UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
VYYO INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
VYYO INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 7, 2002
To our Stockholders:
NOTICE IS HEREBY GIVEN that the 2002 annual meeting of stockholders of
Vyyo Inc., a Delaware corporation, will be held at Vyyo's principal executive
office located at 20400 Stevens Creek Boulevard, 8th Floor, Cupertino,
California 95014, on Tuesday, May 7, 2002, at 10:00 a.m., local time, for the
following purposes:
1. ELECTION OF DIRECTORS. To elect two Class II directors to serve until
the 2005 annual meeting of stockholders or until their respective successors
are elected and qualified;
2. AUTHORIZATION FOR THE BOARD OF DIRECTORS TO EFFECT A REVERSE STOCK SPLIT
IN A RATIO OF ONE-FOR-THREE. To authorize the board of directors to amend Vyyo's
Third Amended and Restated Certificate of Incorporation to effect a reverse
stock split of Vyyo's common stock in a ratio of one-for-three, at any time
until the 2003 annual meeting of stockholders;
3. SELECTION OF INDEPENDENT AUDITORS. To ratify the appointment of
Kesselman & Kesselman CPAs (ISR), a member of PricewaterhouseCoopers
International Limited, as the independent auditors for Vyyo for the year ending
December 31, 2002; and
4. To transact such other business as may properly come before the annual
meeting and any adjournment or postponement thereof.
The foregoing items of business are more fully described in the proxy
statement that is attached and made a part hereof.
The board of directors has fixed the close of business on Monday, March 25,
2002 as the record date for determining the stockholders entitled to notice of
and to vote at the annual meeting and any adjournment or postponement thereof.
Whether or not you expect to attend the annual meeting in person, you are
urged to mark, sign, date and return the enclosed proxy card as promptly as
possible in the postage-prepaid envelope provided to ensure your representation
and the presence of a quorum at the annual meeting. If you send in your proxy
card and then decide to attend the annual meeting to vote your shares in
person, you may still do so. Your proxy is revocable in accordance with the
procedures set forth in the proxy statement.
By Order of the Board of Directors
/s/ Davidi Gilo
Davidi Gilo,
Chairman of the Board
Cupertino, California
March 29, 2002
VYYO INC.
20400 Stevens Creek Blvd., 8th Floor, Cupertino, California 95014
PROXY STATEMENT
General Information
This proxy statement is furnished to stockholders of Vyyo Inc., a
Delaware corporation, in connection with the solicitation by the board of
directors of Vyyo of proxies in the accompanying form for use in voting at the
2002 annual meeting of stockholders to be held on Tuesday, May 7, 2002 at 10:00
a.m., local time, at Vyyo's principal executive office located at 20400 Stevens
Creek Boulevard, 8th Floor, Cupertino, California 95014, and any adjournment or
postponement thereof. The shares represented by the proxies received, properly
marked, dated, executed and not revoked will be voted at the annual meeting.
This proxy statement is being mailed to stockholders on or about April 2, 2002.
Revocability of Proxy
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before it is exercised by: (1) delivering to Vyyo
(to the attention of Stephen P. Pezzola, Vyyo's Secretary) a written notice of
revocation or a duly executed proxy bearing a later date; or (2) attending the
annual meeting and voting in person.
Solicitation and Voting Procedures
The solicitation of proxies will be conducted by mail and Vyyo will
bear all attendant costs. These costs will include the expense of preparing and
mailing proxy materials for the annual meeting and reimbursements paid to
brokerage firms and others for their expenses incurred in forwarding
solicitation material regarding the annual meeting to beneficial owners of
Vyyo's common stock. Vyyo may conduct further solicitation personally,
telephonically or by facsimile through its officers, directors and regular
employees, none of whom will receive additional compensation for assisting with
the solicitation.
The close of business on Monday, March 25, 2002, has been fixed as the
record date for determining the holders of shares of Vyyo's common stock
entitled to notice of and to vote at the annual meeting. As of the close of
business on the record date, Vyyo had 36,865,249 shares of common stock
outstanding and entitled to vote at the annual meeting. The presence at the
annual meeting of a majority, or 18,432,625 of these shares of common stock,
either in person or by proxy, will constitute a quorum for the transaction of
business at the annual meeting. Each outstanding share of common stock on the
record date is entitled to one vote on all matters.
An automated system administered by Vyyo's transfer agent will tabulate
votes cast by proxy and an employee of the transfer agent will tabulate votes
cast in person at the annual meeting. Abstentions and broker non-votes are each
included in the determination of the number of shares present and voting, and
each is tabulated separately. However, broker non-votes are not counted for
purposes of determining the number of votes cast with respect to a particular
proposal. In determining whether a proposal has been approved, abstentions are
counted as votes against the proposal and broker non-votes are not counted as
votes for or against the proposal. With respect to Proposal No. 2, since
Delaware law provides that the reverse split requires the approval of the
holders of a majority of Vyyo's outstanding shares, not merely a majority of the
shares present in person or represented by proxy at the annual meeting,
abstentions and broker non-votes will each count as votes against Proposal No.
2. If no specific instructions are given with respect to matters to be acted
upon at the annual meeting, shares of common stock represented by a properly
executed proxy will be voted (1) FOR the election of management's nominees for
Class II directors listed in Proposal No. 1; (2) FOR the proposal to authorize
the board of directors to amend Vyyo's Third Amended and Restated Certificate of
Incorporation to effect a one-for-three reverse split of the outstanding common
stock at any time prior to the 2003 annual meeting of stockholders; and (3) FOR
the ratification of the selection of Kesselman & Kesselman CPAs (ISR), a member
of PricewaterhouseCoopers International Limited, as the independent auditors for
Vyyo for fiscal year 2002.
1
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Vyyo's Certificate of Incorporation authorizes the number of directors
to be not less than one, nor more than ten. The number of directors on the board
is currently fixed at seven. Vyyo's board of directors is divided into three
classes: Class I, Class II and Class III. The members of each class of directors
serve staggered three-year terms. The board is currently composed of three Class
I directors (Messrs. Gilo, Fischer and Griffin), whose terms will expire upon
the election and qualification of directors at the annual meeting of
stockholders to be held in 2004; two Class II directors (Messrs. Broad and
Brownstein), whose terms will expire upon the election and qualification of
directors at the annual meeting and who have been nominated to continue to
serve as Class II directors for three year terms following the annual meeting;
and two Class III directors (Messrs. Kaplan and Zimmerman), whose terms will
expire upon the election and qualification of directors at the annual meeting
of stockholders to be held in 2003.
At the annual meeting, the stockholders will elect two Class II
directors, each of whom will serve a three-year term until the annual meeting of
stockholders to be held in 2005 or until a successor is elected or appointed and
qualified or until the director's earlier resignation or removal. The board of
directors has no reason to believe that any of the persons named below will be
unable or unwilling to serve as a nominee or as a director if elected.
Certain information about Messrs. Broad and Brownstein, the Class II
nominees, is furnished below:
Lewis S. Broad has been a member of the board of directors since
November 1999. Since May 1, 2000, Mr. Broad has served as Chief Executive
Officer of Portfab LLC, a manufacturer of heating enclosures. He is also a
member of the board of directors of Vesta Corp., a company specializing in
payment processing and fraud prevention for telephone and internet transactions.
From November 1994 until November 1999, Mr. Broad also served as a director of
DSP Communications, Inc., a developer of chip sets for wireless personal
communication applications.Mr. Broad is also a private investor.
Neill H. Brownstein was appointed as a member of the board or directors
in December 1999. Mr. Brownstein is President of Neill H. Brownstein
Corporation, a strategic investment management consulting firm that he founded
in 1976. From June 1970 to January 1995, Mr. Brownstein was associated with
Bessemer Securities Corporation and Bessemer Venture Partners, and during that
period he served as a founding general partner of three affiliated venture
capital funds. Mr. Brownstein also served on the board of directors of Giga
Information Group. From November 1994 until November 1999, Mr. Brownstein also
served as a director of DSP Communications.
Directors are elected by a plurality of the votes cast at the annual
meeting, and the director nominees who receive the greatest number of votes at
the annual meeting (up to the number of directors to be elected) will be
elected. Broker non-votes and abstentions will not affect the outcome of the
vote on the election of directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
---
THE ELECTION OF THE NOMINEES NAMED ABOVE.
2
Directors and Executive Officers
The following table sets forth certain information with respect to
Vyyo's directors and executive officers:
Directors and Executive Officers
Name Age Position
---- --- --------
Davidi Gilo 45 Chairman of the Board of Directors, Chief
Executive Officer, and Interim Chief
Financial Officer
Lewis S. Broad (1)(2) 44 Director
Neill H. Brownstein(1) 57 Director
John P. Griffin 51 Director
Avraham Fischer 45 Director
Samuel L. Kaplan(1) 65 Director
Alan L. Zimmerman(2) 59 Director
Michael P. Corwin 45 President and Chief Operating Officer
Menashe Shahar 51 Executive Vice President, Engineering, and Chief
Technical Officer
Stephen P. Pezzola 45 Executive Vice President, Corporate and Legal
Affairs, and Secretary
- ---------------------------------------
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
Davidi Gilo has served as Vyyo's Chairman of the Board of directors
since 1996. Mr. Gilo served as Chief Executive Officer of Vyyo from April 1999
until October 2000, and was reappointed as Chief Executive Officer in October
2001. Mr. Gilo has also served as Vyyo's Interim Chief Financial Officer since
October 2001. From October 1998 until November 1999, Mr. Gilo also served as
Chairman of the Board of DSP Communications, and from June 1999 until November
1999, he served as DSP Communications' Chief Executive Officer. Mr. Gilo also
served as the Chairman of the Board of DSP Communications from its founding in
1987 through November 1997. Mr. Gilo also served as Chairman of the Board of Zen
Research N.V., a developer of technology and intellectual property for use in CD
and DVD optical storage devices, between July 1995 and December 1999, and was
appointed as Zen Research plc's Chairman in April 2000. Between 1987 and 1993,
he was the President and Chief Executive Officer of DSP Group, Inc., a developer
of telephony and speech compression components, and he served as Chairman of the
Board of DSP Group from 1987 until April 1995.
Avraham Fischer has been a member of the board of directors since
April 1996. Mr. Fischer is a managing partner in the law firm of Fischer,
Behar, Chen & Co., of Tel Aviv, Israel, where he has served since 1982. Since
January 1998, Mr. Fischer has served as co-Chairman of the Board of Isra-Air
Aviation and Tourism, and since January 1997, he has been co-Chairman of the
Board of Ganden Investment Ltd., which has holdings in a group of Israeli
tourism and aviation companies. From January 1995 until October 2000, Mr.
Fischer served as a director on the board of Nogatech, Inc., a developer of
computer chips for telecommunications, and from 1996 until November 1999, he
served as a director of DSP Communications.
John P. Griffin has been a member of the board of directors since
November 1999. Since December 2000, Mr. Griffin has served as the President and
Chief Executive Officer of LightPointe Communications, Inc., a manufacturer of
free space optical telecommunications equipment. From May 1999 to
December 2000, he served as President of the Broadband Wireless Group of ADC
Telecommunications, Inc., a telecommunications equipment provider and systems
integrator, and from April 1998 until May 1999, he was General Manager of the
Loop Transport Division of ADC Telecommunications. From September 1996 through
April 1998, Mr. Griffin served as Vice President of Marketing for the Network
Services Division of ADC Telecommunications. From March 1995 through September
1996, Mr. Griffin served as Vice President of
3
Marketing of RSI Systems, a manufacturer of desktop video conferencing
equipment. Prior to that, he served for nine years with ADC Telecommunications,
the first year as Manager of Technical Support and the remaining eight years in
various marketing positions.
Samuel L. Kaplan has been a member of the board of directors since July
1999. Mr. Kaplan has been a partner in the law firm of Kaplan, Strangis and
Kaplan, P.A. of Minneapolis, Minnesota, since October 1978. Mr. Kaplan also
served as a director of USP Real Estate Investment Trust, a real estate
investment trust. From 1991 until June 1999, Mr. Kaplan also served as a
director of DSP Group.
Alan L. Zimmerman has been a member of the board of directors since July
1999. Since November 1994, Mr. Zimmerman has served as President of Law Finance
Group, Inc., a provider of financing in connection with anticipated awards in
legal proceedings. From 1992 through December 1999, he was Vice President of
Inheritance Funding Company, LLC, a provider of financing to heirs in
connection with anticipated inheritance payments.
Michael P. Corwin has served as Vyyo's President and Chief Operating
Officer since October 2001, and he also served as Vyyo's Chief Operating
Officer from August 1999 through March 2001. In March 2001, Mr. Corwin left
Vyyo for health related reasons. From August 1995 until August 1999, Mr. Corwin
served as Vice President, Operations, of Harmony Management, Inc. a private
investment company. From June 1994 until August 1995, he served as Vice
President of Operations of Nogatech and from 1986 until 1994, he was Vice
President of Purchasing and Production of DSP Group.
Menashe Shahar has served as Vyyo's Vice President, Engineering since July
1994 and as Vyyo's Chief Technical Officer since May 1999. Prior to joining
Vyyo, Mr. Shahar served as Chief Engineer for the Data Communications
Department of Tadiran Telecommunications Group, where he spent five years in the
development of products in the area of packet switching, frame relay and ISDN.
Prior to joining Tadiran, Mr. Shahar served for eight years as a design
engineer in the Israeli Defense Force, where he was involved in designing
modems and other data communication products.
Stephen P. Pezzola joined Vyyo in September 1996 as General Counsel and
Secretary, and he was appointed as Executive Vice President, Corporate and Legal
Affairs, in June 2001. From September 1996 until November 1999, Mr. Pezzola also
served as General Counsel and Corporate Secretary of DSP Communications. From
September 1996 until January 2000, he also served as General Counsel and
Secretary of Zen Research N.V., and from January through April 2000, he served
as Chairman of the Board of Zen Research N.V. In April 2000, Mr. Pezzola became
Executive Vice Chairman of the Board of Zen Research plc. From May 1986 until
September 1996, Mr. Pezzola was a founding shareholder and President of the law
firm of Pezzola & Reinke, APC, of Oakland, California.
Relationships among Directors or Executive Officers
There are no family relationships among any of Vyyo's directors or
executive officers.
Meetings and Committees of the Board of Directors
During 2001, the board met 11 times and acted by written consent one time.
No director attended fewer than 75% of the aggregate of the total number of
meetings of the board, plus the total number of all meetings of committees of
the board on which he served. The board currently has two committees: the
Compensation Committee and the Audit Committee.
The Compensation Committee currently consists of Messrs. Broad and
Zimmerman. Its function is to establish and apply Vyyo's compensation policies
with respect to Vyyo's executive officers. The Compensation Committee held
seven meetings in 2001, and acted by written consent six times.
Vyyo has an Audit Committee composed of independent directors for which
information regarding the functions of the Committee, and its membership,
activities and number of meetings held during fiscal 2001 are set forth below
under the heading "Report of the Audit Committee."
4
Compensation of Directors
Directors serving on the board of directors do not currently receive
any compensation for serving on the board. Directors are reimbursed for their
out-of-pocket expenses incurred in attending board and committee meetings.
In addition, all directors are eligible to participate in our Second
Amended and Restated 2000 Employee and Consultant Equity Incentive Plan (the
"2000 Plan"). The 2000 Plan provides for the grant of non-statutory options to
non-employee directors. Under the 2000 Plan, each non-employee director receives
an initial option to purchase 75,000 shares of common stock on the date on which
he or she becomes a director, at fair market value on the date of grant. These
options have a 10-year term and vest over a four-year period. Thereafter, on the
date immediately following each annual meeting of our stockholders, each of our
non-employee directors receives an annual grant of options to purchase 22,500
shares for each year during such director's term, provided such director has
served on the board of directors for at least six months on such date. These
options have a 10-year term and vest immediately upon the date of grant. The
foregoing awards of options are granted automatically under the Plan.
Accordingly, on May 9, 2001, each of Messrs. Broad, Brownstein, Fischer,
Griffin, Kaplan and Zimmerman were granted options to purchase 22,500 shares of
our common stock pursuant to the automatic grant provisions set forth in the
2000 Plan, in each case at an exercise price of $1.95 per share, following the
2001 annual meeting of stockholders.
In addition, on July 2001, the board of directors adopted a program to
grant to each non-employee director options under the 2000 Plan to purchase
5,000 shares of our common stock, at the time of each regularly scheduled
quarterly meeting of the board. These options have a five-year term and vest
immediately upon the date of grant. Pursuant to this program, the board granted
options to purchase 5,000 shares of our common stock to each of Messrs. Broad,
Brownstein, Fischer, Griffin, Kaplan and Zimmerman, on each of July 17, 2001,
October 22, 2001 and January 15, 2002. The options granted in July 2001 have an
exercise price of $1.10 per share; the options granted in October 2001 have an
exercise price of $0.83 per share; and the options granted in January 2002 have
an exercise price of $1.45 per share. The exercise prices for these options are
equal to the closing per share price of our common stock on the dates of grant
of the applicable options.
5
PROPOSAL NO. 2
AUTHORIZATION FOR THE BOARD TO
EFFECT A ONE-FOR-THREE
REVERSE STOCK SPLIT
General
Vyyo's stockholders are being asked at this annual meeting to act upon
a proposal to authorize the board of directors to effect a reverse stock split
in a ratio of one-for-three at any time prior to the 2003 annual meeting of
stockholders. If the reverse stock split is approved by the stockholders, the
board of directors may subsequently approve and effect, in its sole discretion,
the reverse stock split based on its determination of whether the reverse stock
split is necessary and advisable to retain Vyyo's Nasdaq National Market
listing and to retain liquidity of our common stock. At a special meeting of
the stockholders held on November 13, 2001, a reverse stock split of
one-for-three was approved by the stockholders. However, Vyyo did not
implement that reverse stock split.
An amendment to Vyyo's Third Amended and Restated Certificate of
Incorporation is required to effect the one-for-three reverse stock split. The
form of the proposed amendment to effect the reverse stock split is attached
hereto as Appendix A (the "Certificate of Amendment"). The Certificate of
Amendment will effect a one-for-three reverse split of the shares of Vyyo's
issued and outstanding common stock, but will not change the number of
authorized shares of common stock or preferred stock, or the par value of
Vyyo's common stock or preferred stock.
Vyyo's common stock is quoted on the Nasdaq National Market ("Nasdaq")
under the symbol "VYYO." In order for our common stock to continue to be quoted
on the Nasdaq National Market, we must satisfy various listing maintenance
standards established by Nasdaq. Among other things, as such requirements
pertain to us, we are required to have either stockholders' equity of at least
$10 million or net tangible assets (defined as total assets, excluding goodwill,
minus total liabilities) of at least $4 million, and our common stock held by
persons other than officers, directors and beneficial owners of greater than 10%
of our total outstanding shares, often referred to as the public float, must
have an aggregate market value of at least $5 million. Additionally, we must
have at least 750,000 shares held by persons other than officers, directors and
beneficial owners of greater than 10% of our total outstanding shares, at least
400 persons must own at least 100 shares, and our common stock must have a
minimum bid price of at least $1.00 per share. Under Nasdaq's listing
maintenance standards, if the closing bid price of our common stock remains
below $1.00 per share for 30 consecutive trading days Nasdaq will issue a
deficiency notice to Vyyo. If the closing bid price subsequently does not reach
$1.00 per share or higher for a minimum of ten consecutive trading days during
the 90 calendar days following the issuance of the deficiency notice from
Nasdaq, Nasdaq may de-list our common stock from trading on the Nasdaq National
Market.
If Nasdaq were to de-list our common stock, it may qualify to trade on
the Nasdaq SmallCap Market or the OTC Bulletin Board or in the "pink sheets"
maintained by the National Quotation Bureau, Inc. Each of these markets is
generally considered to be a less efficient market and not as broad as the
Nasdaq National Market. During the second half of 2001, our common stock traded
below Nasdaq's minimum bid price requirement of $1.00 per share for an extended
period of time, and could do so again. To attempt to avoid de-listing in the
event that our common stock trades below $1.00 per share in the future, Vyyo
proposes that the board of directors have the authority to effect a
one-for-three reverse stock split for the purpose of increasing the market
price of our common stock above the Nasdaq minimum bid requirement. Vyyo
currently complies with all other requirements for continued listing on the
Nasdaq National Market, including the $5 million market value of public float
requirement, the $10 million stockholders' equity or $4 million net tangible
assets requirement, and the 750,000 shares held in the public float
requirement, although Vyyo may be unable to continue to meet these
requirements in the future.
The board of directors considered the potential harm to Vyyo of being
de-listed from the Nasdaq National Market, and determined that a reverse stock
split, if necessary, would be the best way to attempt to comply with Nasdaq's
minimum bid price listing standard.
6
Purpose
One of the key requirements for continued listing on Nasdaq is that our
common stock must maintain a minimum bid price above $1.00 per share. Our common
stock traded below $1.00 for an extended period of time during the second half
of 2001 and may do so again. If this occurs, we believe a reverse split may
increase the price level of our common stock above $1.00 per share so that we
may maintain compliance with the Nasdaq minimum bid price listing standard.
If the stockholders do not approve the reverse stock split proposal,
and if the stock price subsequently decreases below $1.00 per share and does not
otherwise increase to and remain greater than $1.00 per share, Vyyo expects the
common stock would be delisted from Nasdaq after the periods set forth in the
Nasdaq listing maintenance standards have elapsed.
Stockholders should recognize that if the reverse split is effectuated
they will own a fewer number of shares than they currently own (a number equal
to the number of shares owned immediately prior to the reverse stock split
divided by three). While we expect that the reverse split will result in an
increase in the market price of our common stock, the reverse split may not
increase the market price of our common stock in proportion to the reduction in
the number of shares of our common stock outstanding resulting from the reverse
split or result in the permanent increase in the market price (which is
dependent upon many factors, including our performance, prospects and other
factors). The history of similar reverse stock splits for companies in like
circumstances is varied. The per-share market price of our common stock after
the reverse split may not exceed or remain in excess of the $1.00 minimum bid
price as required by Nasdaq. In addition, Vyyo could be de-listed due to a
failure to meet other continued Nasdaq listing requirements even if the market
price per post-reverse split share of our common stock remains in excess of
$1.00.
The market price of Vyyo's common stock will also be based on Vyyo's
performance and other factors, some of which are unrelated to the number of
shares outstanding. If the reverse stock split is effected and the market price
of Vyyo's common stock declines, the percentage decline as an absolute number
and as a percentage of Vyyo's overall market capitalization may be greater than
would occur in the absence of a reverse stock split. Furthermore, the liquidity
of Vyyo's common stock could be adversely affected by the reduced number of
shares that would be outstanding after the reverse stock split. In addition,
the reverse split will likely increase the number of stockholders of Vyyo who
own odd lots (less than 100 shares). Stockholders who hold odd lots typically
will experience an increase in the cost of selling their shares, as well as
possible greater difficulty in effecting such sales. Consequently, the reverse
split may not achieve the desired results that have been outlined above.
Principal Effects of the Reverse Stock Split
Number of Shares of Common Stock and Corporate Matters. The reverse
stock split would have the following effects on the number of shares of common
stock outstanding:
o each three (3) of Vyyo's common stock owned by a stockholder
prior to the reverse split would be exchanged for one (1) share
of common stock after the reverse split;
o based on the number of shares of common stock outstanding on
March 25, 2002, the number of shares of Vyyo's common stock
issued and outstanding will be reduced from approximately 37
million shares to approximately 12.3 million shares;
o all outstanding but unexercised options and warrants entitling
the holders thereof to purchase shares of Vyyo's common stock
will enable such holders to purchase, upon exercise of their
options or warrants, one-third (1/3) of the number of shares of
Vyyo's common stock that such holders would have been able to
purchase upon exercise of their options or warrants immediately
preceding the reverse stock split at an exercise price equal to
three times the exercise price specified before the reverse
stock split, resulting in approximately the same aggregate
exercise price being required to be paid upon exercise thereof
immediately preceding the reverse stock split; and
o the number of shares reserved for issuance (including the number
of shares subject to automatic annual increase and the maximum
number of shares that may be subject to options) under Vyyo's
existing stock option plans and its employee stock purchase plan
will be reduced to one-third (1/3) of the number of shares
currently included in such plans.
7
The reverse stock split will affect all of Vyyo's stockholders
uniformly and will not change the proportionate equity interests of our
stockholders, nor will the respective voting rights and other rights of
stockholders be altered, except for possible immaterial changes due to the
treatment of fractional shares resulting from the reverse split. As described
below, stockholders holding fractional shares will be entitled to cash payments
in lieu of such fractional shares. Common stock issued pursuant to the reverse
stock split will remain fully paid and non-assessable. Vyyo will continue to be
subject to the periodic reporting requirements of the Securities Exchange Act of
1934, as amended.
Fractional Shares. We will not issue fractional certificates for
post-reverse split shares in connection with the reverse split. Stockholders who
otherwise would be entitled to receive fractional shares because they hold a
number of pre-reverse split shares not evenly divisible by three (3) will be
entitled, upon surrender to the exchange agent of certificate(s) representing
such shares, to a cash payment in lieu thereof. The cash payment will equal the
fraction to which the stockholder would otherwise be entitled multiplied by the
average of the closing prices (as adjusted to reflect the reverse stock split)
of our common stock, as reported in The Wall Street Journal, during the thirty
(30) trading days preceding the date that is five (5) days before the effective
time of the reverse stock split. If such price is not available, the fractional
share payment will be based on the average of the last bid and ask prices of our
common stock on such days or other prices determined by the Board. The ownership
of a fractional interest will not give the holder thereof any voting, dividend
or other rights except to receive payment therefor as described herein.
Stockholders should be aware that, under the escheat laws of the
various jurisdictions where stockholders reside, where Vyyo is domiciled and
where the funds will be deposited, sums due for fractional interests that are
not timely claimed after the effective time may be required to be paid to the
designated agent for each such jurisdiction. Thereafter, stockholders otherwise
entitled to receive such funds may have to seek to obtain them directly from the
state to which they were paid.
Authorized Shares; Future Stock Issuances. Upon effectiveness of the
reverse stock split, the number of authorized shares of common stock that are
not issued or outstanding would increase from approximately 163 million shares
to approximately 187.7 million shares, based on the number of shares of common
stock outstanding on March 25, 2002. We will continue to have 5,000,000
authorized but unissued shares of preferred stock. Authorized but unissued
shares will be available for issuance, and we may issue such shares in
financings or otherwise. If we issue additional shares, the ownership interest
of holders of Vyyo's common stock may also be diluted. Also, the issued shares
may have rights, preferences or privileges senior to those of Vyyo's common
stock.
Accounting Matters. The reverse stock split will not affect the par
value of Vyyo's common stock. The reverse stock split will not impact the
amounts reported as common stock or total stockholders' equity on Vyyo's balance
sheet. The per share net income or loss and net book value of Vyyo's common
stock will be increased because there will be fewer shares of Vyyo's common
stock outstanding.
Potential Anti-Takeover Effect. Although the increased proportion of
unissued authorized shares to issued shares could, under certain circumstances,
have an anti-takeover effect (for example, by permitting issuances that would
dilute the stock ownership of a person seeking to effect a change in the
composition of Vyyo's Board or contemplating a tender offer or other transaction
for the combination of Vyyo with another company), the reverse stock split
proposal is not being proposed in response to any effort of which we are aware
to accumulate Vyyo's shares of common stock or obtain control of Vyyo, nor is it
part of a plan by management to recommend a series of similar amendments to
Vyyo's Board and stockholders. Other than the reverse stock split proposal,
Vyyo's Board does not currently contemplate recommending the adoption of any
other amendments to Vyyo's Third Amended and Restated Certificate of
Incorporation that could be construed to affect the ability of third parties to
take over or change the control of Vyyo.
Procedure for Effecting Reverse Stock Split and Exchange of Stock Certificates
If Vyyo's stockholders approve the reverse stock split and the Board
subsequently determines prior to the 2003 annual meeting of stockholders that
effecting the reverse stock split is in the best interests of Vyyo and its
stockholders, we will file an amendment to our Third Amended and Restated
Certificate of Incorporation with the Secretary of State of the State of
Delaware. The reverse stock split will become effective at the time of the
filing of the amendment, which we refer to as the "effective time." Beginning at
the effective time, each certificate representing pre-reverse stock split shares
will be
8
deemed for all corporate purposes to evidence ownership of post-reverse
stock split shares.
As soon as practicable after the effective time, stockholders will be
notified that the reverse stock split has been effected. Vyyo's transfer agent,
EquiServe Trust Company, will act as exchange agent for purposes of implementing
the exchange of stock certificates. We refer to such person as the "exchange
agent." Holders of pre-reverse stock split shares will be asked to surrender to
the exchange agent certificates representing such shares in exchange for
certificates representing post-reverse stock split shares in accordance with the
procedures to be set forth in the letter of transmittal Vyyo sends to its
stockholders. No new certificates will be issued to a stockholder until such
stockholder has surrendered such stockholder's outstanding certificate(s),
together with the properly completed and executed letter of transmittal, to the
exchange agent. Any pre-reverse stock split shares submitted for transfer,
whether pursuant to a sale, other disposition or otherwise, will automatically
be exchanged for post-reverse stock split shares. STOCKHOLDERS SHOULD NOT
DESTROY ANY STOCK CERTIFICATE(S) AND SHOULD NOT SUBMIT ANY CERTIFICATE(S) UNTIL
REQUESTED TO DO SO.
Even if the stockholders approve the reverse stock split, Vyyo reserves
the right not to effect the reverse stock split if in the Board's opinion it
would not be in the best interests of Vyyo and its stockholders to effect such
reverse stock split.
No Dissenter's Rights
Under the Delaware General Corporation Law, Vyyo's stockholders are not
entitled to dissenter's rights with respect to the reverse stock split, and Vyyo
will not independently provide stockholders with any such right.
Certain United States Federal Income Tax Consequences
The following is a summary of certain United States federal income tax
consequences of the reverse stock split generally applicable to the holders of
Vyyo shares. This summary addresses only such stockholders who hold their
pre-reverse stock split shares as capital assets and will hold the post-reverse
stock split shares as capital assets. This discussion does not address all
United States federal income tax considerations that may be relevant to
particular stockholders in light of their individual circumstances or to
stockholders that are subject to special rules, such as financial institutions,
tax-exempt organizations, insurance companies, dealers in securities, and
foreign stockholders. The following summary is based upon the provisions of the
Internal Revenue Code of 1986, as amended, applicable Treasury Regulations
thereunder, judicial decisions and current administrative rulings, as of the
date hereof, all of which are subject to change, possibly on a retroactive
basis. Tax consequences under state, local, foreign, and other laws are not
addressed herein. Each stockholder is advised to consult his or her tax advisor
as to the particular facts and circumstances which may be unique to such
stockholder and also as to any estate, gift, state, local or foreign tax
considerations arising out of the reverse stock split.
Exchange Pursuant to Reverse Stock Split. No gain or loss will be
recognized by a stockholder upon such stockholder's exchange of pre-reverse
stock split shares for post-reverse stock split shares pursuant to the reverse
stock split, except to the extent of cash, if any, received in lieu of
fractional shares. See "- Cash in Lieu of Fractional Shares" below. The
aggregate tax basis of the post-reverse stock split shares received in the
reverse stock split will be equal to the aggregate tax basis of the pre-reverse
stock split shares exchanged therefor (excluding any portion of the holder's
basis allocated to fractional shares), and the holding period of the
post-reverse stock split shares will include the holding period of the
pre-reverse stock split shares.
Cash in Lieu of Fractional Shares. A holder of pre-reverse stock split
shares who receives cash in lieu of a fractional share of post-reverse stock
split shares will generally be treated as having received such fractional share
pursuant to the reverse stock split and then as having exchanged such fractional
share for cash in a redemption by Vyyo. The amount of any gain or loss will be
equal to the difference between the ratable portion of the tax basis of the
pre-reverse stock split shares exchanged in the reverse stock split that is
allocated to such fractional share and the cash received in lieu thereof. In
general, any such gain or loss will constitute long-term capital gain or loss if
such pre-reverse stock split shares have been held by the holder for more than
one year at the time of the reverse stock split.
9
Vote Required; Recommendation of Board
The affirmative vote of the holders of a majority of all outstanding
shares of Vyyo's common stock will be required for approval of the authorization
of the board to effect the amendment. As a result, abstentions and broker
non-votes will have the same effect as negative votes.
THE BOARD RECOMMENDS A VOTE FOR THE PROPOSAL TO AUTHORIZE THE BOARD TO
AMEND THE THIRD AMENDED AND RESTATED CERTIFICATE OF INCORPORATION TO EFFECT
A ONE-FOR-THREE REVERSE SPLIT OF THE OUTSTANDING SHARES OF VYYO'S ISSUED AND
OUTSTANDING COMMON STOCK.
10
PROPOSAL NO. 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
On November 28, 2001, and effective on December 3, 2001, the Audit
Committee and the Board of Directors of Vyyo approved the dismissal of Ernst &
Young LLP and the engagement of Kesselman & Kesselman CPAs (ISR), a member of
PricewaterhouseCoopers International Limited ("Kesselman"), as independent
accountants of Vyyo for the year ended December 31, 2001. Ernst & Young LLP's
reports on Vyyo's financial statements for the past two years did not contain an
adverse opinion or a disclaimer of opinion, nor were they qualified or modified
as to uncertainty, audit scope or accounting principles. During Vyyo's two most
recently completed fiscal years and the subsequent interim period preceding the
determination to change accountants, there were no disagreements with Ernst &
Young LLP on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure, which, if not resolved to
the satisfaction of Ernst & Young LLP, would have caused it to make reference to
the subject matter of the disagreement in connection with its reports on Vyyo's
financial statements for such years. Vyyo requested Ernst & Young LLP to furnish
it with a letter addressed to the Securities and Exchange Commission stating
whether or not it agrees with the above statements. Vyyo filed that letter as an
exhibit to the Form 8-K filed on December 4, 2001 reporting the change in
accountants.
Vyyo engaged Kesselman as Vyyo's new independent accountants effective as
of December 3, 2001. During Vyyo's two most recent fiscal years and the
subsequent interim period prior to engaging Kesselman, neither Vyyo nor anyone
on its behalf consulted with Kesselman regarding either (i) the application of
accounting principles to a specific transaction, either completed or proposed,
or the type of audit opinion that might be rendered on Vyyo's financial
statements, and neither a written report nor oral advice was provided to Vyyo by
Kesselman that was an important factor considered by Vyyo in reaching a decision
as to any accounting, auditing or financial reporting issue; or (ii) any matter
that was either the subject of a disagreement, as that term is defined in Item
304(a)(1)(iv) of Regulation S-K and the related instructions to Item 304 of
Regulation S-K, or a reportable event, as that term is defined in Item
304(a)(1)(v) of Regulation S-K.
The board of directors has reappointed Kesselman as independent auditors
to audit the financial statements of Vyyo for the current fiscal year.
Representatives of Kesselman are expected to be present at the annual meeting
and will have an opportunity to make a statement if they so desire and will be
available to respond to appropriate questions.
Fees billed by Kesselman and our prior auditors, Ernst & Young LLP, for
the fiscal year ended December 31, 2001 were as follows:
Audit Fees................................................................... $120,000
Audit Related Fees(1)........................................................ $44,500
Financial Information Systems Design and Implementation Fees................. $0
All Other Fees(2)............................................................ $133,820
(1) Includes fees paid to Ernst & Young in connection with their review of
our financial statements included in our quarterly reports on Form
10-Q for the first three quarters of 2001, and in preparation for the
audit of our 2001 financial statements that was not completed due to
the change in auditors.
(2) Includes $35,000 paid to Kesselman in connection with tax matters,
$86,800 paid to PricewaterhouseCoopers LLP in connection with due
diligence for a certain transaction that was not consummated, and
$12,020 paid to Ernst & Young in connection with tax matters.
The Audit Committee has considered whether the provision of non-audit
services by Kesselman is compatible with maintaining their independence, and has
determined that it is.
Stockholder ratification of the appointment of Kesselman as Vyyo's
independent auditors is not required by Vyyo's bylaws or any other applicable
legal document. However, the Board is submitting the appointment of Kesselman to
the stockholders as a matter of good corporate practice. If the stockholders
fail to ratify the selection, the Audit Committee and the Board will reconsider
the appointment. Even if the selection is ratified, the Board at its discretion
may direct the appointment of a different independent auditing firm at any time.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE FOR RATIFICATION OF THE APPOINTMENT OF KESSELMAN & KESSELMAN CPAs (ISR),
A MEMBER OF PRICEWATERHOUSECOOPERS INTERNATIONAL LIMITED, AS THE COMPANY'S
INDEPENDENT AUDITORS FOR THE YEAR ENDING DECEMBER 31, 2002
11
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information known to us as of March 25,
2002, regarding the beneficial ownership of our common stock by:
o each person known to the board of directors to own beneficially 5% or more
of our common stock;
o each of our directors;
o the named executive officers identified below in "Executive Compensation
and Other Information"; and o all of our directors and executive officers
as a group.
Information with respect to beneficial ownership has been furnished by
each director, officer, or 5% or more stockholders, as the case may be.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission, which generally attribute beneficial
ownership of securities to persons who possess sole or shared voting power or
investment power with respect to those securities, and includes shares of common
stock issuable pursuant to the exercise of stock options or warrants that are
immediately exercisable or exercisable within sixty days after March 25, 2002.
Unless otherwise indicated, the persons or entities identified in this table
have sole voting and investment power with respect to all shares shown as
beneficially owned by them, subject to applicable community property laws.
Name and Address of Amount and Nature of
Beneficial Owner . Beneficial Ownership(1) Percent of Class(1)
------------------------ ----------------------- -------------------
Davidi Gilo(2) 15,854,144 42.5%
c/o Vyyo Inc.
20400 Stevens Creek Blvd., Ste. 800
Cupertino, CA 95014
ADC Telecommunications, Inc.(3) 2,476,603 6.7%
P.O. Box 1101
Minneapolis, MN 55440
John R. O'Connell(4) 820,000 2.2%
Michael P. Corwin(5) 550,212 1.5%
Stephen P. Pezzola(6) 560,532 1.5%
Menashe Shahar(7) 634,722 1.7%
Eran Pilovsky(8) 430,191 1.2%
Arnon Kohavi(9) 614,428 1.7%
Lewis Broad(10) 170,165 *
Neill H. Brownstein(11) 264,145 *
Avraham Fischer(12) 392,766 1.1%
John P. Griffin(13) 120,000 *
Samuel L. Kaplan(14) 232,618 *
Alan L. Zimmerman(15) 309,428 *
All current directors and executive officers as a group
(10 Persons)(16) 19,088,733 49.2%
- -----------------------
* Less than 1%.
(1) Number of shares and percentage ownership include shares issuable
pursuant to stock options held by the person in question exercisable
within 60 days after March 25, 2002. Percentages are based on
36,865,249 shares outstanding as of March 25, 2002.
(2) Includes (a) 14,362,995 shares held by the Gilo Family Trust, of
which Davidi Gilo and his wife Shamaya Gilo are the trustees;
(b) 16,260 shares held by Harmony Management, Inc., of which Davidi
and Shamaya Gilo are the sole stockholders; (c) 3,223 shares held by
the Gilo Group, LLC, a limited liability company of which Mr. Gilo is
a principal owner; and (d) 1,020,000 shares held by the Gilo Family
Foundation, a private not-for-profit charitable
12
foundation of which Davidi and Shamaya Gilo are trustees. Also includes
416,666 shares issuable pursuant to stock options. Excludes 244,947 shares
held in three trusts for the benefit of Mr. Gilo's children, Adi, Elad and
Yael Gilo, as to which Mr. Gilo has no voting or investment power. Mr. Gilo
disclaims beneficial ownership of such shares.
(3) Based on the Schedule 13G dated February 12, 2002, filed by ADC
Telecommunications, Inc. Pursuant to the Schedule 13G filing, ADC
Telecommunications has sole voting and dispositive power with
respect to all of the shares.
(4) Includes 800,000 shares issuable pursuant to stock options. Mr. O'Connell
ceased to be an executive officer of Vyyo in October 2001.
(5) Includes 158,333 shares issuable pursuant to stock options.
(6) Includes 50,203 shares held by the Pezzola-Foster Trust, of which Mr.
Pezzola and his wife Twila Foster are the trustees. Also includes 301,333
shares issuable pursuant to stock options. Excludes 42,000 shares held in
two trusts for the benefit of Mr. Pezzola's children, Genevieve and David
Pezzola, as to which Mr. Pezzola has no voting or investment power.
Mr. Pezzola disclaims beneficial ownership of such shares.
(7) Includes 364,000 shares issuable pursuant to stock options.
(8) Includes 336,000 shares issuable pursuant to stock options. Mr. Pilovsky
resigned from Vyyo in October 2001.
(9) Includes 396,000 shares issuable pursuant to stock options. Mr. Kohavi left
Vyyo in February 2002.
(10) Includes 60,000 shares issuable pursuant to stock options.
(11) Includes 75,000 shares issuable pursuant to stock options.
(12) Includes 25,152 shares held by Rashifa Management and Holdings Ltd.,
of which Mr. Fischer and his wife Vered Fischer are the sole
stockholders. Also includes 285,000 shares issuable pursuant to stock
options.
(13) Includes 60,000 shares issuable pursuant to stock options.
(14) Includes 60,000 shares issuable pursuant to stock options.
(15) Includes 125,000 shares issuable pursuant to stock options.
(16) See footnote (2), footnotes (5) through (7), and footnotes (10)
through (15). Includes 1,905,332 shares issuable pursuant to stock options.
Excludes shares held by former officers of Vyyo, Messrs. O'Connell,
Pilovsky and Kohavi.
Section 16(a) Beneficial Ownership Reporting Compliance
Based upon a review of filings with the Securities and Exchange
Commission, we believe that all of our directors, officers and beneficial
holders of over ten percent of our common stock complied during the fiscal year
ended December 31, 2001 with the reporting requirements of Section 16(a) of the
Securities Exchange Act of 1934.
13
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Summary Compensation Table
The following table sets forth all compensation earned for the years
ended December 31, 2001, 2000 and 1999, by Vyyo's current Chief Executive
Officer and each of Vyyo's six other most highly compensated executive officers
during 2001, including our former Chief Executive Officer and two other former
executive officers (collectively, the "named executive officers").
Summary Compensation Table
Annual Compensation Long-Term Compensation Awards
------------------- -----------------------------
Name and Securities Underlying
Principal Position Year Salary($) Bonus($)(1) Options (#) All Other Compensation ($)
------------------ ---- --------- ----------- ----------- -------------------------
Davidi Gilo 2001 $310,000 -- 1,000,000 --
Chairman of the Board, 2000 $350,000 $304,000 285,000(2) --
Chief Executive Officer and 1999 $175,000(3) -- 975,000 --
Interim Chief Financial
Officer
John O'Connell(4) 2001 $258,017 -- 1,930,000(5) $36,500(6)
Former Chief Executive 2000 $64,808 -- 2,320,000(8) --
Officer 1999 -- $656,800(7) -- --
Michael P. Corwin(9) 2001 $107,051 -- 500,000 $125,000(10)
President and Chief 2000 $225,000 $195,000 197,000 --
Operating Officer 1999 $72,500 -- 360,000 --
Stephen P. Pezzola 2001 $180,000 -- 309,000 --
Executive Vice President, 2000 $201,500 $201,000(11) 109,000 --
Corporate and Legal Affairs, 1999 $140,000(12) -- 193,500 --
and Secretary
Menashe Shahar 2001 $222,228 -- 182,000 $282,565(13)
Executive Vice President, 2000 $147,528 $130,000 182,000 $92,105(14)
Engineering and Chief 1999 $122,370 $20,420 255,000 $58,723(15)
Technical Officer
Eran Pilovsky(16) 2001 $213,170 -- 168,000 $365,512(17)
Former Chief Financial 2000 $239,583 $217,000 468,000 --
Officer 1999 -- -- --
Arnon Kohavi(18) 2001 $200,000 -- 468,000 --
Former Senior Vice 2000 $170,552 $203,231 168,000 --
President, Strategic Affairs 1999 $16,538 -- 240,000 --
- -----------------
(1) Vyyo's executive officers are eligible for annual cash bonuses that
are specified in employment agreements. Such bonuses are based upon
achievement of corporate performance objectives. The executive
officers are also eligible for discretionary bonuses as may be
awarded by the Compensation Committee based upon individual, as well
as corporate performance. Vyyo generally pays bonuses in the year
following that in which the bonuses were earned.
(2) These options were cancelled in December 2000.
(3) Mr. Gilo's salary for services performed in 1999 was
accrued and was paid to Mr. Gilo in 2000.
(4) Mr. O'Connell joined Vyyo in October 2000 and ceased to
be an executive officer of Vyyo in October 2001.
Mr. O'Connell's salary and bonus for services performed in 2000
was accrued and was paid to Mr. O'Connell in 2001.
(5) Includes 1,130,000 options that were cancelled in October 2001.
(6) Includes $24,051 paid for travel expenses incurred by
Mr. O'Connell's family, and $12,449 for taxes incurred by
Mr. O'Connell as a result of the payment of such travel expenses.
(7) Includes a signing bonus of $600,000 paid to Mr. O'Connell
pursuant to his employment agreement.
14
(8) Includes 1,450,000 options that were cancelled in December 2000.
(9) Mr. Corwin joined Vyyo as Chief Operating Officer in August 1999,
resigned from Vyyo for health related reasons in March 2001,
and rejoined Vyyo as President and Chief Operating Officer in
October 2001.
(10) Represents severance paid to Mr. Corwin pursuant to his
termination agreement with Vyyo in connection with his resignation
in March 2001.
(11) Includes a $25,000 bonus paid to Mr. Pezzola upon the consummation
of Vyyo's initial public offering pursuant to his employment
agreement.
(12) $52,000 of this amount was paid to Mr. Pezzola in 1999, and
$87,500 was accrued and was paid to Mr. Pezzola in 2000.
(13) Includes (i) $96,000 reimbursed to Mr. Shahar for rent on his
home pursuant to his employment agreement, (ii) $8,500 reimbursed
to Mr. Shahar for automobile lease payments pursuant to his
employment agreement, (iii) $44,000 paid to Mr. Shahar for
moving expenses in connection with his transfer from Israel to
California, and travel expenses incurred by his family, pursuant to
his employment agreement, and (iii) $134,065 reimbursed to Mr.
Shahar for taxes incurred by him as a result of the above payments.
(14) Includes (i) $6,208 reimbursed to Mr. Shahar for taxes on a company
automobile, (ii) $10,283 paid on behalf of Mr. Shahar for certain
automobile expenses incurred by Mr. Shahar, (iii) $15,440 paid to
Mr. Shahar for accrued but unused vacation time, and (iv) $14,969
paid to Mr. Shahar as severance required under Israeli law in
connection with his transfer from Israel to California. Also
includes a total of $34,418 paid on behalf of Mr. Shahar to a
severance fund, a pension fund and a risk/disability fund. The
amounts held in such funds on Mr. Shahar's behalf were paid to him
upon the termination of his employment with Vyyo Ltd. and his
transfer from Israel to California with Vyyo in 2001.
(15) Includes (i) $4,761 reimbursed to Mr. Shahar for taxes on a company
automobile, (ii) $11,527 paid on behalf of Mr. Shahar for certain
automobile expenses incurred by Mr. Shahar, and (iii) $9,978 paid to
Mr. Shahar for accrued but unused vacation time. Also includes a
total of $28,043 paid on behalf of Mr. Shahar to a severance fund, a
pension fund and a risk/disability fund. The amounts held in such
funds on Mr. Shahar's behalf were paid to him upon the termination
of his employment with Vyyo Ltd. and his transfer from Israel to
California with Vyyo in 2001.
(16) Mr. Pilovsky joined Vyyo in January 2000 and resigned from Vyyo
in October 2001.
(17) Represents severance paid to Mr. Pilovsky pursuant to his employment
agreement and separation agreement, and includes $11,028 paid for
health insurance benefits, and $5,000 that was paid to Mr.
Pilovsky's attorney.
(18) Mr. Kohavi left Vyyo in February 2002.
15
Option Grants in Last Fiscal Year
The following table provides information with respect to stock options
granted during 2001 to each of the named executive officers. In accordance with
the rules of the Securities and Exchange Commission, also shown below is the
potential realizable value over the term of the option (the period from the
grant date to the expiration date) based on assumed rates of stock appreciation
of 5% and 10%, compounded annually, calculated based on the closing price of the
common stock on the grant date, or, in the case of stock options granted before
our initial public offering, based on the fair market value of the common stock
on the grant date, as determined by the board of directors. These amounts are
based on certain assumed rates of appreciation and do not represent our estimate
of future stock price. Actual gains, if any, on stock option exercises will be
dependent on the future performance of our common stock.
Individual Grants Potential Realizable Value at Assumed
---------------------------------------------- Annual Rates of Stock Price
Appreciation for Option Term
----------------------------
Number % of Total
Securities Options
Underlying Granted to Exercise
Options Employee Price Expiration
Name Granted in 2001 ($/Share) Date 0% 5% 10%
---- ------- ------- --------- ---- -- -- ---
Davidi Gilo 1,000,000 10.9% $1.10 7/17/06 -- $303,910 $671,561
John R. O'Connell 1,130,000(1) 12.3% $1.10 7/17/06 -- $343,418 $758,864
800,000 8.7% $0.01 12/31/05 $712,000 $874,566 $1,063,637
Michael P. Corwin 500,000 5.4% $0.83 10/22/06 -- $114,657 $253,362
Stephen P. Pezzola 109,000 1.2% $1.69 4/25/06 -- $50,894 $112,462
200,000 2.2% $1.10 7/17/06 -- $60,782 $134,312
Menashe Shahar 182,000 2.0% $1.69 4/25/06 -- $84,979 $187,781
Eran Pilovsky 168,000 1.8% $1.69 1/15/05 -- $56,604 $121,053
Arnon Kohavi 168,000 1.8% $1.69 4/25/06 -- $78,442 $173,336
300,000(2) 3.3% $0.75 10/01/06 -- $62,163 $137,365
- --------------------------------------
(1) These options were cancelled in October 2001.
(2) These options were cancelled in February 2002.
16
Option Exercises and Option Values for Fiscal 2001
The following table describes for the named executive officers the
number and aggregate value of stock options exercised during fiscal 2001, and
the number and aggregate value of unexercised options held by each of the named
executive officers as of December 31, 2001:
Aggregated Option Exercises in 2001
and Option Values at December 31, 2001
Number of Securities
Underlying Unexercised Value of Unexercised
Aggregate Option Options at In-the-Money Options at
Exercises in 2001 December 31, 2001 December 31, 2001(1)
----------------- ----------------- --------------------
Shares Value
Acquired on Realized
Name Exercise (#) ($)(2) Exercisable Unexercisable Exercisable Unexercisable
---- ------------ --------- ----------- ------------- ----------- -------------
Davidi Gilo -- -- -- 1,000,000 -- $350,000
John R. O'Connell -- -- 800,000 -- $1,152,000 --
Michael P. Corwin 78,192 $478,005 276,475 383,333 $98,255 $237,666
Stephen P. Pezzola -- -- 181,666 236,334 -- $70,000
Menashe Shahar 269,920 $2,685,541 303,333 60,667 -- --
Eran Pilovsky -- -- 336,000 -- -- --
--
Arnon Kohavi -- -- 340,000 356,000 $37,200 $210,000
- ----------------------------
(1) Calculated on the basis of the closing sale price of our common stock as
reported on the Nasdaq National Market on December 31, 2001, of $1.45 per
share, minus the per share exercise price, multiplied by the number of
shares underlying the options.
(2) The value realized is calculated on the basis of the closing sale price of
our common stock as reported on the Nasdaq National Market on the date of
exercise, minus the per share exercise price, multiplied by the number of
shares underlying the options.
17
Employment Agreements
We entered into an employment agreement with Davidi Gilo effective as
of January 1, 2000, and we amended the agreement with Mr. Gilo in August 2001.
The agreement, as amended, provides for a term that expires on December 31,
2003, and will automatically renew for consecutive one-year extensions, unless
terminated by either party upon written notice. Mr. Gilo's agreement originally
provided for an annual base salary equal to $350,000, and as amended the
agreement provides for an annual base salary of $230,000. In addition, Mr. Gilo
is entitled under the agreement to an annual bonus equal to 15%, 50% or 90% of
his annual base salary if we meet 80%, 100% or 120% of our annual business plan,
respectively, with the bonus pro rated if our plan is met between 80% and 100%
or between 100% and 120%. In addition, Mr. Gilo will also be entitled to a
discretionary bonus, as determined by our board of directors or the compensation
committee. Mr. Gilo is required to devote at least 30 hours per week to the
business of Vyyo under his employment agreement.
If Mr. Gilo's employment is terminated by us without cause, he will be
entitled to a severance payment equal to the greater of (1) the full amount of
the cash compensation that he would have been paid under his employment
agreement or (2) 18 months of his original annual base salary of $350,000. If
Mr. Gilo's employment is terminated by us with cause, in exchange for a release
of any claims Mr. Gilo may have against us, he will be entitled to a severance
payment equal to three months of his original annual base salary. If Mr. Gilo
terminates his employment with us, he will be entitled to a severance payment
equal to nine months of his original base salary. If after the initial term Mr.
Gilo's employment is not renewed, he will be entitled to severance payments
equal to 18 months of his original annual base salary in exchange for a release
of any claims he may have against us. Mr. Gilo will remain as an employee during
any period he is receiving severance pay and his options will continue to vest
during that period.
We entered into an employment agreement with Stephen P. Pezzola
effective as of January 1, 2000, and we amended the agreement with Mr. Pezzola
in August 2001. Mr. Pezzola's agreement, as amended, provides for a term that
expires on December 31, 2003, and will automatically renew for consecutive
one-year extensions, unless terminated by either party upon written notice. Mr.
Pezzola's agreement originally provided for an annual base salary equal to
$202,500 effective January 1, 2000 and $210,000 effective January 1, 2001, and
as amended provides for an annual base salary of $120,000. In addition, Mr.
Pezzola is entitled under the agreement to an annual bonus equal to 15%, 50% or
90% of his annual base salary if we meet 80%, 100% or 120% of our annual
business plan, respectively, with the bonus pro rated if our plan is met between
80% and 100% or between 100% and 120%. In addition, Mr. Pezzola will also be
entitled to a discretionary bonus, as determined by our board of directors or
the compensation committee. Mr. Pezzola is required to devote at least 30 hours
per week to the business of Vyyo under his employment agreement.
If Mr. Pezzola's employment is terminated by us without cause, he will
be entitled to a severance payment equal to the greater of (1) the full amount
of the cash compensation that he would have been paid under his employment
agreement or (2) nine months of his annual base salary prior to the amendment of
the agreement of $210,000. If Mr. Pezzola's employment is terminated by us with
cause, in exchange for a release as to any and all claims Mr. Pezzola may have
against us, he will be entitled to a severance payment equal to three months of
his annual base salary prior to the amendment. If Mr. Pezzola terminates his
employment with us, he will be entitled to a severance payment equal to three
months of his annual base salary prior to the amendment. If after the initial
term, Mr. Pezzola's employment is not renewed, he will be entitled to a
severance payment equal to nine months of his annual base salary prior to the
amendment, in exchange for a release of any claims he may have against us. Mr.
Pezzola will remain as an employee during any period he is receiving severance
pay and his options will continue to vest during that period.
Effective as of February 1, 2001, we entered into an employment
agreement with Menashe Shahar which replaced a prior employment agreement dated
January 1, 2000. We amended the current agreement with Mr. Shahar in November
2001. Mr. Shahar's agreement provides for a two-year term ending on January 31,
2003, that will automatically renew for consecutive one-year extensions, unless
terminated by either party upon written notice. Mr. Shahar's agreement
originally provided for an annual base salary equal to $225,000, and as amended
provides for an annual base salary of $250,000. In addition, Mr. Shahar is
entitled to an annual bonus equal to 15%, 50% or 90% of his annual base salary
if we meet 80%, 100% or 120% of our annual business plan, respectively, with the
bonus pro rated if our plan is met between 80% and 100% or between 100% and
120%. In addition, Mr. Shahar will also be entitled to a discretionary bonus, as
determined by our board of directors or the compensation committee.
18
In connection with Mr. Shahar's relocation from Israel to California in
2001, we agreed to pay the following amounts to Mr. Shahar under his employment
agreement, as amended: (1) reimbursement of $8,000 per month of rental payments
on his home in California until November 14, 2001, (2) reimbursement of $1,000
per month for car lease payments until November 14, 2001; (3) certain travel
expenses for Mr. Shahar and his family, (4) a $25,000 moving bonus and
reasonable moving expenses of up to $20,000, (5) approximately $20,000 for
Israeli and United States tax planning and compliance advisors for Mr. Shahar in
connection with his relocation, and (6) reimbursement of any taxes incurred by
Mr. Shahar as a result of the above payments. In addition, under the original
agreement we agreed to loan Mr. Shahar up to $1,000,000 to be used for the
purchase of a home in California. This commitment to extend a loan to Mr. Shahar
was terminated by the amendment to the agreement.
If Mr. Shahar's employment is terminated by us without cause, he will be
entitled to a severance payment equal to the greater of (1) the full amount of
the cash compensation that he would have been paid under his employment
agreement or (2) six months of his then-current base salary. If Mr. Shahar's
employment is terminated by us with cause, in exchange for a release as to any
and all claims Mr. Shahar may have against us, he will be entitled to a
severance payment equal to three months of his then-current base salary. If
after the initial two-year term, Mr. Shahar's employment is not renewed, he will
be entitled to a severance payment equal to six months of his then-current base
salary in exchange for a release of any claims he may have against us. Mr.
Shahar will remain as an employee during any period he is receiving severance
pay and his options will continue to vest during that period.
Michael Corwin has served since October 2001 as our President and Chief
Operating Officer, with an annual base salary of $250,000. Mr. Corwin previously
served as our Chief Operating Officer until he resigned from Vyyo in March 2001
for health related reasons. Our former employment agreement with Michael Corwin
was entered into effective as of January 1, 2000 and was terminated pursuant to
a termination agreement dated effective as of March 21, 2001, upon Mr. Corwin's
resignation from Vyyo as our Chief Operating Officer. Under the termination
agreement, Vyyo paid to Mr. Corwin a $125,000 severance payment and agreed to
pay Mr. Corwin's health insurance premiums until December 31, 2001. In addition,
a total of 148,000 options to purchase common stock held by Mr. Corwin were
accelerated to be vested and exercisable on the date of the termination
agreement and remained outstanding for one year after the date of the
termination agreement. Under his employment agreement prior to its termination,
Mr. Corwin received an annual base salary equal to $225,000 effective January 1,
2000, and $250,000 effective January 1, 2001.
In October 2001, we entered into a separation agreement with John
O'Connell in connection with his termination as our Chief Executive Officer.
This separation agreement terminated the employment agreement we previously had
entered into with Mr. O'Connell in October 2000. Under the separation agreement,
we agreed to the following material terms, in exchange for a release by Mr.
O'Connell of any claims he may have against Vyyo: (1) we agreed that Mr.
O'Connell shall remain as an employee in a non-policy making role until the
earlier to occur of October 31, 2003 or until he accepts any other engagement
for compensation, during which period he shall continue to receive benefits
under our standard employee health insurance benefits policy, but shall receive
no other compensation, (2) we agreed to cancel a promissory note in the
principal amount of $2,834,163, previously issued by Mr. O'Connell to us and
described below, in exchange for Mr. O'Connell returning to us for cancellation
370,000 shares of our common stock held by Mr. O'Connell, (3) we agreed to
reimburse Mr. O'Connell for any federal and state tax incurred by him as a
result of the cancellation of such promissory note, pursuant to the terms of a
Reimbursement Agreement entered into between us and Mr. O'Connell in March 2001,
(4) we granted to Mr. O'Connell fully vested options to purchase 800,000 shares
of our common stock at an exercise price of $0.01 per share, with a termination
date of December 31, 2005, (5) we and Mr. O'Connell agreed to cancel all of his
prior outstanding options, and (6) we agreed to loan Mr. O'Connell up to
$1,000,000 at any time prior to October 31, 2002. This loan would accrue
interest at a rate equal to the lowest allowable rate under tax and accounting
laws, and the principal and any unpaid interest under the loan would be due on
January 1, 2006, subject to earlier repayment upon the following events: (1) if
the closing per share price of our common stock reaches at least $5.00 for at
least 10 consecutive trading days, the full amount of principal and interest
would be due on the 90th trading day (cumulative but not necessarily
consecutive) thereafter that the closing per share price of our common stock
reaches at least $5.00, and (2) if Mr. O'Connell sells any Vyyo shares held by
him, he would be required to repay to us the greater of 50% of the gross sale
proceeds, or $1.25 per share sold, toward the repayment of the loan. The loan
shall be a non-recourse loan and shall be secured only by the 800,000 options
granted to Mr. O'Connell and the underlying shares of common stock.
On December 4, 2000, in connection with an exercise of options to
purchase our common stock, we loaned $2,834,163 to John O'Connell, in exchange
for which Mr. O'Connell issued a full recourse promissory note to us. The note
19
bore interest at a variable rate equal to the federal funds rate of the Federal
Reserve Board as in effect from time to time, plus 2% per annum. Interest was
payable quarterly on the last day of each calendar quarter commencing on March
31, 2001, and principal was due on the earlier of December 4, 2003 or 20
business days after Mr. O'Connell leaves Vyyo. The note was secured by the
purchased shares and by a pledge of the assets held in a brokerage account of
Mr. O'Connell having an initial value of not less than 200% of the amount of the
loan. The note was amended on March 1, 2001 such that (1) commencing on March 1,
2001, the note bore interest at the rate of 4.86% per annum, (2) principal and
interest was to be due and payable on December 4, 2003, and (3) the note was
secured by the shares purchased and our recourse in the event of non-payment of
the note was limited to our rights in such shares as collateral. As of December
5, 2001, Mr. O'Connell owed $2,996,712 in principal and interest under the loan,
which was the largest amount of indebtedness under the loan during 2001. The
loan was terminated and the promissory note cancelled on December 5, 2001 under
the terms of the separation agreement described above.
In October 2001, we entered into a separation agreement with Eran
Pilovsky in connection with his resignation as our Chief Financial Officer. This
separation agreement terminated the employment agreement we previously had
entered into with Mr. Pilovsky in January 2000. Under the separation agreement,
we agreed to the following material terms, in exchange for a release by Mr.
Pilovsky of any claims he may have against Vyyo: (1) we paid to Mr. Pilovsky the
amount of $365,512 as severance, which amount included $11,028 for insurance
benefits through December 31, 2003, and $5,000 that was paid to Mr. Pilovsky's
attorney; and (3) we agreed to accelerate the vesting of all of Mr. Pilovksy's
outstanding options and to extend the termination date of such options until
January 15, 2005.
In February 2002, in connection with the termination of Arnon Kohavi as
our Executive Vice President, Strategic Relations, we paid to Mr. Kohavi the
amount of $133,333, which was equal to two months of Mr. Kohavi's base salary in
lieu of notice, plus six months of his base salary as severance. These amounts
were paid pursuant to the notice and severance provisions set forth in the
employment agreement we had previously entered into with Mr. Kohavi in November
1999, which has been terminated. We also agreed to pay Mr. Kohavi's health
benefits through May 2001 and to accelerate the vesting of Mr. Kohavi's
outstanding options that would be vested through May 2001.
Compensation Committee Report on Executive Compensation
The following report of the compensation committee does not constitute
solicitation material, and shall not be deemed filed or incorporated by
reference into any other filing by Vyyo under the Securities Act of 1933, or the
Securities Exchange Act of 1934.
Compensation Policy. Vyyo's Compensation Policy as established by the
compensation committee is that executive officers' total annual cash
compensation should vary with the performance of Vyyo, and that long-term
incentives awarded to such officers should be aligned with the interest of our
stockholders. Vyyo's executive compensation program is designed to attract and
retain executive officers who will contribute to our long-term success, to
reward executive officers who contribute to Vyyo's financial performance and to
link executive officer compensation and stockholder interests through the grant
of stock options.
Compensation of Vyyo's executive officers consists of three principal
components: salary, bonus, and long-term incentive compensation consisting of
stock option grants.
Salary. The minimum base salaries for our Chief Executive Officer and
each of the other executive officers are generally specified in employment
agreements, and are subject to annual increases by the Compensation Committee in
its discretion. The base salaries of all executive officers are reviewed
annually and, subject to minimum amounts specified in employment agreements, are
set by the Compensation Committee. When setting base salary levels, in a manner
consistent with the Compensation Committee's policy outlined above, the
Committee considers competitive market conditions for executive compensation,
Vyyo's performance and individual performance. In 2001, in recognition of the
reduced business outlook of Vyyo, the employment agreements of our Chief
Executive Officer and two other officers were amended to reduce expenses of
Vyyo. In August 2001, we and Davidi Gilo, our Chairman, Chief Executive Officer
and interim Chief Financial Officer, agreed to reduce Mr. Gilo's annual salary
from $350,000 to $230,000, and we and Stephen Pezzola, our Executive Vice
President, Corporate and Legal Affairs, agreed to reduce Mr. Pezzola's annual
salary from $210,000 to $120,000. In connection with these amendments, the terms
of Mr. Gilo's and Mr. Pezzola's agreements were extended by one year. In
addition, in November 2001, we and Menashe Shahar, our Chief Technical Officer
and Vice President, Engineering, agreed to amend Mr. Shahar's employment
agreement to eliminate Vyyo's obligation to reimburse Mr. Shahar for rent
payments on
20
his home, automobile lease payments, and certain other expenses. In connection
with this amendment, Mr. Shahar's annual salary was increased from $225,000 to
$250,000.
Bonus. The bonuses of the Chief Executive Officer and each of the other
executive officers are specified in employment agreements and are based on Vyyo
achieving certain corporate performance objectives. The Compensation Committee
also evaluates the performance and sets discretionary bonuses payable to the
executive officers. For fiscal 2001, we paid no bonuses to any of our executive
officers.
Long-term Incentive Compensation. We believe that option grants (1)
align executive interests with stockholder interests by creating a direct link
between compensation and stockholder return, (2) give executives a significant,
long-term interest in Vyyo's success, and (3) help retain key executive officers
in a competitive market for executive talent.
Our stock option plans authorize the Committee to grant stock options
to employees and consultants, including executive officers. Option grants are
made from time to time to executive officers whose contributions have or are
expected to have a significant impact on Vyyo's long-term performance. Vyyo's
determination of whether option grants are appropriate each year is based upon
individual performance measures established for each individual. Options are not
necessarily granted to each executive officer during each year. In 2001, we
granted options to Davidi Gilo, our Chairman of the Board, Chief Executive
Officer and interim Chief Financial Officer, to purchase 1,000,000 shares of
common stock. These options vest as to 25% of the options six months after the
date of grant, and the remaining options vest at a rate of 4.167% per month over
the following 18 months. In 2001, we granted options to John O'Connell, our
former Chief Executive Officer, to purchase 1,130,000 shares of common stock. In
connection with Mr. O'Connell's subsequent termination as Chief Executive
Officer, these options were cancelled, and we granted to Mr. O'Connell options
to purchase 800,000 shares of common stock at an exercise price of $0.01 per
share. These new options were fully vested on the date of grant and will expire
on December 31, 2005. Options that were granted to other executive officers in
2001, generally vest as to 50% of the options on the date that is six months
after the date of grant, and thereafter in equal monthly installments over a
period of six months, and expire five years from the date of grant. Details on
stock options granted to certain executive officers in 2001, are provided in
"Option Grants in Last Fiscal Year," and details regarding the option repricing
of Mr. O'Connell's options in 2001 are provided in "Report on Repricing of
Options."
Compensation of Chairman of the Board and Chief Executive Officer, and
former Chief Executive Officer. As described above in "Employment Agreements,"
the minimum salary and bonus of Davidi Gilo, the Chairman of the Board and Chief
Executive Officer, are provided in his employment agreement and are subject to
increases as determined by the board of directors. The base salary specified in
Mr. Gilo's employment agreement, and the long term incentive compensation in the
form of options granted to Mr. Gilo, were established by negotiations with Mr.
Gilo, and in determining the amount of the salary and other compensation paid to
Mr. Gilo, the Compensation Committee considered factors including the
performance of Mr. Gilo and his contributions to Vyyo, the level of salary and
long term incentive compensation paid to persons in similar positions at other
companies in Vyyo's industry, and the considerable competition for executive
talent within the industry. As described above, in August 2001, Mr. Gilo and
Vyyo agreed to amend Mr. Gilo's employment agreement to reduce Mr. Gilo's annual
salary and extend the term of the agreement by one year.
As described above in "Employment Agreements," the minimum salary and
bonus of John O'Connell, our former Chief Executive Officer, were provided in
his employment agreement prior to its termination in October 2001. The base
salary specified in Mr. O'Connell's employment agreement, and the long term
incentive compensation in the form of options granted to Mr. O'Connell, were
established by negotiations with Mr. O'Connell, and in determining the amount of
the salary and other compensation paid to Mr. O'Connell, the Compensation
Committee considered factors including the performance of Mr. O'Connell and his
contributions to Vyyo, the level of salary and long term incentive compensation
paid to persons in similar positions at other companies in Vyyo's industry, and
the considerable competition for executive talent within the industry. The
options granted to Mr. O'Connell at the time he ceased to be our Chief Executive
Officer were established by negotiations with Mr. O'Connell in connection with
the termination of his employment agreement.
Mr. Gilo's and Mr. O'Connell's bonuses under their respective
employment agreements are based on Vyyo's performance each year. For fiscal
2001, no bonuses were paid to either Mr. Gilo or Mr. O'Connell, or to any
other executive officers of Vyyo.
Compensation Policy Regarding Deductibility. Vyyo is required to
disclose its policy regarding qualifying executive compensation for
deductibility under Section 162(m) of the Internal Revenue Code which provides
that, for purposes of the regular income tax and the alternative minimum tax,
the otherwise allowable deduction for compensation paid or accrued with respect
to a covered employee of a publicly-held corporation is limited to $1 million
per year. For the
21
fiscal year ended December 31, 2001, none of our executive officers received $1
million. It is not expected that the compensation to be paid to our executive
officers for fiscal 2002 will exceed the $1 million limit for any officer. Our
option plans are structured so that any compensation deemed paid to an executive
officer when he exercises an outstanding option under any of the option plans,
with an exercise price equal to the fair market value of the option shares on
the grant date, will qualify as performance-based compensation which will not be
subject to the $1 million limitation. The Compensation Committee currently
intends to limit the dollar amount of all other compensation payable to Vyyo's
executive officers to no more than $1 million.
Report on Repricing of Options
In October 2001, the board of directors cancelled all of the existing
options of John O'Connell, Vyyo's former Chief Executive Officer, in exchange
for a new grant of options at an exercise price of $0.01 per share. The existing
options were cancelled and the new options were granted in connection with Mr.
O'Connell's termination as our Chief Executive Officer and the termination of
Mr. O'Connell's employment agreement.
Under the terms of the cancellation and new grant, on October 29, 2001,
Mr. O'Connell's options to purchase 1,130,000 shares of our common stock, which
were previously granted at an exercise price of $1.10 per share, were cancelled,
and 800,000 new options were granted at an exercise price of $0.01 per share,
which was substantially below the closing price of our common stock on such date
of $0.90 per share. The new options were immediately vested as to all of the
options subject to the grant. The new options will terminate on December 31,
2005.
The following table sets forth the number of options repriced for all
of our executive officers for the fiscal years ended December 31, 2001 and 2000:
Number of Length of Original
Securities Market Price Exercise Price at New Option Term
Underlying at Time of Time of Exercise Remaining at Date
Date of Options Repricing Repricing Price of
Name Repricing Repriced(#) ($/Sh) ($/Sh) ($/Sh) Repricing
---- --------- ----------- ---- ----- ---- ---------
John R. O'Connell 10/29/01 800,000 $0.90 $1.10 $0.01 4.7 years(1)
Former Chief 12/04/00 870,000 $7.66 $20.00 $7.66 4.8 years(2)
Executive Officer
- ----------------------
(1) The replacement options have a term of 4.2 years after the date of
grant.
(2) The replacement options have a term of 1.1 years after the date of
grant.
The above Report on Executive Compensation is submitted by the
Compensation Committee:
Lewis S. Broad
Alan L. Zimmerman
Report of the Audit Committee
The following report of the Audit Committee does not constitute
soliciting material and shall not be deemed filed or incorporated by reference
into any other filing by Vyyo under the Securities Act of 1933 or the Securities
Exchange Act of 1934.
The Audit Committee of the board of directors is governed by a written
charter that was adopted by the Committee and approved by the full board in
2000. A copy of the charter was included in the proxy statement for the 2001
annual meeting of stockholders.
The Audit Committee oversees Vyyo's financial reporting process on
behalf of the board of directors. Management has the primary responsibility for
the financial statements and the reporting process including the
22
systems of internal controls. In fulfilling its oversight responsibilities, the
Committee reviewed the audited financial statements in the annual report on Form
10-K for the year ended December 31, 2001, with management including a
discussion on the quality, not just the acceptability, of the accounting
principles, the reasonableness of significant judgments, and the clarity of
disclosures in the financial statements.
The Committee also reviewed with Vyyo's independent auditors, who are
responsible for expressing an opinion on the conformity of those audited
financial statements with generally accepted accounting principles, their
judgments as to the quality, not just the acceptability, of Vyyo's accounting
principles and such other matters as are required to be discussed by Statement
on Auditing Standards No. 61. In addition, the Committee has discussed with the
independent auditors the auditors' independence from management and Vyyo,
including the matters in the written disclosures required by the Independence
Standards Board Standard No. 1, and considered the compatibility of non-audit
services with the auditors' independence.
The Committee discussed with the independent auditors the overall scope
and plans for their audit. The Committee meets with the independent auditors,
with and without management present, to discuss the results of their
examination, their evaluation of Vyyo's internal controls, and the overall
quality of Vyyo's financial reporting. To carry out its responsibilities, the
Audit Committee met five times in 2001.
In reliance on the reviews and discussion referred to above, the
Committee recommended to the board of directors, and the board has approved,
that the audited financial statements be included in Vyyo's annual report on
Form 10-K for the year ended December 31, 2001, for filing with the Securities
and Exchange Commission. The Committee and the board have also recommended,
subject to stockholder approval, the selection of Vyyo's independent auditors.
Members of the Audit Committee
Neill H. Brownstein, Audit Committee Chairman
Lewis S. Broad, Member
Samuel L. Kaplan, Member
23
Stock Performance Graph
The following information and performance graph do not constitute
solicitation material, and shall not be deemed filed or incorporated by
reference into any other filing by Vyyo under the Securities Act of 1933, or the
Securities Exchange Act of 1934.
The graph below compares the cumulative total stockholder return on our
common stock with the cumulative total return on the Nasdaq Stock Market Index
and the Nasdaq Telecommunications Index. The period shown commences on April 5,
2000, the date that our common stock was registered under Section 12 of the
Securities Exchange Act of 1934, and ends on December 31, 2001, the end of
Vyyo's last fiscal year. The graph assumes an investment of $100 on April 5,
2000, and the reinvestment of any dividends.
The comparisons in the graph below are based upon historical data and
are not indicative of, nor intended to forecast, future performance of our
common stock.
TOTAL RETURN TO STOCKHOLDERS
APRIL 5, 2000 TO DECEMBER 31, 2001
Cumulative Total Return*
------------------------
04/05/00 12/31/00 12/31/01
-------- -------- --------
Vyyo Inc. $100 $45.37 $10.74
Nasdaq Stock Market Index $100 $58.79 $46.65
Nasdaq Telecommunications Index $100 $44.61 $29.87
- ------------------------------------------
* $100 invested on April 5, 2000 in stock or index - including reinvestment of
dividends. Fiscal year ending December 31.
24
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since January 1, 2001, there has not been, nor is there currently
proposed, any transaction or series of similar transactions to which we were or
are to be a party in which the amount involved exceeds $60,000 and in which any
director, executive officer or holder of more than 5% of our common stock, or an
immediate family member of any of the foregoing, had or will have a direct or
indirect interest other than compensation arrangements that are described where
required under "Executive Compensation and Other Information" and the
transactions described below.
In 2001, we paid an aggregate of $390,000 to an unaffiliated third
party management company in connection with several charters of an aircraft for
business travel purposes. While we chartered the aircraft directly from the
management company, the chartered aircraft is owned by Harmony Management, Inc.,
of which Davidi Gilo and his wife are the sole shareholders. Payments made by us
to the management company for the aircraft charters were ultimately paid to
Harmony Management, after deductions for certain operating costs and charter
management fees. At the instruction of Harmony Management, the hourly rate
charged by the management company for these charters was substantially less than
the standard rate charged by the management company for similar charters to
other unaffiliated parties. In 2001, we also reimbursed Harmony Management for
sales and marketing expenses incurred by Harmony Management on our behalf
amounting to $285,000.
Prior to entering into a lease for our headquarters office in
Cupertino, California in August 2001, we subleased these premises from Zen
Research, Inc. on a month-to-month basis. Mr. Gilo is a controlling shareholder
and the Chairman of the Board of Zen Research's parent corporation. In addition,
Mr. Pezzola is the Vice Chairman of the Board of Zen Research's parent
corporation. We paid a total of $438,000 to Zen Research for rent and other
reimbursed expenses under our sublease during 2001.
Avraham Fischer, a director of Vyyo, is a senior partner of the law
firm of Fischer, Behar, Chen & Co., which represents us on matters relating to
Israeli law. We paid approximately $287,000 in legal fees to this firm in 2001.
We have entered into indemnification agreements with our directors and
executive officers containing provisions that may require us, among other
things, to indemnify our directors and executive officers against various
liabilities that may arise by virtue of their status or service as directors and
executive officers, and to advance their expenses incurred as a result of any
proceeding against them as to which they could be indemnified.
STOCKHOLDER PROPOSALS
Under our bylaws, if you intend to present a proposal at Vyyo's 2003
annual stockholder meeting, you must deliver a copy of your proposal to our
Corporate Secretary, Stephen P. Pezzola, at Vyyo Inc., 20400 Stevens Creek
Boulevard, Suite 800, Cupertino, California 95014, not less than 60 nor more
than 90 days prior to the anniversary date of the 2002 annual stockholder
meeting, unless the date of Vyyo's 2003 annual stockholder meeting is more than
30 calendar days before or after the date of our 2002 meeting, in which case
your notice of a proposal will be timely if we receive it by the close of
business on the tenth day following the day we publicly announce the date of the
2003 meeting or mail notice of the meeting, whichever occurs first. These
requirements are separate from and in addition to the Securities and Exchange
Commission's requirements for a stockholder to have a proposal included in
Vyyo's proxy statement.
Stockholders interested in submitting a proposal for inclusion in the
proxy materials for Vyyo's annual meeting of stockholders in 2003, may do so by
following the procedures prescribed in Securities and Exchange Commission Rule
14a-8 and submitting such proposal to our Corporate Secretary, Mr. Pezzola, at
our address noted above. To be eligible for inclusion, stockholder proposals
must be received by the Corporate Secretary no later than December 3, 2002.
25
OTHER MATTERS
The board of directors knows of no other business that will be
presented at the annual meeting. If any other business is properly brought
before the annual meeting, it is intended that proxies in the enclosed form will
be voted in respect thereof in accordance with the judgment of the persons
voting the proxies.
It is important that the proxies be returned promptly and that your
shares be represented. Stockholders are urged to mark, date, execute and
promptly return the accompanying proxy card in the enclosed envelope.
By Order of the Board of Directors,
/s/ Davidi Gilo
-----------------------------------
Davidi Gilo
Chairman of the Board
March 29, 2002
Cupertino, California
26
APPENDIX A
FORM OF
CERTIFICATE OF AMENDMENT OF THE
THIRD AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
VYYO INC.
Stephen P. Pezzola hereby certifies that:
1. He is the duly elected and acting Secretary of Vyyo Inc., a corporation
organized and existing under the laws of the state of Delaware (the
"Corporation").
2. Pursuant to Section 242 of the General Corporation Law of the State of
Delaware, this Certificate of Amendment of the Third Amended and Restated
Certificate of Incorporation amends the provisions of the Third Amended and
Restated Certificate of Incorporation of the Corporation.
3. The terms and provisions of this Certificate of Amendment of the Third
Amended and Restated Certificate of Incorporation (i) have been approved by the
Board of Directors of the Corporation in a resolution setting forth and
declaring advisable the amendment contained herein and (ii) have been duly
approved by the required number of shares of outstanding stock of the
Corporation, in each case pursuant to and in accordance with Section 242 of the
Delaware General Corporation Law.
4. Article FOURTH of the Third Amended and Restated Certificate of
Incorporation of the Corporation is hereby amended such that the following
paragraphs shall be inserted at the end thereof:
"Effective immediately upon the filing of this Certificate of Amendment with the
Secretary of State of the State of Delaware (the "Effective Time"), each one (1)
share of Common Stock of the Corporation issued and outstanding, by virtue of
this amendment to the Corporation's Third Amended and Restated Certificate of
Incorporation, shall be combined into one-third (1/3) of one (1) share of fully
paid and nonassessable Common Stock of the Corporation, subject to the treatment
of fractional shares interests described below. Following the effectiveness of
this amendment, the Corporation will evidence the reverse stock split effected
hereby pursuant to procedures adopted by the Corporation.
No fractional shares of Common Stock of the Corporation shall be issued. No
stockholder of the Corporation shall transfer any fractional shares of Common
Stock of the Corporation. The Corporation shall not recognize on its stock
record books any purported transfer of any fractional share of Common Stock of
the Corporation.
A holder of Common Stock at the Effective Time who would otherwise be entitled
to a fraction of a share shall, in lieu thereof, be entitled to receive a cash
payment in an amount equal to the fraction to which the stockholder would
otherwise be entitled multiplied by the average of the closing prices of the
Common Stock, as reported in The Wall Street Journal, on the thirty (30) trading
days preceding the date that is five (5) trading days before the Effective Time
(as adjusted for the reverse stock split effected hereby) (or if such prices are
not available, the average of the last bid and asked prices of the Common Stock
on such days (as adjusted for the reverse stock split effected herby) or other
price determined by the Board of Directors)."
IN WITNESS WHEREOF, this Certificate of Amendment of the Third Amended
and Restated Certificate of Incorporation, which amends certain provisions of
the Third Amended and Restated Certificate of Incorporation of the Corporation,
having been duly adopted in accordance with Section 242 of the Delaware General
Corporation Law, has been duly executed by its Secretary, this
__________________ day of __________________________, 2002.
_________________________________
Stephen P. Pezzola, Secretary
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
VYYO INC.
FOR THE 2002 ANNUAL MEETING OF THE STOCKHOLDERS
MAY 7, 2002
The undersigned stockholder of VYYO INC., a Delaware corporation,
hereby acknowledges receipt of the Notice of Annual Meeting of Stockholders and
Proxy Statement, each dated March 29, 2002, and the 2001 Annual Report to
Stockholders and hereby appoints Michael P. Corwin, Stephen P. Pezzola, and
Bruce P. Johnson, or any of them, proxies, with full power to each of
substitution, on behalf and in the name of the undersigned, to represent the
undersigned at the 2002 Annual Meeting of Stockholders of VYYO INC. to be held
on May 7, 2002 at 10:00 a.m., local time, at VYYO INC.'s principal executive
office located at 20400 Stevens Creek Boulevard, Suite 800, Cupertino,
California 95014, and at any adjournment or adjournments thereof, and to vote
all shares of common stock, which the undersigned would be entitled to vote if
then and there personally present, on the matters set forth below.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED FOR THE ELECTION OF CLASS II DIRECTORS, FOR THE
PROPOSAL TO AUTHORIZE THE BOARD OF DIRECTORS TO EFFECT A ONE-FOR-THREE REVERSE
SPLIT OF THE OUTSTANDING COMMON STOCK, FOR THE RATIFICATION OF THE APPOINTMENT
OF KESSELMAN & KESSELMAN CPAs (ISR), A MEMBER OF PRICEWATERHOUSECOOPERS
INTERNATIONAL LIMITED, AS INDEPENDENT AUDITORS, AND AS SAID PROXIES DEEM
ADVISABLE ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
SEE REVERSE SIDE SEE REVERSE SIDE
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
X Please mark votes as in this example.
- ---
1. ELECTION OF CLASS II DIRECTORS:
Nominees: (01) Lewis S. Broad
(02) Neill H. Brownstein
FOR ALL NOMINEES _____ _____ WITHHELD FROM ALL NOMINEES
___________________________________
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided above.)
2. PROPOSAL TO AUTHORIZE THE BOARD OF DIRECTORS TO AMEND THE VYYO INC. THIRD
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION TO EFFECT A ONE-FOR-THREE
REVERSE SPLIT OF THE OUTSTANDING SHARES OF COMMON STOCK, AT ANY TIME PRIOR TO
THE 2003 ANNUAL MEETING OF STOCKHOLDERS.
______FOR ______AGAINST ______ABSTAIN
3. RATIFICATION OF THE APPOINTMENT OF KESSELMAN & KESSELMAN CPAs
(ISR), A MEMBER OF PRICEWATERHOUSECOOPERS INTERNATIONAL LIMITED, AS
INDEPENDENT AUDITORS OF VYYO INC. FOR FISCAL YEAR 2002.
______FOR ______AGAINST ______ABSTAIN
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT _________
MARK HERE IF YOU PLAN TO ATTEND THE MEETING _________
This Proxy should be marked, dated and
signed by the stockholder(s) exactly as his
or her name appears hereon, and returned
promptly in the enclosed envelope. Persons
signing in a fiduciary capacity should so
indicate. If shares are held by joint tenants
or as community property, both should sign.
Dated:_______________________________
____________________________________
Signature
_____________________________________
Signature