SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
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[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)
(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
EON COMMUNICATIONS CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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[_] Check box if any part of the fee is offset as provided by Exchange Act
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[LETTERHEAD OF EON COMMUNICATIONS]
November 16, 2001
To Our Stockholders:
The Board of Directors joins me in extending to you a cordial invitation to
attend the 2001 Annual Meeting of Stockholders of eOn Communications
Corporation. The Annual Meeting will be held at our corporate headquarters, 4105
Royal Drive NW, Suite 100, Kennesaw, Georgia, at 4:00 PM local time on December
19, 2001.
In addition to voting on the matters described in this Proxy Statement, we
will review our fiscal year 2001 results and discuss our plans for fiscal year
2002 and beyond. There will be an opportunity to discuss matters of interest to
you as a stockholder.
We hope many eOn Communications stockholders will find it convenient to be
present at the meeting, and we look forward to greeting those personally able to
attend. It is important that your shares be represented and voted whether or not
you plan to be present. THEREFORE, REGARDLESS OF THE NUMBER OF SHARES YOU OWN,
PLEASE COMPLETE, SIGN, DATE, AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE
POSTAGE-PAID ENVELOPE PROVIDED. No postage is necessary if the envelope is
mailed in the United States. The prompt return of your proxy will save the
expense involved in further communications. Any stockholder attending the Annual
Meeting may vote in person even if a proxy has been returned.
We hope that you will be able to attend the Annual Meeting, and we look
forward to seeing you.
Sincerely,
/s/ David S. Lee
David S. Lee
Chairman of the Board
EON COMMUNICATIONS CORPORATION
4105 ROYAL DRIVE NW, SUITE 100
KENNESAW, GEORGIA 30144
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NOTICE OF 2001 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 19, 2001
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TO OUR STOCKHOLDERS:
Notice is hereby given that the 2001 Annual Meeting of Stockholders of eOn
Communications Corporation (the "Corporation") will be held at 4105 Royal Drive
NW, Suite 100, Kennesaw, Georgia, at 4:00 PM on December 19, 2001, for the
following purposes:
(1) To elect two Class II directors to serve on the Corporation's
Board of Directors for a term of three years or until their
successors are elected and qualified.
(2) To approve an amendment to the 1999 Employee Stock Purchase Plan
to increase the number of shares of common stock available under
the Employee Stock Purchase Plan to 500,000 shares.
(3) To ratify the appointment of Deloitte & Touche LLP as the
Corporation's independent auditors for the fiscal year ending
July 31, 2002.
(4) To transact any other business which may be properly brought
before the Annual Meeting or any adjournment or postponement
thereof.
The above items of business are more fully described in the Proxy Statement
accompanying this notice. Please read the Proxy Statement carefully.
Only stockholders of record at the close of business on October 26, 2001
are entitled to receive notice of, and to vote at, the Annual Meeting or at any
adjournments or postponements of the meeting. A list of the stockholders
entitled to vote at the Annual Meeting will be available for inspection by any
stockholder during usual business hours ten days prior to the meeting date at
the principal offices of the Corporation located at 4105 Royal Drive NW, Suite
100, Kennesaw, Georgia.
By Order of the Board of Directors,
eOn Communications Corporation
/s/ Lanny N. Lambert
Lanny N. Lambert
CORPORATE SECRETARY
Kennesaw, Georgia
November 16, 2001
Your vote is important. Whether or not you expect to attend the Annual
Meeting, please complete, sign, date, and return the enclosed proxy card in the
enclosed postage-prepaid envelope in order to ensure your representation at the
Annual Meeting. You may revoke your proxy at any time prior to the Annual
Meeting. If you decide to attend the Annual Meeting and wish to change your
proxy vote, you may do so automatically by voting in person at the Annual
Meeting.
EON COMMUNICATIONS CORPORATION
4105 ROYAL DRIVE NW, SUITE 100
KENNESAW, GEORGIA 30144
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PROXY STATEMENT
FOR
2001 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 19, 2001
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This Proxy Statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors of the Corporation for use at the
2001 Annual Meeting of Stockholders to be held on December 19, 2001 for the
purposes set forth in the foregoing Notice. This statement and the form of proxy
are being first sent to security holders on or about November 16, 2001.
The accompanying form of proxy has been prepared at the direction of the
Board of Directors and is sent to you at its request. The proxies named therein
have been designated by the Board of Directors.
Stockholders who execute proxies retain the right to revoke them at any
time before they are voted by attending the Annual Meeting and voting in person
or by notifying the Secretary of the Corporation at 4105 Royal Drive NW, Suite
100, Kennesaw, Georgia 30144, in writing of such revocation prior to the Annual
Meeting. A proxy, when properly executed, duly returned and not so revoked, will
be voted and, if it contains any specification, will be voted in accordance
therewith, provided the proxy is not mutilated or otherwise received in such
form or at such time as to render it unvotable. If no choice is specified, the
proxy will be voted in accordance with the recommendations of the Board of
Directors as stated on the proxy form and in this Proxy Statement.
The recommendations of the Board of Directors with respect to voting on
each scheduled item of business at the Annual Meeting are set forth in this
Proxy Statement. In summary, the Board recommends that stockholders vote:
. for the election of the nominated slate of two Class II directors to serve
on the Corporation's Board of Directors for a term of three years or until
their successors are elected and qualified (see page 2);
. for the amendment to the 1999 Employee Stock Purchase Plan to increase the
number of shares subject to the plan to 500,000 (see page 5); and
. for the ratification of the appointment of Deloitte & Touche LLP as the
Corporation's independent auditors for the fiscal year ending July 31, 2002
(see page 8).
With respect to any other item of business that properly comes before the Annual
Meeting, the proxy holders will vote the shares of Common Stock represented by
valid proxies as recommended by the Board of Directors or, if no recommendation
is given, as they may determine in their own discretion.
The proxy solicitation will be conducted by mail, except that in a limited
number of instances proxies may be solicited by officers, directors and regular
employees of the Corporation personally, by telephone or by facsimile. The
Corporation does not presently anticipate payment of any compensation or fees of
any nature to anyone for the solicitation of these proxies, except that the
Corporation may pay persons holding shares in their name, or of their nominees,
for the expense of sending proxies and proxy material to principals. The entire
cost of solicitation will be borne by the Corporation.
1
OUTSTANDING SHARES AND VOTING RIGHTS
Only holders of the 11,980,587 outstanding shares of Common Stock at the
close of business on the record date, October 26, 2001, are entitled to receive
notice of the Annual Meeting and to vote the shares of Common Stock that they
held on that date at the Annual Meeting. Each outstanding share of Common Stock
entitles its holder to cast one vote on each matter to be voted on at the Annual
Meeting.
The presence in person or representation by proxy of a majority of the
outstanding shares of Common Stock as of the record date at the Annual Meeting
will constitute a quorum, thereby permitting the stockholders to conduct their
business at the Annual Meeting.
The election of directors will be determined by a plurality of the votes of
the shares of Common Stock present in person or represented by proxy at the
Annual Meeting and entitled to vote thereon. A properly executed proxy marked
"WITHHOLD AUTHORITY" with respect to the election of one or more directors will
not be voted with respect to the director or directors indicated, although it
will be counted for the purpose of determining whether there is a quorum.
The approval of the amendment to the 1999 Employee Stock Purchase Plan, the
ratification of the appointment of Deloitte & Touche LLP as the Corporation's
independent auditors for the fiscal year ending July 31, 2002, and each other
item of business that properly comes before the Annual Meeting, will be
determined by the affirmative vote of the majority of the shares of Common Stock
present in person or represented by proxy at the Annual Meeting and entitled to
vote thereon. A properly executed proxy marked "ABSTAIN" with respect to any
such matter will not be voted on the matter. Under Delaware law, abstentions are
counted for the purpose of determining whether there is a quorum and, being
shares entitled to vote, are counted in the determination of voting results.
In general, if a stockholder holds shares of Common Stock in "street name"
through a broker or other nominee, and if the broker or other nominee is not
instructed or otherwise empowered to vote the stockholder's shares at a meeting
with respect to a particular matter, then the stockholder's shares will
constitute "broker non-votes" as to such matter. Under Delaware law, broker
non-votes are counted for the purpose of determining whether there is a quorum;
however, because they reflect the withholding of voting power on a specified
matter, they are not shares entitled to vote and thus are not counted in the
determination of voting results. As a practical matter, there will be no "broker
non-votes" at the Annual Meeting, because the nature of the matters to be acted
upon by the Corporation's stockholders at the Annual Meeting is such that the
brokers or other nominees will have discretion to vote the stockholder's shares
even in the absence of express instructions from the stockholders.
At the Annual Meeting, votes will be counted by a representative of
Computershare Investor Services, Inc., the Corporation's independent transfer
agent and registrar. Such representative will process the votes cast by the
stockholders, will make a report of inspection and count of the votes cast by
the stockholders, and will certify as to the number of votes cast on each
proposal.
PROPOSAL NO. 1 - ELECTION OF DIRECTORS
The Board of Directors of the Corporation currently consists of five
directors divided into three classes designated Class I, Class II, and Class
III. A single class of directors is elected each year at the Annual Meeting.
Subject to transition provisions, each class of directors serves until the third
annual meeting of stockholders after his/her election or until a successor has
been elected and duly qualified. Two Class II directors will be elected at the
Annual Meeting.
The persons named in the accompanying form of proxy will vote the shares
represented by all valid proxies which are received for the election of the
nominees hereinafter named, unless the authority to do so is withheld on the
proxy. The two nominees for the Class II directors are presently serving in such
capacity.
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Management has no reason to believe that the nominees will refuse to act or
be unable to accept election; however, in such event and if any other unforeseen
contingency should arise, it is the intention of the persons named in the
accompanying form of proxy to vote for another nominee selected by the Board of
Directors in accordance with their best judgment.
The following descriptions set forth certain information, as of September
30, 2001, about each director, including each person's business experience for
the past five years. There is no family relationship between any of the
directors or executive officers of the Corporation.
NOMINEES FOR CLASS II DIRECTORS WHOSE TERMS EXPIRE IN 2004
ROBERT P. DILWORTH, age 61, became a director of eOn in 1998. He serves on
the board of Metricom Inc., a wireless data communications company, and was its
President from 1987 to 1997, its Chief Executive Officer from 1987 to 1998, and
its Chairman from 1997 to 2000. Mr. Dilworth also serves as Chairman of GraphOn
Corporation, a computer software company, and as a director for Mobility
Electronics, a computer peripheral company. Mr. Dilworth received a B.S. from
Los Angeles State University.
DAVID S. LEE, age 64, became the Chairman of the Board of eOn in 1991 and
served as Chief Executive Officer from May 2000 through August 2001. Mr. Lee is
a director of ESS Technology, Inc., a provider of semiconductor and software
solutions for multimedia applications, and Linear Technology Corporation, a
semiconductor company. Mr. Lee is also a Regent of the University of California.
From 1985 to 1988, Mr. Lee was President and Chairman of Data Technology
Corporation, a computer peripheral company. Prior to 1985, he was Group
Executive and Chairman of the Business Information Systems Group of ITT
Corporation, a diversified company, and President of ITT Qume, formerly Qume
Corporation, a computer systems peripherals company. In 1973, Mr. Lee co-founded
Qume Corporation and was its Executive Vice President until the company was
acquired by ITT Corporation in 1978. Mr. Lee received an M.S. from North Dakota
State University and a B.S. and an honorary doctorate from Montana State
University.
CLASS III DIRECTOR WHOSE TERM EXPIRES IN 2002
W. FRANK KING, age 61, became a director of eOn in 1998. Mr. King is a
director of Concero, a software integration consulting firm, and was its
President and Chief Executive Officer from 1992 to 1998. He is also a director
of iBasis, Inc., a telecommunications company; Aleri Inc., a software company;
Perficient Inc., a professional services company; and NMS Communications, a
telecommunications company. Dr. King earned a Ph.D. from Princeton University,
an M.S. from Stanford University and a B.S. from the University of Florida.
CLASS I DIRECTORS WHOSE TERMS EXPIRE IN 2003
STEPHEN R. BOWLING, age 59, became a director of eOn in 1993. From 1994 to
1997, he was the President of eOn and, from 1994 to 1998, he was the Chief
Executive Officer of eOn. In 1993, Mr. Bowling became President, Chief Executive
Officer and a director of Cortelco Systems Holding Corporation. Mr. Bowling is
the Chief Financial Officer of Cidco Communications Corporation, a provider of
telephone equipment to the regional Bell operating companies. He was the
President and Chief Executive Officer of eManage.com, an internet web site
service company in 1999 and 2000. eManage.com filed for Chapter 11 bankruptcy in
November 2000. Mr. Bowling received an M.B.A. from Stanford University and a
B.A. from Williams College.
JENNY HSUI THELEEN, age 49, became a director of eOn in 1997. She is the
Chairman of CV Transportation Services, an integrated transportation and
distribution company. In 1984, Ms. Theleen co-founded ChinaVest, a private
equity investment firm, and today serves as a managing director of ChinaVest.
Ms. Theleen earned her post-graduate degree from L'Institut d'Etudes Politiques
and a bachelor's degree from the University of Singapore.
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BOARD OF DIRECTORS AND COMMITTEE MEETINGS
During fiscal year 2001, six meetings of the Board of Directors were held.
For the year, each of the directors during the term of their tenure attended or
participated in at least 75% of the aggregate of (i) the total number of
meetings of the Board of Directors and (ii) the total number of meetings held by
all committees of the Board of Directors on which such director served. The
Corporation has no standing executive or nominating committee, but does have the
following two standing committees:
Audit Committee
The Audit Committee consists of Robert P. Dilworth, W. Frank King, and
Jenny Hsui Theleen. The Audit Committee makes recommendations to the Board
regarding the selection of independent auditors, reviews the scope and results
of the audit engagement, approves the fees for the auditors, reviews and
evaluates eOn's internal control functions, and reviews all potential conflict
of interest situations. See "Certain Transactions." The Audit Committee has
adopted a written charter, and all members are considered independent under
criteria defined by the Nasdaq Stock Market. The Audit Committee met three times
during fiscal year 2001.
Compensation Committee
The Compensation Committee consists of Robert P. Dilworth, W. Frank King,
and Jenny Hsui Theleen. The Compensation Committee reviews, determines, and
establishes the salaries, bonuses and other compensation of the Corporation's
executive officers and administers the Corporation's Equity Incentive Plans in
which executive officers and other key employees participate. The Compensation
Committee met three times during fiscal year 2001.
Compensation of Directors
Salaried officers of the Corporation or its subsidiaries do not receive
additional compensation for serving as members of the Board of Directors. No
additional compensation is paid if a full-time officer serves on any committee
of the Board of Directors.
Annual cash payments of $15,000 are paid to each non-employee serving as a
member of the Board of Directors. Directors are also entitled to reimbursement
of expenses incurred to attend meetings. Non-employees serving as members of the
Board of Directors are eligible to receive stock option grants under the eOn
Communications Corporation 1999 Equity Incentive Plan (the "1999 Plan"), which
was adopted by the Board of Directors and approved by a majority of stockholders
in April 1999. As of September 30, 2001, there were five non-employee directors
eligible to participate in the 1999 Plan: Stephen R. Bowling, Robert P.
Dilworth, W. Frank King, David S. Lee, and Jenny Hsui Theleen. Grants of stock
options to purchase 5,000 shares of Common Stock were made to each of these five
directors on May 22, 2001. The exercise price of the stock options was $1.00 per
share, which was equal to the fair market value of the Common Stock on the date
of grant, and the stock options become exercisable on May 22, 2002, and expire
on May 22, 2011.
In order to recruit and retain qualified directors, the Board's intent is
to make annual grants of stock options to purchase 5,000 shares of Common Stock
to each director. Exercise prices will be equal to the fair market value on the
date of grant. Each stock option will become exercisable one year following the
date of grant and expire ten years from the date of grant.
Options granted under the 1999 Plan to directors may be exercised only if
the holder has been in continuous service on the Board of Directors at all times
since the date of the grant of the option.
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Recommendation of the Board of Directors
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES FOR CLASS II
DIRECTORS LISTED ABOVE.
PROPOSAL NO. 2: APPROVAL OF AMENDMENT TO THE 1999
EMPLOYEE STOCK PURCHASE PLAN
On August 28, 2001 the Board of Directors approved an amendment to the
1999 Employee Stock Purchase Plan (the "ESPP"). The amendment increases the
number of shares of Common Stock that may be issued under the ESPP from 250,000
to 500,000 and is subject to shareholder approval. This amendment to the ESPP is
being proposed to allow future grants to employees. No other amendments to the
ESPP are proposed for shareholder approval.
The Board of Directors originally approved the ESPP on April 7, 1999,
authorizing the issuance of up to 250,000 shares of the Corporation's Common
Stock pursuant to the ESPP. The stockholders of the Corporation approved the
ESPP on April 7, 1999.
As of September 30, 2001, 62,744 shares remained available for purchase
under the ESPP. Unless additional shares are approved for issuance under the
amended ESPP, it is possible that there will not be sufficient approved shares
available for the scheduled purchase by ESPP participants on February 28, 2002.
The ESPP was adopted by the Board of Directors to provide a means by
which employees of the Corporation and its subsidiaries will be given an
opportunity to purchase stock in the Corporation at a discount from the market
price, to attract and retain employees, and to increase employee morale.
The ESPP permits participants to purchase shares of the Corporation's
Common Stock directly from the Corporation by authorizing payroll withholdings
over a predetermined period (each, an "Offering Period"), and purchase such
shares at specified purchase dates (with such dates constituting the end of
individual purchase periods ("Purchase Period")) during each Offering Period
with the payroll amounts withheld. Such purchase rights are granted solely to
eligible employees of the Corporation and its subsidiaries. The ESPP is intended
to be an "employee stock purchase plan" as defined in Section 423 of the
Internal Revenue Code of 1986, as amended (the "Code").
Administration
The ESPP is administered by the Board of Directors, or a committee thereof,
which has the final power to construe and interpret the ESPP and the rights
granted under it. The Board of Directors has the power, subject to the
provisions of the ESPP, to interpret and apply the ESPP and to establish rules
and procedures for the administration of its responsibilities under the ESPP.
Shares Subject to the ESPP
Subject to approval by the Corporation's shareholders, the maximum
number of shares of Common Stock available for sale under the amended ESPP is
500,000, which number is subject to proportional adjustment to reflect stock
splits, stock dividends, mergers, consolidations, and similar events. The shares
to be sold to the Participants (as defined below) will be issued by the
Corporation. In the event that insufficient shares of Common Stock are available
under the ESPP for a full allocation of shares to all Participants on a Purchase
Date (as defined below), the Corporation will make a pro rata allocation of the
shares remaining available for issuance, and return to each Participant any
unused payroll deductions.
Eligibility
Any person currently employed on a full-time basis by the Corporation
or any of its designated subsidiaries (an "Employee") may participate in the
ESPP.
5
Notwithstanding the foregoing, no Employee is eligible for the grant of
any rights under the ESPP if, immediately after such grant, such Employee would
own, directly or indirectly, stock possessing five percent (5%) or more of the
total combined voting power or value of all classes of stock of the Corporation
or its subsidiaries (including any stock which such Employee may purchase under
all outstanding rights and options, whether or not vested ). In addition, no
Employee may be granted rights that would permit such Employee to buy more than
$ 25,000 worth of Common Stock (determined at the fair market value of the
Common Stock on the first day of an Offering Period) under all employee stock
purchase plans of the Corporation in any calendar year.
As of September 30, 2001, approximately 80 of the Corporation's
employees were eligible to participate in the ESPP.
Participation in the ESPP
An Employee who has satisfied the eligibility requirements may
participate in the ESPP (a "Participant") by delivering an election notice form
to the Corporation, authorizing payroll deductions and designating the amount of
payroll deductions to be made from the Participant's paycheck. The amount of
payroll deductions must be in whole percentages, not to exceed fifteen percent
(15%). Payroll deductions will begin on the first day of each Purchase Period
(September 1 and March 1) (an "Enrollment Date") following the filing of an
election notice form with the Corporation.
The Corporation will establish and maintain a separate account for each
Participant (the "Account"), and all payroll deductions made for a Participant
will be credited to such Participant's Account and deposited with the general
funds of the Corporation. No interest will be paid or allowed on amounts
credited to a Participant's Account, and a Participant may not make any
additional payments to such account.
On the last day of each Purchase Period (February 28 and August 31) (a
"Purchase Date"), each Participant will have the right to purchase from the
Corporation, at the purchase price discussed below, that number of shares of
Common Stock (excluding fractional shares) that can be purchased or issued by
the Corporation with the amounts held in such Participant's Account.
Purchase of Shares Under the ESPP
A Participant who does not, 10 days prior to a Purchase Date, notify
the Corporation that such Participant does not want to purchase any shares of
Common Stock pursuant to the ESPP will be deemed to elect to purchase the
maximum number of shares of Common Stock purchasable with the amounts held in
such Participant's Account. Any amounts in an Account not used on a Purchase
Date will remain in such Account and be eligible to purchase Common Stock on a
subsequent Purchase Date.
Purchase Price
The purchase price for the Common Stock purchased pursuant to the ESPP
(the "Purchase Price") shall be the lesser of (i) 85% of the Fair Market Value
of the Common Stock on the Offering Date, or (ii) 85% of the Fair Market Value
of the Common Stock on the Purchase Date.
The "Fair Market Value" means the value of the Common Stock determined
as follows:
If the Common Stock is listed or admitted to trading on the Nasdaq National
Market or a stock exchange which reports closing sale prices, the Fair Market
Value shall be the closing sale price for such stock on the date of valuation on
the Nasdaq National Market or principal stock exchange on which the Common Stock
is then listed or admitted to trading, or, if no closing sale price is quoted or
no sale takes place on such day, then the Fair Market Value shall be the closing
sale price of the Common Stock on the Nasdaq National Market or such exchange on
the next preceding day on which a sale occurred.
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Delivery of Stock
Shares of the Corporation's Common Stock acquired under the ESPP are issued
directly to the employee by the Corporation's transfer agent.
Withdrawal
A Participant may withdraw the amounts held in such Participant's Account
at any time prior to 10 days before the Purchase Date of an Offering Period by
delivering a written notice of withdrawal to the Corporation. The entire balance
of the Account will be paid to the Participant, and the Participant will cease
to participate in the ESPP for the remainder of the Offering Period in which the
withdrawal notice was given. An Employee may be reinstated as a Participant for
a subsequent Offering Period by executing and delivering a new election notice
form to the Corporation.
Expiration of Rights
A Participant's participation in the ESPP terminates upon termination
of such Participant's employment with the Corporation or its subsidiaries for
any reason. Upon such termination, the entire balance of such Participant's
Account will be paid to the Participant or his or her beneficiary, without
interest.
A Participant may designate a beneficiary who is to receive any shares
of Common Stock purchased under the ESPP or any cash from the Participant's
Account in the event of such Participant's death. If no beneficiary is
designated, any cash or shares will be delivered to the executor or
administrator of the Participant's estate.
Corporate Change
Upon a merger or consolidation in which the Corporation is not the
surviving entity, or the sale of substantially all of the assets of the
Corporation or a reverse merger in which the Corporation is the surviving entity
(a "Corporate Change"), either (i) the surviving corporation shall assume the
rights previously granted pursuant to the ESPP or substitute new rights covering
the shares of the successor corporation, with appropriate adjustments to the
number and kind of shares and prices, or (ii) the ESPP and rights previously
granted pursuant to the ESPP will continue in full force. If a surviving
corporation refuses to assume or continue the ESPP, or to substitute similar
options, then any rights outstanding will be exercised automatically as if the
effective date of the Corporate Change were a Purchase Date, unless a
Participant withdraws from the ESPP prior to such effective date.
Amendments and Termination
The Corporation may amend, suspend or terminate the ESPP at any time,
provided that the stockholders of the Corporation approve any amendment within
twelve (12) months before or after the adoption.
Restrictions on Transfer
Rights granted under the ESPP are not transferable other than by will
or the laws of descent and distribution, and during an Employee's lifetime, may
be exercised only by the Employee to whom such rights are granted.
Federal Income Tax Information
The ESPP is intended to qualify as an "employee stock purchase plan"
within the meaning of Section 423 of the Code. Under the Code, no income will be
taxable to a Participant at the time the shares of Common Stock are purchased
from the Corporation pursuant to the ESPP, and no income will be taxable
7
to a Participant until disposition of the shares acquired. The method of
taxation upon disposition will depend upon the holding period of the purchased
shares.
If the Common Stock is disposed of at least two (2) years after the
Enrollment Date and at least one (1) year after the Purchase Date, or in the
event of a Participant's death while owning such shares, then the lesser of (a)
the fifteen percent (15%) excess of the Fair Market Value of the Common Stock at
the time the right was granted over the Purchase Price, or (b) the excess of the
Fair Market Value of the Common Stock at the time of the disposition over the
Purchase Price, will be treated as ordinary income. Any further gain or any loss
will be taxed as capital gain or loss.
If the Common Stock is disposed of before the expiration of either of
the holding periods described above (a "Disqualifying Disposition"), then the
entire excess of the Fair Market Value of the stock on the Purchase Date over
the Purchase Price will be treated as ordinary income at the time of such
disposition. The balance of any gain will be treated as capital gain. Even if
the Common Stock is disposed of for less than the Fair Market Value on the
Purchase Date, the same amount of ordinary income is attributed to the
Participant, and a capital loss is recognized equal to the difference between
the sale price and the Fair Market Value of the stock on the Purchase Date.
There are no federal income tax consequences to the Corporation by
reason of the grant or purchase of rights under the ESPP. The Corporation will
be entitled to a deduction, however, to the extent that a Participant recognizes
ordinary income on a Disqualifying Disposition of the shares.
ESPP Benefits
Participation in the ESPP is voluntary and is dependent upon each
eligible Employee's election to participate and his or her determination as to
the level of payroll deductions. Accordingly, future purchases under the ESPP
are not determinable.
Required Vote of Shareholders
The approval of a majority of the shares of Common Stock is required to
approve the proposed amendment to the ESPP increasing the number of shares
available for issuance thereunder.
Recommendation of the Board of Directors
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" APPROVAL OF THE AMENDMENT TO
THE ESPP. PROXIES AND VOTING INSTRUCTIONS WILL BE VOTED IN FAVOR OF THE APPROVAL
OF THE AMENDMENT OF THE ESPP UNLESS THE SHAREHOLDER SPECIFIES OTHERWISE.
PROPOSAL NO. 3: RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors has re-appointed Deloitte & Touche LLP as our
independent auditors for the fiscal year ending July 31, 2002. This accounting
firm has audited the financial statements of the Corporation continuously since
fiscal year 1996. In the event the stockholders fail to ratify the appointment,
the Board of Directors will reconsider its selection. Even if the selection is
ratified, the Board of Directors in its discretion may direct the appointment of
a different independent auditing firm at any time during the year if the Board
of Directors believes such a change would be in the best interests of the
Corporation and its stockholders.
8
A representative of Deloitte & Touche LLP is expected to be available at
the Annual Meeting to respond to appropriate questions and may make a statement
if he or she so desires.
Recommendation of the Board of Directors
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF THE
APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE CORPORATION'S INDEPENDENT AUDITORS
FOR THE FISCAL YEAR ENDING JULY 31, 2001.
FEES PAID TO THE INDEPENDENT AUDITORS
AUDIT FEES
The aggregate fees billed by Deloitte & Touche LLP ("Deloitte") for professional
services rendered for the audit of the Corporation's annual financial statements
for the year ended July 31, 2001, and for the reviews of the financial
statements included in the Corporation's Quarterly Reports filed on Form 10-Q
for that fiscal year were $161,000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
There were no Deloitte fees or services relating to financial information
systems design and implementation for the year ended July 31, 2001.
ALL OTHER FEES
The aggregate fees billed by Deloitte for services rendered to the Corporation,
other than for services described above, for the year ended July 31, 2001, were
$144,000. These fees relate primarily to the preparation of federal and state
tax returns and consultation on the pending spin-off of Cortelco Systems Puerto
Rico, Inc.
OTHER MATTERS
The Board of Directors knows of no other business which will be presented
at the Annual Meeting. If any other business is properly brought before the
Annual Meeting, proxies in the enclosed form will be voted in respect thereof in
accordance with the judgments of the persons voting the proxies.
STOCKHOLDER PROPOSALS FOR 2002 ANNUAL MEETING
Stockholders interested in presenting a proposal for consideration at the
Corporation's 2002 Annual Meeting of Stockholders must follow the procedures
prescribed in the Corporation's amended and restated bylaws and the SEC's proxy
rules. Proposals of stockholders that are intended to be presented at the
Corporation's 2002 Annual Meeting of Stockholders (other than those submitted
for inclusion in the Corporation's proxy materials pursuant to rule 14a-8 of the
SEC's proxy rules) must be received by the Corporation (attention: Secretary) no
earlier than August 22, 2002, and no later than September 21, 2002. Proposals of
stockholders pursuant to Rule 14a-8 of the SEC's proxy rules that are intended
to be presented at the Corporation's 2002 Annual Meeting of Stockholders must be
received by the Corporation (attention: Secretary) no later than July 20, 2002,
to be included in the Corporation's proxy materials relating to that meeting.
9
STOCK OWNERSHIP
The following table sets forth information regarding beneficial ownership
of the Corporation's Common Stock as of September 30, 2001, by each person known
by the Corporation to be the beneficial owner of more than five percent of the
outstanding shares of the Common Stock. Except as otherwise indicated below, the
person owns such Common Stock directly with sole investment and sole voting
power.
Number of Shares Percent of
Name and Address of Beneficial Owner Beneficially Owned Class (4)
- -------------------------------------------------- -------------------------- --------------
David S. Lee 2,876,068 (1) 23.63%
14000 Tracy Court
Los Altos Hills, CA 94022
ChinaVest Inc. and affiliated entities 1,788,457 (2) 14.70%
19/F Dina House
11 Duddell Street
Central, Hong Kong
Jenny Hsui Theleen 1,793,457 (3) 14.74%
160 Sansome Street, 18/th/ Floor
San Francisco, CA 94104
___________________________
(1) Consists of 2,355,538 shares held directly by David S. Lee, 84,500 shares
held by the Lee Family Trust, 431,030 shares held by Cortelco Systems
Holding Corporation, and 5,000 shares issuable upon the exercise of
options that will become exercisable within 60 days of September 30, 2001.
Mr. Lee is the trustee of the Lee Family Trust and is both Chairman and
principal stockholder of Cortelco Systems Holding Corporation. Mr. Lee
disclaims beneficial ownership of the shares held by Cortelco Systems
Holding Corporation.
(2) Consists of 1,538,073 shares held by ChinaVest IV, L.P., 177,057 shares
held by ChinaVest IV-A, L.P. and 73,327 shares held by ChinaVest IV-B,
L.P. (collectively "ChinaVest").
(3) Consists of 1,788,457 shares held by ChinaVest and 5,000 shares issuable
upon the exercise of options that are exercisable within 60 days of
September 30, 2001. ChinaVest Partners IV is a general partner of
ChinaVest IV, L.P. and ChinaVest IV-A, L.P. ChinaVest Management Ltd.
is a general partner of ChinaVest IV-B, L.P. Jenny Hsui Theleen is a
general partner of ChinaVest Partners IV and a stockholder of ChinaVest
Management Ltd. Ms. Theleen disclaims beneficial ownership of these shares
except to the extent of her proportional partnership interest therein.
(4) There were 11,980,297 outstanding shares of Common Stock as of September
30, 2001 and 188,461 shares issuable to executive officers and directors
upon the exercise of options that will become exercisable within 60 days
of September 30, 2001.
10
Set forth below is information as of September 30, 2001, regarding the
shares of the Corporation's Common Stock beneficially owned by each director and
nominee, each executive officer of the Corporation, and all directors and
executive officers of the Corporation as a group. Except as otherwise indicated
below, each individual owns such Common Stock directly with sole investment and
sole voting power.
Number of Shares Percent of
Name of Beneficial Owner Principal Position Beneficially Owned Class (8)
- -------------------------------- -------------------------------- ------------------ ---------------
Troy E. Lynch President, Chief Executive 46,840 (1) *
Officer
Lanny N. Lambert Vice President, Chief 88,000 (2) *
Financial Officer, Secretary
Thomas G. Bevan Vice President, Chief
Marketing Officer - *
David S. Lee Chairman of the Board 2,876,068 (3) 23.63 %
Stephen R. Bowling Director 503,191 (4) 4.14 %
Robert P. Dilworth Director 32,410 (5) *
W. Frank King Director 41,661 (6) *
Jenny Hsui Theleen Director 1,793,457 (7) 14.74 %
All directors and executive
officers as a group (8 persons) 4,950,597 40.68 %
_________________________
* Less than one percent.
(1) Consists of 46,840 shares issuable upon the exercise of options that will
become exercisable within 60 days of September 30, 2001.
(2) Consists of 73,000 shares held directly and 15,000 shares issuable upon the
exercise of options that will become exercisable within 60 days of
September 30, 2001.
(3) Consists of 2,355,538 shares held directly by David S. Lee, 84,500 shares
held by the Lee Family Trust, 431,030 shares held by Cortelco Systems
Holding Corporation, and 5,000 shares issuable upon the exercise of options
that will become exercisable within 60 days of September 30, 2001. Mr. Lee
is the trustee of the Lee Family Trust and is both Chairman and principal
stockholder of Cortelco Systems Holding Corporation. Mr. Lee disclaims
beneficial ownership of the shares held by Cortelco Systems Holding
Corporation.
(4) Consists of 19,611 shares held directly, 431,030 shares held by Cortelco
Systems Holding Corporation, and 52,550 shares issuable upon the exercise
of options that will become exercisable within 60 days of September 30,
2001. Mr. Bowling is the President, Chief Executive Officer, and a director
of Cortelco Systems Holding Corporation. Of the 431,030 shares held by
Cortelco Systems Holding Corporation, 83,165 of the shares are issuable to
Mr. Bowling upon the exercise of options to purchase shares in Cortelco
Systems Holding Corporation. Other than his option for 83,165 shares of
common stock, Mr. Bowling disclaims beneficial ownership of the shares held
by Cortelco Systems Holding Corporation.
(5) Consists of 32,410 shares issuable upon the exercise of options that will
become exercisable within 60 days of September 30, 2001.
(6) Consists of 10,000 shares held directly and 31,661 shares issuable upon the
exercise of options that will become exercisable within 60 days of
September 30, 2001.
(7) Consists of 1,788,457 shares held by ChinaVest and 5,000 shares issuable
upon the exercise of options that will become exercisable within 60 days of
September 30, 2001. ChinaVest Partners IV is a general partner of ChinaVest
IV, L.P. and ChinaVest IV-A, L.P. ChinaVest Management Ltd. is a general
partner of ChinaVest IV-B, L.P. Jenny Hsui Theleen is a general partner of
ChinaVest Partners IV and a stockholder of ChinaVest Management Ltd. Ms.
Theleen disclaims beneficial ownership of these shares except to the extent
of her proportional partnership interest therein.
(8) There were 11,980,297 outstanding shares of Common Stock as of September
30, 2001 and 188,461 shares issuable to executive officers and directors
upon the exercise of options that will become exercisable within 60 days of
September 30, 2001
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth certain information concerning compensation
earned for the fiscal years ended July 31, 2001 and 2000, by the Corporation's
Chief Executive Officer, and by executive officers who earned more than $100,000
in salary and bonus during fiscal 2001 (the "named executive officers".)
Long-Term
Compensation
Annual Compensation Awards
------------------------------- ------------------
Securities All Other
Name and Principal Position Year Salary Bonus Underlying Options Compensation ($)
- --------------------------------------------------- --------- ------------------ ----------------
David S. Lee 2001 - - 5,000 15,000 (1)
Chairman of the Board, 2000 - - 5,000
Former Chief Executive Officer 7,500 (1)
Troy E. Lynch 2001 150,000 - 200,000 2,452 (2)
President and Chief Executive 2000 147,631 19,109 40,000 1,459 (3)
Officer
Robert R. Cash 2001 109,615 - - 37,017 (4)
Former Vice President and 2000 150,000 48,044 - 2,423 (5)
Chief Marketing Officer
___________________________
(1) Consists entirely of director's fees.
(2) Consists of $2,000 in matching contributions to the Corporation's 401(k)
plan and $452 in term life insurance premiums paid by the Corporation.
(3) Consists of $1,038 in matching contributions to the Corporation's 401(k)
plan and $421 in term life insurance premiums paid by the Corporation.
(4) Consists of $36,057 accrued under the separation agreement (see "Employment
Contracts and Termination of Employment and Change in Control
Arrangements"), $692 in matching contributions to the Corporation's 401(k)
plan, and $268 in term life insurance premiums paid by the Corporation.
(5) Consists of $1,969 in matching contributions to the Corporation's 401(k)
plan and $454 in term life insurance premiums paid by the Corporation.
12
Stock Option Grants In Fiscal Year 2001
The following table sets forth information regarding each grant of stock
options made during fiscal year 2001 to each of the named executive officers.
Unless otherwise indicated, options vest at a rate of 25% beginning one year
after the grant date and in equal monthly installments over a three year period
thereafter.
The potential realizable value is calculated based on the term of the
option at the time of grant, which is 10 years. Stock price appreciation of 5%
and 10% is assumed pursuant to rules promulgated by the SEC and does not
represent a prediction of the performance of the Corporation's stock price. The
potential realizable value at 5% and 10% appreciation is calculated by assuming
that the exercise price on the date of grant appreciates at the indicated rate
for the entire term of the option and that the option is exercised at the
exercise price and sold on the last day of its term at the appreciated price.
Potential Realizable
Value at Assumed
Individual Grants Annual Rates of Stock
Price Appreciation for
Option Term
----------------------------------------------------------------- --------------------------
Percentage
Name of Total
Number of Options
Securities Granted to Exercise
Underlying Employees Price
Options in Fiscal Per Expiration
Granted 2001 (1) Share Date 5 % 10 %
- ---------------- ----------------- ------------ ----------- -------------- ----------- -----------
David S. Lee 5,000 (2) 0.60 % $1.00 05/22/11 $3,144 $7,969
Troy E. Lynch 200,000 24.03 % $1.50 02/26/11 $188,668 $478,123
Robert R. Cash - - - - - -
___________________________
(1) Based upon an aggregate of 832,383 shares subject to options
granted to employees of eOn under the 1999 and 2001 Equity
Incentive Plans in fiscal 2001, including the named executive
officers.
(2) Options vest 100% one year after the grant date.
13
Aggregated Option Exercises in Fiscal 2001 and Fiscal Year-End
Option Values
The following table sets forth, for the named executive officers,
the shares acquired and the value realized on each exercise of stock
options during the year ended July 31, 2001, and the number and value
of securities underlying unexercised options held by the named
executive officers at July 31, 2001. Options generally vest at either a
rate of (1) 12.5% six months after the grant date and equal monthly
installments thereafter over a 42 month period, or (2) 25% one year
after the grant date and equal monthly installments thereafter over a
three year period. These options have a term of 10 years. The value of
unexercised in-the-money options have been calculated using the closing
price of the Corporation's Common Stock on July 31, 2001 of $0.85.
Number of Securities Value of Unexercised
Underlying Unexercised Options In-The-Money Options
-------------------------------- ---------------------------------
Shares
Acquired
On Value
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ----------------------- ------------ ------------ --------------- -------------- ------------ -----------------
David S. Lee - - 5,000 5,000 - -
Troy E. Lynch - - 39,582 247,518 - -
Robert R. Cash 3,124 $750 - - - -
Employment Contracts and Termination of Employment and Change in
Control Arrangements
Agreement with Robert R. Cash. In connection with Mr. Cash's
resignation as an officer of the Corporation, Mr. Cash entered into an
agreement to continue as a consultant to the Corporation through July
31, 2001. The agreement included the following provisions: a salary of
$23,077 during the term of the agreement; $12,980 for earned and unused
vacation; and the right to exercise all vested options from previous
grants within 90 days after April 15, 2001.
14
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of Robert P. Dilworth, W. Frank King,
and Jenny Hsui Theleen. None of the members of the current Compensation
Committee are, or have ever been, officers or employees of eOn. In addition, no
member of the Compensation Committee served as an executive officer of any
entity where one of the Corporation's executive officers was a director.
COMPENSATION COMMITTEE REPORT
Overview and Philosophy
Our Compensation Committee is responsible for establishing the compensation
payable to our executive officers, including the named executive officers. Such
compensation is primarily comprised of the following elements: base salary,
bonuses, stock options, and benefits.
It is the Compensation Committee's objective that executive compensation be
directly influenced by our business results. Accordingly our executive
compensation program is structured to stimulate and reward exceptional
performance that results in enhanced corporate and stockholder values. Industry
compensation surveys are also reviewed in the Compensation Committee's
assessment of appropriate compensation levels.
The Compensation Committee recognizes that the highly-specialized industry
sector in which we operate is extremely competitive world-wide, with the result
that there is substantial demand for high-caliber, seasoned executives. It is
crucial that we be assured of retaining and rewarding our executive personnel
essential in contributing to the attainment of our performance goals. For these
reasons, the Compensation Committee believes our executive compensation
arrangements must remain competitive with other providers.
Cash Compensation
A key objective of our executive compensation program is to position our
key executives to earn annual cash compensation (base salary plus bonus)
generally comparable to that which the executive would earn at other companies
in the industry.
Base salaries for our executive officers are established considering a
number of factors, including the recommendation of our Chief Executive Officer,
our growth and profit margins, the executive's performance and contribution to
our overall performance, and the salary levels of comparable positions reported
in industry surveys. The Compensation Committee adheres to a compensation
philosophy of moderate levels of fixed compensation such as base salary. Base
salary decisions are made as part of a formal review process.
Bonuses are provided in accordance with the executive's written agreement
where one is in place. Otherwise, bonuses are paid on a discretionary basis
based upon individual performance.
Stock Options
The Compensation Committee grants stock options under the 1999 Equity
Incentive Plan to provide direct linkage with stockholder interests. The
Compensation Committee considers the recommendation of our Chief Executive
Officer, stock options previously granted to that individual, industry
practices, the executive's performance and accountability level, and assumed,
potential stock value when determining stock option grants. The Compensation
Committee relies upon competitive guideline ranges of retention-effective,
target gain objectives to be derived from option gains based upon relatively
aggressive assumptions relating to planned growth and earnings. In this manner,
the potential executive's gains parallel those of other stockholders over the
long-term. Therefore, the stock option program serves as our only long-term
incentive and retention tool for executives and other key employees. Stock
options provide an
15
incentive to executives to maximize long-term profitable growth which
ordinarily, over time, should be reflected in the price of our stock.
Benefits
We offer to our executives benefits that are substantially the same as the
benefits offered to all eOn employees.
Chief Executive Officer Performance and Compensation
When Mr. Lee assumed the position of Chief Executive Officer in May 2000,
he declined the opportunity to receive compensation related to his performance
in this capacity, due to the fact he already has significant holdings in the
Corporation.
Compliance with Internal Revenue Code Section 162(m)
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to publicly held companies for compensation exceeding $1 million paid
to certain of the Corporation's executive officers. The compensation to be paid
to any of our executive officers for fiscal year 2001 did not exceed the $1
million limit per officer, nor is it expected that the compensation to be paid
to any of our executive officers for fiscal year 2002 will exceed that limit.
Our 1999 Equity Incentive Plan is structured so that any compensation deemed
paid to an executive officer when he exercises an outstanding option with an
exercise price equal to the fair market value of the option shares on the grant
date will qualify as performance-based compensation which will not be subject to
the $1 million limitation. Because it is very unlikely that the cash
compensation payable to any of our executive officers in the foreseeable future
will approach the $1 million limit, the Compensation Committee has decided at
this time not to take any other action to limit or restructure the elements of
cash compensation payable to our executive officers. The Compensation Committee
will reconsider this decision should the individual compensation of any
executive officer ever approach the $1 million level.
It is the opinion of the Compensation Committee that the adopted executive
compensation policies and plans provide the necessary total remuneration program
to properly align our performance and the interests of our stockholders with
competitive and equitable executive compensation in a balanced and reasonable
manner, for both the short and long-term.
The Compensation Committee of the Board
Robert P. Dilworth
W. Frank King
Jenny Hsui Theleen
16
AUDIT COMMITTEE REPORT
In accordance with its written charter adopted by the Board of Directors,
the Audit Committee assists the Board in fulfilling its responsibility for
oversight of the quality and integrity of the accounting, auditing, and
financial reporting practices of the Corporation. During fiscal year 2001, the
Audit Committee met three times.
In discharging its oversight responsibility as to the audit process, the
Audit Committee obtained from the independent auditors a formal written
statement describing all relationships between the auditors and the Corporation
that might bear on the auditors' independence consistent with Independence
Standards Board Standard No. 1, "Independence Discussions with Audit
Committees," and discussed with the auditors their independence from the
Corporation and its management.
The Audit Committee discussed and reviewed with the independent auditors
all communications required by generally accepted auditing standards, including
those described in Statement on Auditing Standards No. 61, as amended,
"Communication with Audit Committees" and, with and without management present,
discussed and reviewed the results of the independent auditors' examination of
the financial statements.
The Audit Committee reviewed the audited financial statements of the
Corporation for the fiscal year ended July 31, 2001, with management and the
independent auditors. Management has the responsibility for the preparation of
the Corporation's financial statements and the independent auditors have the
responsibility for the examination of those statements.
Based upon the above-mentioned review and discussions with management and
the independent auditors, the Audit Committee recommended to the Board that the
Corporation's audited financial statements be included in its Annual Report on
Form 10-K for the fiscal year ended July 31, 2001, for filing with the
Securities and Exchange Commission. The Audit Committee also recommended the
reappointment, subject to stockholder approval, of Deloitte & Touche LLP as the
Corporation's independent auditors and the Board concurred in such
recommendation.
The Audit Committee of the Board
Robert P. Dilworth, Chairperson
W. Frank King
Jenny Hsui Theleen
17
PERFORMANCE GRAPH
The following graph compares the cumulative total return of the
Corporation's Common Stock with the Nasdaq Stock Market (U.S.) Index ("Nasdaq
US") and the Nasdaq Telecommunications Index. The graph covers the period from
February 4, 2000, the commencement date of our initial public offering of shares
of common stock, to July 31, 2001. The graph assumes that $100 was invested on
February 4, 2000, in our common stock and in the Nasdaq Stock Market (U.S.)
Index and the Nasdaq Telecommunications Index on January 31, 2000, and all
dividends were reinvested. No cash dividends have been declared on our common
stock. The performance shown in the graph represents past performance and should
not be considered an indication of future performance.
COMPARISON OF TOTAL STOCKHOLDER RETURN
AMONG EON COMMUNICATIONS CORPORATION, THE NASDAQ STOCK MARKET (U.S.)
INDEX AND THE NASDAQ TELECOMMUNICATIONS INDEX
[GRAPH]
------------- ------------- -------------
02/04/00 07/31/00 07/31/01
------------- ------------- -------------
EON COMMUNICATIONS CORPORATION 100.00 30.21 7.08
NASDAQ US 100.00 95.86 51.45
NASDAQ TELECOMMUNICATIONS 100.00 63.13 30.63
Notwithstanding anything to the contrary set forth in any of our previous
filings made under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, that might incorporate future filings made by
us under those statutes, neither the preceding Stock Performance Graph nor the
Compensation Committee report or the Audit Committee report is to be
incorporated by reference into any such prior filings, nor shall such graph or
reports be incorporated by reference into any future filings made by us under
those statutes.
18
CERTAIN TRANSACTIONS
We purchase single line phones from Cortelco, Inc. ("CI"), a wholly-owned
subsidiary of Cortelco Systems Holding Corporation ("CSHC"). In addition, CI
performs warehouse, assembly, test, and rework and repair services for eOn.
David S. Lee is the Chairman and principal stockholder of CSHC. Stephen R.
Bowling is President, Chief Executive Officer and a director of CSHC. In fiscal
2001, our purchases from CI totaled $985,000.
eOn believes that all of the transactions set forth above were made on
terms no less favorable to eOn than could have been otherwise obtained from
unaffiliated third parties. As a matter of policy, all transactions between eOn
and any of its officers, directors or principal stockholders are approved by a
majority of the board of directors, including a majority of the independent and
disinterested members of the board.
FORM 10-K
We have filed an Annual Report on Form 10-K for the year ended July 31,
2001 with the Securities and Exchange Commission. A copy of the 10-K is
incorporated into our annual report, which has been mailed concurrently with
this Proxy Statement to all stockholders entitled to notice and to vote at the
annual meeting. The financial and other information contained on Form 10-K is
hereby incorporated by reference into this proxy statement.
Dated: November 16, 2001
THE BOARD OF DIRECTORS OF
EON COMMUNICATIONS CORPORATION
19
APPENDIX A
EON COMMUNICATIONS CORPORATION
1999 EMPLOYEE STOCK PURCHASE PLAN
ADOPTED APRIL 7, 1999
APPROVED BY THE STOCKHOLDERS ON APRIL 7, 1999
EFFECTIVE DATE: FEBRUARY 4, 2000
AMENDED BY THE BOARD OF DIRECTORS ON AUGUST 28, 2001
AND SUBJECT TO APPROVAL BY THE STOCKHOLDERS ON DECEMBER 19, 2001
1. PURPOSE.
(A) The purpose of this 1999 Employee Stock Purchase Plan (the "Plan") is
to provide a means by which employees of eOn Communications Corporation, a
Delaware corporation (the "Company"), and its Affiliates, as defined in
subparagraph 1(b), which are designated as provided in subparagraph 2(b), may be
given an opportunity to purchase stock of the Company.
(B) The word "Affiliate" as used in the Plan means any parent corporation
or subsidiary corporation of the Company, as those terms are defined in Sections
424(e) and (f), respectively, of the Internal Revenue Code of 1986, as amended
(the "Code").
(C) The Company, by means of the Plan, seeks to retain the services of its
employees, to secure and retain the services of new employees, and to provide
incentives for such persons to exert maximum efforts for the success of the
Company.
(D) The Company intends that the rights to purchase stock of the Company
granted under the Plan be considered options issued under an "employee stock
purchase plan" as that term is defined in Section 423(b) of the Code.
2. ADMINISTRATION.
(A) The Plan shall be administered by the Board of Directors (the "Board")
of the Company unless and until the Board delegates administration to a
committee as provided in subparagraph 2(c). Whether or not the Board has
delegated administration the Board shall have the final power to determine all
questions of policy and expediency that may arise in the administration of the
Plan.
(B) The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:
(I) To determine when and how rights to purchase stock of the Company
shall be granted and the provisions of each offering of such rights (which need
not be identical).
(II) To designate from time to time which Affiliates of the Company
shall be eligible to participate in the Plan.
(III) To construe and interpret the Plan and rights granted under it,
and to establish, amend and revoke rules and regulations for its administration.
The Board, in the exercise of this power, may correct any defect, omission or
inconsistency in the Plan, in a manner and to the extent it shall deem necessary
or expedient to make the Plan fully effective.
(IV) To amend the Plan as provided in paragraph 13.
(V) Generally, to exercise such powers and to perform such acts as
the Board or the Committee deems necessary or expedient to promote the best
interests of the Company and its Affiliates and to carry out the intent that the
Plan be treated as an "employee stock purchase plan" within the meaning of
Section 423 of the Code.
(C) The Board may delegate administration of the Plan to a committee
composed of not fewer than two (2) members of the Board (the "Committee"). If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the board, subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.
3. SHARES SUBJECT TO THE PLAN.
(A) Subject to the provisions of paragraph 12 relating to adjustments upon
changes in stock, the stock that may be sold pursuant to rights granted under
the Plan shall not exceed in the aggregate five hundred thousand (500,000)
shares of the Company's common stock (the "Common Stock"). If any right granted
under the Plan shall for any reason terminate without having been exercised, the
Common Stock not purchased under such right shall again become available for the
Plan.
(B) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
4. GRANT OF RIGHTS; OFFERING.
(A) The Board or the Committee may from time to time grant or provide for
the grant of rights to purchase Common Stock of the Company under the Plan to
eligible employees (an "Offering") on a date or dates (the "Offering Date(s)")
selected by the Board or the Committee. Each Offering shall be in such form and
shall contain such terms and conditions as the Board or the Committee shall deem
appropriate, which shall comply with the requirements of Section 423(b)(5) of
the Code that all employees granted rights to purchase stock under the Plan
shall have the same rights and privileges. The terms and conditions of an
Offering shall be incorporated by reference into the Plan and treated as part of
the Plan. The provisions of separate Offerings need not be identical, but each
Offering shall include (through incorporation of the provisions of this Plan by
reference in the document comprising the Offering or otherwise) the period
during which the Offering shall be effective, which period shall not exceed
twenty-seven (27) months beginning with the Offering Date, and the substance of
the provisions contained in paragraphs 5 through 8, inclusive.
(B) If an employee has more than one right outstanding under the Plan,
unless he or she otherwise indicates in agreements or notices delivered
hereunder: (1) each agreement or notice delivered by that employee will be
deemed to apply to all of his or her rights under the Plan, and (2) a right with
a lower exercise price (or an earlier-granted right, if two rights have
identical exercise prices), will be exercised to the fullest possible extent
before a right with a higher exercise price (or a later-granted right, if two
rights have identical exercise prices) will be exercised.
5. ELIGIBILITY.
(A) Rights may be granted only to employees of the Company or, as the
Board or the Committee may designate as provided in subparagraph 2(b), to
employees of any Affiliate of the Company. Except as provided in subparagraph
5(b), an employee of the Company or any Affiliate shall not be eligible to be
granted rights under the Plan unless, on the Offering Date, such employee has
been in the employ of the Company or any Affiliate for such continuous period
preceding such grant as the Board or the Committee may require, but in no event
shall the required period of continuous employment be equal to or greater than
two (2) years. In addition, unless otherwise determined by the Board or the
Committee and set forth in the terms of the applicable Offering, no employee of
the Company or any Affiliate shall be eligible to be granted rights under the
Plan unless, on the Offering Date, such employee's customary employment with the
Company or such Affiliate is for at least twenty (20) hours per week and at
least five (5) months per calendar year.
(B) The Board or the Committee may provide that each person who, during
the course of an Offering, first becomes an eligible employee of the Company or
designated Affiliate will, on a date or dates specified in the Offering which
coincides with the day on which such person becomes an eligible employee or
occurs thereafter, receive a right under that Offering, which right shall
thereafter be deemed to be a part of that Offering. Such right shall have the
same characteristics as any rights originally granted under that Offering, as
described herein, except that:
(I) the date on which such right is granted shall be the "Offering
Date" of such right for all purposes, including determination of the exercise
price of such right;
(II) the period of the Offering with respect to such right shall
begin on its Offering Date and end coincident with the end of such Offering; and
(III) the Board or the Committee may provide that if such person first
becomes an eligible employee within a specified period of time before the end of
the Offering, he or she will not receive any right under that Offering.
(C) No employee shall be eligible for the grant of any rights under the
Plan if, immediately after any such rights are granted, such employee owns stock
possessing five percent (5%) or more of the total combined voting power or value
of all classes of stock of the Company or of any Affiliate. For purposes of this
subparagraph 5(c), the rules of Section 424(d) of the Code shall apply in
determining the stock ownership of any employee, and stock which such employee
may purchase under all outstanding rights and options shall be treated as stock
owned by such employee.
(D) An eligible employee may be granted rights under the Plan only if such
rights, together with any other rights granted under "employee stock purchase
plans" of the Company and any Affiliates, as specified by Section 423(b)(8) of
the Code, do not permit such employee's rights to purchase stock of the Company
or any Affiliate to accrue at a rate which exceeds twenty-five thousand dollars
($25,000) of fair market value of such stock (determined at the time such rights
are granted) for each calendar year in which such rights are outstanding at any
time.
(E) Officers of the Company and any designated Affiliate shall be eligible
to participate in Offerings under the Plan, provided, however, that the Board or
the Committee may provide in an Offering that certain employees who are highly
compensated employees within the meaning of Section 423(b)(4)(D) of the Code
shall not be eligible to participate.
6. RIGHTS; PURCHASE PRICE.
(A) On each Offering Date, each eligible employee, pursuant to an Offering
made under the Plan, shall be granted the right to purchase up to the number of
shares of Common Stock of the Company purchasable with a percentage designated
by the Board or the Committee not exceeding fifteen percent (15%) of such
employee's Earnings (as defined by the Board for each Offering) during the
period which begins on the Offering Date (or such later date as the Board or the
Committee determines for a particular Offering) and ends on the date stated in
the Offering, which date shall be no later than the end of the Offering. The
Board or the Committee shall establish one or more dates during an Offering (the
"Purchase Date(s)") on which rights granted under the Plan shall be exercised
and purchases of Common Stock carried out in accordance with such Offering.
(B) In connection with each Offering made under the Plan, the Board or the
Committee may specify a maximum number of shares that may be purchased by any
employee as well as a maximum aggregate number of shares that may be purchased
by all eligible employees pursuant to such Offering. In addition, in connection
with each Offering that contains more than one Purchase Date, the Board or the
Committee may specify a maximum aggregate number of shares which may be
purchased by all eligible employees on any given Purchase Date under the
Offering. If the aggregate purchase of shares upon exercise of rights granted
under the Offering would exceed any such maximum aggregate number, the Board or
the Committee shall make a pro rata allocation of the shares available in as
nearly a uniform manner as shall be practicable and as it shall deem to be
equitable.
(C) The purchase price of stock acquired pursuant to rights granted under
the Plan shall be not less than the lesser of:
(I) an amount equal to eighty-five percent (85%) of the fair market
value of the stock on the Offering Date; or
(II) an amount equal to eighty-five percent (85%) of the fair market
value of the stock on the Purchase Date.
7. PARTICIPATION; WITHDRAWAL; TERMINATION.
(A) An eligible employee may become a participant in the Plan pursuant to
an Offering by delivering a participation agreement to the Company within the
time specified in the Offering, in such form as the Company provides. Each such
agreement shall authorize payroll deductions of up to the maximum percentage
specified by the Board or the Committee of such employee's Earnings (as defined
by the Board for each Offering) during the Offering. The payroll deductions made
for each participant shall be credited to an account for such participant under
the Plan and shall be deposited with the general funds of the Company. A
participant may reduce (including to zero) or increase such payroll deductions,
and an eligible employee may begin such payroll deductions, after the beginning
of any Offering only as provided for in the Offering. A participant may make
additional payments into his or her account only if specifically provided for in
the Offering and only if the participant has not had the maximum amount withheld
during the Offering.
(B) At any time during an Offering, a participant may terminate his or her
payroll deductions under the Plan and withdraw from the Offering by delivering
to the Company a notice of withdrawal in such form as the Company provides. Such
withdrawal may be elected at any time prior to the end of the Offering except as
provided by the Board or the Committee in the Offering. Upon such withdrawal
from the Offering by a participant, the Company shall distribute to such
participant all of his or her accumulated payroll deductions (reduced to the
extent, if any, such deductions have been used to acquire stock for the
participant) under the Offering, without interest, and such participant's right
to acquire Common Stock under that Offering shall be automatically terminated. A
participant's withdrawal from an Offering will have no effect upon such
participant's eligibility to participate in any other Offerings under the Plan
but such participant will be required to deliver a new participation agreement
in order to participate in subsequent Offerings under the Plan.
(C) Rights granted pursuant to any Offering under the Plan shall terminate
immediately upon cessation of a participant's employment with the Company and
any designated Affiliate, for any reason, and the Company shall distribute to
such terminated employee all of his or her accumulated payroll deductions
(reduced to the extent, if any, such deductions have been used to acquire stock
for the terminated employee), under the Offering, without interest.
(D) Rights granted under the Plan shall not be transferable by a
participant other than by will or the laws of descent and distribution, or by a
beneficiary designation as provided in paragraph 14, and during a participant's
lifetime, shall be exercisable only by such participant.
8. EXERCISE.
(A) On each date specified therefor in the relevant Offering ("Purchase
Date"), each participant's accumulated payroll deductions and other additional
payments specifically provided for in the Offering (without any increase for
interest) will be applied to the purchase of whole shares of stock of the
Company, up to the maximum number of shares permitted pursuant to the terms of
the Plan and the applicable Offering, at the purchase price specified in the
Offering. Unless otherwise provided for in the applicable Offering, no
fractional shares shall be issued upon the exercise of rights granted under the
Plan. The amount, if any, of accumulated payroll deductions remaining in each
participant's account after the purchase of shares which is less than the amount
required to purchase one share of stock on the final Purchase Date of an
Offering shall be held in each such participant's account for the purchase of
shares under the next Offering under the Plan, unless such participant withdraws
from such next Offering, as provided in subparagraph 7(b), or is no longer
eligible to be granted rights under the Plan, as provided in paragraph 5, in
which case such amount shall be distributed to the participant after such final
Purchase Date, without interest. The amount, if any, of accumulated payroll
deductions remaining in any participant's account after the purchase of shares
which is equal to the amount required to purchase whole shares of Common Stock
on the final Purchase Date of an Offering shall be distributed in full to the
participant after such Purchase Date, without interest.
(B) No rights granted under the Plan may be exercised to any extent unless
the shares to be issued upon such exercise under the Plan (including rights
granted thereunder) are covered by an effective registration statement pursuant
to the Securities Act of 1933, as amended (the "Securities Act") and the Plan is
in material compliance with all applicable state, foreign and other securities
and other laws applicable to the Plan. If on a Purchase Date in any Offering
hereunder the Plan is not so registered or in such compliance, no rights granted
under the Plan or any Offering shall be exercised on such Purchase Date, and the
Purchase Date shall be delayed until the Plan is subject to such an effective
registration statement and such compliance, except that the Purchase Date shall
not be delayed more than twelve (12) months and the Purchase Date shall in no
event be more than twenty-seven (27) months from the Offering Date. If on the
Purchase Date of any Offering hereunder, as delayed to the maximum extent
permissible, the Plan is not registered and in such compliance, no rights
granted under the Plan or any Offering shall be exercised then all payroll
deductions accumulated during the Offering (reduced to the extent, if any, such
deductions have been used to acquire stock) shall be distributed to the
participants, without interest.
9. COVENANTS OF THE COMPANY.
(A) During the terms of the rights granted under the Plan, the Company
shall at all times make reasonable efforts to keep available the number of
shares of stock required to satisfy such rights, provided that this section
shall not require the Company to take any action that would result in adverse
tax, accounting or financial consequences to the Company.
(B) The Company shall seek to obtain from each federal, state, foreign or
other regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to issue and sell shares of stock upon exercise of
the rights granted under the Plan. If, after reasonable efforts, the Company is
unable to obtain from any such regulatory commission or agency the authority
which counsel for the Company deems necessary for the lawful issuance and sale
of stock under the Plan, the Company shall be relieved from any liability for
failure to issue and sell stock upon exercise of such rights unless and until
such authority is obtained.
10. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock to participants pursuant to rights granted
under the Plan shall constitute general funds of the Company.
11. RIGHTS AS A STOCKHOLDER.
A participant shall not be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to rights granted
under the Plan unless and until the participant's shares acquired upon exercise
of rights hereunder are recorded in the books of the Company (or its transfer
agent).
12. ADJUSTMENTS UPON CHANGES IN STOCK.
(A) If any change is made in the stock subject to the Plan, or subject to
any rights granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan and outstanding rights will
be appropriately adjusted in the class(es) and maximum number of shares subject
to the Plan and the class(es) and number of shares and price per share of stock
subject to outstanding rights. Such adjustments shall be made by the Board or
the Committee, the determination of which shall be final, binding and
conclusive. (The conversion of any convertible securities of the Company shall
not be treated as a "transaction not involving the receipt of consideration by
the Company.")
(B) In the event of: (1) a dissolution or liquidation of the Company; (2) a
merger or consolidation in which the Company is not the surviving corporation;
(3) a reverse merger in which the Company is the surviving corporation but the
shares of Common Stock outstanding immediately preceding the merger are
converted by virtue of the merger into other property, whether in the form of
securities, cash or otherwise; or (4) the acquisition by any person, entity or
group within the meaning of Section 13(d) or 14(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), or any comparable successor
provisions (excluding any employee benefit plan, or related trust, sponsored or
maintained by the Company or any Affiliate of the Company) of the beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act,
or comparable successor rule) of securities of the Company representing at least
fifty percent (50%) of the combined voting power entitled to vote in the
election of directors, then, as determined by the Board in its sole discretion
(i) any surviving or acquiring corporation may assume outstanding rights or
substitute similar rights for those under the Plan, (ii) such rights may
continue in full force and effect, or (iii) participants' accumulated payroll
deductions may be used to purchase Common Stock immediately prior to the
transaction described above and the participants' rights under the ongoing
Offering terminated.
13. AMENDMENT OF THE PLAN.
(A) The Board or the Committee at any time, and from time to time, may
amend the Plan. However, except as provided in paragraph 12 relating to
adjustments upon changes in stock, no amendment shall be effective unless
approved by the stockholders of the Company within twelve (12) months before or
after the adoption of the amendment if such amendment requires stockholder
approval in order for the Plan to obtain employee stock purchase plan treatment
under Section 423 of the Code or to comply with the requirements of Rule 16b-3
promulgated under the Exchange Act.
(B) The Board or the Committee may amend the Plan in any respect the Board
or the Committee deems necessary or advisable to provide eligible employees with
the maximum benefits provided or to be provided under the provisions of the Code
and the regulations promulgated thereunder relating to employee stock purchase
plans and/or to bring the Plan and/or rights granted under it into compliance
therewith.
(C) Rights and obligations under any rights granted before amendment of the
Plan shall not be altered or impaired by any amendment of the Plan, except with
the consent of the person to whom such rights were granted, or except as
necessary to comply with any laws or governmental regulations, or except as
necessary to ensure that the Plan and/or rights granted under the Plan comply
with the requirements of Section 423 of the Code.
14. DESIGNATION OF BENEFICIARY.
(A) A participant may file a written designation of a beneficiary who is to
receive any shares and cash, if any, from the participant's account under the
Plan in the event of such participant's death subsequent to the end of an
Offering but prior to delivery to the participant of such shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under the Plan in the event
of such participant's death during an Offering.
(B) Such designation of beneficiary may be changed by the participant at
any time by written notice in the form prescribed by the Company. In the event
of the death of a participant and in the absence of a beneficiary validly
designated under the Plan who is living at the time of such participant's death,
the Company shall deliver such shares and/or cash to the executor or
administrator of the estate of the participant, or if no such executor or
administrator has been appointed (to the knowledge of the Company), the Company,
in its sole discretion, may deliver such shares and/or cash to the spouse or to
any one or more dependents or relatives of the participant, or if no spouse,
dependent or relative is known to the Company, then to such other person as the
Company may designate.
15. TERMINATION OR SUSPENSION OF THE PLAN.
(A) The Board or the Committee in its discretion, may suspend or terminate
the Plan at any time. No rights may be granted under the Plan while the Plan is
suspended or after it is terminated.
(B) Rights and obligations under any rights granted while the Plan is in
effect shall not be altered or impaired by suspension or termination of the
Plan, except as expressly provided in the Plan or with the consent of the person
to whom such rights were granted, or except as necessary to comply with any laws
or governmental regulation, or except as necessary to ensure that the Plan
and/or rights granted under the Plan comply with the requirements of Section 423
of the Code.
16. EFFECTIVE DATE OF PLAN.
The Plan shall become effective upon the effective date of the initial
public offering of the Common Stock of the Company (the "Effective Date"), but
no rights granted under the Plan shall be exercised unless and until the Plan
has been approved by the stockholders of the Company within twelve (12) months
before or after the date the Plan is adopted by the Board, which date may be
prior to the Effective Date.
17. GRANT; OFFERING DATE.
(A) The Board of Directors of eOn Communications Corporation (the
"Company"), pursuant to the Company's 1999 Employee Stock Purchase Plan (the
"Plan"), hereby authorizes the grant of rights to purchase shares of the common
stock of the Company ("Common Stock") to all Eligible Employees (an "Offering").
Subject to subsection 1(b) below, the first Offering shall begin on the
effective date of the initial public offering of the Company's Common Stock (the
"Effective Date") and shall end on August 31, 2000 (the "Initial Offering").
Thereafter, subject to subsection 1(b) below, an Offering shall begin on
September 1 every year, beginning on September 1, 2000. An Offering shall end on
the day prior to the first day of the subsequent Offering. The first day of an
Offering is that
Offering's "Offering Date." If an Offering Date would fall on a day during which
the Company's Common Stock is not actively traded, then the Offering Date shall
be the next subsequent day during which the Company's Common Stock is actively
traded.
(B) Prior to the commencement of any Offering, the Board of Directors (or
the Committee described in subparagraph 2(c) of the Plan, if any) may change any
or all terms of such Offering and any subsequent Offerings. The granting of
rights pursuant to each Offering hereunder shall occur on each respective
Offering Date unless, prior to such date (a) the Board of Directors (or such
Committee) determines that such Offering shall not occur, or (b) no shares
remain available for issuance under the Plan in connection with the Offering.
18. ELIGIBLE EMPLOYEES.
(A) All employees of the Company and each of its Affiliates (as defined in
the Plan) incorporated in the United States, shall be granted rights to purchase
Common Stock under each Offering on the Offering Date of such Offering, provided
that each such employee otherwise meets the employment requirements of
subparagraph 5(a) of the Plan (an "Eligible Employee"). Notwithstanding the
foregoing, the following employees shall not be Eligible Employees or be granted
rights under an Offering: (i) part-time or seasonal employees whose customary
employment is less than 20 hours per week or 5 months per calendar year or (ii)
5% stockholders (including ownership through unexercised options) described in
subparagraph 5(c) of the Plan.
(B) Each person who first becomes an Eligible Employee during any Offering
will, on the first business day of the month of September or March during the
Offering, which coincides with the day on which such person becomes an Eligible
Employee or which occurs thereafter, receive a right under such Offering, which
right shall thereafter be deemed to be a part of the Offering. Such right shall
have the same characteristics as any rights originally granted under the
Offering except that:
(I) the date on which such right is granted shall be the "Offering
Date" of such right for all purposes, including determination of the exercise
price of such right; and
(II) the Offering for such right shall begin on its Offering Date and
end coincident with the end of the ongoing Offering.
19. RIGHTS.
(A) Subject to the limitations contained herein and in the Plan, on each
Offering Date each Eligible Employee shall be granted the right to purchase the
number of shares of Common Stock purchasable with up to fifteen percent (15%) of
such Eligible Employee's Earnings paid during such Offering after the Eligible
Employee first commences participation; provided, however, that no employee may
purchase Common Stock on a particular Purchase Date that would result in more
than fifteen percent (15%) of such employee's Earnings in the period from the
Offering Date to such Purchase Date having been applied to purchase shares under
all ongoing Offerings under the Plan and all other Company plans intended to
qualify as "employee stock purchase plans" under Section 423 of the Internal
Revenue Code of 1986, as amended (the "Code"). For this Offering, "Earnings"
means the total compensation paid to an employee, including all salary, wages
(including amounts elected to be deferred by the employee, that would otherwise
have been paid, under any cash or deferred arrangement or other deferred
compensation program established by the Company), overtime pay, commissions,
bonuses, and other remuneration paid directly to the employee, but excluding
profit sharing, the cost of employee benefits paid for by the Company, education
or tuition reimbursements, imputed income arising under any Company group
insurance or benefit program, traveling expenses, business and moving expense
reimbursements, income received in connection with stock options, contributions
made by the Company under any employee benefit plan, and similar items of
compensation.
(B) Notwithstanding the foregoing, the maximum number of shares of Common
Stock an Eligible Employee may purchase on a Purchase Date in an Offering is
such number of shares as has a fair market value (determined as of the Offering
Date for such Offering) equal to (x) $25,000 multiplied by the number of
calendar years in which the right under such Offering has been outstanding any
time, minus (y) the fair market value of any other shares of Common Stock
(determined as of the relevant Offering Date with respect to such shares) which,
for purposes of the limitation of Section 423(b)(8) of the Code, are attributed
to any of such calendar years in which the right is outstanding. The amount in
clause (y) of the previous sentence shall be determined in accordance with
regulations under Section 423(b)(8) of the Code based on (i) the number of
shares previously purchased with respect to such calendar years pursuant to such
Offering or any other Offering under the Plan, or pursuant to any other Company
plans intended to qualify as "employee stock purchase plans" under Section 423
of the Code, and (ii) the number of shares subject to other rights outstanding
on the Offering Date for such Offering pursuant to the Plan or any other such
Company plan.
(C) The maximum aggregate number of shares available to be purchased by all
Eligible Employees under an Offering shall be the number of shares remaining
available under the Plan on the Offering Date. If the aggregate purchase of
shares of Common Stock upon exercise of rights granted under the Offering would
exceed the maximum aggregate number of shares available under either of the
limits set forth in this subsection 3(c), the Board shall make a pro rata
allocation of the shares available in a uniform and equitable manner.
20. PURCHASE PRICE.
The purchase price of the Common Stock under the Offering shall be the
lesser of eighty-five percent (85%) of the fair market value of the Common Stock
on the Offering Date or eighty-five percent (85%) of the fair market value of
the Common Stock on the Purchase Date, in each case rounded up to the nearest
whole cent per share. For the Initial Offering, the fair market value of the
Common Stock at the time when the Offering commences shall be the price per
share at which shares of Common Stock are first sold to the public in the
Company's initial public offering.
21. PARTICIPATION.
(A) Except as otherwise provided in this paragraph 5, an Eligible Employee
may elect to participate in an Offering only at the beginning of the Offering;
provided, however, that a person who first becomes an Eligible Employee during
an Offering may elect to participate at the Offering Date applicable to such
Eligible Employee in accordance with subparagraph 2(b). An Eligible Employee
shall become a participant in an Offering by delivering an agreement authorizing
payroll deductions. Such deductions may be in whole percentages only, with a
minimum percentage of one percent (1%) and maximum percentage of fifteen percent
(15%) of Earnings. A participant may not make additional payments into his or
her account. The agreement shall be made on such enrollment form as the Company
provides, and must be delivered to the Company before the date of participation
to be effective for such Offering, as determined by the Company and communicated
to Eligible Employees. As to the Initial Offering, the time for filing an
enrollment form and commencing participation for individuals who are Eligible
Employees on the Offering Date for the Initial Offering shall be determined by
the Company and communicated to such Eligible Employees.
(B) Generally, a participant may increase or reduce (including to zero) his
or her participation level only as of each September 1 or March 1 during any
Offering (except not during the ten (10) days immediately preceding a Purchase
Date. Any such change in participation shall be made by delivering a notice to
the Company or a designated Affiliate in such form and at such time as the
Company provides. Notwithstanding the foregoing, a participant may reduce his or
her participation level to zero at any time during the course of an Offering
(except not during the ten (10) days immediately preceding a Purchase Date).
Additionally, a participant may withdraw from an Offering and receive his or her
accumulated payroll deductions from the Offering (reduced to the extent, if any,
such deductions have been used to acquire Common Stock for the participant on
any prior Purchase Dates), without interest at any time prior to the end of the
Offering, excluding only each ten (10) day period immediately preceding a
Purchase Date (or such shorter period of time determined by the Company and
communicated to participants), by delivering a withdrawal notice to the Company
in such form as the Company provides. A participant who has withdrawn from an
Offering shall not be entitled to again participate in such Offering, but may
participate in other Offerings under the Plan by submitting a new participation
agreement in accordance with the terms thereof.
22. PURCHASES.
Subject to the limitations contained herein, on each Purchase Date, each
participant's accumulated payroll deductions (without any increase for interest)
shall be applied to the purchase of whole shares of Common Stock, up to the
maximum number of shares permitted under the Plan and the Offering. "Purchase
Date" shall be defined as the last day of each August and of each February.
(Notwithstanding the foregoing sentence, August 31, 1999 under the Initial
Offering shall not be a Purchase Date.) If a Purchase Date would not fall on a
day during which the Company's Common Stock is actively traded, then the
Purchase Date shall be the nearest prior day during which the Company's Common
Stock is actively traded.
23. NOTICES AND AGREEMENTS.
Any notices or agreements provided for in an Offering or the Plan shall be
given in writing, in a form provided by the Company, and unless specifically
provided for in the Plan or this Offering shall be deemed effectively given upon
receipt or, in the case of notices and agreements delivered by the Company, five
(5) days after deposit in the United States mail, postage prepaid.
24. EXERCISE CONTINGENT ON STOCKHOLDER APPROVAL.
The rights granted under an Offering are subject to the approval of the
Plan by the shareholders as required for the Plan to obtain treatment as a tax-
qualified employee stock purchase plan under Section 423 of the Code.
25. OFFERING SUBJECT TO PLAN.
Each Offering is subject to all the provisions of the Plan, and its
provisions are hereby made a part of the Offering, and is further subject to all
interpretations, amendments, rules and regulations which may from time to time
be promulgated and adopted pursuant to the Plan. In the event of any conflict
between the provisions of an Offering and those of the Plan (including
interpretations, amendments, rules and regulations which may from time to time
be promulgated and adopted pursuant to the Plan), the provisions of the Plan
shall control.
[LOGO OF eOn(TM) communications]
PROXY
2001 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON DECEMBER 19, 2001
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned revokes all previous proxies, acknowledges receipt of the
Notice of the 2001 Annual Meeting of Stockholders to be held on December 19,
2001, and the Proxy Statement, and appoints David S. Lee and Lanny N. Lambert
and each of them, the Proxy of the undersigned, with full power of substitution,
to vote all shares of Common Stock of eOn Communications Corporation (the
"Corporation"), which the undersigned is entitled to vote, either on his own
behalf or on behalf of any entity or entities, at the 2001 Annual Meeting of
Stockholders of eOn Communications Corporation to be held at the Corporation's
executive offices, 4105 Royal Drive NW, Suite 100, Kennesaw, Georgia 30144, on
Wednesday, December 19, 2001 at 4:00 PM local time (the "Annual Meeting"), and
at any adjournment or postponement thereof, with the same force and effect as
the undersigned might or could do if personally present thereat. The shares
represented by this proxy shall be voted by the proxies in the manner set forth
on the reverse side and with discretionary authority with respect to any other
business, not known or determined at the time of the solicitation of this proxy,
that properly comes before the Annual Meeting or any postponement or adjournment
thereof.
THANK YOU FOR VOTING
Please mark your vote as indicated in this example [X]
1. To elect the following two directors to serve for a three-year term ending upon the 2004 Annual Meeting of Stockholders or
until their successors are elected and qualified.
FOR all nominees listed to the right (except as marked to the contrary) [_] Nominees: 01 RobertP. Dilworth
WITHHOLD AUTHORITY to vote all nominees listed to the right [_] 02 David S. Lee
(Instruction: To withhold authority to vote for any individual nominee, write that nominee's name on the space provided) __________
2. To approve the amendment to the 1999 Employee Stock Purchase Plan
FOR |_| AGAINST |_| ABSTAIN |_|
3. To ratify the appointment of Deloitte & Touche LLP as independent auditors of the Corporation for the fiscal year
ending July 31, 2002.
FOR |_| AGAINST |_| ABSTAIN |_|
Signature __________________________________ Signature ____________________________________ Date ________________
The board of directors recommends a vote FOR each of the directors listed above and a vote FOR the other proposals. This proxy, when
properly executed, will be voted as specified above. This proxy will be voted FOR the election of the directors listed above and FOR
the other proposals if no specification is made.
PLEASE VOTE