Form DEF 14A
Eagle Broadband, Inc. (EAG)
Filed: August 8, 2005 (period: August 31, 2005)
Official notification to shareholders of matters to
be brought to a vote (Proxy)
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X] Filed by a Party other than the Registrant
[_] Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
[X] Definitive Proxy Statement Commission Only (as permitted
[_] Definitive Additional Materials by Rule 14a-6(e)(2))
[_] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
EAGLE BROADBAND, INC.
(Name of Registrant as Specified in Its Charter)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i) (1) 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:
EAGLE BROADBAND
101 COURAGEOUS DRIVE
LEAGUE CITY, TEXAS 77573
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August 8, 2005
TO OUR SHAREHOLDERS:
You are cordially invited to attend the Annual Meeting of Shareholders
of Eagle Broadband, Inc., which will be held on September 20, 2005, beginning at
1:30 p.m., Central Time, at the South Shore Harbour Resort & Conference Center,
2500 South Shore Blvd., League City, Texas 77573.
Information about the Annual Meeting, including matters on which
shareholders will act, may be found in the notice of annual meeting and proxy
statement accompanying this letter.
Your Eagle Broadband stockholder vote is very important. Each share of
Eagle Broadband stock that you own represents one vote. If you do not vote your
shares, you will not have a say in the important issues to be voted on at the
Annual Meeting. Whether or not you plan to attend the meeting, please vote as
soon as possible.
YOUR VOTE IS IMPORTANT.
IN ORDER TO ASSURE YOUR REPRESENTATION AT THE MEETING AND ENSURE THAT YOUR VOTE
IS RECORDED PROMPTLY, YOU ARE REQUESTED TO COMPLETE, SIGN, AND DATE THE
ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE AS SOON AS POSSIBLE, EVEN
IF YOU PLAN TO ATTEND THE MEETING.
BECAUSE THE APPROVAL OF THE 2005 EMPLOYEE STOCK OPTION PLAN IS
CONSIDERED A "NON-ROUTINE" MATTER, THE BANK OR BROKERAGE FIRM HOLDING YOUR
SHARES CAN NOT VOTE ON YOUR BEHALF UNLESS IT RECEIVES SPECIFIC VOTING
INSTRUCTIONS FROM YOU. THEREFORE, TO ENSURE THAT YOUR VOTE IS PROPERLY RECORDED,
IT IS VERY IMPORTANT THAT YOU COMPLETE, SIGN, DATE AND MAIL IN YOUR PROXY AT THE
EARLIEST POSSIBLE TIME.
This meeting is for Eagle Broadband shareholders. Only shareholders of
record or their designated proxy are entitled to attend the meeting. All
shareholders who attend the meeting will be required to show proof of ownership
of Eagle Broadband stock such as a brokerage account statement and valid photo
identification such as a current driver's license or passport.
If you should have any questions concerning the Annual Meeting or the
matters to be voted on, please contact Eagle Broadband Investor Relations at
(281) 538-6000 or send an email to INVESTORS@EAGLEBROADBAND.COM.
Sincerely yours,
/S/ C.J. REINHARTSEN
C. J. Reinhartsen
- --------------------
Chairman
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EAGLE BROADBAND, INC.
101 COURAGEOUS DRIVE, HOUSTON, TEXAS 77573
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
-----------------------------------------
The Annual Meeting of Shareholders of Eagle Broadband, Inc. will be
held at the South Shore Harbour Resort & Conference Center, 2500 South Shore
Blvd., League City, Texas 77573, at 1:30 p.m., Central Time, September 20, 2005,
for the following purposes:
1) To elect seven directors to the Board of Directors to serve until our
next annual meeting of shareholders, or until their respective
successors have been elected or appointed.
2) To approve our 2005 Employee Stock Option Plan.
3) To ratify the appointment of Lopez, Blevins, Bork & Associates, LLP, as
our auditors for the fiscal year ending August 31, 2005.
4) To act upon such other matters, if any, as may properly come before the
meeting or any adjournments or postponements thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
All Eagle Broadband shareholders are invited to attend the Annual
Meeting. Only shareholders of record at the close of business on July 26, 2005,
will be entitled to notice of and to vote at this meeting or any adjournments
that may take place.
The Board of Directors has determined that the adoption of the 2005
Employee Stock Option Plan is advisable and in the best interest of Eagle
Broadband and its stockholders. We have established the stock option plan in
order to attract and retain the best qualified employees for the Company. The
Board recommends you vote to approve the adoption of the 2005 Employee Stock
Option Plan adopted by the Board. As a stockholder, you cast one vote for each
share you own.
YOUR VOTE IS IMPORTANT.
IN ORDER TO ASSURE YOUR REPRESENTATION AT THE MEETING AND ENSURE THAT YOUR VOTE
IS RECORDED PROMPTLY, YOU ARE REQUESTED TO COMPLETE, SIGN, AND DATE THE
ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE AS SOON AS POSSIBLE, EVEN
IF YOU PLAN TO ATTEND THE MEETING.
Your stock will be voted in accordance with your instructions. Any
shareholder attending the meeting may vote in person even if he or she has
previously returned a proxy. Please note, however, that if your shares of record
are held by a broker, bank or other nominee and you wish to attend and vote in
person at the meeting, you must obtain a proxy issued in your name from the
record holder.
By Order of the Board of Directors,
C. J. REINHARTSEN
- ---------------------
CHAIRMAN
Dated: August 8, 2005
TABLE OF CONTENTS
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Information Concerning Solicitation and Voting .............................. 1
General ............................................................ 1
Availability of Annual Report and Form 10-K ........................ 1
Revocability of Proxies ............................................ 1
Quorum; Abstentions and Broker Non-Votes ........................... 1
Votes Required to Adopt Proposals .................................. 2
Solicitation ....................................................... 2
Shareholder Proposals .............................................. 2
Dissenter's Rights ................................................. 2
Proposal 1 - Election of Directors .......................................... 3
Proposal 2 - 2005 Employee Stock Option Plan ................................ 7
Proposal 3 - Ratify the Appointment of Lopez, Blevins, Bork & Associates, LLP 12
Security Ownership of Certain Beneficial Owners and Management .............. 13
Executive Officers .......................................................... 14
Related Party Transactions .................................................. 17
Audit Committee Report ...................................................... 17
Report of the Compensation Committee ........................................ 18
Stock Price Performance Graph ............................................... 19
Other Matters ............................................................... 19
Appendix A - Audit Committee Charter ........................................ A-1
Appendix B - 2005 Employee Stock Option Plan ................................ B-1
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EAGLE BROADBAND, INC.
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 20, 2005
================================================================================
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Company's Board of
Directors for use at the Annual Meeting of Shareholders to be held on September
20, 2005, at 1:30 p.m., Central Time (the "Annual Meeting"), or at any
adjournment or postponement of this meeting, for the purposes set forth in this
Proxy Statement and in the accompanying Notice of Annual Meeting of
Shareholders. The Annual Meeting will be held at South Shore Harbour Resort &
Conference Center, 2500 South Shore Blvd., League City, Texas 77573. We intend
to mail this Proxy Statement and accompanying proxy card to shareholders on or
about August 8, 2005. The Board of Directors of Eagle Broadband, Inc., a Texas
corporation, prepared this proxy statement for the purpose of soliciting proxies
for our Annual Meeting of Shareholders. When you see the term "we," "our," the
"Company" or "Eagle," it refers to Eagle Broadband, Inc., and its subsidiaries.
AVAILABILITY OF ANNUAL REPORT AND FORM 10-K
Accompanying this Proxy Statement is the Company's Annual Report on
Form 10-K filed with the Securities and Exchange Commission. The Company makes
available, free of charge through its website (WWW.EAGLEBROADBAND.COM), its
annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on
Form 8-K and amendments to those reports filed or furnished pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act"), as
soon as reasonably practicable after such documents are electronically filed
with or furnished to the Securities and Exchange Commission. These reports can
be found in the "Investor Relations" section of the Company's website under "SEC
Filings". The Company will provide to any shareholder without charge, upon the
written request of that shareholder, a copy of the Company's Annual Report on
Form 10-K (without exhibits), including financial statements and the financial
statement schedules, for the fiscal year ended August 31, 2004. Requests should
be addressed to Eagle Broadband Investor Relations.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before its use by delivering to the Company's
Secretary, at the address of the Company's executive offices noted above,
written notice of revocation or a duly executed proxy bearing a later date or by
attending the Annual Meeting and voting in person. Attendance at the Annual
Meeting will not, by itself, revoke a proxy. Please note, however, that if your
shares of record are held by a broker, bank or other nominee and you wish to
attend and vote in person at the Annual Meeting, you must obtain a proxy issued
in your name from the record holder.
QUORUM; ABSTENTIONS AND BROKER NON-VOTES
Our common stock is the only type of security entitled to vote at the
Annual Meeting. Only shareholders of record at the close of business on July 26,
2005 (the "Record Date") will be entitled to notice of and to vote at the Annual
Meeting. At the close of business on the Record Date, there were 270,154,927
shares of common stock outstanding and entitled to vote. Each holder of record
of shares of common stock on that date will be entitled to one vote for each
share held on all matters to be voted upon at the Annual Meeting. Shares of
common stock may not be voted cumulatively.
Proxies properly executed, duly returned to the Company and not revoked
will be voted in accordance with the specifications made. Where no
specifications are given, such proxies will be voted "FOR" each of the seven
nominees, "FOR" the approval of the 2005 Employee Stock Option Plan, and "FOR"
the ratification of Lopez, Blevins, Bork & Associates, LLP as our auditors. It
is not expected that any matters other than those referred to in this Proxy
Statement will be brought before the Annual Meeting. If, however, any matter not
described in this Proxy Statement is properly presented for action at the Annual
Meeting, the persons named as proxies in the enclosed form of proxy will have
discretionary authority to vote according to their own discretion.
The required quorum for the transaction of business at the Annual
Meeting is a majority of the issued and outstanding shares of the Company's
common stock entitled to vote at the Annual Meeting, whether present in person
or represented by proxy. The bylaws of the Company provide that unless otherwise
provided by law or by the Articles of Incorporation, all matters other than the
election of directors shall be decided by the affirmative vote of a majority of
the outstanding shares of stock represented in person or by proxy at the Annual
Meeting. Shares of common stock represented by a properly signed and returned
proxy will be treated as present at the Annual Meeting for purposes of
determining a quorum, regardless of whether the proxy is marked as casting a
vote or abstaining. Shares of stock represented by "broker non-votes" (i.e.,
shares of stock held in record name by brokers or nominees as to which (i)
instructions have not been received from the beneficial owners or persons
entitled to vote; (ii) the broker or nominee does not have discretionary voting
power under applicable rules or the instrument under which it serves in such
capacity; or (iii) the record holder has indicated on the proxy card or has
executed a proxy and otherwise notified the Company that it does not have
authority to vote such shares on that matter) will be treated as present for
purposes of determining a quorum.
VOTES REQUIRED TO ADOPT PROPOSALS
PROPOSAL 1. Directors are elected by a plurality of the affirmative
votes cast by those shares present in person, or represented by proxy, and
entitled to vote at the Annual Meeting. This means seven nominees for directors
receiving the highest number of affirmative votes will be elected. Abstentions
and broker non-votes will not affect the election of a candidate who receives a
plurality of votes. Shareholders may not cumulate votes in the election of
directors.
PROPOSAL 2. Approval of the 2005 Employee Stock Option Plan requires
the approval of a majority of the outstanding shares of stock represented in
person or proxy at the Annual Meeting. Abstentions for Proposal Two will have
the same effect as votes against the proposal. Broker non-votes for Proposal
Two, however, will be deemed shares not entitled to vote on the proposal, will
not be counted as votes for or against the proposal, and will not be included in
calculating the number of votes necessary for approval of the proposal.
PROPOSAL 3. Ratification of Lopez, Blevins, Bork & Associates, LLP as
our independent public auditors for the fiscal year ending August 31, 2005,
requires the affirmative vote of a majority of those shares present in person,
or represented by proxy, and cast either affirmatively or negatively at the
Annual Meeting. Abstentions and broker non-votes will not be counted as having
been voted on the proposal and will have no effect on the proposal.
SOLICITATION
The Company will bear the costs of soliciting proxies. In addition to
soliciting shareholders by mail and through its regular employees, the Company
will request that banks and brokers and other persons representing beneficial
owners of the shares forward the proxy solicitation material to such beneficial
owners and the Company may reimburse these parties for their reasonable
out-of-pocket costs. The Company has retained The Altman Group, Inc. to aid in
the solicitation of proxies for a fee of $6,000 and the reimbursement of
out-of-pocket expenses. The Company may also use the services of its officers,
directors & others to solicit proxies, personally or by telephone, facsimile or
electronic mail, without additional compensation.
SHAREHOLDER PROPOSALS
Proposals of shareholders that are intended to be presented at our 2005
Annual Meeting of Shareholders in the proxy materials for such meeting must
comply with the requirements of SEC Rule 14a-8 and must be received by our
Secretary within a reasonable time in order to be included in the Proxy
Statement and proxy materials relating to our 2005 Annual Meeting of
Shareholders. Moreover, with respect to any proposal by a shareholder not
seeking to have the proposal included in the proxy statement but seeking to have
the proposal considered at our next annual meeting, such shareholder must
provide written notice of such proposal to our Secretary at our principal
executive offices not less than 120 calendar days before the date that the 2006
Annual Meeting proxy statement is mailed to shareholders. With respect to a
proposal not to be included in the proxy statement, in the event notice is not
timely given, and the proposal is permitted at the annual meeting, the persons
who are appointed as proxies may exercise their discretionary voting authority
with respect to such proposals, if the proposal is considered at our next annual
meeting, even if the shareholders have not been advised of the proposal. In
addition, shareholders must comply with all the rules and regulations of the
Securities and Exchange Commission then in effect and the procedural
requirements of our Bylaws.
DISSENTER'S RIGHTS
Neither Texas law nor our articles of incorporation or bylaws provide
our shareholders with dissenters' rights in connection with the election of
directors, establishment of a stock option plan or ratification of the
solicitation of Lopez, Blevins, Bork & Associates, LLP as our auditors.
2
===============================================================================
PROPOSAL 1 - ELECTION OF DIRECTORS
===============================================================================
The Board of Directors currently consists of six members. Christopher
Futer, currently a director, will not stand for re-election. The Nominating
Committee of the Board of Directors has nominated for re-election Dr. Glenn
Goerke, C.J. Reinhartsen, Lorne Persons, Jr., James Yarbrough, and Dr. H. Dean
Cubley and for election David Micek and Robert Bach. Each of the nominees
currently sits on the Board, except for Mr. Bach (who will be an independent
director) and Mr. Micek (who is the Company's president and chief executive
officer). The shares represented by the enclosed proxy will be voted for the
election as directors, the seven nominees named below to serve until the 2006
Annual Meeting or until their successors have been duly elected and qualified.
The seven persons receiving the highest number of "for" votes represented by
shares of Company common stock present in person or represented by proxy and
entitled to be voted at the Annual Meeting will be elected. All of the nominees
have indicated to the Company that they will be available to serve as directors.
If any of the nominees becomes unavailable for any reason or if a vacancy should
occur before the election (which events are not anticipated), the shares
represented by the enclosed proxy may be voted for such other person or persons
recommended by the Board of Directors as may be determined by the holders of the
proxy. There are no family relationships among our executive officers and
directors.
DIRECTOR NOMINEES
The Directors have nominated the following persons.
NOMINEE AGE CURRENT DIRECTOR
Robert Bach 56 No
Dr. H. Dean Cubley 63 Yes
Dr. Glenn Goerke 73 Yes
David Micek 51 No
Lorne Persons, Jr. 58 Yes
C. J. Reinhartsen 62 Yes
James Yarbrough 49 Yes
MR. ROBERT BACH. Robert L. Bach is an attorney with the Minneapolis,
Minnesota law firm of Felhaber, Larson, Fenlon & Vogt, P.A., where he has
practiced for 28 years. Mr. Bach is a civil trial specialist certified by the
Minnesota State Bar Association. He received his J.D. from the University of
Minnesota Law School and his B.A. from the University of Iowa.
DR. H. DEAN CUBLEY. Dr. Cubley has served as a director since March
1996, was chief executive officer from March 1996 to October 2003 and president
from March 1996 until September 2001. Dr. Cubley has served as chairman of ERF
Wireless, Inc. since 2004. From 1965 to 1984, Dr. Cubley worked for the NASA
Manned Spacecraft Center in the Electromagnetic Systems Branch of the
Engineering and Development Directorate. Dr. Cubley holds a Ph.D. in electrical
engineering from the University of Houston and B. S. and M. S. in electrical
engineering from the University of Texas.
DR. GLENN GOERKE. Dr. Goerke has served as a director since March 2000.
Dr. Goerke is president emeritus of the University of Houston and currently
serves as a director of The Institute for the Future of Higher Education. He has
served as vice president of Edusafe Systems, Inc. since 1996. From 1995 to 1997,
Dr. Goerke served as president of the University of Houston. From 1991 to 1995,
he served as president of the University of Houston - Clear Lake. Dr. Goerke
holds a Ph.D. in Adult and Higher Education from Michigan State University and
M.A. and B.A. degrees from Eastern Michigan University.
DAVID MICEK. Mr. Micek served as Chief Operating Officer from November
2004 to April 2005 and has served as President and Chief Executive Officer since
April 2005. From 2002 to 2003, Mr. Micek was president at Internet search
company AltaVista Software. From 2000 to 2001, Mr. Micek was president and CEO
of wireless networking company Zeus Wireless. From 1999 to 2000, he was
president and CEO of broadband video applications company iKnowledge. From 1995
to 1997, Mr. Micek was vice president and general manager at Texas Instruments
Software. From 1985 to 1995, he held various senior marketing, product
management and general management positions at enterprise and applications
software companies Neuron Data, Borland International and Ashton-Tate. He holds
an MBA from the University of Southern California.
LORNE PERSONS, JR. Mr. Persons has served as Director since March 2003.
He has been a sales executive in the Insurance Industry since 1975. Since 1995
Mr. Persons has served as President of National Insurance Marketing Corporation,
Aurora, Colorado currently contracted to National States Insurance Company as a
regional sales and recruiting director in a five-state area.
3
C. J. (JIM) REINHARTSEN. Mr. Reinhartsen has served as Director since
November 2002 and Chairman since April 2005. Since 1993, Mr. Reinhartsen has
served as President of the Clear Lake Area Economic Development Foundation
(CLAEDF) which in 2003 he renamed the Bay Area Houston Economic Partnership.
From 1988 to 1993, when he retired with 30 years service at Grumman, Mr.
Reinhartsen was Vice President and General Manager for the Grumman Houston
Corporation headquartered in Houston, Texas.
JUDGE JAMES YARBROUGH. Judge Yarbrough has served as a Director of
Eagle since October 2004. Since 1995, Judge Yarbrough has served as Chief
Executive Officer and County Judge of Galveston County. From 1989 to 1994, Judge
Yarbrough was the founder and President of James D. Yarbrough & Company. He also
serves as a Director at American National Insurance Company, where he is
Chairman of its Compensation Committee, and a member and financial expert for
its Audit Committee.
BOARD MEETINGS AND COMMITTEES
The Board held seven meetings during the fiscal year ended August 31,
2004. Each Board member with the exception of Mr. Yarbrough, who did not become
a director until October, 2004, attended at least 75% or more of the Board
meetings held during the fiscal year ended August 31, 2004. As of the date of
the Proxy Statement, the Board has three standing committees: (1) the
Compensation Committee; (2) the Audit Committee; and (3) the Nominating
Committee.
DIRECTOR INDEPENDENCE
The Board of Directors has determined that each of Messrs. Goerke,
Persons, Reinhartsen and Yarbrough are independent directors as defined in the
listing standards of the American Stock Exchange. As part of its analysis, the
Board of Directors determined that none of these independent directors has a
direct or indirect material relationship with the Company that would interfere
with the exercise of independent judgment.
COMPENSATION COMMITTEE
The Compensation Committee of the Board reviews and approves salaries
and incentive compensation for the Company's executive officers. The
Compensation Committee consists of four, non-employee directors: Messrs. Goerke,
Persons, Reinhartsen (Compensation Committee Chair) and Yarbrough. Messrs.
Goerke, Persons, Reinhartsen and Yarbrough are independent as defined in the
listing standards of the American Stock Exchange. The Compensation Committee
held seven meetings in the fiscal year ended August 31, 2004. Each director,
with the exception of Mr. Yarbrough, who did not become a director and
Compensation Committee member until October, 2004, attended at least 75% or more
of the Compensation Committee meetings held during the fiscal year ended August
31, 2004. The Report of the Compensation Committee is included in this Proxy
Statement. In addition, the Board has adopted a written charter for the
Compensation Committee, which is available on the Company's website at
WWW.EAGLEBROADBAND.COM.
AUDIT COMMITTEE
The Audit Committee of the Board consists of three non-employee
directors: Messrs. Goerke, Reinhartsen and Yarbrough (Audit Committee Chair).
Each of Messrs. Goerke, Reinhartsen and Yarbrough are independent as defined in
the listing standards of the American Stock Exchange. The Audit Committee
engages the Company's independent auditors, reviews the Company's financial
controls, evaluates the scope of the annual audit, reviews audit results,
consults with management and the Company's independent auditors prior to the
presentation of financial statements to shareholders and, as appropriate,
initiates inquiries into aspects of the Company's internal accounting controls
and financial affairs. The Audit Committee met seven times in the fiscal year
ended August 31, 2004. Each director, with the exception of Mr. Yarbrough, who
did not become a director and audit committee member until October, 2004,
attended at least 75% or more of the Audit Committee meetings held during the
fiscal year ended August 31, 2004.
The Board has determined that Mr. Yarbrough qualifies as an "audit
committee financial expert" as defined by Item 401(h) of Regulation S-K of the
Exchange Act. The Report of the Audit Committee is included in this Proxy
Statement. In addition, the Board has adopted a written charter for the Audit
Committee, which is attached to this Proxy Statement as Appendix A and is also
available on the Company's website at WWW.EAGLEBROADBAND.COM.
4
NOMINATING COMMITTEE
The Nominating Committee is a new standing committee of the Board
effective as of October, 2004 created to review and approve candidates for
election and to fill vacancies on the Board, including the director nominees
being voted upon at the Annual Meeting. The Nominating Committee consists of
four non-employee directors: Messrs. Goerke, Persons (Nominating Committee
Chair), Reinhartsen and Yarbrough. Each of Messrs. Goerke, Persons, Reinhartsen
and Yarbrough are independent as defined in the listing standards of the
American Stock Exchange. The Nominating Committee met seven times in the fiscal
year ended August 31, 2004. Each director, with the exception of Mr. Yarbrough,
who did not become a director and nominating committee member until October,
2004, attended at least 75% or more of the Nominating Committee meetings held
during the fiscal year ended August 31, 2004. The Board has adopted a written
charter for the Nominating Committee, which is available on the Company's
website at WWW.EAGLEBROADBAND.COM.
CONSIDERATION OF DIRECTOR NOMINEES
DIRECTOR QUALIFICATIONS
In discharging its responsibilities to nominate candidates for election
to the Board, the Nominating Committee has not specified any minimum
qualifications for serving on the Board. However, the Nominating Committee
endeavors to evaluate, propose and approve candidates with business experience
and personal skills in finance, marketing, financial reporting and other areas
that may be expected to contribute to an effective Board. The Nominating
Committee seeks to assure that the Board is composed of individuals who have
experience relevant to the needs of the Company and who have the highest
professional and personal ethics, consistent with the Company's values and
standards. Candidates should be committed to enhancing stockholder value and
should have sufficient time to carry out their duties and to provide insight and
practical wisdom based on experience. Each director must represent the interests
of all shareholders.
IDENTIFYING AND EVALUATING NOMINEES FOR DIRECTORS
The Nominating Committee will utilize a variety of methods for
identifying and evaluating nominees for director. Candidates may come to the
attention of the Nominating Committee through current Board members,
professional search firms, shareholders or other persons. These candidates will
be evaluated at regular or special meetings of the Nominating Committee, and may
be considered at any point during the year. The Nominating Committee will
consider properly submitted shareholder nominations for candidates for the
Board. Following verification of the shareholder status of persons proposing
candidates, recommendations will be aggregated and considered by the Nominating
Committee. If any materials are provided by a shareholder in connection with the
nomination of a director candidate, such materials will be forwarded to the
Nominating Committee. The Nominating Committee will also review materials
provided by professional search firms or other parties in connection with a
nominee who is not proposed by a shareholder.
COMMUNICATIONS WITH THE BOARD
The Board has adopted the following policy for shareholders who wish to
communicate any concern directly with the Board. Shareholders may mail or
deliver their communication to the Company's principal executive offices,
addressed as follows:
Addressee (*)
c/o Secretary
Eagle Broadband, Inc..
101 Courageous Drive
League City, Texas 77573
*Addressees: Board of Directors; Audit Committee of the Board of Directors;
Nominating Committee of the Board of Directors; Compensation Committee of the
Board of Directors; name of individual director.
Copies of written communications received at such address will be
forwarded to the addressee as soon as practicable.
5
ATTENDANCE AT ANNUAL MEETINGS
Members of the Board of Directors are encouraged to attend the
Company's Annual Meeting; however, attendance is not mandatory. All members of
the Board, except Mr. Yarbrough who was not a director at that time, attended
the last Annual Meeting.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of four, non-employee directors,
Messrs. Goerke, Persons, Reinhartsen (Compensation Committee Chair) and
Yarbrough. None of the members of the Compensation Committee has been or is an
officer or employee of the Company. None of the Company's executive officers
serves on the Board of Directors or compensation committee of a company that has
an executive officer that serves on the Company's Board or Compensation
Committee. No member of the Company's Board is an executive officer of a company
in which one of the Company's executive officers serves as a member of the Board
of Directors or Compensation Committee of that company.
COMPENSATION OF DIRECTORS
Directors receive $4,500 for regular meeting whether attended in
person or via teleconference and $2,250 for special meeting where attended in
person or via teleconference meetings attended. Directors receive $1,000 for
each committee meeting attended, whether in person or via teleconference. The
secretary receives $1,000 for attending meetings of the Board of Directors.
During the fiscal year ended August 31, 2004 and ending August 31, 2005,
directors received a five year option to purchase 8,333 shares of common stock
at an exercise price of $0.78 per share for each of the six, regularly scheduled
board meetings per year that they attend.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our directors, executive
officers, and the persons who beneficially own more than ten percent of our
common stock, to file reports of ownership and changes in ownership with the
Securities and Exchange Commission. Copies of all filed reports are required to
be furnished to us. Based solely on the reports received by us and on the
representations of the reporting persons, we believe that these persons have
complied with all applicable filing requirements during the fiscal year ended
August 31, 2004, except for a late Form 3 filing by Mr. Shapiro and a late Form
4 and/or Form 5 from Messrs. Clifford, Cubley, Futer, Goerke, Persons,
Reinhartsen, Royall and Weisman for the issuance and exercise of options. Each
late Form 3, Form 4 and/or Form 5 has been or will be subsequently filed.
BASED UPON THE RECOMMENDATION OF THE NOMINATING COMMITTEE, THE BOARD OF
DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE ELECTION TO THE BOARD
OF EACH OF THE ABOVE NOMINEES. A NOMINEE MUST RECEIVE A PLURAILITY OF THE VOTE
OF THE HOLDERS OF THE OUTSTANDING SHARES OF COMMON STOCK PRESENT OR REPRESTED BY
PROXY AT THE ANNUAL MEETING.
6
===============================================================================
PROPOSAL 2 - 2005 EMPLOYEE STOCK OPTION PLAN
===============================================================================
BACKGROUND INFORMATION
The Board of Directors has adopted, subject to stockholder approval,
the Company's 2005 Employee Stock Option Plan (the "Plan"). The purpose of the
Plan is to promote the interests of the Company and its stockholders and give it
a competitive advantage by: (i) attracting and retaining employees of
outstanding ability; (ii) motivating employees by means of performance-related
incentives to achieve longer-range performance goals; and (iii) enabling
employees to participate in the long-term growth and financial success of the
Company by acquiring an interest in the Company. The following summary is
qualified in its entirety by reference to the full text of the Plan, which is
attached to this Proxy Statement as Appendix B.
GENERAL ADMINISTRATION OF THE PLAN
The Plan will be administered by the Compensation Committee of the
Board of Directors (the "Committee"). The Committee will be authorized to grant
to employees of the Company awards in the form of stock options, performance
shares, and restricted stock. In addition, the Committee will have the authority
to grant other stock-based awards in the form of stock appreciation rights,
restricted stock units, and stock unit awards. The Plan will become effective
upon approval by the stockholders and will expire ten years from such effective
date unless terminated earlier or extended by the Board of Directors.
Each member of the Committee must be a "non-employee director" within
the meaning of Rule 16b-3 promulgated by the Securities and Exchange Commission
under the Exchange Act, an "independent director" as defined by American Stock
Exchange rules and an "outside director" within the meaning of the Code. The
Committee will select persons to receive grants from among the eligible
participants, determine the types of grants and number of shares to be awarded
to grantees, and set the terms, conditions, and provisions of the grants
consistent with the Plan. The Committee has authority to amend awards and to
accelerate vesting and/or exercisability of awards. The Committee may also
establish rules for administration of the Plan.
ELIGIBILITY
The Committee will select grantees from among employees, officers,
directors and consultants of the Company and its subsidiaries. The eligible
participants will be those who, in the opinion of the Committee, have the
capacity for contributing in a substantial measure to the successful performance
of the Company. All awards and the terms of any award to eligible participants
who are members of the Committee must also be approved by the Board of
Directors.
SHARES SUBJECT TO THE PLAN
Subject to adjustment as described below, a maximum of 30,000,000
shares of Company common stock may be issued under the Plan. Any shares of
Company common stock subject to awards that are forfeited or withheld in payment
of any exercise price or taxes will again be available for grant. Also, if an
award terminates without shares of Company common stock being issued, then the
shares that were subject to the award will again be available for grant. The
shares may be authorized and unissued shares or treasury shares. In the event of
a stock split, stock dividend, spin-off, or other relevant change affecting the
Company's common stock, the Committee shall make appropriate adjustments to the
number of shares available for grants and to the number of shares and price
under outstanding grants made before the event.
TYPES OF AWARDS UNDER THE PLAN
STOCK OPTIONS
The Committee may grant awards in the form of options to purchase
shares of the Company's common stock. With regard to each such option, the
Committee will determine the number of shares subject to the option, the manner
and time of the exercise of the option, and the exercise price per share of
stock subject to the option; provided, however, that the exercise price of any
"Incentive Stock Option" (as defined in the Plan) may not be less than 100% of
the fair market value of the shares of Company common stock on the date the
option is granted. The exercise price may, at the discretion of the Committee,
be paid by a participant in cash, shares of Company common stock or a
combination thereof. The period of any option shall be determined by the
Committee, but no Incentive Stock Option may be exercised later than 10 years
after the date of grant. The aggregate fair market value, determined at the date
of grant of the Incentive Stock Option, of Company common stock for which an
Incentive Stock Option is exercisable for the first time during any calendar
year as to any participant shall not exceed the maximum limitation as provided
in Section 422 of the Code. The effect of a grantee's termination of employment
by reason of death, retirement, disability, or otherwise will be specified in
the option agreement evidencing the grant of the option.
7
STOCK APPRECIATION RIGHTS
The Plan also authorizes the Committee to grant stock appreciation
rights ("SARs"). Upon exercising a SAR, the holder receives for each share with
respect to which the SAR is exercised, an amount equal to the difference between
the exercise price (which may not be less than the fair market value of such
share on the date of grant unless otherwise determined by the Committee) and the
fair market value of the Company common stock on the date of exercise. At the
Committee's discretion, payment of such amount may be made in cash, shares of
Company common stock, or a combination thereof. Each SAR granted will be
evidenced by an agreement specifying the terms and conditions of the award,
including the effect of termination of employment (by reason of death,
disability, retirement or otherwise) on the exercisability of the SAR. No SAR
may have a term of greater than 10 years.
PERFORMANCE SHARES
The Plan permits the Committee to grant awards of performance shares to
eligible employees from time to time. These awards are contingent upon the
achievement of certain performance goals established by the Committee. The
length of time over which performance will be measured, the performance goals,
and the criteria to be used in determining whether and to what degree the goals
have been attained will be determined by the Committee. The Committee will also
determine the effect of termination of employment of a grantee (by reason of
death, retirement, disability or otherwise) during the performance period.
RESTRICTED STOCK AND RESTRICTED STOCK UNITS
Under the Plan, the Committee may award restricted shares of the
Company's common stock and restricted stock units to eligible employees from
time to time and subject to certain restrictions as determined by the Committee.
The nature and extent of restrictions on such shares and units, the duration of
such restrictions, and any circumstance which could cause the forfeiture of such
shares or units shall be determined by the Committee. The Committee will also
determine the effect of the termination of employment of a recipient of
restricted stock or restricted stock units (by reason of retirement, disability,
death or otherwise) prior to the lapse of any applicable restrictions.
OTHER STOCK BASED AWARDS
In addition, the Committee shall have authority under the Plan to grant
stock unit awards, which can be in the form of common stock or units, the value
of which is based, in whole or in part, on the value of the Company's common
stock. Such stock unit awards will be subject to such terms, restrictions,
conditions, vesting requirements and payment rules as the Committee may
determine. Stock unit awards may not be assigned, sold, transferred, pledged or
otherwise encumbered prior to the date shares are issued or, if later, the date
provided by the Committee at the time of grant of the stock unit award. Stock
unit awards may relate in whole or in part to certain performance criteria
established by the Committee at the time of grant. The Committee will also
determine the effect of termination of employment of a stock unit award
recipient (by reason of death, retirement, disability or otherwise) during any
applicable vesting period.
AWARDS TO COVERED EMPLOYEES
The Plan permits the Committee to grant qualified performance-based
awards ("Awards") to the chief executive officer and the four other highest
compensated officers of the Company (the "Covered Employees"). These Awards are
intended to qualify as performance-based pay under Section 162(m) of the Code to
enable the Company to deduct the compensation paid to the Covered Employees
attributable to these Awards. In general, Section 162(m) limits the deduction
for compensation paid to the Covered Employees to a dollar limitation
($1,000,000), but permits performance-based pay to be deductible without regard
to the dollar limitation.
IF THE AWARD IS A STOCK OPTION OR SAR GRANT WITH AN EXERCISE PRICE EQUAL TO THE
FAIR MARKET VALUE OF THE UNDERLYING SHARES OF COMMON STOCK ON THE DATE OF GRANT,
THE AWARD QUALIFIES AS PERFORMANCE-BASED PAY UNDER SECTION 162 (M).
If performance shares are granted, then the Committee will establish
performance goals based on the attainment of one or more of the following
measures with respect to the Company or an affiliate, or a subsidiary, division
or department of the Company or an affiliate for whom the Covered Employee
performs services: revenue growth; earnings before interest, taxes, depreciation
and amortization; earnings before interest and taxes; operating income; pre- or
after-tax income; earnings per share from continuing operations; other board or
committee approved performance measurements; earnings per share; cash flow; cash
flow per share; return on equity; return on invested capital; return on assets;
economic value added (or an equivalent metric); share price performance; total
stockholder return; improvement in or attainment of expense levels; or
improvement in or attainment of working capital levels. The preceding goals may
be based on attaining specified levels of Company performance under one or more
of the measures described above relative to the performance of other companies.
8
The Committee will establish the relevant goals at a time when the
outcome is substantially uncertain, and the Committee will certify whether the
goals have been attained. This process of establishing goals and confirming
their attainment is intended to comply with Section 162(m) and permit the Award
to qualify as deductible performance-based pay.
CHANGE IN CONTROL
In order to preserve the rights of participants in the event of a
Change in Control (as defined in the Plan), the Committee in its discretion may,
at the time a grant is made or at any time thereafter, take one or more of the
following actions: (i) provide for the acceleration of any time period relating
to the exercise of an award, (ii) provide for the purchase of the award upon the
participant's request for an amount of cash or other property that could have
been received upon the exercise or realization of the award had the award been
currently exercisable or payable, (iii) adjust the terms of the award in a
manner determined by the Committee to reflect the Change in Control, (iv) cause
the award to be assumed, or new rights substituted therefore, by another entity,
or (v) make such other provisions as the Committee may consider equitable and in
the best interests of the Company.
AMENDMENT AND TERMINATION OF THE PLAN
The Board of Directors may amend, alter, suspend, discontinue or
terminate the Plan or any portion thereof at any time, provided that no
amendment shall be made without stockholder approval which (a) is required to be
approved by stockholders to comply with applicable laws or rules, (b) increase
the number of shares of Company common stock reserved for issuance under the
Plan or (c) would cause the Company to be unable to grant Incentive Stock
Options.
FEDERAL INCOME TAX CONSEQUENCES
Under current U.S. federal tax law, the following are the U.S. federal
income tax consequences generally arising with respect to awards made under the
Plan.
EXERCISE OF INCENTIVE STOCK OPTION AND SUBSEQUENT SALE OF SHARES
A participant who is granted an Incentive Stock Option does not realize
taxable income at the time of the grant or at the time of exercise. If the
participant makes no disposition of shares acquired pursuant to the exercise of
an Incentive Stock Option before the later of two years from the date of grant
or one year from such date of exercise ("statutory holding period") any gain (or
loss) realized on such disposition will be recognized as a long-term capital
gain (or loss). Under such circumstances, the Company will not be entitled to
any deduction for federal income tax purposes.
However, if the participant disposes of the shares during the statutory
holding period, that will be considered a disqualifying disposition. Provided
the amount realized in the disqualifying disposition exceeds the exercise price,
the ordinary income a participant shall recognize in the year of a disqualifying
disposition will be the lesser of (i) the excess of the amount realized over the
exercise price, or (ii) the excess of the fair market value of the shares at the
time of the exercise over the exercise price; and the Company generally will be
entitled to a deduction for the amount of ordinary income recognized by such
participant. The ordinary income recognized by the participant is not considered
wages and the Company is not required to withhold, or pay employment taxes, on
such ordinary income. Finally, in addition to the ordinary income described
above, the participant shall recognize capital gain on the disqualifying
disposition in the amount, if any, by which the amount realized in the
disqualifying disposition exceeds the fair market value of the shares at the
time of the exercise, and shall be long-term or short-term capital gain
depending on the participant's post-exercise holding period for such shares.
Special tax rules apply when all or a portion of the exercise price of
an Incentive Stock Option is paid by delivery of already owned shares, but
generally it does not materially change the tax consequences described above.
However, the exercise of an Incentive Stock Option with shares which are, or
have been, subject to an Incentive Stock Option, before such shares have
satisfied the statutory holding period, generally will result in the
disqualifying disposition of the shares surrendered.
Notwithstanding the favorable tax treatment of Incentive Stock Options
for regular tax purposes, as described above, for alternative minimum tax
purposes, an Incentive Stock Option is generally treated in the same manner as a
nonqualified stock option. Accordingly, a participant must generally include as
alternative minimum taxable income for the year in which an Incentive Stock
Option is exercised, the excess of the fair market value of the shares acquired
on the date of exercise over the exercise price of such shares. However, to the
extent a participant disposes of such shares in the same calendar year as the
exercise, only an amount equal to the optionee's ordinary income for regular tax
purposes with respect to such disqualifying disposition will be recognized for
the optionee's calculation of alternative minimum taxable income in such
calendar year.
9
EXERCISE OF NONQUALIFIED STOCK OPTION AND SUBSEQUENT SALE OF SHARES
A participant who is granted a nonqualified stock option does not
realize taxable income at the time of the grant, but does recognize ordinary
income at the time of exercise in an amount equal to the excess of the fair
market value of the shares acquired on the date of exercise over the exercise
price of such shares; and the Company generally will be entitled to a deduction
for the amount of ordinary income recognized by such participant. The ordinary
income recognized by the participant is considered supplemental wages and the
Company is required to withhold, and the Company and the participant are
required to pay applicable employment taxes, on such ordinary income.
Upon the subsequent disposition of shares acquired through the exercise
of a nonqualified stock option, any gain (or loss) realized on such disposition
will be recognized as a long-term, or short-term, capital gain (or loss)
depending on the participant's post-exercise holding period for such shares.
LAPSE OF RESTRICTIONS ON RESTRICTED STOCK AND SUBSEQUENT SALE OF SHARES
A participant who has been granted an award of restricted stock or
restricted stock units does not realize taxable income at the time of the grant.
When the restrictions lapse, the participant will recognize ordinary income in
an amount equal to the excess of the fair market value of the shares at such
time over the amount, if any, paid for such shares; and the Company generally
will be entitled to a deduction for the amount of ordinary income recognized by
such participant. The ordinary income recognized by the participant is
considered supplemental wages and the Company is required to withhold, and the
Company and the participant are required to pay applicable employment taxes, on
such ordinary income. Upon the subsequent disposition of the formerly restricted
shares, any gain (or loss) realized on such disposition will be recognized as a
long-term, or short-term, capital gain (or loss) depending on the participant's
holding period for such shares after their restrictions lapse.
Under Section 83(b) of the Code, a participant who receives an award of
restricted stock may elect to recognize ordinary income for the taxable year in
which the restricted stock was received equal to the excess of the fair market
value of the restricted stock on the date of the grant, determined without
regard to the restrictions, over the amount (if any) paid for the restricted
stock. Any gain (or loss) recognized upon a subsequent disposition of the shares
will be capital gain (or loss) and will be long term or short term depending on
the post-grant holding period of such shares. If, after making the election, a
participant forfeits any shares of restricted stock, or sells restricted stock
at a price below its fair market value on the date of grant, such participant is
only entitled to a tax deduction with respect to the consideration (if any) paid
for the restricted stock, not the amount elected to be included as income at the
time of grant.
SARS, PERFORMANCE SHARES AND STOCK UNIT AWARDS
A participant who is granted a SAR does not realize taxable income at
the time of the grant, but does recognize ordinary income at the time of
exercise of the SAR in an amount equal to the excess of the fair market value of
the shares (on the date of exercise) with respect to which the SAR is exercised,
over the grant price of such shares; and the Company generally will be entitled
to a deduction for the amount of ordinary income recognized by the such
participant.
A participant who has been awarded a performance share or a stock unit
award does not realize taxable income at the time of the grant, but does
recognize ordinary income at the time the award is paid equal to the amount of
cash (if any) paid and the fair market value of shares (if any) delivered; and
the Company generally will be entitled to a deduction for the amount of ordinary
income recognized by the such participant.
The ordinary income recognized by a participant in connection with a
SAR, performance share or a stock unit award is considered supplemental wages
and the Company is required to withhold, and the Company and the participant are
required to pay applicable employment taxes, on such ordinary income.
To the extent, if any, that shares are delivered to a participant in
satisfaction of either the exercise of a SAR, or the payment of a performance
share or stock unit award, upon the subsequent disposition of such shares any
gain (or loss) realized will be recognized as a long-term, or short-term,
capital gain (or loss) depending on the participant's post- delivery holding
period for such shares.
10
NEW PLAN BENEFITS
The following table lists the number of shares of common stock that the
listed individuals will be entitled to purchase pursuant to their respective
employment agreements, upon shareholder approval. Additional grants and awards
under the Plan, which may be made to Company executive officers, directors and
other employees, are not presently determinable, as such grants and awards will
be made at the discretion of the Compensation Committee.
NUMBER OF SHARES OF
NAME AND POSITION COMMON STOCK DOLLAR VALUE (1)
----------------- ------------ ----------------
David Micek, President & Chief Executive Officer 9,200,000 (2) $641,000
Eric Blachno, Chief Financial Officer 700,000 (3) $ 44,000
Randall Shapiro, Vice President of Marketing 840,000 (4) --
Executive officers as a group 10,740,000 $685,000
Non-executive officer employees as a group 2,166,120 --
Non-executive directors as a group 504,166 --
TOTAL 13,410,286 $685,000
- ------------------
(1) Based on a price of $.22 per share, the last sales price of the common
stock on July 21, 2005, less the exercise price where applicable.
(2) Once vested, Mr. Micek's employment agreement grants him the right to
purchase (i) 500,000 shares of common stock at an exercise price of
$.61 per share (ii) 6,700,000 shares of common stock at an exercise
price of $.19 per share and (iii) 2,000,000 shares of restricted stock
upon the attainment of certain targeted goals. See "Executive Officers
- Executive Employment Agreements."
(3) Once vested, Mr. Blachno's employment agreement grants him the right to
purchase 500,000 shares of common stock at an exercise price of $.61
per share as well as the right to receive 200,000 shares of common
stock upon the attainment of certain targeted goals. See "Executive
Officers - Executive Employment Agreements."
(4) Once vested, Mr. Shapiro's employment agreement grants him the right to
purchase 1,010,000 shares of common stock at prices ranging from $.41
to $1.13.
BASED UPON THE RECOMMENDATION OF THE COMPENSATION COMMITTEE, THE BOARD HAS
APPROVED THE ADOPTION OF OUR 2005 EMPLOYEE STOCK OPTION PLAN AND RECOMMENDS A
VOTE "FOR" THE APPROVAL OF THE PROPOSED PLAN.
11
================================================================================
PROPOSAL 3 - RATIFY THE APPOINTMENT OF LOPEZ, BLEVINS, BORK & ASSOCIATES, LLP
================================================================================
In August 2004, we engaged Lopez, Blevins, Bork & Associates, LLP
("Lopez & Associates") as our independent auditors for the fiscal year ended
August 31, 2004. Mr. Lopez was previously the audit manager primarily
responsible for auditing our company when he was employed with Malone & Bailey,
P.C. ("Malone & Bailey"). Mr. Lopez resigned from Malone & Bailey in August 2004
and formed his new accounting firm, Lopez & Associates. Malone & Bailey audited
our financial statements for the fiscal year ended August 31, 2003.
The Audit Committee has selected Lopez & Associates as our independent
auditors for the fiscal year ended August 31, 2005, subject to shareholder
ratification. In the event this ratification is not approved by our
shareholders, the Audit Committee will review their future selection of
auditors.
We expect that a representative of Lopez & Associates will attend the
Annual Meeting, and the representative will have an opportunity to make a
statement if she or he so desires. The representative will also be available to
respond to appropriate questions from shareholders.
Malone & Bailey's report dated December 5, 2003, except as to Note 2 on
which date is July 27, 2004, on the Company's balance sheet as of August 31,
2003, and the related statement of operations, stockholders' equity, and cash
flows for the year ended, did not contain an adverse opinion or disclaimer of
opinion, or qualification or modification as to uncertainty, audit scope, or
accounting principles. In connection with the audit of the Company's financial
statements, and in the subsequent interim period, there were no disagreements
with Malone & Bailey on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope and procedures which, if not
resolved to the satisfaction of Malone & Bailey would have caused Malone &
Bailey to make reference to the matter in their report.
During the year ended August 31, 2003, and subsequent to August 31,
2003, through August 23, 2004, neither the Company nor anyone on its behalf
consulted with Lopez & Associates regarding either the application of accounting
principals to a specified transaction, either completed or proposed, or the type
of audit opinion that might be rendered in the Company's financial statement,
nor had Lopez & Associates provided the Company a written report or oral advise
regarding such principles or audit opinion or any matter that was the subject of
a disagreement or reportable event set forth in Item 304(a)(iv) and (v),
respectively, of Regulation S-K with Malone & Bailey.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
Fees for services provided by Malone & Bailey, the Company's auditors
for the fiscal year ended August 31, 2003, and services provided by Lopez &
Associates for the fiscal year ended August 31, 2004, were as follows:
o AUDIT FEES: The aggregate fees billed to the Company for the audit of
the Company's annual financial statements and for the review of the
financial statements included in the Company's quarterly reports on
Form 10-Q totaled $137,717 and $59,660 in the fiscal years ended August
31, 2004, by Lopez & Associates and August 31, 2003, by Malone &
Bailey, respectively.
o AUDIT RELATED FEES: The aggregate fees to the Company for audit-related
services totaled $9,420 in the fiscal year ended August 31, 2004, by
Lopez & Associates and $0 in the fiscal year ended August 31, 2003, by
Malone & Bailey.
o TAX FEES: There were no aggregate fees billed to the Company for tax
compliance, tax advice and tax planning services in the fiscal years
ended August 31, 2004, by Lopez & Associates and August 31, 2003, by
Malone & Bailey.
o ALL OTHER FEES: There were no aggregate fees billed for services
rendered to the Company, other than the services described above for
fiscal years ended August 31, 2004, or August 31, 2003.
The Audit Committee has determined that the rendering of non-audit
services by Lopez & Associates and Malone & Bailey was compatible with
maintaining their independence.
POLICY ON AUDIT COMMITTEE PRE-APPROVAL AND PERMISSIBLE NON-AUDIT SERVICES OF
INDEPENDENT AUDITORS
The Audit Committee is responsible for appointing, setting compensation
for and overseeing the work of the independent auditor. The Audit Committee has
established a policy requiring its pre-approval of all audit and permissible
non-audit services provided by the independent auditor. The Audit Committee
considers whether such services are consistent with the rules of the SEC on
auditor independence as well as whether the independent auditor is best
positioned to provide the most effective and efficient service, for reasons such
as familiarity with the Company's business, people, culture, accounting systems,
risk profile and other factors and input from the Company's management. The
Audit Committee's charter authorizes the Audit Committee to delegate to one or
more of its members the pre-approval of audit and permissible non-audit services
provided that those members report any pre-approvals to the full committee.
Pursuant to this authority, the Audit Committee has delegated to its Chair the
authority to address any requests for pre-approval of services between Audit
Committee meetings provided that the amount of fees for any particular services
requested does not exceed $125,000 and the Chair must report any pre-approval
decisions to the Audit Committee at its next scheduled meeting. The policy
prohibits the Audit Committee from delegating to management the Audit
Committee's responsibility to pre-approve permitted services of the independent
auditor. During the fiscal year ended August 31, 2004, all of the services
related to the audit or other fees described above were pre-approved by the
Audit Committee and none were provided pursuant to any waiver of the
pre-approval requirement.
12
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE "FOR" THE RATIFICATION OF THE
APPOINTMENT OF LOPEZ, BLEVINS BORK & ASSOCIATES, LLC, AS INDEPENDENT AUDITORS
FOR THE FISCAL YEAR ENDING AUGUST 31, 2005.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of July 26, 2005, a total of 270,154,927 shares of our common stock
were outstanding. The following table sets forth, as of July 26, 2005, certain
information with respect to shares beneficially owned by: (a) each person who is
known by us to be the beneficial owner of more than 5% of our outstanding shares
of common stock, (b) each of our current directors and director nominees, (c)
the executive officers named in the Summary Compensation Table below (as of
August 31, 2004), and (c) all current directors and executive officers as a
group.
Beneficial ownership has been determined in accordance with Rule 13d-3
under the Exchange Act. Under this rule, certain shares may be deemed to be
beneficially owned by more than one person (if, for example, persons share the
power to vote or the power to dispose of the shares). In addition, shares are
deemed to be beneficially owned by a person if the person has the right to
acquire shares (for example, upon exercise of an option or warrant) within sixty
days of the date as of which the information is provided. In computing the
percentage ownership of any person, the amount of shares is deemed to include
the amount of shares beneficially owned by such person by reason of such
acquisition rights. As a result, the percentage of outstanding shares of any
person as shown in the following table does not necessarily reflect the person's
actual voting power at any particular date.
To our knowledge, except as indicated in the footnotes to this table
and pursuant to applicable community property laws, the persons named in the
table have sole voting and investment power with respect to all shares of common
stock shown as beneficially owned by them. Unless otherwise indicated, the
business address of the individuals listed is Eagle Broadband, Inc., 101
Courageous Drive, League City, Texas 77573.
SHARES BENEFICIALLY OWNED AS OF JULY 26, 2005
-----------------------------------------------
BENEFICIAL OWNER NUMBER OF SHARES PERCENT OF CLASS
- ---------------- ---------------- ----------------
Robert Bach 618,179 (1) *
H. Dean Cubley 1,196,500 (2) *
Christopher Futer 242,305 (3) *
Glenn Goerke 250,323 (4) *
David Micek 883,334 (5) *
Lorne Persons, Jr. 389,658 (6) *
C. J. Reinhartsen 198,214 (7) *
Richard Royall 37,500 (8) *
Randall Shapiro 789,600 (9) *
David Weisman 2,638,585 1%
James Yarbrough 41,667 (10) *
All current directors and
executive officers as a group
(9 persons) 4,199,935 (11) 1.5%
- ---------------------------
* Less than 1%
(1) Includes 20,000 shares held in a trust of which he is a trustee.
(2) Includes options to purchase 37,500 shares of common stock at an
exercise price of $1.00 per share and an option to purchase 41,667
shares of common stock at an exercise price of $0.78 per share.
(3) Includes options to purchase 50,000 shares of common stock at an
exercise price of $1.00 per share and an option to purchase 41,667
shares of common stock at an exercise price of $0.78 per share.
(4) Includes options to purchase 50,000 shares of common stock at an
exercise price of $1.00 per share and an option to purchase 41,667
shares of common stock at an exercise price of $0.78 per share.
(5) These shares are deemed beneficially owned by Mr. Micek under two
options granted to him pursuant to his employment agreement. Please see
the Executive Employment Contracts section for more details.
(6) Includes options to purchase 50,000 shares of common stock at an
exercise price of $1.00 per share and an option to purchase 41,667
shares of common stock at an exercise price of $0.78 per share.
(7) Includes options to purchase 50,000 shares of common stock at an
exercise price of $1.00 per share and an option to purchase 41,667
shares of common stock at an exercise price of $0.78 per share.
(8) Consists of an option to purchase 37,500 shares of common stock at an
exercise price of $1.00 per share.
(9) These shares are deemed beneficially owned by Mr. Shapiro under options
granted to him pursuant to his employment agreement. See "Executive
Officers - Executive Employment Contracts."
(10) An option to purchase 41,667 shares of common stock at an exercise
price of $0.78 per share.
(11) Includes an option to purchase an aggregate of 208,334 shares of common
stock at $0.61.
13
EXECUTIVE OFFICERS
Our executive officers are as follows:
NAME AGE OFFICE HELD
- ---- --- -----------
David Micek 51 President & Chief Executive Officer
Eric Blachno 43 Chief Financial Officer
Randall Shapiro 45 Vice President of Marketing
The following biographical information is for Messrs. Blachno and
Shapiro (please see Proposal 1 for biographical information with respect to Mr.
Micek):
ERIC BLACHNO. Mr. Blachno has served as Chief Financial Officer since
November, 2004. From 2003 to 2004, Mr. Blachno served as Vice President of
Finance and Chief Financial Officer at Cascade Microtech, Inc, a manufacturer of
electrical metrology semiconductor equipment. From 2000 to 2003, Mr. Blachno
served as Vice President of Finance and Chief Financial Officer at Luminent,
Inc., a fiber optic components provider which was acquired by MRV
Communications. From 1998 to 2000, Mr. Blachno served as managing director at
PMG Capital, an investment banking firm which was acquired by Investec. From
1995 to 1998, Mr. Blachno served as managing director and senior communications
equipment analyst at investment bank Bear Stearns & Co, Inc. From 1986 to 1995,
Mr. Blachno held various management and staff positions in software development,
communications systems, sales and marketing, and finance at International
Business Machines Corporation. Mr. Blachno holds an MBA in Finance from the
Wharton School, University of Pennsylvania, an MS in Telecommunications from
Pace University, and a BS with High Honors in Computer Science from the
University of Florida.
RANDALL SHAPIRO. Mr. Shapiro has served as Vice President of Marketing
since October, 2003. From 2002 to 2003, Mr. Shapiro was responsible for all
marketing functions at security software startup IP Dynamics. From 2000 to 2001,
Mr. Shapiro managed overall marketing functions for telecommunications equipment
provider Canyon Networks. From 1997 to 1999, Mr. Shapiro was Director, Product
Marketing for networking equipment provider Thomson Enterprise Networks. From
1994 to 1997, Mr. Shapiro was Director, Marketing and Business Development at
technology training and marketing services company, Wave Technologies. From 1983
to 1994, Mr. Shapiro held senior sales and marketing management positions with
enterprise software companies Novasoft Systems and Metaphor Computer Systems as
well as IBM Corporation. He holds a B.S. in Business & Marketing from the
University of Arizona.
14
CODE OF ETHICS FOR THE CEO, CFO AND SENIOR FINANCIAL OFFICERS
In December 2003, in accordance with SEC Rules, the Audit Committee and
the Board adopted the CEO, CFO and Senior Financial Officers Code of Ethical
Conduct, as amended in October 2004. The Board believes that these individuals
must set an exemplary standard of conduct, particularly in the areas of
accounting, internal accounting control, auditing and finance. This code sets
forth ethical standards the designated officers must adhere to and other aspects
of accounting, auditing and financial compliance. The full text of the Code of
Ethics for the CEO, CFO and Senior Financial Officers has been posted to the
Company's website, and can be found under the Corporate Governance link.
EXECUTIVE COMPENSATION
The following table contains compensation data for our named executive
officers for the fiscal years ended August 31, 2004, 2003 and 2002.
SUMMARY COMPENSATION TABLE
Annual Long Term
Compensation Compensation Awards
------------ ---------------------
Securities Underlying All Other
Name and Salary Bonus Options Compensation
Principal Positions Year ($) ($) (#) ($)
------------------- ---- --------- --- --------------------- ------------
H. Dean Cubley,(1) 2004 $275,558 -0- 2,037,500 (2)
(former CEO) 2003 $275,000 -0- 300,000 -0-
2002 $275,000 -0- 300,000 -0-
David Weisman, (3) 2004 $345,120(4) -0- 1,237,500 (5)
(former CEO) 2003 -0- -0- -0- -0-
2002 -0- -0- -0- -0-
Randall Shapiro, 2004 $166,931 -0- -0- -0-
Vice President, Marketing 2003 -0- -0- -0- -0-
2002 -0- -0- -0- -0-
Richard Royall, 2004 $60,001 -0- -0- -0-
(Former CFO) (6) 2003 $227,344 -0- 37,500 -0-
2002 $75,450 -0- -0- -0-
- -----------------------
(1) Dr. Cubley served as chief executive officer from March 1996 until
October 2003.
(2) In December 2003, Dr, Cubley agreed to cancel options to purchase an
aggregate of 9,975,000 shares of common stock at an exercise price of
$0.41 per share, in exchange for an exchangeable promissory note in the
amount of $2,689,000, representing the difference between the market
price and exercise price on the date of cancellation of the vested
options and to include any amount that became vested subsequent thereto
("Guaranteed Value"). Pursuant to the terms of the note, the Company
re-issued options to Dr. Cubley in 2004 to purchase 9,975,000 shares at
an exercise price of $.41 per share and continued to guarantee Dr.
Cubley the Guaranteed Value, less any profit obtained from the sale of
the vested options. In December 2004 and January 2005, Dr. Cubley
exercised options to purchase 2,000,000 shares (representing all of the
options then owned by Dr. Cubley, except for the right to purchase
37,500 shares at $1.00 per share), obligating the Company under the
Guarantee obligation in the note to pay Dr. Cubley.
(3) Mr. Weisman was elected CEO in October, 2003 and was succeeded by Mr.
Micek, who was appointed President and CEO April, 2005.
(4) Mr. Weisman's total compensation for fiscal year ending August 31, 2004
includes salary and consulting fees.
(5) In December 2003, Mr. Weisman agreed to cancel options to purchase an
aggregate of 3,200,000 shares of common stock at an exercise price of
$.41 per share, in exchange for an exchangeable promissory note in the
amount of $1,362,000, representing the difference between the market
price and exercise price on the date of cancellation of the vested
options and to include any amount that became vested subsequent thereto
("Guaranteed Value"). Pursuant to the terms of the note, the Company
re-issued options to Mr. Weisman in 2004 to purchase 3,200,000 shares
at an exercise price of $.41 per share and continued to guarantee Mr.
Weisman the Guaranteed Value, less any profit obtained from the sale of
the vested options. In January 2005, Mr. Weisman exercised options to
purchase shares (representing all of the options then owned by Mr.
Weisman), obligating the Company under the Guarantee obligation in the
note to pay Mr. Weisman. In June 2005, Mr. Weisman entered a note
exchange agreement with the Company where the Company issued 3,377,778
shares of Company common stock to Mr. Weisman to fully satisfy the
Company's outstanding Guarantee obligation under the note.
(6) Mr. Royall resigned as the chief financial officer in November 2004.
15
The following table sets forth information concerning individual grants
of stock options made during the fiscal year ended August 31, 2004, to our named
executive officers. No stock appreciation rights were issued during the fiscal
year.
OPTION GRANTS FOR FISCAL YEAR ENDING AUGUST 31, 2004
Potential Realizable
Individual Grants Annual Rates of Stock Value At Assumed
--------------------------------------- Appreciation for Option
% of Total Term (a)
---------- --------
Number of Options Exercise/
Securities Granted To Base
Options Fiscal Price Expiration
Name Granted Year(1) ($/Share) Date 5% ($)(b) 10% ($)(b)
---- ------- ------- --------- ---- --------- ----------
H.Dean Cubley 2,000,000 33% $0.41 9/1/08 $3,470,145 $4,121,063
37,500 * $1.00 6/15/09 $1,875 $2,250
David Weisman 300,000 5% $0.41 9/1/08 $520,580 $618,159
400,000 7% $0.60 9/1/08 $600,574 $713,148
500,000 9% $0.75 9/1/08 $658,416 $781,833
37,500 * $1.00 6/15/09 $1,875 $2,250
Randall Shapiro 75,000 2% $0.41 9/1/08 $129,827 $153,903
150,000 3% $0.41 9/1/08 $6,426 $6,852
100,000 2% $1.13 9/1/08 $0 $0
100,000 2% $1.10 9/1/08 $29,464 $34,928
100,000 2% $1.00 9/1/08 $41,741 $49,482
100,000 2% $0.90 9/1/08 $54,018 $64,035
85,000 2% $0.60 9/1/08 $77,221 $91,541
100,000 2% $0.75 9/1/08 $72,432 $85,865
Richard Royall -0- N/A N/A N/A N/A N/A
- --------------------------
* Less than 1%
(1) Percentages are based on 6,082,500 options issued and are rounded up to the
nearest whole number.
The following table sets forth information concerning option exercises
during the fiscal year ended August 31, 2004, and option holdings as of August
31, 2004, with respect to our named executive officers. No stock appreciation
rights were outstanding at the end of the fiscal year.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
Value Number of Securities Value of Unexercised
Shares Acquired Realized Underlying Unexercised In-the-Money
Name on Exercise (#) ($) Options at FY-End (#) Options at FY-End ($)(*)
---- --------------- -------- -------------------------- -------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- ------------
H. Dean Cubley -0- -0- 2,037,500 (1) -0- $ 920,000 (1) -0-
David Weisman -0- -0- 1,237,500 (2) -0- $ 306,000 (2) -0-
Randall Shapiro -0- -0- 710,000 300,000 $ 617,700 $261,000
Richard Royall -0- -0- 37,500 -0- (3) -0-
-------------------
* The fair market value of our common stock at August 31, 2004 was $0.87
per share.
(1) See footnote #2 under "Summary Compensation Table" above.
(2) See footnote #4 under "Summary Compensation Table" above.
(3) The exercise price is $1.00 per share which at fiscal year end 2004 was
not in-the-money.
16
EXECUTIVE EMPLOYMENT CONTRACTS
Mr. Micek's employment agreement, provides for an annual salary of
$275,000 and is effective through November 2007, and shall be extended until
November 2009, if agreed by both parties. Under the terms of his original
employment agreement, Mr. Micek was granted the right to purchase 500,000 shares
of Company common stock at a price per share of $0.61, which vests over 36
months (13,889 shares per month). In April 2005, Mr. Micek's employment
agreement was amended and he was granted the right to (i) purchase 6,700,000
shares at an exercise price of $.19 per share, vesting on a 36 month term
(186,111 shares per month) which vesting accelerates upon a change of control or
termination of employee without cause and (ii) granted 2,000,000 shares of
restricted stock upon Mr. Micek's or the Company's attainment of certain
objectives and/or Company milestones, which to date have not been satisfied. Mr.
Micek receives customary fringe benefits.
Mr. Blachno's employment agreement, provides for an annual salary of
$200,000 and is effective through November 2007, and shall be extended until
November 2009, if agreed by both the Company and him. Under the terms of his
employment agreement, Mr. Blachno was granted the right to purchase 500,000
shares of Company common stock exercisable at a price per share of $0.61, which
vests over 24 months (20,833 shares per month). Additionally, Mr. Blachno has a
right to receive 200,000 shares of Company common stock upon the satisfaction of
certain objectives and/or Company milestones, which to date have not been
satisfied.
Mr. Shapiro's employment agreement provides for an annual base salary
of $190,000 and is effective through November 30, 2005. Mr. Shapiro is owed a
bonus of $146,000 pursuant to the terms of his employment agreement. As of the
Record Date, Mr. Shapiro has options that have vested which allow him to
purchase 710,000 shares of Company common stock at exercise prices ranging from
$0.41 to $1.13 with an expiration date of September 1, 2008. Additionally, Mr.
Shapiro has unvested options which allow him to purchase 300,000 shares of
Company common stock at exercise prices ranging from $0.90 to $1.10, with an
expiration date of September 1, 2008.
RELATED PARTY TRANSACTIONS
There are no related party transactions other than what is disclosed
herein.
AUDIT COMMITTEE REPORT
In accordance with its written charter adopted by the Board of
Directors, the Audit Committee assists the Board in fulfilling its
responsibility for oversight of the quality and integrity of the accounting,
auditing, and financial reporting practices of the Company. The Audit Committee
recommends to the Board of Directors, subject to shareholder approval, the
selection of the Company's independent accountants. The Audit Committee is
comprised of Messrs. Goerke, Reinhartsen and Yarbrough (Audit Committee Chair).
Messrs. Goerke, Reinhartsen and Yarbrough are independent directors, as defined
by the American Stock Exchange's listing standards.
Management is responsible for our internal controls. Our independent
auditors, Lopez & Associates, are responsible for performing an independent
audit of the company's consolidated financial statements in accordance with
generally accepted auditing standards and to issue a report thereon. The Audit
Committee has general oversight responsibility with respect to financial
reporting, and reviews the results and scope of the audit and other services
provided by Lopez & Associates.
The Audit Committee members are not professional accountants or
auditors, and their functions are not intended to duplicate or to certify the
activities of management and Lopez & Associates, nor can the Audit Committee
certify that Lopez & Associates is "independent" under applicable rules. The
Audit Committee serves a board-level oversight role, in which it provides
advice, counsel, and direction to management and the auditors on the basis of
the information it receives, discussions with management and the auditors and
the experience of the Audit Committee members in business, financial, and
accounting matters.
In this context, the Audit Committee has met and held discussions with
management and Lopez & Associates. Management represented to the Audit Committee
that our consolidated financial statements were prepared in accordance with
generally accepted accounting principles, and the Audit Committee has reviewed
and discussed the consolidated financial statements with management and Lopez &
Associates. The Audit Committee discussed with Lopez & Associates matters
required to be discussed by Statement on Auditing Standards No. 61
(Communication with Audit Committees).
Lopez & Associates also provided to the Audit Committee the written
disclosures required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees), and the Audit Committee
discussed with Lopez & Associates their independence.
17
Based upon the Audit Committee's discussion with management and Lopez &
Associates and the Audit Committee's review of the representations of management
and the report of Lopez & Associates to the Audit Committee, the Audit Committee
recommended that the Board of Directors include the company's audited
consolidated financial statements in the Eagle Broadband, Inc. Annual Report on
Form 10-K for the year ended August 31, 2004 filed with the Securities and
Exchange Commission.
Submitted by the Audit Committee of the
Board of Directors of Eagle Broadband, Inc.:
Glenn Goerke, Jim Reinhartsen and James Yarbrough.
REPORT OF THE COMPENSATION COMMITTEE
OVERVIEW
The Compensation Committee of the Board of Directors supervises our
executive compensation. The overall goal of the Compensation Committee is to
insure that compensation policies are established that are consistent with our
strategic business objectives and that provide incentives for the attainment of
those objectives. This is affected in the context of a compensation program that
includes base pay, annual incentive compensation and stock ownership. The
Compensation Committee is comprised of Messrs. Goerke, Persons, Reinhartsen
(Compensation Committee Chair) and Yarbrough.
We seek to provide executive compensation that will support the
achievement of our financial goals while attracting and retaining talented
executives and rewarding superior performance. In performing this function, the
Compensation Committee reviews executive compensation surveys and other
available information.
We seek to provide an overall level of compensation to our executives
that are competitive within our industry and other companies of comparable size
and complexity. Compensation in any particular case may vary from any industry
average on the basis of annual and long-term performance as well as individual
performance. The Compensation Committee will exercise its discretion to set
compensation where in its judgment external, internal or individual
circumstances warrant it. In general, we compensate our executive officers
through a combination of base salary, annual incentive compensation in the form
of cash bonuses and long-term incentive compensation in the form of stock
options.
Base salary levels for our executive officers are set generally to be
competitive in relation to the salary levels of executive officers in other
companies within our industry or other companies of comparable size, taking into
consideration the position's complexity, responsibility and need for special
expertise. In reviewing salaries in individual cases the Compensation Committee
also takes into account individual experience and performance.
We provide long-term incentive compensation through our stock option
plan. The number of shares covered by any grant is generally determined by the
then current stock price, subject in certain circumstances, to vesting
requirements. In special cases, however, grants may be made to reflect increased
responsibilities or reward extraordinary performance.
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Weisman was elected to the position of chief executive officer in
October 2003 and served in such capacity until April 2005. Mr. Weisman's salary
was $275,000 during the fiscal year ended August 31, 2004. Mr. Weisman earned
options to purchase 1,237,500 shares at an exercise price ranging from $0.41 per
share to $0.75 per share. Mr. Micek currently serves as our president and chief
executive officer pursuant to an employment agreement described in "Executive
Officers - Executive Employment Agreements".
Submitted by the Compensation Committee of the
Board of Directors of Eagle Broadband, Inc.:
Glenn Goerke, Lorne Persons, Jim Reinhartsen and James Yarbrough.
18
STOCK PRICE PERFORMANCE GRAPH
This section includes a tabular comparison of the cumulative total
stockholder return on: our common stock against the cumulative total return of
the NASDAQ Index and the communications equipment peer group ("Peer Group") for
the period of five fiscal years commencing August 31, 1999, and ending August
31, 2004. The graph and table assume that $100 was invested on August 31, 1998,
in each of our common stock, the NASDAQ Index and the Peer Group, and that all
dividends were reinvested. Our Peer Group consists of companies that we believe
are engaged in the same or similar business as Eagle Broadband. The comparisons
shown in the comparison below are based upon historical data. The stock price
performance shown in the comparison below is not necessarily indicative of, nor
intended to forecast, the potential future performance of our common stock.
COMPARISON OF CUMULATIVE TOTAL RETURN OF ONE OR MORE
COMPANIES, PEER GROUPS, INDUSTRY INDEXES AND/OR BROAD MARKETS
[GRAPHIC OMITTED-SET FORTH BELOW IS THE TABULAR REPRESENTATION OF OMITTED GRAPHIC]
----------------------------------------- ----------- ---------- ----------- ---------- ----------- ----------
AUG-99 AUG-00 AUG-01 AUG-02 AUG-03 AUG-04
----------------------------------------- ----------- ---------- ----------- ---------- ----------- ----------
EAGLE BROADBAND INC. $100 $439 $59 $35 $33 $61
----------------------------------------- ----------- ---------- ----------- ---------- ----------- ----------
NASDAQ US $100 $153 $65 $48 $66 $67
----------------------------------------- ----------- ---------- ----------- ---------- ----------- ----------
COMMUNICATIONS EQUIPMENT, NEC $100 $142 $73 $23 $34 $43
----------------------------------------- ----------- ---------- ----------- ---------- ----------- ----------
OTHER MATTERS
The Board knows of no other business to come before the Annual Meeting.
However, if any other matters are properly brought before the Annual Meeting,
the persons named in the accompanying or their substitutes will vote in their
discretion on those matters.
BY ORDER OF THE BOARD OF DIRECTORS
/S/ C. J. REINHARTSEN, CHAIRMAN
August 8, 2005
League City, Texas
PLEASE COMPLETE, SIGN, DATE, AND PROMPTLY RETURN THE ACCOMPANYING PROXY
IN THE ENCLOSED ENVELOPE. YOU MAY REVOKE YOUR PROXY AT ANY TIME PRIOR TO THE
ANNUAL MEETING.
THANK YOU FOR YOUR ATTENTION TO THIS MATTER. YOUR PROMPT RESPONSE WILL
GREATLY FACILITATE ARRANGEMENTS FOR THE ANNUAL MEETING.
19
APPENDIX A
EAGLE BROADBAND, INC.
AUDIT COMMITTEE CHARTER
ORGANIZATION
The Audit Committee shall consist of three or more directors as determined by
the Board of Directors, each of whom shall be free from any relationship that in
the opinion of the Board would interfere with the exercise of independent
judgment as a member of the Committee. Each member shall meet the independence
and financial literacy requirements of the American Stock Exchange. One member
must have accounting or related financial management expertise, as interpreted
by the Board. One or more members may be designated as an Audit Committee
financial expert by the Board.
If an Audit Committee member simultaneously serves on the audit committees of
more than three public companies, then in each case the Board must determine
that simultaneous service on such other audit committees would not impair the
effectiveness of the service of that director on the Company's Audit Committee.
The Board shall disclose any such determination in the Company's annual proxy
statement.
The members of the Committee shall be elected by the Board for a one-year term
and may be re-elected for successive terms. One member of the Committee will be
elected by the Board as Chairman and will be responsible for the scheduling of
regular and special meetings and the functioning of the Committee.
STATEMENT OF PURPOSE AND AUTHORITY
The Audit Committee shall assist the Board in fulfilling its oversight
responsibilities to the shareholders to overview (1) the integrity of the
financial statements of the Company, (2) the compliance by the Company with
legal and regulatory requirements, and (3) the independence, qualifications and
performance of the Company's independent auditor. The Committee shall prepare an
Audit Committee report as required to be included in the Company's annual proxy
statement under the rules of the Securities and Exchange Commission.
The Audit Committee is directly responsible for the appointment, compensation
and oversight of the public accounting firm engaged to prepare or issue an audit
report on the financial statements of the Company or performing other audit,
review or attest services for the Company, and each such public accounting firm
shall report directly to the Audit Committee. The Audit Committee shall have the
sole authority to retain special legal, accounting or other consultants to
advise the Committee and to approve the fees and other retention terms of these
consultants.
The Audit Committee may request any officer or employee of the Company or the
Company's outside counsel or independent auditor to attend a meeting of the
Committee or to meet with any members of, or consultants to, the Committee. In
discharging its oversight role, the Committee is empowered to investigate any
matter brought to its attention, with full power to retain outside counsel or
other experts for this purpose or to otherwise carry out its duties.
RESPONSIBILITIES AND PROCEDURES
In fulfilling its responsibilities to the Company's Board of Directors and
shareholders, the Audit Committee will have certain responsibilities and follow
certain procedures, as described below. The timing and extent of specific steps
to be taken within each such procedure is fully within the discretion of the
Committee. Other responsibilities and procedures of the Audit Committee may be
required from time to time by law, rules of the American Stock Exchange, the
Company's Bylaws or the Board of Directors.
In fulfilling its responsibilities, the Audit Committee will:
o Engage the independent auditor to audit the financial statements of the
Company, which firm is ultimately accountable to the Audit Committee.
o Review and approve the fees and other compensation to be paid to the
independent auditor.
o Review and discuss at least annually a written statement from the
independent auditor detailing any and all relationships between the
auditor and the Company that bear on the independence of the auditor,
as well as the internal quality control procedures of the auditor, any
material issues raised by the most recent internal quality control
review, or peer review, of the firm, or by any inquiry or investigation
by governmental or professional authorities, within the preceding five
years, respecting one or more independent audits carried out by the
firm, and any steps taken to deal with any such issues.
A-1
o Review with the independent auditor and financial managers of the
Company the scope of the proposed audit for the current year.
o Review with management and the independent auditor the audited
financial statements and quarterly financial statements and the
discussions under "Management's Discussion and Analysis" to be included
or incorporated by reference in the Company's annual and quarterly
reports.
o Oversee the financial statement disclosures and ensure that management
has a system in place to identify proper disclosures, draft the
disclosures and review the process.
o Review significant financial reporting issues and judgments highlighted
by management and the independent auditor. Inquire whether the
independent auditor is satisfied with the disclosure and content of the
financial statements to be presented to the shareholders. Review any
major issues identified by the independent auditor regarding accounting
and auditing principles and estimates, or any changes therein.
o Review the effects of regulatory and accounting changes, as well as off
balance sheet structures, on the financial statements of the Company.
o Discuss the Company's earnings press releases, as well as financial
information and earnings guidance provided to analysis and rating
agencies. The Committee may address this information generally and is
not required to address in advance each earnings release or instance
when guidance is provided.
o Following completion of the annual audit, review with management and
the independent auditor any significant problems or difficulties
encountered during the course of the audit, including any restrictions
on the scope of work or access to required information, and
management's response.
o Review any significant disagreements identified by management and the
independent auditor in connection with the preparation of the financial
statements. Review any special audit steps adopted in light of material
control deficiencies.
o Review with the independent auditor and with financial and accounting
personnel, the adequacy and effectiveness of the accounting and
financial controls of the Company, and elicit any recommendations for
the improvement of internal controls. Particular emphasis should be
given to the adequacy of the internal controls to expose any payments,
transactions, or procedures that might be deemed illegal or otherwise
improper.
o Meet separately, periodically, with the independent auditor without
members of management present. Among the items to be discussed in this
meeting are the independent auditors' evaluation of the competency of
the Company's financial and accounting personnel, and the level of
cooperation that the independent auditor received during the course of
the audit.
o Evaluate the performance of the independent auditor and, if so
determined by the Audit Committee, terminate the engagement of the
independent auditor. This evaluation should include the review and
evaluation of the lead partner of the independent auditor.
o Determine that rotation requirements for partners of the independent
auditor have been satisfied. Consider whether there should be rotation
of the audit firm itself in order to assure continuing auditor
independence.
o Set clear hiring policies for employees or former employees of the
independent auditor.
o Review a summary of the programs and policies of the Company designed
to monitor compliance with applicable laws and regulations.
o Establish procedures for (1) the receipt, retention and treatment of
complaints received by the Company regarding accounting, accounting
controls or auditing matters and (2) the confidential, anonymous
submission by employees of the issuer of concerns regarding
questionable accounting or auditing matters.
o Establish procedures for reporting violations of the Company's Code of
Business Conduct and Ethics and Code of Ethics for the Chief Executive
Officer and Chief Financial Officer and monitoring accountability for
such Codes.
o Review a summary of the procedures established by the Company that
monitor the compliance by the Company with its loan and indenture
covenants and restrictions.
o Discuss guidelines and policies with respect to risk assessment and
risk management. Inquire of the CFO and the independent auditor about
significant risks or exposures and assess the steps management has
taken to minimize such risk to the Company.
A-2
o Discuss any exceptions identified by the independent auditor resulting
from their review of the Company's quarterly reports on Form 10-Q.
o Review and reassess the adequacy of this charter annually and recommend
any proposed changes to the Board for approval.
o Conduct an annual self-evaluation of the performance of the Committee.
o Report periodically to the full Board and review with the full board
any issues regarding the quality or integrity of the financial
statements and the performance and independence of the independent
auditors.
o Prepare the report required to be included in the Company's annual
proxy statement under the rules of the Securities and Exchange
Commission.
o Develop and recommend to the Board a set of corporate governance
guidelines applicable to the Company.
o Review and approve the policies and disclosures related to governance
and director nominations to be set forth in the Company's annual proxy
statement under the rules of the Securities and Exchange Commission.
The Audit Committee will meet prior to each meeting of the Board and may hold as
many other meetings as it deems appropriate during the year to fulfill its
responsibilities. Although the Audit Committee has certain responsibilities and
powers, as set forth in this charter, it is not the duty of the Audit Committee
to plan or conduct audits or to determine that the Company's financial
statements are complete and accurate and are in accordance with generally
accepted accounting principles. This is the responsibility of management and the
independent auditor. Nor is it the duty of the Audit Committee to assure
compliance with laws and regulations or the Company's internal codes and
policies. The Audit Committee shall be entitled to rely on management and the
independent auditor in fulfilling its oversight and other responsibilities under
this charter.
A-3
APPENDIX B
EAGLE BROADBAND, INC.
2005 EMPLOYEE STOCK OPTION PLAN
ARTICLE I - PLAN
1.1 PURPOSE. This Plan is a plan for key employees, officers,
directors, and consultants of the Company and its Affiliates and is intended to
advance the best interests of the Company, its Affiliates, and its stockholders
by providing those persons who have substantial responsibility for the
management and growth of the Company and its Affiliates with additional
incentives and an opportunity to obtain or increase their proprietary interest
in the Company, thereby encouraging them to continue in the employ of the
Company or any of its Affiliates.
1.2 RULE 16B-3 PLAN. The Company is subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "1934
Act"), and therefore the Plan is intended to comply with all applicable
conditions of Rule 16b-3 (and all subsequent revisions thereof) promulgated
under the 1934 Act. To the extent any provision of the Plan or action by the
Board of Directors or Committee fails to so comply, it shall be deemed null and
void, to the extent permitted by law and deemed advisable by the Committee. In
addition, the Board of Directors may amend the Plan from time to time, as it
deems necessary in order to meet the requirements of any amendments to Rule
16b-3 without the consent of the shareholders of the Company.
1.3 EFFECTIVE DATE OF PLAN. The Plan shall be effective September 20,
2005 (the "Effective Date"), provided that the Plan shall have been approved by
at least a majority vote of stockholders voting in person or by proxy at a duly
held stockholders' meeting on or prior to such date. No Incentive Option,
Nonqualified Option, Stock Appreciation Right, or Restricted Stock Award shall
be granted pursuant to the Plan ten years after the Effective Date.
ARTICLE II - DEFINITIONS
The words and phrases defined in this Article shall have the meaning
set out in these definitions throughout this Plan, unless the context in which
any such word or phrase appears reasonably requires a broader, narrower, or
different meaning.
2.1 "Affiliate" means any subsidiary corporation. The term "subsidiary
corporation" means any corporation (other than the Company) in an unbroken chain
of corporations beginning with the Company if, at the time of the action or
transaction, each of the corporations other than the last corporation in the
unbroken chain owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in the chain.
2.2 "Award" means each of the following granted under this Plan:
Incentive Option, Nonqualified Option, Stock Appreciation Right, or Restricted
Stock Award.
2.3 "Board of Directors" means the board of directors of the
Company.
2.4 "Code" means the Internal Revenue Code of 1986, as amended.
2.5 "Committee" means the Compensation Committee of the Board of
Directors or such other committee designated by the Board of Directors or the
entire Board of Directors.
2.6 "Company" means Eagle Broadband, Inc., a Texas Corporation.
2.7 "Consultant" means any person, including an advisor, engaged by the
Company or Affiliate to render services and who is compensated for such
services.
2.8 "Non-Employee Director" means that term as defined in
Rule 16b-3 under the 1934 Act.
2.9 "Eligible Persons" shall mean, with respect to the Plan, those
persons who, at the time that an Award is granted, are (i) Employees and all
other key personnel, including officers and directors, of the Company or
Affiliate, or (ii) Consultants or independent contractors who provide valuable
services to the Company or Affiliate as determined by the Committee.
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2.10 "Employee" means a person employed by the Company or any
Affiliate to whom an Award is granted.
2.11 "Fair Market Value" of the Stock as of any date means (a) the
average of the high and low sale prices of the Stock on that date on the
principal securities exchange on which the Stock is listed; or (b) if the Stock
is not listed on a securities exchange, the average of the high and low sale
prices of the Stock on that date as reported on the NASDAQ; or (c) if the Stock
is not listed on the NASDAQ, the average of the high and low bid quotations for
the Stock on that date as reported by the National Quotation Bureau
Incorporated; or (d) if none of the foregoing is applicable, an amount at the
election of the Committee equal to (x), the average between the closing bid and
ask prices per share of Stock on the last preceding date on which those prices
were reported or (y) that amount as determined by the Committee in good faith.
2.12 "Incentive Option" means an option to purchase Stock granted under
this Plan which is designated as an "Incentive Option" and satisfies the
requirements of Section 422 of the Code.
2.13 "Nonqualified Option" means an option to purchase Stock granted
under this Plan other than an Incentive Option.
2.14 "Option" means both an Incentive Option and a Nonqualified Option
granted under this Plan to purchase shares of Stock.
2.15 "Option Agreement" means the written agreement by and between the
Company and an Eligible Person, which sets out the terms of an Option.
2.16 "Outside Director" shall mean a member of the Board of Directors
serving on the Committee who satisfies Section 162(m) of the Code.
2.17 "Plan" means the Eagle Broadband, Inc. 2005 Employee Stock Option
Plan, as set out in this document and as it may be amended from time to time.
2.18 "Plan Year" means the Company's fiscal year.
2.19 "Restricted Stock" means Stock awarded or purchased under a
Restricted Stock Agreement entered into pursuant to this Plan, together with (i)
all rights, warranties or similar items attached or accruing thereto or
represented by the certificate representing the stock and (ii) any stock or
securities into which or for which the stock is thereafter converted or
exchanged. The terms and conditions of the Restricted Stock Agreement shall be
determined by the Committee consistent with the terms of the Plan.
2.20 "Restricted Stock Agreement" means an agreement between the
Company or any Affiliate and the Eligible Person pursuant to which the Eligible
Person receives a Restricted Stock Award subject to this Plan.
2.21 "Restricted Stock Award" means an Award of Restricted Stock.
2.22 "Restricted Stock Purchase Price" means the purchase price, if
any, per share of Restricted Stock subject to an Award. The Committee shall
determine the Restricted Stock Purchase Price. It may be greater than or less
than the Fair Market Value of the Stock on the date of the Stock Award.
2.23 "Stock" means the common stock of the Company, $.001 par value,
or, in the event that the outstanding shares of common stock are later changed
into or exchanged for a different class of stock or securities of the Company or
another corporation, that other stock or security.
2.24 "Stock Appreciation Right" and "SAR" means the right to receive
the difference between the Fair Market Value of a share of Stock on the grant
date and the Fair Market Value of the share of Stock on the exercise date.
2.25 "10% Stockholder" means an individual who, at the time the Option
is granted, owns Stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company or of any Affiliate. An individual
shall be considered as owning the Stock owned, directly or indirectly, by or for
his brothers and sisters (whether by the whole or half blood), spouse,
ancestors, and lineal descendants; and Stock owned, directly or indirectly, by
or for a corporation, partnership, estate, or trust, shall be considered as
being owned proportionately by or for its stockholders, partners, or
beneficiaries.
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ARTICLE III - ELIGIBILITY
The individuals who shall be eligible to receive Awards shall be those
Eligible Persons of the Company or any of its Affiliates as the Committee shall
determine from time to time. The Board of Directors of Directors may designate
one or more individuals who shall not be eligible to receive any Award under
this Plan or under other similar plans of the Company.
ARTICLE IV - GENERAL PROVISIONS RELATING TO AWARDS
4.1 AUTHORITY TO GRANT AWARDS. The Committee may grant to those
Eligible Persons of the Company or any of its Affiliates, as it shall from time
to time determine, Awards under the terms and conditions of this Plan. The
Committee shall determine subject only to any applicable limitations set out in
this Plan, the number of shares of Stock to be covered by any Award to be
granted to an Eligible Person.
4.2 DEDICATED SHARES. The total number of shares of Stock with respect
to which Awards may be granted under the Plan shall be 30,000,000 shares. The
shares may be treasury shares or authorized but unissued shares. The number of
shares stated in this Section 4.2 shall be subject to adjustment in accordance
with the provisions of Section 4.5. In the event that any outstanding Award
shall expire or terminate for any reason or any Award is surrendered, the shares
of Stock allocable to the unexercised portion of that Award may again be subject
to an Award under the Plan.
4.3 NON-TRANSFERABILITY. Awards shall not be transferable by the
Eligible Person otherwise than by will or under the laws of descent and
distribution, and shall be exercisable, during the Eligible Person's lifetime,
only by him. Restricted Stock shall be purchased by and/or become vested under a
Restricted Stock Agreement during the Eligible Person's lifetime, only by him.
Any attempt to transfer an Award other than under the terms of the Plan and the
Agreement shall terminate the Award and all rights of the Eligible Person to
that Award.
4.4 REQUIREMENTS OF LAW. The Company shall not be required to sell or
issue any Stock under any Award if issuing that Stock would constitute or result
in a violation by the Eligible Person or the Company of any provision of any
law, statute, or regulation of any governmental authority. Specifically, in
connection with any applicable statute or regulation relating to the
registration of securities, upon exercise of any Option or pursuant to any
Award, the Company shall not be required to issue any Stock unless the Committee
has received evidence satisfactory to it to the effect that the holder of that
Option or Award will not transfer the Stock except in accordance with applicable
law, including receipt of an opinion of counsel satisfactory to the Company to
the effect that any proposed transfer complies with applicable law. The
determination by the Committee on this matter shall be final, binding, and
conclusive. The Company may, but shall in no event be obligated to, register any
Stock covered by this Plan pursuant to applicable securities laws of any country
or any political subdivision. In the event the Stock issuable on exercise of an
Option or pursuant to an Award is not registered, the Company may imprint on the
certificate evidencing the Stock any legend that counsel for the Company
considers necessary or advisable to comply with applicable law. The Company
shall not be obligated to take any other affirmative action in order to cause
the exercise of an Option or vesting under an Award, or the issuance of shares
pursuant thereto, to comply with any law or regulation of any governmental
authority.
4.5 CHANGES IN THE COMPANY'S CAPITAL STRUCTURE.
(a) The existence of outstanding Options or Awards shall not affect in
any way the right or power of the Company or its stockholders to make or
authorize any or all adjustments, recapitalizations, reorganizations or other
changes in the Company's capital structure or its business, or any merger or
consolidation of the Company, or any issue of bonds, debentures, preferred or
prior preference stock ahead of or affecting the Stock or its rights, or the
dissolution or liquidation of the Company, or any sale or transfer of all or any
part of its assets or business, or any other corporate act or proceeding,
whether of a similar character or otherwise. If the Company shall effect a
subdivision or consolidation of shares or other capital readjustment, the
payment of a Stock dividend, or other increase or reduction of the number of
shares of the Stock outstanding, without receiving compensation for it in money,
services or property, then (a) the number, class, and per share price of shares
of Stock subject to outstanding Options under this Plan shall be appropriately
adjusted in such a manner as to entitle an Eligible Person to receive upon
exercise of an Option, for the same aggregate cash consideration, the equivalent
total number and class of shares he would have received had he exercised his
Option in full immediately prior to the event requiring the adjustment; and (b)
the number and class of shares of Stock then reserved to be issued under the
Plan shall be adjusted by substituting for the total number and class of shares
of Stock then reserved, that number and class of shares of Stock that would have
been received by the owner of an equal number of outstanding shares of each
class of Stock as the result of the event requiring the adjustment.
(b) If the Company is merged or consolidated with another corporation
and the Company is not the surviving corporation, or if the Company is
liquidated or sells or otherwise disposes of substantially all its assets while
unexercised Options remain outstanding under this Plan (each of the foregoing
referred to as a "Corporate Transaction"):
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(i) Subject to the provisions of clause (ii) below, in the
event of such a Corporate Transaction, any unexercised Options shall
automatically accelerate so that they shall, immediately prior to the
specified effective date for the Corporate Transaction become 100%
vested and exercisable; provided, however, that any unexercised Options
shall not accelerate, as described above, if and to the extent such
Option is, in connection with the Corporate Transaction, either to be
assumed by the successor corporation or parent thereof (the "Successor
Corporation") or to be replaced with a comparable award for the
purchase of shares of the capital stock of the Successor Corporation.
Whether or not any unexercised Option is assumed or replaced shall be
determined by the Company and the Successor Corporation in connection
with the Corporate Transaction. The Board of Directors shall make the
determination of what constitutes a comparable award to the unexercised
Option, and its determination shall be conclusive and binding. The
unexercised Option shall terminate and cease to remain outstanding
immediately following the consummation of the Corporate Transaction,
except to the extent assumed by the Successor Corporation.
(ii) All outstanding Options may be canceled by the
Board of Directors as of the effective date of any Corporate
Transaction, if (i) notice of cancellation shall be given to each
holder of an Option and (ii) each holder of an Option shall have the
right to exercise that Option in full (without regard to any
limitations set out in or imposed under this Plan or the Option
Agreement granting that Option) during a period set by the Board of
Directors preceding the effective date of the Corporate Transaction
and, if in the event all outstanding Options may not be exercised in
full under applicable securities laws without registration of the
shares of Stock issuable on exercise of the Options, the Board of
Directors may limit the exercise of the Options to the number of shares
of Stock, if any, as may be issued without registration. The method of
choosing which Options may be exercised, and the number of shares of
Stock for which Options may be exercised, shall be solely within the
discretion of the Board of Directors.
(c) In each situation described in this Section 4.5, the Committee will
make similar adjustments, as appropriate, in outstanding Stock Appreciation
Rights.
(d) The issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, for cash or property,
or for labor or services either upon direct sale or upon the exercise of rights
or warrants to subscribe for them, or upon conversion of shares or obligations
of the Company convertible into shares or other securities, shall not affect,
and no adjustment by reason of such issuance shall be made with respect to, the
number, class, or price of shares of Stock then subject to outstanding Awards.
4.6 ELECTION UNDER SECTION 83(B) OF THE CODE. No Eligible Person shall
exercise the election permitted under Section 83(b) of the Code without written
approval of the Committee. Any Eligible Person doing so shall forfeit all Awards
issued to him under this Plan.
ARTICLE V - OPTIONS AND STOCK APPRECIATION RIGHTS
5.1 TYPE OF OPTION. The Committee shall specify at the time of grant
whether a given Option shall constitute an Incentive Option or a Nonqualified
Option. Incentive Stock Options may only be granted to employees.
5.2 OPTION PRICE. The price at which Stock may be purchased under an
Incentive Option shall not be less than the greater of: (a) 100% of the Fair
Market Value of the shares of Stock on the date the Option is granted or (b) the
aggregate par value of the shares of Stock on the date the Option is granted.
The Committee in its discretion may provide that the price at which shares of
Stock may be purchased under an Incentive Option shall be more than 100% of Fair
Market Value. In the case of any 10% Stockholder, the price at which shares of
Stock may be purchased under an Incentive Option shall not be less than 110% of
the Fair Market Value of the Stock on the date the Incentive Option is granted.
The price at which shares of Stock may be purchased under a Nonqualified Option
shall be such price as shall be determined by the Committee in its sole
discretion but in no event lower than the par value of the shares of Stock on
the date the Option is granted.
5.3 DURATION OF OPTIONS AND SARS. No Option or SAR shall be exercisable
after the expiration of ten (10) years from the date the Option or SAR is
granted. In the case of a 10% Stockholder, no Incentive Option shall be
exercisable after the expiration of five (5) years from the date the Incentive
Option is granted.
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5.4 AMOUNT EXERCISABLE -- INCENTIVE OPTIONS. Each Option may be
exercised from time to time, in whole or in part, in the manner and subject to
the conditions the Committee, in its sole discretion, may provide in the Option
Agreement, as long as the Option is valid and outstanding. To the extent that
the aggregate Fair Market Value (determined as of the time an Incentive Option
is granted) of the Stock with respect to which Incentive Options first become
exercisable by the optionee during any calendar year (under this Plan and any
other incentive stock option plan(s) of the Company or any Affiliate) exceeds
$100,000, the portion in excess of $100,000 of the Incentive Option shall be
treated as a Nonqualified Option. In making this determination, Incentive
Options shall be taken into account in the order in which they were granted.
5.5 EXERCISE OF OPTIONS. Each Option shall be exercised by the delivery
of written notice to the Committee setting forth the number of shares of Stock
with respect to which the Option is to be exercised, together with:
(a) Cash, certified check, bank draft, or postal or express money
order payable to the order of the Company for an amount equal
to the option price of the shares;
(b) Stock at Fair Market Value on the exercise date (if approved
in advance in writing by the Committee);
(c) An election to make a cashless exercise through a registered
broker-dealer (if approved in advance in writing by the
Committee);
(d) An election to have shares of Stock, which otherwise would be
issued on exercise, withheld in payment of the exercise price
(if approved in advance in writing by the Committee); and/or
(e) Any other form of payment which is acceptable to the
Committee.
As promptly as practicable after receipt of written notification and
payment, the Company shall deliver to the Eligible Person certificates for the
number of shares with respect to which the Option has been exercised, issued in
the Eligible Person's name. If shares of Stock are used in payment, the
aggregate Fair Market Value of the shares of Stock tendered must be equal to or
less than the aggregate exercise price of the shares being purchased upon
exercise of the Option, and any difference must be paid by cash, certified
check, bank draft, or postal or express money order payable to the order of the
Company. Delivery of the shares shall be deemed effected for all purposes when a
stock transfer agent of the Company shall have deposited the certificates in the
United States mail, addressed to the Eligible Person, at the address specified
by the Eligible Person.
Whenever an Option is exercised by exchanging shares of Stock owned by
the Eligible Person, the Eligible Person shall deliver to the Company
certificates registered in the name of the Eligible Person representing a number
of shares of Stock legally and beneficially owned by the Eligible Person, free
of all liens, claims, and encumbrances of every kind, accompanied by stock
powers duly endorsed in blank by the record holder of the shares represented by
the certificates (with signature guaranteed by a commercial bank or trust
company or by a brokerage firm having a membership on a registered national
stock exchange). The delivery of certificates upon the exercise of Options is
subject to the condition that the person exercising the Option provides the
Company with the information the Company might reasonably request pertaining to
exercise, sale or other disposition.
5.6 STOCK APPRECIATION RIGHTS. All Eligible Persons shall be eligible
to receive Stock Appreciation Rights. The Committee shall determine the SAR to
be awarded from time to time to any Eligible Person. The grant of a SAR to be
awarded from time to time shall neither entitle such person to, nor disqualify
such person from, participation in any other grant of awards by the Company,
whether under this Plan or any other plan of the Company. If granted as a
stand-alone SAR Award, the terms of the Award shall be provided in a Stock
Appreciation Rights Agreement.
5.7 STOCK APPRECIATION RIGHTS IN TANDEM WITH OPTIONS. Stock
Appreciation Rights may, at the discretion of the Committee, be included in each
Option granted under the Plan to permit the holder of an Option to surrender
that Option, or a portion of the part which is then exercisable, and receive in
exchange, upon the conditions and limitations set by the Committee, an amount
equal to the excess of the Fair Market Value of the Stock covered by the Option,
or the portion of it that was surrendered, determined as of the date of
surrender, over the aggregate exercise price of the Stock. In the event of the
surrender of an Option, or a portion of it, to exercise the Stock Appreciation
Rights, the shares represented by the Option or that part of it which is
surrendered, shall not be available for reissuance under the Plan. Each Stock
Appreciation Right issued in tandem with an Option (a) will expire not later
than the expiration of the underlying Option, (b) may be for no more than 100%
of the difference between the exercise price of the underlying Option and the
Fair Market Value of a share of Stock at the time the Stock Appreciation Right
is exercised, (c) is transferable only when the underlying Option is
transferable, and under the same conditions, and (d) may be exercised only when
the underlying Option is eligible to be exercised.
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5.8 CONDITIONS OF STOCK APPRECIATION RIGHTS. All Stock Appreciation
Rights shall be subject to such terms, conditions, restrictions or limitations
as the Committee deems appropriate, including by way of illustration but not by
way of limitation, restrictions on transferability, requirement of continued
employment, individual performance, financial performance of the Company, or
payment of any applicable employment or withholding taxes.
5.9 PAYMENT OF STOCK APPRECIATION RIGHTS. The amount of payment to
which the Eligible Person who reserves an SAR shall be entitled upon the
exercise of each SAR shall be equal to the amount, if any by which the Fair
Market Value of the specified shares of Stock on the exercise date exceeds the
Fair Market Value of the specified shares of Stock on the date of grant of the
SAR. The SAR shall be paid in either cash or Stock, as determined in the
discretion of the Committee as set forth in the SAR agreement. If the payment is
in Stock, the number of shares to be paid shall be determined by dividing the
amount of such payment by the Fair Market Value of Stock on the exercise date of
such SAR.
5.10 EXERCISE ON TERMINATION OF EMPLOYMENT. Unless it is expressly
provided otherwise in the Option or SAR agreement, Options and SAR's granted to
Employees shall terminate three months after severance of employment of the
Employee from the Company and all Affiliates for any reason, with or without
cause, other than death, retirement under the then established rules of the
Company, or severance for disability. The Committee shall determine whether
authorized leave of absence or absence on military or government service shall
constitute severance of the employment of the Employee at that time.
5.11 DEATH. If, before the expiration of an Option or SAR, the Eligible
Person, whether in the employ of the Company or after he has retired or was
severed for disability, or otherwise dies, the Option or SAR shall continue
until the earlier of the Option's or SAR's expiration date or one year following
the date of his death, unless it is expressly provided otherwise in the Option
or SAR agreement. After the death of the Eligible Person, his executors,
administrators, or any persons to whom his Option or SAR may be transferred by
will or by the laws of descent and distribution shall have the right, at any
time prior to the Option's or SAR's expiration or termination, whichever is
earlier, to exercise it, to the extent to which he was entitled to exercise it
immediately prior to his death, unless it is expressly provided otherwise in the
Option or SAR's agreement.
5.12 RETIREMENT. Unless it is expressly provided otherwise in the
Option or SAR Agreement, before the expiration of an Option or SAR, the Employee
shall be retired in good standing from the employ of the Company under the then
established rules of the Company, the Option or SAR shall continue until the
earlier of the Option's or SAR's expiration date or six months following the
date of his retirement, unless it is expressly provided otherwise in the Option
or SAR agreement.
5.13 DISABILITY. If, before the expiration of an Option or SAR, the
Employee shall be severed from the employ of the Company for disability, the
Option or SAR shall terminate on the earlier of the Option's or SAR's expiration
date or one year after the date he was severed because of disability, unless it
is expressly provided otherwise in the Option or SAR agreement.
5.14 SUBSTITUTION OPTIONS. Options may be granted under this Plan from
time to time in substitution for stock options held by employees of other
corporations who are about to become employees of or affiliated with the Company
or any Affiliate as the result of a merger or consolidation of the employing
corporation with the Company or any Affiliate, or the acquisition by the Company
or any Affiliate of the assets of the employing corporation, or the acquisition
by the Company or any Affiliate of stock of the employing corporation as the
result of which it becomes an Affiliate of the Company. The terms and conditions
of the substitute Options granted may vary from the terms and conditions set out
in this Plan to the extent the Committee, at the time of grant, may deem
appropriate to conform, in whole or in part, to the provisions of the stock
options in substitution for which they are granted.
5.15 NO RIGHTS AS STOCKHOLDER. No Eligible Person shall have any rights
as a stockholder with respect to Stock covered by his Option until the date a
stock certificate is issued for the Stock.
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ARTICLE VI - AWARDS
6.1 RESTRICTED STOCK AWARDS. The Committee may issue shares of Stock to
an Eligible Person subject to the terms of a Restricted Stock Agreement. The
Restricted Stock may be issued for no payment by the Eligible Person or for a
payment below the Fair Market Value on the date of grant. Restricted Stock shall
be subject to restrictions as to sale, transfer, alienation, pledge or other
encumbrance and generally will be subject to vesting over a period of time
specified in the Restricted Stock Agreement. The Committee shall determine the
period of vesting, the number of shares, the price, if any, of Stock included in
a Restricted Stock Award, and the other terms and provisions which are included
in a Restricted Stock Agreement.
6.2 RESTRICTIONS. Restricted Stock shall be subject to the terms and
conditions as determined by the Committee, including without limitation, any or
all of the following:
(a) a prohibition against the sale, transfer, alienation, pledge, or
other encumbrance of the shares of Restricted Stock, such prohibition to lapse
(i) at such time or times as the Committee shall determine (whether in annual or
more frequent installments, at the time of the death, disability, or retirement
of the holder of such shares, or otherwise);
(b) a requirement that the holder of shares of Restricted Stock
forfeit, or in the case of shares sold to an Eligible Person, resell back to the
Company at his cost, all or a part of such shares in the event of termination of
the Eligible Person's employment during any period in which the shares remain
subject to restrictions;
(c) A prohibition against employment of the holder of Restricted Stock
by any competitor of the Company or its Affiliates, or against such holder's
dissemination of any secret or confidential information belonging to the Company
or an Affiliate;
(d) unless stated otherwise in the Restricted Stock Agreement, (i) if
restrictions remain at the time of severance of employment with the Company and
all Affiliates, other than for reason of disability or death, the Restricted
Stock shall be forfeited; and (ii) if severance of employment is by reason of
disability or death, the restrictions on the shares shall lapse and the Eligible
Person or his heirs or estate shall be 100% vested in the shares subject to the
Restricted Stock Agreement.
6.3 STOCK CERTIFICATE. Shares of Restricted Stock shall be registered
in the name of the Eligible Person receiving the Restricted Stock Award and
deposited, together with a stock power endorsed in blank, with the Company. Each
such certificate shall bear a legend in substantially the following form:
"The transferability of this certificate and the shares of Stock
represented by it is restricted by and subject to the terms and
conditions (including conditions of forfeiture) contained in the Eagle
Broadband, Inc., 2005 Stock Employee Option Plan, and an agreement
entered into between the registered owner and the Company. A copy of
the Plan and agreement is on file in the office of the Secretary of the
Company."
6.4 RIGHTS AS STOCKHOLDER. Subject to the terms and conditions of the
Plan and unless otherwise provided in the Restricted Stock Award agreement, each
Eligible Person receiving a certificate for Restricted Stock shall have all the
rights of a stockholder with respect to the shares of Stock included in the
Restricted Stock Award during any period in which such shares are subject to
forfeiture and restrictions on transfer, including without limitation, the right
to vote such shares. Dividends paid with respect to shares of Restricted Stock
in cash or property other than Stock in the Company or rights to acquire stock
in the Company shall be paid to the Eligible Person currently. Dividends paid in
Stock in the Company or rights to acquire Stock in the Company shall be added to
and become a part of the Restricted Stock.
6.5 LAPSE OF RESTRICTIONS. At the end of the time period during which
any shares of Restricted Stock are subject to forfeiture and restrictions on
sale, transfer, alienation, pledge, or other encumbrance, such shares shall vest
and will be delivered in a certificate, free of all restrictions, to the
Eligible Person or to the Eligible Person's legal representative, beneficiary or
heir; provided the certificate shall bear such legend, if any, as the Committee
determines is reasonably required by applicable law. By accepting a Stock Award
and executing a Restricted Stock Agreement, the Eligible Person agrees to remit
when due any federal and state income and employment taxes required to be
withheld.
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6.6 RESTRICTION PERIOD. No Restricted Stock Award may provide for
restrictions continuing beyond ten (10) years from the date of grant.
ARTICLE VII - ADMINISTRATION
The Committee shall administer the Plan. All questions of
interpretation and application of the Plan and Awards shall be subject to the
determination of the Committee. A majority of the members of the Committee shall
constitute a quorum. All determinations of the Committee shall be made by a
majority of its members. Any decision or determination reduced to writing and
signed by a majority of the members shall be as effective as if it had been made
by a majority vote at a meeting properly called and held. This Plan shall be
administered in such a manner as to permit the Options, which are designated to
be Incentive Options, to qualify as Incentive Options. In carrying out its
authority under this Plan, the Committee shall have full and final authority and
discretion, including but not limited to the following rights, powers and
authorities, to:
(a) Determine the Eligible Persons to whom and the time (s) at
which Options or Awards will be made;
(b) Determine the number of shares and the purchase price of Stock
covered in each Option or Award, subject to the terms of the
Plan;
(c) Determine the terms, provisions, and conditions of each Option
and Award, which need not be identical;
(d) Accelerate the time at which any outstanding Option or SAR may
be exercised, or Restricted Stock Award will vest;
(e) Define the effect, if any, on an Option or Award of the death,
disability, retirement, or termination of employment of the
Employee;
(f) Prescribe, amend and rescind rules and regulations relating to
administration of the Plan; and
(g) Make all other determinations and take all other actions
deemed necessary, appropriate, or advisable for the proper
administration of this Plan.
The actions of the Committee in exercising all of the rights, powers,
and authorities set out in this Article and all other Articles of this Plan,
when performed in good faith and in its sole judgment, shall be final,
conclusive and binding on all parties.
ARTICLE VIII - AMENDMENT OR TERMINATION OF PLAN
The Board of Directors of the Company may amend, terminate or suspend this Plan
at any time, in its sole and absolute discretion; provided, however, that to the
extent required to qualify this Plan under Rule 16b-3 promulgated under Section
16 of the Securities Exchange Act of 1934, as amended, no amendment that would
(a) materially increase the number of shares of Stock that may be issued under
this Plan, (b) materially modify the requirements as to eligibility for
participation in this Plan, or (c) otherwise materially increase the benefits
accruing to participants under this Plan, shall be made without the approval of
the Company's stockholders. Subject to the preceding sentence, the Board of
Directors shall have the power to make any changes in the Plan and in the
regulations and administrative provisions under it or in any outstanding
Incentive Option as in the opinion of counsel for the Company may be necessary
or appropriate from time to time to enable any Incentive Option granted under
this Plan to continue to qualify as an incentive stock option or such other
stock option as may be defined under the Code so as to receive preferential
federal income tax treatment.
ARTICLE IX - MISCELLANEOUS
9.1 NO ESTABLISHMENT OF A TRUST FUND. No property shall be set aside
nor shall a trust fund of any kind be established to secure the rights of any
Eligible Person under this Plan. All Eligible Persons shall at all times rely
solely upon the general credit of the Company for the payment of any benefit
which becomes payable under this Plan.
9.2 NO EMPLOYMENT OBLIGATION. The granting of any Option or Award shall
not constitute an employment contract, express or implied, nor impose upon the
Company or any Affiliate any obligation to employ or continue to employ any
Eligible Person. The right of the Company or any Affiliate to terminate the
employment of any person shall not be diminished or affected by reason of the
fact that an Option or Award has been granted to him.
B-8
9.3 FORFEITURE. Notwithstanding any other provisions of this Plan, if
the Committee finds by a majority vote after full consideration of the facts
that an Eligible Person, before or after termination of his employment with the
Company or an Affiliate for any reason (a) committed or engaged in fraud,
embezzlement, theft, commission of a felony, or proven dishonesty in the course
of his employment by the Company or an Affiliate, which conduct damaged the
Company or Affiliate, or disclosed trade secrets of the Company or an Affiliate,
or (b) participated, engaged in or had a material, financial, or other interest,
whether as an employee, officer, director, consultant, contractor, stockholder,
owner, or otherwise, in any commercial endeavor in the United States which is
competitive with the business of the Company or an Affiliate without the written
consent of the Company or Affiliate, the Eligible Person shall forfeit all
outstanding Options and all outstanding Awards, and including all exercised
Options and other situations pursuant to which the Company has not yet delivered
a stock certificate. Clause (b) shall not be deemed to have been violated solely
by reason of the Eligible Person's ownership of stock or securities of any
publicly owned corporation, if that ownership does not result in effective
control of the corporation.
The decision of the Committee as to the cause of an Employee's
discharge, the damage done to the Company or an Affiliate, and the extent of an
Eligible Person's competitive activity shall be final. No decision of the
Committee, however, shall affect the finality of the discharge of the Employee
by the Company or an Affiliate in any manner.
9.4 TAX WITHHOLDING. The Company or any Affiliate shall be entitled to
deduct from other compensation payable to each Eligible Person any sums required
by federal, state, or local tax law to be withheld with respect to the grant or
exercise of an Option or SAR, or lapse of restrictions on Restricted Stock. In
the alternative, the Company may require the Eligible Person (or other person
exercising the Option, SAR or receiving the Stock) to pay the sum directly to
the employer corporation. If the Eligible Person (or other person exercising the
Option or SAR or receiving the Stock) is required to pay the sum directly,
payment in cash or by check of such sums for taxes shall be delivered within 10
days after the date of exercise or lapse of restrictions. The Company shall have
no obligation upon exercise of any Option or lapse of restrictions on Stock
until payment has been received, unless withholding (or offset against a cash
payment) as of or prior to the date of exercise or lapse of restrictions is
sufficient to cover all sums due with respect to that exercise. The Company and
its Affiliates shall not be obligated to advise an Eligible Person of the
existence of the tax or the amount which the employer corporation will be
required to withhold.
9.5 WRITTEN AGREEMENT. Each Option and Award shall be embodied in a
written agreement which shall be subject to the terms and conditions of this
Plan and shall be signed by the Eligible Person and by a member of the Committee
on behalf of the Committee and the Company or an executive officer of the
Company, other than the Eligible Person, on behalf of the Company. The agreement
may contain any other provisions that the Committee in its discretion shall deem
advisable which are not inconsistent with the terms of this Plan.
9.6 INDEMNIFICATION OF THE COMMITTEE AND THE BOARD OF DIRECTORS. With
respect to administration of this Plan, the Company shall indemnify each present
and future member of the Committee and the Board of Directors against, and each
member of the Committee and the Board of Directors shall be entitled without
further act on his part to indemnity from the Company for, all expenses
(including attorney's fees, the amount of judgments, and the amount of approved
settlements made with a view to the curtailment of costs of litigation, other
than amounts paid to the Company itself) reasonably incurred by him in
connection with or arising out of any action, suit, or proceeding in which he
may be involved by reason of his being or having been a member of the Committee
and/or the Board of Directors, whether or not he continues to be a member of the
Committee and/or the Board of Directors at the time of incurring the expenses,
including, without limitation, matters as to which he shall be finally adjudged
in any action, suit or proceeding to have been found to have been negligent in
the performance of his duty as a member of the Committee or the Board of
Directors. However, this indemnity shall not include any expenses incurred by
any member of the Committee and/or the Board of Directors in respect of matters
as to which he shall be finally adjudged in any action, suit or proceeding to
have been guilty of gross negligence or willful misconduct in the performance of
his duty as a member of the Committee and the Board of Directors. This right of
indemnification shall inure to the benefit of the heirs, executors or
administrators of each member of the Committee and the Board of Directors and
shall be in addition to all other rights to which a member of the Committee and
the Board of Directors may be entitled as a matter of law, contract, or
otherwise.
9.7 GENDER. If the context requires, words of one gender when used in
this Plan shall include the others and words used in the singular or plural
shall include the other.
9.8 HEADINGS. Headings of Articles and Sections are included for
convenience of reference only and do not constitute part of the Plan and shall
not be used in construing the terms of the Plan.
B-9
9.9 OTHER COMPENSATION PLANS. The adoption of this Plan shall not
affect any other stock option, incentive or other compensation or benefit plans
in effect for the Company or any Affiliate, nor shall the Plan preclude the
Company from establishing any other forms of incentive or other compensation for
employees of the Company or any Affiliate.
9.10 OTHER OPTIONS OR AWARDS. The grant of an Option or Award shall not
confer upon the Eligible Person the right to receive any future or other Options
or Awards under this Plan, whether or not Options or Awards may be granted to
similarly situated Eligible Persons, or the right to receive future Options or
Awards upon the same terms or conditions as previously granted.
9.11 GOVERNING LAW. The provisions of this Plan shall be construed,
administered, and governed under the laws of the State of Texas.
B-10
FORM OF PROXY
EAGLE BROADBAND, INC.
ANNUAL MEETING OF SHAREHOLDERS
EAGLE BROADBAND, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of Eagle Broadband, Inc., ("the Company")
hereby acknowledges receipt of the Notice of Annual Meeting of Shareholders and
appoints C. J. Reinhartsen or David Micek and each of them, with full power of
substitution, as Proxy or Proxies to vote as specified in this Proxy all the
shares of common stock of the Company of the undersigned at the Annual Meeting
of Shareholders of the Company to the held at South Shore Hotel, 2500 South
Shore Blvd., League City, Texas, 77575 on September 20, 2005, 1:30 p.m., Central
Time, and any and all adjournments or postponements thereof. Either of such
Proxies or substitutes shall have and may exercise all of the powers of said
Proxies hereunder. The undersigned shareholder hereby revokes any proxy or
proxies heretofore executed for such matters.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER AS DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR THE ELECTION OF THE NOMINEES UNDER PROPOSAL ONE, VOTED FOR THE
ADOPTION OF THE EMPLOYEE STOCK OPTION PLAN UNDER PROPOSAL TWO, VOTED FOR THE
RATIFICATION OF LOPEZ, BLEVINS, BORK & ASSOCIATES, LLP AS OUR AUDITORS UNDER
PROPOSAL THREE, AND IN THE DISCRETION OF THE PROXIES AS TO ANY OTHER MATTERS
THAT MAY PROPERLY COME BEFORE THE MEETING. THE UNDERSIGNED SHAREHOLDER MAY
REVOKE THIS PROXY AT ANY TIME BEFORE IT IS VOTED BY THE DELIVERING TO THE
SECRETARY OF THE COMPANY EITHER A WRITTEN REVOCATION OF THE PROXY OR A DULY
EXECUTED PROXY BEARING A LATER DATE, OR BY APPEARING AT THE ANNUAL MEETING AND
VOTING IN PERSON.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE DIRECTORS' NOMINEES UNDER
PROPOSAL ONE. A VOTE "FOR" THE ADOPTION OF THE COMPANY'S EMPLOYEE STOCK OPTION
PLAN UNDER PROPOSAL TWO AND THE RATIFICATION OF THE AUDITORS UNDER PROPOSAL
THREE. PLEASE MARK, SIGN, DATE, AND RETURN THIS CARD USING THE ENCLOSED RETURN
ENVELOPE AT YOUR EARLIEST POSSIBLE OPPORTUNITY.
1. To elect directors out of the seven persons nominated to hold office
until the 2006 Annual Meeting of Shareholders:
You may check some or all of the seven nominees.
FOR AGAINST ABSTAIN
Robert Bach [ ] [ ] [ ]
H. Dean Cubley [ ] [ ] [ ]
Glenn Goerke [ ] [ ] [ ]
David Micek [ ] [ ] [ ]
Lorne Persons, Jr [ ] [ ] [ ]
C. J. (Jim) Reinhartsen [ ] [ ] [ ]
James Yarbrough [ ] [ ] [ ]
2. To adopt the Company's 2005 Employee Stock [ ] [ ] [ ]
Option Plan.
3. To ratify Lopez, Blevins, Bork & Associates, LLP [ ] [ ] [ ]
as our independent auditors.
DATED: __________________________ ______________________________________
[Signature]
--------------------------------------
[Signature if jointly held]
--------------------------------------
[Printed Name]
Please sign exactly as your name appears
hereon. (If shares are held by joint
tenants, both should sign. If signing as
Attorney, Executor, Administrator, Trustee
or Guardian, please give your title as such.
If the signer is a corporation, please sign
in the full corporate name by duly
authorized officer.)