Plan. In the event of any conflicting
provisions between the law applicable to the General Plan and the
Israeli Law which is applicable to this Israeli Plan, the provisions
of the Israeli Law shall prevail. In respect of issuances of Options
under the Israeli Plan (as annexed to the General Plan), the Committee
need not determine whether the issuances hereunder are "Incentive
Stock Options" within the meaning of the US Federal Income Tax Code or
"Non-Qualified Stock Options".
In the event of any conflict between the Israeli Plan and the
General Plan, then the provisions of the Israeli Plan shall prevail.
Subject to the provisions of this Israeli Plan, the provisions of the
General Plan shall continue to be in full force and effect.
All capitalized terms used in this Israeli Plan shall have the
meanings designated in the General Plan, unless otherwise defined in
this Israeli Plan.
3. ELIGIBILITY
Options may be granted only to employees (including directors who
are employees) and consultants of Vyyo Ltd.
4. DEFINITIONS
The following definitions shall be applicable to the terms used
in the Israeli Plan:
4.1. "Trust Agreement" means the agreement between the Company, Vyyo
Ltd. and the Trustee as may be in effect from time to time
specifying the duties and authority of the Trustee.
4.2. "Trust Assets" means the Options or shares held by the Trustee
under the Trust Agreement for the benefit of the Participants
pursuant to the Israeli Plan and the Trust Agreement.
4.3. "Trustee" means the Trustee (and any successor Trustee)
appointed by the Board of Directors of the Company to hold the
Trust Assets.
5. GRANT OF OPTIONS
Each Option granted for the benefit of a Participant under the
Israeli Plan shall be evidenced by a Stock Option Agreement, to be
entered into by and between the Company, Vyyo Ltd. and such
Participant, in form and substance as may be from time to time
approved by the Committee, which shall incorporate the provisions of
the General Plan, as amended hereby, and the Trust Agreement by
reference. In the event of any conflict between the terms and
conditions of a Stock Option Agreement and the terms hereof, the terms
hereof shall control.
6. GRANT OF OPTIONS TO BE HELD BY TRUSTEE; DIVIDEND AND VOTING RIGHTS
6.1. GRANT OF OPTIONS TO BE HELD BY TRUSTEE
6.1.1. Each Option shall be issued, or transferred, to the Trustee to
be held in trust for the benefit of the Participant. All
certificates representing Options shall be issued in the name
of the Trustee under the Israeli Plan, shall be deposited with
the Trustee, and shall be held by the Trustee until such time
that such Option is released.
6.1.2. Subject to the terms hereof and to the terms in the Stock
Option Agreement, each Participant may, after exercising the
Options or any part thereof, require the Company to cause the
Trustee to release the shares issued pursuant to the exercise
of such Options, provided that no Option shall be exercised by
the Participant unless and until such Participant shall have
deposited with the Trustee an amount of money which, in the
Trustee's sole judgment, is sufficient and necessary to satisfy
Israeli withholding tax requirements. In any case, the
Participant will be responsible for payment of Participant's
tax liability in full and shall indemnify the Company or
Trustee in respect of any liability thereof.
6.2. DIVIDEND AND VOTING.
No Participant shall have any of the rights of a shareholder of
the Company with respect to any Options or Shares which are to derive
from the exercise of any Options, until such time as the Options are
duly exercised and the shares are issued to the trustee or the
Participant. If upon the exercise of any Option, Shares are issued
hereunder to the Trustee, the relevant Participant shall be entitled
to receive (i) a proxy from the Trustee to vote the Shares that the
Trustee holds for Participant's benefit and (ii) any cash dividends
paid with respect to such Shares.
7. MAINTENANCE OF ASSETS BY TRUSTEE
The Trustee shall maintain records of the Options held for the
benefit of each Participant.
8. METHOD OF EXERCISE OF OPTION
Subject to the terms of the General Plan and the terms in the
Stock Option Agreement, an Option shall be exercisable, in whole or in
part, during the Option Period, upon delivery by the Participant to
each of the Trustee and the Company of a duly executed copy of the
relevant notice of exercise in the prescribed form, specifying the
number of Shares as to which such Option is being exercised. The
notice to the Company shall be accompanied by full payment of the
option exercise price thereof (the "Option Exercise Price") in NIS or
in such currency as may be required by the Company. If the exercise
price is paid in any currency other than United States Dollars, the
exchange rate shall be that reasonably specified by the Company at the
time of exercise. The shares issued pursuant to exercise of the
Options shall be delivered by the Company to the Trustee pursuant to
the provisions of Paragraph 6.1 above, or upon the Trustee's
confirmation that the Trustee has received an amount sufficient to pay
the full withholding tax liability in accordance with Paragraph 6
above, the Company shall deliver the shares directly to the
Participant, or the Participant's nominee.
9. ADMINISTRATION, AMENDMENT AND TERMINATION OF THE ISRAELI PLAN
10. The Board and the Committee shall have all power and authority
with respect to the administration, amendment and termination of the
Israeli Plan as they hold in respect of the General Plan, except that
no discretion or authority is hereby granted to the Board or the
Committee so as to disqualify the Israeli Plan under Section 3(9).
11. GOVERNING LAW
This Israeli Plan, and any dispute, controversy or claim arising
out of, or relating to, any tax issue regarding the General Plan which
might arise between (i) the Company, Vyyo Ltd., or the Trustee, and
(ii) a Participant who was granted an Option pursuant to this Israeli
Plan, shall be governed and interpreted in accordance with the laws of
the State of Israel.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
VYYO INC.
FOR THE 2001 ANNUAL MEETING OF THE STOCKHOLDERS
MAY 8, 2001
THE UNDERSIGNED STOCKHOLDER OF VYYO INC., A DELAWARE CORPORATION,
HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
AND PROXY STATEMENT, EACH DATED MARCH 27, 2001 AND THE 2000 ANNUAL REPORT
TO STOCKHOLDERS AND HEREBY APPOINTS JOHN O'CONNELL, ERAN PILOVSKY, AND
STEPHEN P. PEZZOLA, OR ANY OF THEM, PROXIES, WITH FULL POWER TO EACH OF
SUBSTITUTION, ON BEHALF AND IN THE NAME OF THE UNDERSIGNED, TO REPRESENT
THE UNDERSIGNED AT THE 2001 ANNUAL MEETING OF STOCKHOLDERS OF VYYO INC. TO
BE HELD ON MAY 8, 2001 AT 10:00 A.M., LOCAL TIME, AT VYYO INC.'S PRINCIPAL
EXECUTIVE OFFICE LOCATED AT 20400 STEVENS CREEK BOULEVARD, SUITE 800,
CUPERTINO, CALIFORNIA 95014, AND AT ANY ADJOURNMENT OR ADJOURNMENTS
THEREOF, AND TO VOTE ALL SHARES OF COMMON STOCK, WHICH THE UNDERSIGNED
WOULD BE ENTITLED TO VOTE IF THEN AND THERE PERSONALLY PRESENT, ON THE
MATTERS SET FORTH BELOW.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED FOR THE ELECTION OF CLASS I DIRECTORS, FOR THE
AMENDMENT OF THE 2000 EMPLOYEE AND CONSULTANT EQUITY INCENTIVE PLAN, FOR
THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT
AUDITORS, AND AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY
PROPERLY COME BEFORE THE MEETING.
1. ELECTION OF CLASS I DIRECTORS:
NOMINEES: (1) DAVIDI GILO, (2) AVRAHAM FISCHER
(3) JOHN P. GRIFFIN
_____FOR ALL NOMINEES _____WITHHELD FROM ALL NOMINEES
- ------------------------------------------------------
(INSTRUCTION): TO WITHHOLD AUTHORITY TO
VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE THAT
NOMINEE'S NAME IN THE SPACE PROVIDED ABOVE.
2. APPROVAL OF AN AMENDMENT TO THE AMENDED AND RESTATED 2000 EMPLOYEE
AND CONSULTANT EQUITY INCENTIVE PLAN TO INCREASE THE NUMBER OF SHARES
AVAILABLE FOR ISSUANCE THEREUNDER.
______FOR ______AGAINST ______ABSTAIN
3. RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS
INDEPENDENT AUDITORS OF VYYO INC. FOR FISCAL YEAR 2001.
______FOR ______AGAINST ______ABSTAIN
MARK HERE | | MARK HERE | |
FOR ADDRESS IF YOU PLAN
CHANGE AND TO ATTEND
NOTE AT LEFT THE MEETING
This Proxy should be marked,
dated and signed by the stockholder(s) exactly as his or her name
appears hereon, and returned promptly in the enclosed envelope.
Persons signing in a fiduciary capacity should so indicate. If
shares are held by joint tenants or as community property, both
should sign. DATED:__________________________, 2001
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SIGNATURE
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SIGNATURE