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 Commission Only (as permitted by Rule
14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss. 14a-11 or ss. 240.14a-12.
P-COM, INC.
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(Name of Registrant as Specified in Charter)
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|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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(2) Aggregate number of securities to which transaction applies:
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(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):
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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:
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(4) Date filed:
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[P-COM LOGO]
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September 3, 2004
Dear Stockholder:
You are cordially invited to attend the annual meeting of the
stockholders of P-Com, Inc. At the P-Com annual meeting, P-Com stockholders will
be asked to:
o approve an amendment to P-Com's certificate of incorporation to
increase the authorized common stock of P-Com from 23,333,333
shares to 35,000,000;
o approve the removal of certain limitations on the exercise of
P-Com's outstanding warrants;
o adopt P-Com's 2004 Equity Incentive Plan;
o elect two directors to the board of directors of P-Com; and
o ratify the appointment of Aidman Piser & Company as independent
auditors of P-Com.
At the meeting, stockholders of P-Com will also be asked to give
management the discretionary authority to adjourn the meeting to a later date or
dates, but not later than October 31, 2004, in order to solicit additional
proxies in favor of any of the proposals listed above.
The date, time, and place of the annual meeting of the stockholders of
P-Com are as follows:
October 8, 2004
at 10:00 a.m. local time
at the corporate offices of P-Com, Inc.
3175 S. Winchester Boulevard
Campbell, California 95008
P-Com's common stock is currently traded on the OTC Bulletin Board
under the symbol "PCMC" and on August 16, 2004, the closing price of P-Com's
common stock was $0.88 per share.
THE BOARD OF DIRECTORS OF P-COM RECOMMENDS THAT THE STOCKHOLDERS OF
P-COM VOTE (I) FOR THE AMENDMENT TO P-COM'S CERTIFICATE OF INCORPORATION; (II)
FOR THE REMOVAL OF CERTAIN LIMITATIONS ON THE EXERCISE OF P-COM'S OUTSTANDING
WARRANTS; (III) FOR THE ADOPTION OF P-COM'S 2004 EQUITY INCENTIVE PLAN; (IV) FOR
THE ELECTION OF P-COM'S DIRECTOR NOMINEES TO THE BOARD OF DIRECTORS OF P-COM;
(V) FOR THE RATIFICATION OF THE APPOINTMENT OF AIDMAN PISER & COMPANY AS
INDEPENDENT AUDITORS OF P-COM; AND (VI) FOR GRANTING P-COM'S MANAGEMENT THE
DISCRETIONARY AUTHORITY TO ADJOURN THE ANNUAL MEETING, ALL AS FURTHER DESCRIBED
IN THE ATTACHED MATERIALS.
The accompanying notice of the annual meeting of the stockholders of
P-Com and proxy statement explains the proposals being presented for your
approval, and they provide specific information about the annual meeting. Please
read these materials carefully.
Whether or not you expect to attend the meeting, please complete, date,
sign and promptly return the accompanying proxy in the enclosed postage paid
envelope so that your shares may be represented at the meeting, regardless of
the number of shares you own. If you sign, date and return your proxy card
without indicating how you want to vote, your proxy will be voted in accordance
with the recommendations of the board of directors.
We join our board of directors in strongly supporting and recommending
that you vote in favor of the proposals presented to you for approval.
Sincerely,
/s/ Sam Smookler
Sam Smookler
President and Chief Executive Officer of P-Com, Inc.
This proxy statement is dated September 3, 2004, and was first mailed
to stockholders of P-Com on or about September 13, 2004.
[P-COM LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 8, 2004
TO THE STOCKHOLDERS OF P-COM, INC.:
NOTICE IS HEREBY GIVEN that the 2004 Annual Meeting of Stockholders of
P-Com, Inc., a Delaware corporation, will be held on October 8, 2004 at 10:00
a.m., local time at the corporate offices of P-Com, Inc. located at 3175 S.
Winchester Boulevard, Campbell, California 95008. At the meeting, you will be
asked to vote on the following matters:
1. To approve an amendment to P-Com's certificate of incorporation
to increase the authorized common stock of P-Com from 23,333,333
shares to 35,000,000 shares.
2. To approve the removal of certain limitations on the exercise of
P-Com's outstanding warrants.
3. To adopt P-Com's 2004 Equity Incentive Plan which shall replace
P-Com's 1995 Stock Option/Stock Issuance Plan.
4. To elect two directors to P-Com's board of directors to serve for
three-year terms ending upon the 2007 annual meeting of
stockholders or until a successor is duly elected and qualified.
5. To ratify the appointment of Aidman Piser & Company as
independent auditors of P-Com for the fiscal year ending December
31, 2004.
6. To grant P-Com's management the discretionary authority to
adjourn the annual meeting to a date or dates not later than
October 31, 2004, if necessary to enable P-Com's board of
directors to solicit additional proxies in favor of any of the
proposals listed above.
7. To consider such other matters as may properly come before the
annual meeting or any adjournment of the annual meeting.
P-Com's board of directors has approved each of the proposals and
recommends that you vote FOR each of the proposals as described in the attached
materials. Before voting, you should carefully review all the information
contained in the attached proxy statement.
All P-Com stockholders are cordially invited to attend the P-Com annual
meeting in person. Whether or not you expect to attend the annual meeting,
please complete, date, sign and promptly return the accompanying proxy in the
enclosed postage paid envelope so that your shares may be represented at the
annual meeting, regardless of the number of shares you own. If you receive more
than one proxy card because your shares are registered in different names and
addresses, each proxy card should be signed and returned to assure that all your
shares will be represented at the annual meeting. You may revoke your proxy at
any time prior to the annual meeting. If you attend the annual meeting and vote
by ballot, your proxy will be revoked automatically and only your vote at the
annual meeting will be counted.
Only P-Com stockholders of record at the close of business on August
10, 2004, the record date for the P-Com annual meeting, are entitled to receive
notice of and to vote at the annual meeting or any adjournment of the annual
meeting. The stock transfer books of P-Com will remain open between the record
date and the date of the annual meeting. A list of stockholders entitled to vote
at the annual meeting will be available for inspection at the executive offices
of P-Com.
Sincerely,
/s/ Sam Smookler
Sam Smookler
President and Chief Executive Officer
September 3, 2004
Campbell, California
YOUR VOTE IS IMPORTANT.
PLEASE EITHER (1) MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD AS
PROMPTLY AS POSSIBLE IN THE ENCLOSED POSTAGE-PAID ENVELOPE; (2) USE THE
TELEPHONE NUMBER INDICATED BELOW OR SHOWN ON THE PROXY CARD TO SUBMIT YOUR PROXY
BY TELEPHONE; OR (3) VISIT THE WEBSITE INDICATED BELOW OR NOTED ON YOUR PROXY
CARD TO SUBMIT YOUR PROXY ON THE INTERNET. IN THIS WAY, IF YOU ARE UNABLE TO
ATTEND IN PERSON, YOUR SHARES CAN STILL BE VOTED AT THE P-COM ANNUAL MEETING.
VOTING ELECTRONICALLY OR BY TELEPHONE
In addition to submitting your proxy by mail, you may also submit your
proxy:
o through the Internet, by visiting a website established for that
purpose at http://www.eproxyvote.com/pcom and following the
instructions; or
o by telephone, by calling the toll-free number 1-877-PRX-VOTE
(1-877-779-8683) in the United States, Canada or Puerto Rico on a
touch-tone phone and following the recorded instructions.
If you are a beneficial owner, please refer to your proxy card or the
information forwarded by your bank, broker or other holder of record to see
which options are available to you.
INFORMATION ON P-COM'S WEBSITE
Information on any P-Com website is not part of this proxy statement
and P-Com stockholders should not rely on that information in deciding whether
to approve the proposals described in this proxy statement, unless that
information is also in this proxy statement.
TABLE OF CONTENTS
Page
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ANNUAL MEETING OF P-COM STOCKHOLDERS..............................................................................1
General......................................................................................................1
Purpose of the Annual Meeting................................................................................1
Recommendation of P-Com's Board of Directors.................................................................1
Record Date and Outstanding Shares...........................................................................2
Quorum and Vote Required.....................................................................................2
Proxies......................................................................................................3
Revocation of Proxies........................................................................................4
Appraisal Rights Under Delaware Law..........................................................................4
Expenses; Solicitation.......................................................................................4
Shares held by P-Com Directors and Executive Officers........................................................5
PROPOSAL TO AMEND ITS CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF SHARES OF AUTHORIZED COMMON STOCK....5
General......................................................................................................5
Purpose of and Rationale for Proposed Amendment..............................................................6
Effect of Proposed Amendment.................................................................................6
Anti-Takeover Effects........................................................................................7
Approvals Required...........................................................................................7
Recommendation of P-Com's Board of Directors.................................................................7
PROPOSAL TO REMOVE LIMITATIONS ON EXERCISE OF P-COM'S OUTSTANDING WARRANTS........................................7
Background...................................................................................................7
Proposal to Permit Removal of Limitation on Exercise of Warrants.............................................8
Purpose of and Rationale for Proposal........................................................................8
Additional Working Capital...................................................................................8
Effect of Proposal...........................................................................................9
Approvals Required..........................................................................................10
Recommendation of P-Com's Board of Directors................................................................10
PROPOSAL TO ADOPT THE 2004 EQUITY INCENTIVE PLAN.................................................................10
Equity Incentive Awards.....................................................................................10
Share Reserve...............................................................................................11
Changes in Capitalization...................................................................................11
Eligibility.................................................................................................11
Valuation...................................................................................................11
Stock Options...............................................................................................11
Restricted Stock............................................................................................14
Stock Units.................................................................................................15
Change in Control...........................................................................................16
Amendment and Termination...................................................................................16
Federal Income Tax Consequences.............................................................................16
Accounting Treatment........................................................................................18
New Plan Benefits...........................................................................................19
Approvals Required..........................................................................................19
Recommendation of P-Com's Board of Directors................................................................19
PROPOSAL TO ELECT P-COM'S DIRECTOR NOMINEES TO THE P-COM BOARD OF DIRECTORS......................................19
General.....................................................................................................19
Nominees for Term Ending Upon the 2004 Annual Meeting of Stockholders.......................................20
Continuing Director for Term Ending Upon the 2005 Annual Meeting of Stockholders............................20
Continuing Director for Term Ending Upon the 2006 Annual Meeting of Stockholders............................20
Board Committees and Meetings...............................................................................21
Stockholder Communications with the Board of Directors......................................................21
Approvals Required..........................................................................................21
Recommendation of the Board of Directors....................................................................21
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PROPOSAL TO RATIFY THE SELECTION OF ITS INDEPENDENT AUDITORS.....................................................21
General.....................................................................................................21
Principal Accountant Fees and Services......................................................................22
Approvals Required..........................................................................................23
Recommendation of the Board of Directors....................................................................23
PROPOSAL TO GRANT P-COM'S MANAGEMENT THE DISCRETIONARY AUTHORITY TO ADJOURN THE ANNUAL MEETING...................23
Approvals Required..........................................................................................24
Recommendation of the Board of Directors....................................................................24
DIRECTORS AND OFFICERS...........................................................................................24
BENEFICIAL OWNERSHIP OF SECURITIES...............................................................................26
EXECUTIVE COMPENSATION AND RELATED INFORMATION...................................................................27
Summary Compensation Table..................................................................................27
Option Grants in Last Fiscal Year...........................................................................29
Aggregated Option Exercises and Fiscal Year-End Option Values...............................................29
Director Compensation.......................................................................................30
Employment Contracts, Termination of Employment Agreements and Change of Control Agreements.................30
Compensation Committee Interlocks and Insider Participation.................................................33
Report of the Compensation Committee of the Board of Directors on Executive Compensation....................33
AUDIT COMMITTEE REPORT...........................................................................................35
Stock Performance Graph.....................................................................................36
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE..........................................................36
SUBMISSION OF STOCKHOLDER PROPOSALS..............................................................................36
INCORPORATION OF OTHER DOCUMENTS BY REFERENCE....................................................................37
OTHER MATTERS....................................................................................................37
APPENDIX A - 2004 EQUITY INCENTIVE PLAN
APPENDIX B - AUDIT COMMITTEE CHARTER
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ANNUAL MEETING OF P-COM STOCKHOLDERS
GENERAL
The board of directors of P-Com, Inc., a Delaware corporation, asks
that you appoint its representatives as proxies to vote your shares of P-Com
common stock at the annual meeting of the stockholders of P-Com to be held on
October 8, 2004. The annual meeting will be held at 10:00 a.m., Pacific Time at
P-Com's corporate headquarters, located at 3175 S. Winchester Boulevard,
Campbell, California 95008. To appoint the proxies, please sign and return the
enclosed form of proxy card. These proxy solicitation materials were mailed on
or about September 13, 2004, to all stockholders entitled to vote at the annual
meeting.
PURPOSE OF THE ANNUAL MEETING
At the annual meeting, P-Com will ask its stockholders to approve the
following matters:
1. To approve an amendment to P-Com's certificate of incorporation
to increase the number of shares of common stock authorized for
issuance from 23,333,333 shares to 35,000,000 shares.
2. To approve the removal of certain limitations on the exercise of
P-Com's outstanding warrants.
3. To adopt P-Com's 2004 Equity Incentive Plan which will supersede
and replace P-Com's 1995 Stock Option/Stock Issuance Plan.
4. To elect two directors to P-Com's board of directors to serve for
three-year terms ending upon the 2007 annual meeting of
stockholders or until a successor is duly elected and qualified.
5. To ratify the appointment of Aidman Piser & Company as
independent auditors of P-Com for the fiscal year ending December
31, 2004.
6. To grant P-Com's management the discretionary authority to
adjourn the annual meeting to a date or dates not later than
October 31, 2004, if necessary to enable P-Com's board of
directors to solicit additional proxies in favor of any of the
proposal listed above.
7. To consider such other matters as may properly come before the
annual meeting or any adjournment of the annual meeting.
RECOMMENDATION OF P-COM'S BOARD OF DIRECTORS
The board of directors of P-Com has approved the amendment to increase
the number of authorized shares of P-Com common stock and recommends that P-Com
stockholders vote FOR the proposal to amend P-Com's certificate of incorporation
to increase the number of shares of common stock that P-Com is authorized to
issue from 23,333,333 to 35,000,000.
P-Com's board of directors recommends that P-Com stockholders vote FOR
the proposal to approve the removal of certain limitations on the exercise of
P-Com's outstanding warrants.
P-Com's board of directors has approved the proposed 2004 Equity
Incentive Plan to supersede and replace P-Com's 1995 Stock Option/Stock Issuance
Plan. P-Com's board of directors recommends that P-Com stockholders vote FOR the
proposal to adopt the 2004 Equity Incentive Plan.
P-Com's board of directors has approved the nomination of George P.
Roberts and Brian T. Josling for election to the board of directors of P-Com to
serve for three-year terms ending upon the 2007 annual meeting of stockholders
or until their successors are duly elected and qualified. P-Com's board of
directors recommends that P-Com stockholders vote FOR the election of these two
director nominees.
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P-Com's board of directors has approved the appointment of Aidman Piser
& Company as independent auditors of P-Com for the fiscal year ending December
31, 2004. P-Com's board of directors recommends that P-Com stockholders vote FOR
the ratification of the appointment of Aidman Piser & Company as independent
auditors of P-Com.
It may be necessary to adjourn the annual meeting. If a quorum is not
present at the annual meeting, the annual meeting may need to be adjourned to
enable P-Com's board of directors to solicit additional proxies. If a quorum is
present but the number of shares voting in favor of any of the proposals listed
above is insufficient to approve that proposal under Delaware law, then, if the
adjournment proposal has received the affirmative vote of the holders of a
majority of the shares present in person or represented by proxy at the meeting
and voting on the proposal, P-Com's management will have the discretion to
adjourn the annual meeting to a date or dates not later than October 31, 2004 to
provide P-Com's board of directors additional time to solicit proxies in favor
of that proposal. P-Com's board of directors recommends that P-Com stockholders
vote FOR the adjournment proposal.
To assure that your shares of P-Com common stock, Series C Preferred
Stock and Series D Preferred Stock are represented at the annual meeting, please
complete, date and sign the enclosed proxy and mail it promptly in the
postage-paid envelope provided or submit your proxy electronically by telephone
or via the Internet, whether or not you plan to attend the meeting. You may
revoke your proxy at any time before votes are cast at the meeting.
RECORD DATE AND OUTSTANDING SHARES
Only holders of record of P-Com common stock, Series C Preferred Stock
and Series D Preferred Stock at the close of business on August 10, 2004, the
record date for P-Com's annual meeting, are entitled to receive notice of and to
vote at the annual meeting. On the record date, the following numbers of shares
of each class of P-Com stock were issued and outstanding:
o 10,426,734 shares of P-Com common stock were issued and
outstanding and held by approximately 864 holders of record.
o no shares of P-Com Series A Junior Participating Preferred Stock
were issued or outstanding,
o 108,406 shares of P-Com Series B Preferred Stock were issued and
outstanding and held by three holders of record.
o 6,230 shares of P-Com Series C Preferred Stock were issued and
outstanding and held by approximately 103 holders of record.
o 2,000 shares of P-Com Series D Preferred Stock were issued and
outstanding and held by three holders of record.
QUORUM AND VOTE REQUIRED
At the annual meeting, the holders of shares of each class of P-Com
stock are entitled to vote as follows:
o Holders of P-Com common stock will be entitled to one vote per
share of common stock held as of the record date.
o Holders of P-Com Series B Preferred Stock will not be entitled to
vote.
o Holders of P-Com Series C Preferred Stock will be entitled to one
vote for each share of P-Com common stock issuable upon
conversion of the Series C Preferred Stock held as of the record
date.
o Holders of P-Com Series D Preferred Stock will be entitled to one
vote for each share of P-Com common stock issuable upon
conversion of the Series D Preferred Stock held as of the record
date.
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A quorum of stockholders is necessary to hold a valid meeting. A quorum
will be present at the annual meeting if shares representing a majority of the
votes entitled to be cast are represented in person or by proxy. If a quorum is
not present at the annual meeting, P-Com expects that the meeting will be
adjourned or postponed to a later date so that a quorum can be established.
Abstentions and "broker non-votes" count as being present to establish a quorum.
A "broker non-vote" occurs when a broker is not permitted to vote because the
broker does not have instructions from the beneficial owner of the shares and
the broker does not have the discretion under applicable exchange rules to vote
on matters presented.
The proposal to approve the amendment to P-Com's certificate of
incorporation (Proposal 1) requires the affirmative vote of (i) the holders of a
majority of the shares of P-Com common stock outstanding as of the record date,
voting as a separate class, and (ii) the holders of a majority of the shares of
P-Com common stock, Series C Preferred Stock and Series D Preferred Stock
outstanding as of the record date, voting together as a single class.
Abstentions and broker non-votes will have the same effect as a vote against
these proposals.
The proposal to approve the removal of certain limitations on the
exercise of P-Com's outstanding warrants (Proposal 2) requires the affirmative
vote of the holders of a majority of the shares of P-Com common stock
outstanding as of the record date, voting as a separate class. Abstentions and
broker non-votes will have the same effect as a vote against this proposal.
The proposal to adopt P-Com's 2004 Equity Incentive Plan (Proposal 3)
requires the affirmative vote of (i) the holders of a majority of the shares of
P-Com common stock outstanding as of the record date, voting as a separate
class, and (ii) the holders of a majority of the shares of P-Com common stock,
Series C Preferred Stock and Series D Preferred Stock outstanding as of the
record date, voting together as a single class. Abstentions and broker non-votes
will have the same effect as a vote against these proposals.
Directors are elected by a plurality vote, which means that the two
nominees who receive the most votes will be elected to the board of directors of
P-Com. P-Com stockholders may not cumulate their votes in the election of
directors. Abstentions and broker non-votes will not affect the outcome of the
vote on the election of directors.
All other proposals will be decided by the affirmative vote of the
holders of a majority of the shares of P-Com common stock, Series C Preferred
Stock and Series D Preferred Stock present in person or represented by proxy at
the annual meeting and entitled to vote on the matters presented. Abstentions
and broker non-votes will not affect the outcome of the vote on these proposals.
All votes will be tabulated by the inspector of election appointed for
the meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes.
PROXIES
All shares of P-Com common stock, Series C Preferred Stock and Series D
Preferred Stock represented by properly executed proxies and received in time
for the annual meeting (and not revoked) will be voted at the annual meeting in
the manner specified by the grantors of those proxies. Properly executed proxies
that do not contain voting instructions will be voted FOR each of the proposals
described in the accompanying notice of annual meeting and this proxy statement,
and the proxy holder may vote the proxy in its discretion as to any other matter
which may properly come before the meeting.
If you are a holder of shares of P-Com common stock, Series C Preferred
Stock or Series D Preferred Stock, in order for your shares to be included in
the vote, you must vote your shares by one of the following means:
o in person by written ballot;
o by proxy by completing, signing and dating the enclosed proxy and
returning it in the enclosed postage paid envelope;
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o in the United States, Canada and Puerto Rico, by telephone by
calling 1-877-PRX-VOTE (1-877-779-8683), as noted on the proxy
card; or
o via the Internet by visiting http://www.eproxyvote.com/pcom, as
noted on the proxy card.
Please note, however, that if your shares are held of record by a
broker, bank or other nominee and you wish to vote those shares in person at the
annual meeting, you must obtain from the nominee holding your P-Com common
stock, Series C Preferred Stock or Series D Preferred Stock, a properly executed
legal proxy, identifying you as a P-Com stockholder, authorizing you to act on
behalf of the nominee at the annual meeting, and identifying the number of
shares with respect to which the authorization is granted.
Only shares affirmatively voted for the approval of the proposals set
forth above, including properly executed proxies that do not contain voting
instructions, will be counted as votes in favor of such proposals. Brokers who
hold shares of P-Com common stock, Series C Preferred Stock or Series D
Preferred Stock in street name for customers who are the beneficial owners of
those shares may not give a proxy to vote those shares without specific
instructions from those customers.
P-Com does not expect that any matter other than the proposals set
forth above will be brought before its annual meeting. If, however, other
matters are properly presented, the persons named as proxies will vote in
accordance with their judgment.
REVOCATION OF PROXIES
All properly signed proxies that P-Com receives before the vote at the
annual meeting that are not revoked will be voted at the annual meeting
according to the instructions indicated on the proxies or, if no direction is
indicated, to approve each of the proposals described in the accompanying notice
of annual meeting and this proxy statement. P-Com stockholders may revoke their
proxies at any time before it is exercised by taking any of the following
actions:
o delivering a written notice to the corporate secretary of P-Com
by any means, including facsimile, bearing a date later than the
date of the proxy, stating that the proxy is revoked;
o signing and delivering a proxy relating to the same shares and
bearing a later date before the vote at the meeting;
o delivering electronically by telephone or the Internet a valid
proxy relating to the same shares and bearing a later date before
the vote at the meeting; or
o attending the meeting and voting in person by written ballot,
although attendance at the meeting will not, by itself, revoke a
proxy.
APPRAISAL RIGHTS UNDER DELAWARE LAW
P-Com stockholders are not entitled to appraisal rights in connection
with any of the matters submitted to P-Com's stockholders for approval.
EXPENSES; SOLICITATION
P-Com will mail a copy of the proxy statement to each holder of record
of its common stock, Series C Preferred Stock and Series D Preferred Stock as
determined on the record date for P-Com's annual meeting. P-Com will pay the
expenses of soliciting proxies to be voted at its annual meeting. After the
original mailing of the proxies and other soliciting materials, P-Com will
request brokers, custodians, nominees and other record holders of P-Com common
stock, Series C Preferred Stock and Series D Preferred Stock to forward copies
of the proxy and other soliciting materials to persons for whom they hold shares
of P-Com common stock, Series C Preferred Stock and Series D Preferred Stock and
to request authority for the exercise of proxies. In those cases, upon the
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request of the record holders, P-Com will reimburse such holders for their
reasonable expenses. P-Com intends to retain Georgeson Shareholder Communication
Inc. as its proxy solicitor in connection with the proxy statement. The
estimated cost for the engagement is $15,000. The services to be provided by
Georgeson Shareholder Communications Inc. consist of the following: (i) advance
review of proxy materials, (ii) dissemination of broker search cards, (iii)
distribution of proxy materials, (iv) solicitation of ADP, brokers, banks and
institutional holders, and (v) delivery of executed proxies. The original
solicitation of proxies by mail may be supplemented by a solicitation by
telephone or other means by directors, officers or employees of P-Com. No
additional compensation will be paid to these individuals for any such services.
Except as described above, P-Com does not presently intend to solicit proxies
other than by mail.
SHARES HELD BY P-COM DIRECTORS AND EXECUTIVE OFFICERS
As of the record date, the directors and executive officers of P-Com
owned approximately 62,135 outstanding shares of P-Com common stock,
approximately 79 shares of P-Com Series C Preferred Stock and no shares of P-Com
Series D Preferred Stock. The common stock owned by the directors and executive
officers of P-Com represented less than 1% of the 10,426,734 shares of P-Com
common stock outstanding on that date and the Series C Preferred Stock owned by
the directors and executive officers of P-Com represented approximately 1% of
the 6230 shares of Series C Preferred Stock outstanding on that date.
PROPOSAL TO AMEND P-COM'S CERTIFICATE OF INCORPORATION
TO INCREASE THE NUMBER OF SHARES OF AUTHORIZED COMMON STOCK
GENERAL
The board of directors of P-Com has adopted resolutions approving, and
requesting that the stockholders authorize, an amendment to P-Com's certificate
of incorporation to increase the number of authorized shares of P-Com common
stock from 23,333,333 shares to 35,000,000 shares. This amendment will not
change the total number of authorized shares of P-Com's preferred stock, which
is currently 2,000,000 shares. The board of directors of P-Com has determined
that this amendment is advisable and in the best interests of P-Com and its
stockholders and has directed that it be submitted for the approval of the P-Com
stockholders. This increase in the number of authorized shares of P-Com common
stock will become effective upon filing the amendment with the Secretary of
State of the State of Delaware. P-Com currently plans to file the amendment as
soon as reasonably practicable after receiving approval from its stockholders.
However, the board of directors reserves the right pursuant to Section 242(c) of
the Delaware General Corporation Law, notwithstanding stockholder approval and
without further action by the stockholders, to determine not to proceed with
this proposed increase in the number of authorized shares of P-Com common stock
if, at any time before the filing of the proposed amendment with the Secretary
of State of the State of Delaware, the board of directors, in its sole
discretion, determines that the increase in the number of authorized shares of
common stock is no longer in the best interests of P-Com and its stockholders.
If this proposal is approved, the first paragraph of Article IV of the
certificate of incorporation will be amended to reflect an increase of
11,666,667 shares in the number of authorized shares of P-Com's common stock.
The proposed amendment to the first paragraph of Article IV of P-Com's
certificate of incorporation is set forth in its entirety below:
This Corporation is authorized to issue two (2) classes of stock, to be
designated, respectively, "Common Stock" and "Preferred Stock." The
total number of shares that this Corporation is authorized to issue is
Thirty-Seven Million (37,000,000) shares. Thirty-Five Million
(35,000,000) shares shall be Common Stock, par value $.0001 per share,
and Two Million (2,000,000) shares shall be Preferred Stock, par value
$.0001 per share.
The italicized portions of the proposed amendment set forth above
reflect the only proposed changes to the first paragraph of Article IV of
P-Com's certificate of incorporation as presently in effect (other than the
omission of certain provisions that were necessary to effect the 1-for-30
reverse stock split implemented on July 19, 2004), and they are italicized
solely to illustrate the specific amendment proposed.
5
PURPOSE OF AND RATIONALE FOR PROPOSED AMENDMENT
P-Com is currently authorized to issue a total of 23,333,333 shares of
common stock. Of this amount, approximately 10.4 million shares of common stock
are currently outstanding. In addition P-Com is required to reserve
approximately 8.8 million shares of common stock for issuance upon conversion or
exercise of P-Com's outstanding convertible securities. P-Com has also reserved
approximately 2.5 million shares for issuance under its 1995 Stock Option/Stock
Issuance Plan, and P-Com intends to reserve an additional 2.5 million shares for
issuance under the 2004 Equity Incentive Plan if it is adopted by P-Com's
stockholders at the 2004 annual meeting. As a result, P-Com currently has little
or no ability to issue additional shares of its common stock. The objective of
the proposed increase in the number of authorized shares of common stock is to
ensure that P-Com has a sufficient number of shares of common stock authorized
for future issuances and other corporate purposes. In the event that the
proposed increase is not approved and the proposal to adopt the 2004 Equity
Incentive Plan is approved, P-Com will be unable to reserve any additional
shares for issuance under the 2004 Equity Incentive Plan. The number of shares
reserved under the 2004 Equity Incentive Plan will be capped at the number of
shares previously reserved and unissued under the 1995 Stock Option/Stock
Issuance Plan.
In addition to the foregoing reasons, the board of directors of P-Com
believes that the number of shares of P-Com common stock available for issuance
should be increased in order to provide P-Com with the flexibility to issue
shares in connection with future financings and strategic acquisitions, debt
restructurings or resolutions, equity compensation and incentives to employees
and officers, forward stock splits and other corporate purposes that may occur
in the future without the delay and expense associated with obtaining special
stockholder approval each time an opportunity requiring the issuance of shares
of common stock arises. Such a delay might deny P-Com the flexibility that the
board of directors views as important in facilitating the effective use of
P-Com's securities.
P-Com also constantly evaluates potential transactions with third
parties that may involve the issuance of P-Com common stock, such as financing
transactions, debt restructuring transactions and business combination
transactions. P-com plans to continue initiating discussions with third parties
regarding potential investments, the restructuring or other resolution of its
outstanding debts, asset purchases, acquisitions and other transactions. The
board of directors, therefore, believes that it is prudent to increase the
number of authorized shares of common stock from 23,333,333 to 35,000,000 in
order to have a sufficient number of shares of common stock to meet P-Com's
business needs, which may include raising additional capital, converting
outstanding debt into shares of common stock, issuing common stock in connection
with potential acquisitions and permitting the conversion or exercise of P-Com's
outstanding convertible securities.
EFFECT OF PROPOSED AMENDMENT
The increase in the authorized shares of P-Com common stock will not
have an immediate effect on the rights of existing stockholders.
If the proposal to increase the number of authorized shares of P-Com
common stock is not approved, P-Com will not have the flexibility to issue
additional shares in connection with the various corporate purposes described
above, including the reservation of a sufficient number of shares for issuance
under the 2004 Equity Incentive Plan, in the event the 2004 Equity Incentive
Plan is approved.
Current holders of common stock do not have preemptive or similar
rights, which means that they do not have a right to purchase a proportionate
share of any new issuances of P-Com's common stock in order to maintain their
proportionate ownership of P-Com. Therefore, the issuance of any additional
shares of common stock will have a dilutive effect on earnings per share and on
the equity and voting power of existing holders of P-Com common stock. It may
also adversely affect the market price of P-Com's common stock. However, in the
event additional shares are issued in transactions that position P-Com to take
advantage of favorable business opportunities or provide working capital
sufficient to allow P-Com to pursue and/or expand its business plan, the market
price may increase. This proposed amendment to P-Com's certificate of
incorporation will not otherwise alter or modify the rights, preferences,
privileges or restrictions of the common stock.
6
ANTI-TAKEOVER EFFECTS
Although this proposed amendment to P-Com's certificate of
incorporation is not motivated by anti-takeover concerns and is not considered
by the board of directors to be an anti-takeover measure, the availability of
additional authorized shares of common stock could enable the board of directors
to issue shares defensively in response to a takeover attempt or to make an
attempt to gain control of P-Com more difficult or time-consuming. For example,
shares of common stock could be issued to purchasers who might side with
management in opposing a takeover bid which the board of directors determines is
not in the best interests of P-Com and its stockholders, thus diluting the
ownership and voting rights of the person seeking to obtain control of P-Com. In
certain circumstances, the issuance of common stock without further action by
the stockholders may have the effect of delaying or preventing a change of
control of P-Com, may discourage bids for P-Com's common stock at a premium over
the market price of the common stock and may adversely affect the market price
of the common stock. Thus, increasing the authorized number of shares of common
stock could render more difficult and less likely a hostile asset purchase,
tender offer or proxy contest, assumption of control by a holder of a large
block of P-Com's stock, and the possible removal of P-Com's incumbent
management. P-Com is not aware of any proposed attempt to take over P-Com or of
any attempt to acquire a large block of P-Com's common stock.
APPROVALS REQUIRED
The affirmative vote of (i) the holders of a majority of the shares of
P-Com common stock outstanding on the record date, voting as a separate class,
and (ii) the holders of a majority of the shares of P-Com common stock, Series C
Preferred Stock and Series D Preferred Stock outstanding on the record date,
voting together as a single class, is required to approve this proposal to amend
P-Com's certificate of incorporation.
RECOMMENDATION OF P-COM'S BOARD OF DIRECTORS
The board of directors has determined that the proposed amendment to
P-Com's certificate of incorporation is in the best interests of P-Com and its
stockholders and recommends that the stockholders of P-Com vote FOR the proposal
to amend P-Com's certificate of incorporation to increase the number of
authorized shares of P-Com common stock from 23,333,333 shares to 35,000,000
shares.
PROPOSAL TO REMOVE LIMITATIONS ON
EXERCISE OF P-COM'S OUTSTANDING WARRANTS
BACKGROUND
In March, May and July 2003, P-Com issued (i) Series A Warrants to
purchase 122,267 shares of common stock at an initial exercise price of $3.60
per share and (ii) Series B Warrants to purchase 171,066 shares of common stock
at an initial exercise price of $6.00 per share. Both the Series A Warrants and
Series B Warrants have a term of three years. As of August 17, 2004, none of the
outstanding Series A Warrants or Series B Warrants had been exercised.
In October and December 2003, P-Com issued (i) Series C-1 Warrants to
purchase approximately 2.3 million shares of common stock at an initial exercise
price of $4.50 per share, increasing to $5.40 per share one year after their
respective dates of issuance, and (ii) Series C-2 Warrants to purchase
approximately 2.3 million shares of common stock at an initial exercise price of
$5.40 per share, increasing to $6.60 per share 18 months after their respective
dates of issuance. Both the Series C-1 Warrants and Series C-2 Warrants have a
term of five years. As of August 17, 2004, approximately 910,000 of the
outstanding Series C-1 Warrants and approximately 910,000 of the outstanding
Series C-2 Warrants have been exercised.
The number of shares of common stock issuable upon exercise of these
warrants is subject to adjustment for stock splits, stock dividends and similar
transactions and for certain dilutive issuances.
7
PROPOSAL TO PERMIT REMOVAL OF LIMITATION ON EXERCISE OF WARRANTS
Currently, no holder of Series A Warrants or Series B Warrants may
exercise any of these warrants if the exercise would cause the holder or any of
its affiliates, individually or in the aggregate, to beneficially own more than
4.99% of P-Com's outstanding common stock. Similarly, no holder of Series C-1
Warrants or Series C-2 Warrants may exercise any of these warrants if the
exercise would cause the holder or any of its affiliates, individually or in the
aggregate, to beneficially own more than 9.999% of P-Com's outstanding common
stock. According to the terms of the Series A Warrants, Series B Warrants,
Series C-1 Warrants and Series C-2 Warrants, the removal of these exercise
limitations requires the prior approval of (i) the holders of a majority of
P-Com's outstanding common stock and (ii) the holder of each warrant being
amended.
P-Com is requesting that its stockholders approve this proposal to
permit the removal of the 4.99% exercise limitation from all outstanding Series
A Warrants and Series B Warrants and the removal of the 9.999% exercise
limitation from all outstanding Series C-1 Warrants and Series C-2 Warrants.
Stockholder approval of this proposal will not necessarily effect any change to
P-Com's outstanding warrants. Since the removal of these exercise limitations
requires the prior approval of both (i) the holders of a majority of P-Com's
outstanding common stock and (ii) the holder of each warrant being amended,
stockholder approval of this proposal will only provide P-Com with the ability
to remove the applicable exercise limitation if the holder of one of these
warrants so desires.
If this proposal is approved by P-Com's stockholders and P-Com and the
holder of a Series A Warrant, Series B Warrant, Series C-1 Warrant or Series C-2
Warrant subsequently agree to remove the applicable exercise limitation with
respect to a particular warrant, then the holder will be able to exercise that
same warrant, without regard to the exercise limitation. For Series A Warrants
and Series B Warrants, the removal of the 4.99% exercise limitation will be
effective immediately upon the holder's agreement to remove the limitation. For
Series C-1 Warrants and Series C-2 Warrants, the removal of the 9.999% exercise
limitation will be effective on the 61st day after the agreement to remove the
limitation is made.
PURPOSE OF AND RATIONALE FOR PROPOSAL
Additional Working Capital
As of June 30, 2004, P-Com had working capital of $4.9 million. A
potential source of additional funds to improve P-Com's working capital position
is the cash exercise price that is payable to P-Com upon exercise of its
outstanding Series A Warrants, Series B Warrants, Series C-1 Warrants and Series
C-2 Warrants. The last reported sale price of P-Com common stock on the OTC
Bulletin Board on August 16, 2004 was $0.88 per share, which is significantly
lower than the current exercise prices of P-Com's outstanding warrants. In order
to encourage the exercise of its outstanding warrants and thereby raise
additional funds and streamline its capital structure, in June 2004, P-Com
offered its warrant holders more favorable terms upon which they could exercise
their warrants, including a reduced exercise price. (The modified exercise terms
did not provide for the issuances of a greater number of shares of common stock
upon exercise of any outstanding warrant.) However, some of P-Com's warrant
holders were unable to take advantage of this offer because the 4.99% and 9.999%
exercise limitations described above prevented them from exercising their
warrants. In order to enable these warrant holders to fully exercise their
Series A Warrants, Series B Warrants, Series C-1 Warrants and Series C-2
Warrants, P-Com is asking its stockholders to permit the removal of the
applicable exercise limitation from these warrants.
In order to raise additional funding and address P-Com's immediate
working capital needs, P-Com issued promissory notes to those warrant holders
who were prevented from exercising their warrants at the more favorable terms
offered in June 2004, by the 4.99% and 9.999% exercise limitations described
above. The aggregate principal amount represented by these promissory notes is
approximately $1.2 million, which is the same amount that P-Com would have
received in cash if these warrant holders were permitted to fully exercise their
warrants at the reduced exercise prices offered to P-Com's other warrant holders
in June 2004. If P-Com's stockholders approve this proposal to permit the
removal of the 4.99% and 9.999% exercise limitations from P-Com's outstanding
warrants, those warrant holders to whom the promissory notes were issued will be
able to fully exercise their warrants and pay the corresponding exercise price
by canceling P-Com's obligations under the promissory notes. If P-Com's
stockholders do not approve this proposal, the warrant holders to whom the
promissory notes were issued will be unable to exercise their warrants and P-Com
will be required to repay its indebtedness under the promissory notes.
8
Additional Shares Available for Corporate Purposes
P-Com is authorized to issue a total of 23,333,333 shares of common
stock. Of this amount, approximately 10.4 million shares of common stock are
currently outstanding and approximately 8.8 million shares of common stock have
been reserved for issuance upon conversion or exercise of P-Com's outstanding
convertible securities, including the Series A Warrants, Series B Warrants,
Series C-1 Warrants and Series C-2 Warrants. As a result, P-Com will have little
or no flexibility to issue additional shares of common stock in connection with
financing programs, acquisitions, forward stock splits and other corporate
purposes without the delay and expense involved in obtaining stockholder
approval each time an opportunity requiring the issuance of shares of common
stock arises. Such a delay could cause P-Com to lose the opportunity to pursue
one or more of these transactions.
Currently, approximately 1.6 million shares of common stock are
issuable upon exercise of the Series A Warrants, Series B Warrants, Series C-1
Warrants and Series C-2 Warrants that are held by warrant holders who are
prevented from exercising their warrants by the 4.99% and 9.999% exercise
limitations described above. If these warrant holders were permitted to fully
exercise their warrants at the more favorable exercise prices that were offered
to P-Com's other warrant holders in June 2004, the total number of shares of
P-Com common stock actually issued to these warrant holders would be
approximately 823,000 shares. In addition, in connection with the warrant offer
described above, these warrant holders have tentatively agreed to surrender two
outstanding warrants in consideration for the issuance of a share of common
stock, resulting in the issuance of an additional 411,400 shares of common
stock, and the concurrent cancellation of warrants to purchase 411,400 shares of
common stock. The remaining unissued shares of common stock would then be
available to P-Com to issue in connection with the corporate purposes mentioned
above.
Under the agreements pursuant to which the Series C-1 Warrants and
Series C-2 Warrants were issued, P-Com is required to reserve 125% of total
number of shares issuable upon exercise of the Series C-1 Warrants and Series
C-2 Warrants. As these warrants are exercised, the additional 25% reserve
requirement will lapse and the shares of common stock that were previously
subject to this reserve requirement will be available for issuance in connection
with the corporate purposes mentioned above. Currently, approximately 1.7
million shares of P-Com common stock are reserved for issuance upon exercise of
the Series C-1 Warrants and Series C-2 Warrants that are held by warrant holders
who are prevented from exercising their warrants by the 9.999% exercise
limitation. This amount includes the additional 25% reserve requirement. If
P-Com's stockholders approve this proposal to permit the removal of the 9.999%
exercise limitation and the warrant holders who are affected by that exercise
limitation subsequently exercise their Series C-1 Warrants and Series C-2
Warrants in full, P-Com will have approximately 338,000 shares of common stock
that are no longer subject to the additional 25% reserve requirement and,
therefore, available for issuance in connection with other corporate purposes.
EFFECT OF PROPOSAL
If the removal of the 4.99% and 9.999% exercise limitations on the
Series A Warrants, Series B Warrants, Series C-1 Warrants and Series C-2
Warrants, respectively, is approved by P-Com's stockholders, P-Com and the
holder of each these warrants will be able (but not required) to amend these
warrants by deleting the 4.99% or 9.999% exercise limitation, as the case may
be. This means that even if P-Com's stockholders approve this proposal, the
removal of the 4.99% or 9.999% exercise limitation, as the case may be, will
require the mutual agreement of P-Com and the holder of the Series A Warrant,
Series B Warrant, Series C-1 Warrant or Series C-2 Warrant being amended.
As described above, P-Com has addressed its immediate working capital
needs by issuing promissory notes in the aggregate principal amount of
approximately $1.2 million. These promissory notes have been issued to those
warrant holders who are currently prevented from exercising their warrants by
the 4.99% and 9.999% exercise limitations. If P-Com's stockholders approve this
proposal to permit the removal of the 4.99% and 9.999% exercise limitations from
P-Com's outstanding warrants, these warrant holders will be able to fully
exercise their warrants and pay the corresponding exercise price by canceling
P-Com's obligations under the promissory notes. If P-Com's stockholders do not
approve this proposal to permit the removal of the 4.99% and 9.999% exercise
limitations, these warrant holders will be unable to exercise their warrants and
P-Com will be required to repay its indebtedness under the promissory notes.
9
The existence of the 4.99% and 9.999% exercise limitations prevents the
dilution that would otherwise occur upon the exercise of P-Com's outstanding
warrants from occurring all at once because it limits the extent to which the
Series A Warrants, Series B Warrants, Series C-1 Warrants and Series C-2
Warrants may be exercised at any given time. If P-Com's stockholders approve
this proposal to permit removal of the 4.99% and 9.999% exercise limitations and
the warrant holders who are currently prevented from fully exercising their
warrants subsequently agree with P-Com to remove these limitations, the existing
holders of P-Com common stock may suffer this dilution much sooner than if the
exercise limitation had not been removed. If this proposal to remove the 4.99%
and 9.999% exercise limitations is not approved, the warrant holders who are
currently affected by these limitations would be forced to sell their shares of
P-Com common stock in order to accommodate the exercise of their warrants.
APPROVALS REQUIRED
The affirmative vote of the holders of a majority of the shares of
P-Com common stock, Series C Preferred Stock and Series D Preferred Stock
outstanding on the record date, voting together as a single class, is required
to approve the proposal to permit the removal of the 4.99% exercise limitation
that currently applies to P-Com's outstanding Series A Warrants and Series B
Warrants.
The affirmative vote of the holders of a majority of the shares of
P-Com common stock outstanding on the record date, voting as a separate class,
is required to approve the proposal to permit the removal of the 9.999% exercise
limitation that currently applies to P-Com's outstanding Series C-1 Warrants and
Series C-2 Warrants.
RECOMMENDATION OF P-COM'S BOARD OF DIRECTORS
The board of directors has determined that the removal of the 4.99%
exercise limitation on all of P-Com's outstanding Series A Warrants and Series B
Warrants and the removal of the 9.999% exercise limitation on all of P-Com's
outstanding Series C-1 Warrants and Series C-2 Warrants is in the best interests
of P-Com and recommends that the stockholders of P-Com vote FOR the proposal to
approve the removal of these exercise limitations from P-Com's outstanding
Series A Warrants, Series B Warrants, Series C-1 Warrants and Series C-2
Warrants.
PROPOSAL TO ADOPT THE 2004 EQUITY INCENTIVE PLAN
P-Com's stockholders are being asked to adopt P-Com's 2004 Equity
Incentive Plan (the "2004 Plan"), which will supersede and replace the 1995
Stock Option/Stock Issuance Plan (the "1995 Plan") that is currently in effect.
The following is a summary of the principal features of the 2004 Plan,
and it is qualified in its entirety by reference to the full text of the 2004
Plan, a copy of which is attached as Appendix A to this proxy statement. If
approved, the 2004 Plan will serve as the successor to P-Com's 1995 Plan.
EQUITY INCENTIVE AWARDS
The 2004 Plan provides four different types of equity incentive awards:
(i) stock options, (ii) stock appreciation rights, (iii) restricted stock, and
(iv) stock units. The principal features of each of these types of awards are
described below. The Compensation Committee of P-Com's board of directors
administers the provisions of the 2004 Plan with respect to all officers and
directors of P-Com subject to the short-swing trading restrictions of the
federal securities laws ("Section 16 Insiders"). With respect to all other
participants, the 2004 Plan may be administered by either the Compensation
Committee or a special stock option committee (the "Secondary Committee")
comprised of one or more directors appointed by the board of directors or by the
entire board of directors itself. Each entity, whether the Compensation
Committee, the Secondary Committee or the board of directors, will be referred
to in this summary as the Plan Administrator with respect to its particular
administrative functions under the 2004 Plan, and each Plan Administrator will
have complete discretion (subject to the provisions of the 2004 Plan) to
authorize equity incentive awards under the 2004 Plan within the scope of its
administrative authority.
10
SHARE RESERVE
The number of shares of common stock underlying stock options, stock
appreciation rights, restricted stock and stock units awarded under the 2004
Plan may not exceed 3,000,000 shares. The remaining shares of common stock
reserved for issuance under the 1995 Plan shall rollover into the 2004 Plan
share reserve upon the approval of the 2004 Plan. The board of directors shall
reserve the required number of shares from the authorized and unissued shares of
common stock in order to bring the total 2004 Plan share reserve to 3,000,000
shares.
Should any stock option, stock appreciation right or stock unit be
forfeited or terminate prior to its exercise in full, the shares of common stock
subject to the unexercised portion of that stock option, stock appreciation
right or stock unit, as the case may be, will again be available for subsequent
awards under the 2004 Plan. Similarly, if any restricted stock or common stock
issued upon the exercise of stock options are forfeited, such shares will again
be available for subsequent awards under the 2004 Plan
CHANGES IN CAPITALIZATION
If any change is made to the outstanding shares of common stock by
reason of any recapitalization, stock dividend, stock split, reverse stock
split, combination of shares, exchange of shares or other change in corporate
structure effected without P-Com's receipt of consideration, appropriate
adjustments will be made to (i) the number of shares reserved for future awards
under the 2004 Plan, (ii) the maximum number of stock options, stock
appreciation rights, restricted stock and stock units that may be awarded to a
participant in any calendar year, (iii) the number of shares of common stock
underlying each outstanding stock option and stock appreciation right, (iv) the
exercise price under each outstanding stock option and stock appreciation right
and (v) the number of stock units included in any prior award that has not yet
been settled. All such adjustments will be designed to preclude the enlargement
or dilution of participant rights and benefits under the 2004 Plan.
ELIGIBILITY
Employees, non-employee directors, and independent consultants and
advisors to P-Com and its subsidiaries (whether now existing or subsequently
established) will be eligible to receive awards under the 2004 Plan.
As of August 10, 2004, 7 executive officers, 4 non-employee directors
and 133 other employees were eligible to receive awards under the 2004 Plan.
VALUATION
The fair market value per share of common stock on any relevant date
under the 2004 Plan will be the last reported sale price per share on that date,
as reported on the OTC Bulletin Board. On August 16, 2004, the last reported
sale price of P-Com common stock was $0.88 per share.
STOCK OPTIONS
Grant
The Plan Administrator has complete discretion under the 2004 Plan to
determine which eligible individuals are to receive option grants, the time or
times when such grants are to be made, the number of shares subject to each such
grant, the status of any granted option as either an incentive stock option or a
non-statutory stock option under the federal tax laws, the vesting schedule (if
any) to be in effect for the option grant or stock issuance and the maximum term
for which any granted option is to remain outstanding. Under the 2004 Plan, an
individual may not receive options to purchase more than 833,333 shares of
common stock in any given year. In addition, an individual may not receive
incentive stock options that first become exercisable in any given year for
shares having a fair market value in excess of $100,000, as determined on the
date of grant.
11
Price and Exercisability
The exercise price per share for incentive stock options granted under
the 2004 Plan may not be less than 100% of the fair market value per share of
common stock on the option grant date. The exercise price for non-statutory
stock options granted under the 2004 Plan may not be less that 85% of the fair
market value per share of common stock on the option grant date.
No option will have a term in excess of 10 years, and options will
generally vest and become exercisable in one or more installments over the
optionee's period of service with P-Com. Stock options that are immediately
exercisable in full, without any vesting period, may also be granted under the
2004 Plan at the discretion of the Plan Administrator. The Plan Administrator
may also determine that all or part of an option granted under the 2004 Plan
will fully vest if a change in control (as defined below) occurs with respect to
P-Com or if the optionee is involuntarily terminated after a change in control.
The exercise price may be paid in cash or in shares of the common
stock. Outstanding options may also be exercised through one of the following
methods:
o a same-day sale, pursuant to which a designated brokerage firm is
to effect an immediate sale of the shares purchased under the
option and pay over to P-Com, out of the sale proceeds available
on the settlement date, sufficient funds to cover the exercise
price for the purchased shares plus all applicable withholding
taxes;
o a stock pledge, pursuant to which all or part of the shares being
purchased under the option are pledged to a designated brokerage
firm or lender as security for a loan, the proceeds of which are
paid directly to P-Com and sufficient to cover the exercise price
for the purchased shares plus all applicable withholding taxes;
and
o a full-recourse promissory note delivered to P-Com in an amount
equal to the exercise price for the purchased shares plus all
applicable withholding taxes, provided that the par value of the
shares being purchased is paid in cash.
Termination of Service
Upon the optionee's cessation of employment or service with P-Com, the
optionee will have a limited period of time in which to exercise his or her
outstanding options for any shares in which the optionee is vested at that time.
However, at any time while the options remain outstanding, the Plan
Administrator will have complete discretion to extend the period following the
optionee's cessation of employment or service during which his or her
outstanding options may be exercised. The Plan Administrator will also have
complete discretion to accelerate the exercisability or vesting of those options
in whole or in part at any time.
Modification and Assumption of Options
The Plan Administrator has the discretion to modify, extend or assume
outstanding options or may accept the cancellation of outstanding options in
return for the grant of new options for the same or a different number of shares
and at the same or a different exercise price. However, no modification of an
option may, without the consent of the optionee, alter or impair his or her
rights or obligations under the option.
Repurchase of Options
The Plan Administrator, in its discretion, may at any time offer to
repurchase for cash the unexercised portion of any outstanding option upon the
terms and conditions specified by the Plan Administrator. The Plan
Administrator, in its discretion, may also permit an optionee to cash-out the
unexercised portion of his or her option upon the terms and conditions specified
by the Plan Administrator.
12
Other Provisions
No optionee will have any stockholder rights with respect to the option
shares until the optionee has exercised the option and paid the exercise price
for the purchased shares. Options are generally not assignable or transferable
other than by will or the laws of inheritance and, during the optionee's
lifetime, the option may be exercised only by such optionee. However, the Plan
Administrator may allow non-statutory options to be transferred or assigned
during the optionee's lifetime to one or more members of the optionee's
immediate family or to a trust established exclusively for one or more such
family members, to the extent such transfer or assignment is in furtherance of
the optionee's estate plan.
STOCK APPRECIATION RIGHTS
Grant
The Plan Administrator has complete discretion under the 2004 Plan to
determine which eligible individuals are to receive stock appreciation rights,
the time or times when such grants are to be made, the number of shares subject
to each stock appreciation right, the vesting schedule (if any) to be in effect
for the stock appreciation right and the maximum term for which any stock
appreciation right is to remain outstanding. Under the 2004 Plan, an individual
may not receive stock appreciation rights that pertain to more than 833,333
shares of common stock in any given year.
Price and Exercisability
The base price for stock appreciation rights are set forth in each
agreement under which the stock appreciation right is granted. A stock
appreciation right agreement may provide for either a fixed base price of a base
price that fluctuates in accordance with a predetermined formula while the stock
appreciation right is outstanding.
Each stock appreciation right agreement will specify the term of the
stock appreciation right and the date or dates when all or any installment of
the stock appreciation right will vest and become exercisable. The Plan
Administrator may also determine that all or part of a stock appreciation right
will fully vest if a change in control occurs with respect to P-Com or if the
holder is involuntarily terminated after a change in control.
Stock appreciation rights may also be awarded alone. These stand-alone
stock appreciation rights provide the holders with the right to receive a
payment equal to the excess of (a) the fair market value of the shares of common
stock subject to the stock appreciation right over (b) the aggregate base price
payable for those shares. The payment may, at the discretion of the Plan
Administrator, be made in cash, shares of common stock or a combination of both.
Stock appreciation rights may be awarded in combination with options.
These tandem stock appreciation rights provide the holders with the right to
surrender their options for a payment equal to the excess of (a) the fair market
value of the vested shares of common stock subject to the surrendered option
over (b) the aggregate exercise price payable for those shares. The payment may,
at the discretion of the Plan Administrator, be made in cash, shares of common
stock or a combination of both.
Termination of Service
At the discretion of the Plan Administrator, each stock appreciation
right agreement may provide that a stock appreciation right will expire prior to
the end of its term if the employment or service of the holder of the stock
appreciation right ceases for any reason. While a stock appreciation right
remains outstanding, the Plan Administrator will also have complete discretion
to extend the period following the holder's cessation of employment or service
during which his or her outstanding stock appreciation right may be exercised.
The Plan Administrator will also have complete discretion to accelerate the
exercisability or vesting of outstanding stock appreciation rights in whole or
in part at any time.
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Modification and Assumption of Stock Appreciation Rights
The Plan Administrator has the discretion to modify, extend or assume
outstanding stock appreciation rights or may accept the cancellation of
outstanding stock appreciation rights in return for the grant of new stock
appreciation rights for the same or a different number of shares and at the same
or a different base price. However, no modification of a stock appreciation
right may, without the consent of the holder, alter or impair his or her rights
or obligations under the stock appreciation right.
Other Provisions
Stock appreciation rights are generally not assignable or transferable
other than by will or the laws of inheritance and, during the holder's lifetime,
the stock appreciation may be exercised only by such holder. However, the Plan
Administrator may allow stock appreciation rights to be transferred or assigned
during the holder's lifetime to one or more members of the holder's immediate
family or to a trust established exclusively for one or more such family
members, to the extent such transfer or assignment is in furtherance of the
holder's estate plan.
RESTRICTED STOCK
Grant
The Plan Administrator has complete discretion under the 2004 Plan to
determine which eligible individuals are to receive shares of restricted stock,
the time or times when such grants are to be made, the number of shares granted
and the vesting schedule (if any) to be in effect for the restricted stock. In
any given year, the number of shares of restricted stock that are subject to
performance-based vesting conditions granted to a participant in the 2004 Plan
may not exceed 833,333 shares.
Payment
Generally, restricted stock may be sold or awarded under the 2004 Plan
for any fair and valuable consideration determined by the Plan Administrator,
including (without limitation) cash, cash equivalents, full-recourse promissory
notes, past services and future services. If an award of restricted stock
consists of newly issued shares of restricted stock, the consideration must
consist exclusively of cash, cash equivalents, past services rendered to P-Com
(or its subsidiaries) or full-recourse promissory notes, as the Plan
Administrator may determine.
Vesting
Awards of restricted stock may or may not be subject to vesting in one
or more installments upon the satisfaction of conditions specified in the
restricted stock agreement. A restricted stock agreement may provide for
accelerated vesting in the event of the holder's death, disability, retirement
or other events. The Plan Administrator may also determine that all or part of a
restricted stock award will fully vest if a change in control occurs with
respect to P-Com or if the holder is involuntarily terminated after a change in
control.
Voting and Dividend Rights
The holders of restricted stock awarded under the 2004 Plan will have
the same voting, dividend and other rights as P-Com's other stockholders. A
restricted stock agreement, however, may require that the holders of restricted
stock invest any cash dividends received in additional shares of restricted
stock, and those additional shares of restricted stock will be subject to the
same conditions and restrictions as the original shares of restricted stock on
which the dividends were paid.
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STOCK UNITS
Grant
The Plan Administrator has complete discretion under the 2004 Plan to
determine which eligible individuals are to receive stock units, the time or
times when such grants are to be made, the number of stock units granted and the
vesting schedule (if any) to be in effect for the stock units. In any given
year, the number of stock units that are subject to performance-based vesting
conditions granted to a participant in the 2004 Plan may not exceed 833,333
shares.
Payment
No cash consideration is required to be paid for awards of stock units.
Vesting
Award of stock units may or may not be subject to vesting in one or
more installments upon satisfaction of conditions specified in the stock unit
agreement. A stock unit agreement may provide for accelerated vesting in the
event of the holder's death, disability, retirement or other events. The Plan
Administrator may also determine that all or part of an award of stock units
will fully vest if a change in control occurs with respect to P-Com or if the
holder is involuntarily terminated after a change in control.
Settlement of Stock Units
Settlement of vested stock units may be made in the form of cash,
shares of common stock or a combination of both, as determined by the Plan
Administrator. Methods of converting stock units into cash may include (without
limitation) a method based on the average fair market value of the common stock
over a series of trading days. Vested stock units may be settled in a lump sum
or in one or more installments.
Voting and Dividend Rights
The holders of stock units will have no voting rights. Prior to
settlement or forfeiture, a stock unit awarded under the 2004 Plan may, at the
Plan Administrator's discretion, carry with it the right to receive dividend
equivalents that entitle the holder to be credited with an amount equal to the
cash dividends paid on P-Com's common stock while the stock unit is outstanding.
Settlement of dividend equivalents may be made in the form of cash, shares of
common stock or a combination of both. Prior to settlement, dividend equivalents
will be subject to the same conditions and restrictions as the stock units to
which they attach.
Death of Recipient
Any award of stock units that becomes payable after the recipient's
death will be distributed to the recipient's beneficiaries. Each recipient of an
award of stock units under the 2004 Plan will designate one or more
beneficiaries for this purpose by filing the prescribed form with P-Com. If no
beneficiary is designated or if no designated beneficiary survives the award
recipient, then any stock units that become payable after the recipient's death
shall be distributed to the recipient's estate.
Creditor's Rights
A holder of stock units will have no rights other than those of a
general creditor of P-Com. Stock units represent an unfunded and unsecured
obligation of P-Com, subject to the terms and conditions of the applicable stock
unit agreement.
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CHANGE IN CONTROL
For purposes of the 2004 Plan, P-Com will be deemed to have undergone a
change in control upon the occurrence of any of the following events:
1. The consummation of a merger or consolidation of P-Com with or
into another entity or any other corporate reorganization, if the
persons who were stockholders of P-Com immediately prior to such
merger, consolidation or other reorganization own immediately
after such merger, consolidation, or other reorganization less
than 50% of the total voting power of the continuing or surviving
entity or the direct or indirect parent corporation of the
continuing or surviving entity;
2. The sale, transfer or other disposition of all or substantially
all of P-Com's assets;
3. A change in the composition of P-Com's board of directors, after
which fewer than a majority of the incumbent directors are
directors who either (A) had been directors of P-Com on the date
24 months prior to such change in composition (the "original
directors") or (B) were elected or nominated for election to the
Board with the affirmative votes of at least a majority of the
original directors who were in office at the time of such election
or nomination; or
4. Any transaction that causes any person to be the beneficial owner
(as that term is defined under the rules of the Securities and
Exchange Commission) of shares representing at least 51% of the
total voting power represented by P-Com's outstanding voting
securities.
A transaction will not constitute a change in control if its sole
purpose is to change P-Com's state of incorporation or to create a holding
company that will be owned in substantially the same proportions by the persons
who held P-Com's securities immediately before such transaction.
The acceleration of vesting upon a change in control may be seen as an
anti-takeover provision and may have the effect of discouraging an asset
purchase proposal, a takeover attempt or other efforts to gain control of P-Com.
AMENDMENT AND TERMINATION
The board of directors may amend or modify the 2004 Plan in any or all
respects whatsoever, subject to any stockholder approval required under
applicable law or regulation or pursuant to the express provisions of the 2004
Plan summarized above. The board of directors may terminate the 2004 Plan at any
time. If the 2004 Plan is approved by P-Com's stockholders, it will
automatically terminate on May 7, 2014.
FEDERAL INCOME TAX CONSEQUENCES
Stock Options
Options granted under the 2004 Plan may be either incentive stock
options that satisfy the requirements of Section 422 of the Internal Revenue
Code or non-statutory options that are not intended to meet such requirements.
The Federal income tax treatment for the two types of options differs as
follows:
Incentive Options. No taxable income is recognized by the optionee at
the time of the option grant, and no taxable income is generally recognized at
the time the option is exercised. The optionee will, however, recognize taxable
income in the year in which the purchased shares are sold or otherwise made the
subject of a taxable disposition. For Federal income tax purposes, dispositions
are divided into two categories: (i) qualifying dispositions and (ii)
disqualifying dispositions. A qualifying disposition occurs if the sale or other
disposition is made more than 2 years after the option grant date and more than
1 year after the exercise date. If the sale or disposition occurs before these
two periods are satisfied, then a disqualifying disposition will result.
Upon a qualifying disposition, the optionee will recognize long-term
capital gain or loss in an amount equal to the excess or shortfall of (i) the
amount realized upon the sale or other disposition of the purchased shares over
16
(ii) the exercise price paid for the shares. If there is a disqualifying
disposition of the shares, then generally the excess of (i) the fair market
value of those shares on the exercise date over (ii) the exercise price paid for
the shares will be taxable as ordinary income to the optionee. Any additional
gain or loss recognized upon the disposition will be recognized as a capital
gain or loss by the optionee.
If the optionee makes a disqualifying disposition of the purchased
shares, then generally P-Com will be entitled to an income tax deduction, for
the taxable year in which such disposition occurs, equal to the excess of (i)
the fair market value of such shares on the option exercise date over (ii) the
exercise price paid for the shares. If the optionee makes a qualifying
disposition, P-Com will not be entitled to any income tax deduction.
Non-Statutory Options. No taxable income is recognized by an optionee
upon the grant of a non-statutory option. The optionee will in general recognize
ordinary income, in the year in which the option is exercised, equal to the
excess of the fair market value of the purchased shares on the exercise date
over the exercise price paid for the shares, and the optionee will be required
to satisfy the tax withholding requirements applicable to such income.
P-Com will be entitled to an income tax deduction equal to the amount
of ordinary income recognized by the optionee with respect to the exercised
non-statutory option. The deduction will in general be allowed for the taxable
year of P-Com in which such ordinary income is recognized by the optionee.
Stock Appreciation Rights
As discussed above, P-Com may grant either stand-alone stock
appreciation rights or tandem stock appreciation rights under the 2004 Plan.
Generally, the recipient of a stand-alone stock appreciation right will not
recognize any taxable income at the time the stand-alone stock appreciation
rights is granted.
With respect to stand-alone stock appreciation rights, if the employee
receives the appreciation inherent in the stock appreciation right in cash, the
cash will be taxable as ordinary compensation income to the employee at the time
that it is received. If the employee receives the appreciation inherent in the
stock appreciation right in stock, the employee will recognize ordinary
compensation income equal to the excess of the fair market value of the stock on
the day it is received over any amounts paid by the employee for the stock.
With respect to tandem stock appreciation rights, if a holder elects to
surrender the underlying option in exchange for cash or stock equal to the
appreciation inherent in the underlying option, the tax consequences to the
employee will be the same as discussed above relating to stand-alone stock
appreciation rights. If the employee elects to exercise the underlying option,
the holder will be taxed at the time of exercise as if he or she had exercised a
non-statutory stock option (discussed above), i.e., the employee will recognize
ordinary income for federal tax purposes measured by the excess of the then fair
market value of the shares over the exercise price.
In general, there will be no federal income tax deduction allowed to
P-Com upon the grant or termination of stand-alone stock appreciation rights or
tandem stock appreciation rights. However, upon the exercise of either a
stand-alone stock appreciation right or a tandem stock appreciation right, P-Com
will be entitled to a deduction for federal income tax purposes equal to the
amount of ordinary income that the employee is required to recognize as a result
of the exercise, provided that the deduction is not otherwise disallowed under
the Internal Revenue Code.
Restricted Stock
Restricted stock awards will generally be taxed in the same manner as
non-statutory stock options. However, a restricted stock award is subject to a
"substantial risk of forfeiture" within the meaning of Section 83 of the
Internal Revenue Code to the extent the award will be forfeited in the event
that the employee ceases to provide services to P-Com. As a result of this
substantial risk of forfeiture, the employee will not recognize ordinary income
at the time of award. Instead, the employee will recognize ordinary income on
the dates when the stock is no longer subject to a substantial risk of
forfeiture, or when the stock becomes transferable, if earlier. The employee's
ordinary income is measured as the difference between the amount paid for the
stock, if any, and the fair market value of the stock on the date the stock is
no longer subject to forfeiture.
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The employee may accelerate his or her recognition of ordinary income,
if any, and begin his or her capital gains holding period by timely filing
(i.e., within 30 days of the award) an election pursuant to Section 83(b) of the
Internal Revenue Code. In such event, the ordinary income recognized, if any, is
measured as the difference between the amount paid for the stock, if any, and
the fair market value of the stock on the date of award, and the capital gain
holding period commences on that date. The ordinary income recognized by an
employee will be subject to tax withholding by P-Com. Unless limited by Section
162(m) of the Internal Revenue Code, P-Com is entitled to a deduction in the
same amount as and at the time the employee recognizes ordinary income.
Stock Units
Upon the settlement of stock units granted under the 2004 Plan, the
holder will generally recognize ordinary income in an amount equal to the amount
of cash received and the fair market value of any unrestricted shares received.
In general, there will be no federal income tax deduction allowed to
P-Com upon the grant or termination of stock units. However, upon the settlement
of stock units granted under the 2004 Plan, P-Com will be entitled to a
deduction for federal income tax purposes equal to the amount of ordinary income
that the employee is required to recognize as a result of the settlement,
provided that the deduction is not otherwise disallowed under the Internal
Revenue Code.
Deductibility of Executive Compensation
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to public companies for compensation in excess of $1 million paid to
P-Com's chief executive officer or any of the four other most highly compensated
officers. Certain performance-based compensation is specifically exempt from the
deduction limit if it otherwise meets the requirements of Section 162(m). One of
the requirements for equity compensation plans is that there must be a limit to
the number of shares granted to any one individual under the plan. Accordingly,
the 2004 Plan provides that no employee may be granted stock options, stock
appreciation rights, restricted stock or stock units, in each case, that pertain
to more than 833,333 shares in any calendar year. Stockholder approval of the
2004 Plan will constitute stockholder approval of these limitations for purposes
of Section 162(m).
Golden Parachute Rules
Internal Revenue Code Section 280G provides that if certain executives
receive payments that are made because of a change in control of P-Com, then a
portion of those payments will be (i) subject to a 20% excise tax imposed on the
executives that receive such payments, and (ii) nondeductible by P-Com. For this
purpose, the acceleration of the vesting of stock options is treated as a
payment. These adverse tax consequences only apply (i) if the total amount of
the payments to such an executive equal or exceed 300% of his or her average
annual compensation and (ii) to the extent that the payments actually exceed his
or her average annual compensation.
THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF U.S. FEDERAL INCOME
TAXATION UPON AWARDEES AND P-COM WITH RESPECT TO THE GRANT AND EXERCISE OF
AWARDS UNDER THE 2004 PLAN. IT DOES NOT PURPORT TO BE COMPLETE AND DOES NOT
DISCUSS THE TAX CONSEQUENCES ARISING IN THE CONTEXT OF THE EMPLOYEE'S DEATH OR
THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH THE
EMPLOYEE'S INCOME OR GAIN MAY BE TAXABLE.
ACCOUNTING TREATMENT
Option grants or restricted stock issuances with exercise or issue
prices that are less than the fair market value of the shares on the grant or
issue date will result in a compensation expense to P-Com's earnings equal to
the difference between the exercise or issue price and the fair market value of
the shares on the grant or issue date. Such expense will be amortized against
P-Com's earnings over the period that the option shares or issued shares are to
vest.
Option grants or restricted stock issuances with exercise or issue
prices equal to the fair market value of the shares at the time of issuance or
grant generally will not result in any charge to P-Com's earnings, but P-Com
must disclose, in pro-forma statements to P-Com's financial statements, the
18
impact those option grants would have upon P-Com's reported earnings if the fair
value of those options were treated as compensation expense. Whether or not
granted at a discount, the number of outstanding options may be a factor in
determining P-Com's earnings per share on a fully diluted basis.
In addition, any option grants made to non-employee consultants (but
not non-employee directors) will result in a direct charge to P-Com's reported
earnings based upon the fair value of the option measured initially as of the
grant date and then subsequently on the vesting date of each installment of the
underlying option shares. Such charge will accordingly be adjusted to reflect
the appreciation (if any) in the value of the option shares over the period
between the grant date of the option and the vesting date of each installment of
the option shares. Should any outstanding options under the 2004 Plan be
repriced, then that repricing will also trigger a direct charge to P-Com's
reported earnings measured by the appreciation in the value of the underlying
shares between the grant of the repriced option and the date the repriced option
is exercised for those shares or terminates unexercised.
Generally, the granting of stock appreciation rights and stock units
will result in a compensation expense to P-Com's earnings. The value of stock
appreciation rights and stock units are treated as compensation expense, being
charged against P-Com's earnings in the year of the grant and prorated over the
vesting period. The expense is then adjusted each year as the value of the award
increases or decreases.
NEW PLAN BENEFITS
Because benefits under the 2004 Plan will depend on the Plan
Administrator's actions and the fair market value of common stock at various
future dates, it is not possible to determine the benefits that will be received
by directors, executive officers and other employees if the 2004 Plan is
approved by the stockholders.
APPROVALS REQUIRED
The affirmative vote of the holders of a majority of the shares of
P-Com common stock, Series C Preferred Stock and Series D Preferred Stock
outstanding on the record date, voting together as a single class, is required
to approve this proposal to adopt the proposed 2004 Plan.
RECOMMENDATION OF P-COM'S BOARD OF DIRECTORS
The board of directors of P-Com recommends that P-Com stockholders vote
FOR the proposed adoption of P-Com's 2004 Plan.
PROPOSAL TO ELECT P-COM'S DIRECTOR
NOMINEES TO THE P-COM BOARD OF DIRECTORS
GENERAL
P-Com's certificate of incorporation provides for a classified board
of directors consisting of three classes of directors with staggered three-year
terms. Each class consists, as nearly as possible, of one-third of the total
number of directors. The class whose term of office expires at the 2004 annual
meeting currently consists of two directors. The directors elected to this class
will serve for a term of three years, expiring at the 2007 annual meeting of
stockholders or until a successor has been duly elected. The nominees listed
below are currently directors of P-Com.
Each nominee for election has agreed to serve if elected, and
management has no reason to believe that such nominee will be unavailable to
serve. If the nominees are unable or decline to serve as a director at the time
of the annual meeting, the proxies will be voted for any nominee who may be
designated by the present board of directors to fill the vacancy. Unless
otherwise instructed, the proxy holders will vote the proxies received by them
FOR the nominees named below.
19
NOMINEES FOR TERM ENDING UPON THE 2004 ANNUAL MEETING OF STOCKHOLDERS
George P. Roberts, 71, is a founder of P-Com and has served as Chief
Executive Officer and a Director from October 1991 to May 2001, and as interim
Chief Executive Officer since January 2002. Mr. Roberts resigned from his
position as interim Chief Executive Officer on September 1, 2003. Since
September 1993, he has also served as Chairman of the Board of Directors.
Brian T. Josling, 61, has served as a Director of P-Com since September
1999. Since December 2000, he has served as the President of Fuel Cells, Canada,
the Canadian Association of fuel cell and hydrogen companies. Mr. Josling is a
professional corporate director having served on 12 boards in Canada and the
United States from 1993 to present. He also currently serves on the board of
directors of Membrane Reactor Technology Ltd., Wmode, Inc., and Conduit Ventures
Ltd.
CONTINUING DIRECTOR FOR TERM ENDING UPON THE 2005 ANNUAL MEETING OF STOCKHOLDERS
Frederick R. Fromm, 55, has served as a Director of P-Com since June
2001. From May 2003 to January 2004, Mr. Fromm was President and Chief Executive
Officer of Gluon Networks, Inc. a telecommunications equipment company. From
July 2000 to October 2001, he was President, and from November 2001 to October
2002 he was also Chief Executive Officer of Oplink Communications, Inc., an
optical components company. From October 1998 to July 2000 he was President and
Chief Executive Officer of Siemens Information and Communications Networks,
Inc., a telecommunications equipment company. From October 1996 to October 1998
he was President and Chief Executive Officer of Siemens Telecom Networks, Inc. a
telecommunications equipment company.
Craig Roos, 58, has served as a Director of P-Com since December 2003.
Mr. Roos is founder and sole owner of Roos Capital Planners, Inc., which he
formed in 1979 and which specializes in advisory services to the communications
industry, primarily in the fixed and mobile wireless area. Mr. Roos has served
on the boards of several companies in the wireless, communications, software,
media, and telecommunications industries. He served as chairman of MobileMedia
Corporation from 1993 until 1995. Mr. Roos also was a co-founder of Locate, a
digital local access carrier specializing in high-speed T-1 level radio carrier
technologies. Mr. Roos has testified before the United States Congress on
telecommunications issues and is a former chairman of the Alternative Local
Telecommunications Trade Association. Mr. Roos currently serves on the Board of
Directors of SPEEDCOM Wireless Corporation.
CONTINUING DIRECTOR FOR TERM ENDING UPON THE 2006 ANNUAL MEETING OF STOCKHOLDERS
John A. Hawkins, 44, has served as a Director of P-Com since September
1991. Since August 1995, Mr. Hawkins has been a General Partner of Generation
Capital Partners, L.P., a private equity firm. He also currently serves on the
board of directors of High End Systems and NTE, Inc.
Samuel Smookler, 63, has served as Chief Executive Officer and a
Director of P-Com since September 2003. Mr. Smookler served as Chief Executive
Officer and Chairman of Maxima Corporation, a developer of high capacity optical
wireless transmission systems from August 2002 to August 2003. Mr. Smookler
served as Chief Executive Officer and as a director of Stratex Networks from May
2000 through December 2001. Prior to such appointment, he served as President
and Chief Operating Officer of Stratex Networks from January 1998. Mr. Smookler
was President and Chief Operating Officer of Signal Technology Corporation, a
manufacturer of electronic components and subsystems, from February 1997 to
January 1998. He served as Vice President and General Manager of the
Interconnection Products Division of Augat Corporation, a manufacturer of
telecommunications connection products, from November 1994 to February 1997. Mr.
Smookler served as General Manager of a division of M/A-COM, Inc., a
manufacturer of radio and microwave communications products, from February 1992
to November 1994.
20
BOARD COMMITTEES AND MEETINGS
The board of directors held 20 meetings and acted by unanimous written
consent 15 times during the fiscal year ended December 31, 2003. The board of
directors has an Audit Committee and a Compensation Committee. Each Director
attended or participated in 75% or more of the aggregate of (i) the total number
of meetings of the board of directors and (ii) the total number of meetings held
by all committees of the Board on which such director served during 2003. P-Com
encourages its directors to attend the annual meetings of stockholders. At the
2003 annual meeting of stockholders, 2 directors of P-Com were in attendance.
The Audit Committee currently consists of three directors, Mr. Josling,
Mr. Fromm, and Mr. Roos. The Board of Directors has determined that Messrs.
Josling, Fromm and Roos are "independent directors" as defined in the NASDAQ
Marketplace Rules and also meet the additional independence standards for Audit
Committee members. The Audit Committee is primarily responsible for approving
the services performed by P-Com's independent accountants and reviewing their
reports regarding P-Com's accounting practices and systems of internal
accounting controls. The Board of Directors has determined that Mr. Roos is the
"audit committee financial expert," as defined in the rules of the Securities
and Exchange Commission. The Audit Committee held 3 meetings and acted by
unanimous written consent one time during 2003. The Audit Committee has a
written charter, a copy of which is attached hereto as Appendix B.
The Compensation Committee currently consists of two directors, Mr.
Hawkins and Mr. Fromm, and is primarily responsible for reviewing and approving
P-Com's general compensation policies and setting compensation levels for its
executive officers. The Compensation Committee also has the authority to
administer P-Com's Employee Stock Purchase Plan and its 1995 Stock Option/Stock
Issuance Plan and, if adopted by P-Com's stockholders, the 2004 Equity Incentive
Plan, and to make option grants thereunder. The Compensation Committee held 2
meetings and acted by unanimous written consent one time during 2003.
All of our directors participate in the director nomination process,
and our board of directors does not have a standing nominating committee. We
believe that the establishment of such a committee is not warranted in view of
the fact that a majority of our directors are independent directors as defined
under Rule 4200(a)(15) of the listing standards of the National Association of
Securities Dealers.
STOCKHOLDER COMMUNICATIONS WITH THE BOARD OF DIRECTORS
P-Com's stockholders may contact the Board of Directors or any of the
individual directors by writing to them c/o Daniel W. Rumsey, Vice President,
General Counsel and Secretary, P-Com, Inc., 3175 S. Winchester Blvd., Campbell,
California 95008. Inquiries sent by mail will be reviewed, sorted and summarized
by Mr. Rumsey or his designee before they are forwarded to the Board of
Directors or individual directors.
APPROVALS REQUIRED
Directors are elected by a plurality of the votes cast at the annual
meeting. This means that the two director nominees who receive the highest
number of votes will be elected to P-Com's board of directors.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The board of directors of P-Com recommends that the P-Com stockholders
vote FOR the election of each of the nominees named above.
PROPOSAL TO RATIFY THE SELECTION OF ITS INDEPENDENT AUDITORS
GENERAL
Effective August 7, 2003, P-Com agreed to retain Aidman, Piser &
Company as the principal accountant to audit P-Com's financial statements for
the fiscal year ending December 31, 2003. Concurrently with the agreement to
21
engage Aidman, Piser & Company, P-Com's former accountants,
PricewaterhouseCoopers LLP resigned as P-Com's independent accountants. P-Com's
board of directors approved the decision to change accountants.
During P-Com's two most recent fiscal years and any subsequent interim
period, there were no disagreements between P-Com and PricewaterhouseCoopers LLP
on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedures, which disagreements, if not
resolved to the satisfaction of PricewaterhouseCoopers LLP, would have caused it
to make a reference to the subject matter of the disagreements in connection
with its reports.
The board of directors has selected Aidman, Piser & Company,
independent public accountants, to audit the financial statements of P-Com for
the fiscal year ending December 31, 2004, and recommends that stockholders vote
for ratification of such appointment. The affirmative vote of a majority of the
shares of P-Com stock represented and voting at the P-Com annual meeting is
required to ratify the selection of Aidman, Piser & Company. In the event of a
negative vote on ratification, the board of directors will reconsider its
selection. Even if the selection is ratified, the board of directors in its
discretion may direct the appointment of a different independent auditing firm
at any time during the year if the board of directors believes that such a
change would be in the best interests of P-Com and its stockholders.
A representative of Aidman Piser & Company is expected to be present at
the annual meeting, will have the opportunity to make a statement if he or she
desires to do so, and will be available to respond to appropriate questions.
Other than the provision of services by Aidman Piser & Company to P-Com
in connection with audit and tax engagements, neither Aidman Piser & Company nor
any of its affiliates has any relationship with P-Com or any of its affiliates,
except in the firm's capacity as P-Com's auditor.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
Audit Fees
Effective August 7, 2003, P-Com retained Aidman, Piser & Company
("Aidman Piser") as the principal accountant to audit P-Com's financial
statements for the fiscal year ending December 31, 2003. Concurrently with the
agreement to engage Aidman Piser, P-Com's former accountants,
PricewaterhouseCoopers LLP resigned as P-Com's independent accountants.
Additional information relating to our predecessor principal accountants is
included in Part II, Item 9 above under the caption "Changes in and
Disagreements with Accountants on Accounting and Financial Disclosure." The
aggregate fees Aidman Piser billed us for 2003 for professional services for
review of financial statements included in our Reports on Form 10-Q or services
normally provided by Aidman Piser in connection with filings or engagements for
2003 was $30,000.
Audit-Related Fees
The aggregate fees Aidman Piser billed us in the fiscal year ended
December 31, 2003 for assurance and related services that are reasonably related
to the performance of the audit or review of the Company's financial statements
and are not reported above under the caption "Audit Fees" were $43,000, and were
principally related to assisting the Company's management in responding to
comments of the Securities and Exchange Commission ("Commission") following its
review of the Company's reports filed with the Commission under the Securities
Exchange Act of 1934, our acquisition of SPEEDCOM Wireless Corporation, for
audit-related services in connection with restructuring activities, and filing
of registration statements.
Tax Fees
Aidman Piser did not bill us any additional fees in the last two
fiscal years for tax compliance, advisory and planning services.
All Other Fees
22
Aidman Piser did not bill us any additional fees in the last two
fiscal years for products and services, other than the services reported above.
Audit Committee Pre-Approval Policies
The Audit Committee has adopted an Audit Committee Charter, which
sets forth the procedures and policies pursuant to which services to be
performed by the independent auditor are to be pre-approved. Under the Charter,
proposed services either may be pre-approved by agreeing to a framework with
descriptions of allowable services with the Audit Committee ("general
pre-approval"), or require the specific pre-approval of the Audit Committee.
Unless a type of service has received general pre-approval, it requires specific
pre-approval by the Audit Committee if it is to be provided by the independent
auditor.
The Audit Committee will annually review and pre-approve the services
that may be provided by the independent auditor that are subject to general
pre-approval. Under the Charter, the Audit Committee may delegate pre-approval
authority one or more designated members of the Audit Committee the authority to
pre-approve audit and permissible non-audit services, provided such pre-approval
decision is presented to the full Audit Committee at its scheduled meetings. The
member to whom such authority is delegated must report, for informational
purposes only, any pre-approval decisions to the Audit Committee at its next
meeting.
APPROVALS REQUIRED
The affirmative vote of a majority of the shares of P-Com common stock,
Series C Preferred Stock and Series D Preferred Stock present in person or
represented by proxy and entitled to vote at the P-Com annual meeting is
required to approve this proposal to ratify the selection Aidman Piser & Company
as P-Com's independent accountants.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The board of directors recommends that P-Com stockholders vote FOR the
ratification of the appointment of Aidman Piser & Company to serve as P-Com's
independent auditors for the fiscal year ending December 31, 2004.
PROPOSAL TO GRANT P-COM'S MANAGEMENT THE
DISCRETIONARY AUTHORITY TO ADJOURN THE ANNUAL MEETING
If at the annual meeting the number of shares of P-Com common stock
voting in favor of any of the foregoing proposals is insufficient to approve
that proposal under Delaware law, P-Com's management intends to move to adjourn
the annual meeting in order to enable P-Com's board of directors to solicit
additional proxies in favor of that proposal. In that event, P-Com will ask its
stockholders to vote only upon the adjournment proposal and any other proposals
that have a sufficient number of shares voting in their favor, but not upon any
proposal with an insufficient number of shares voting in its favor.
In the adjournment proposal, P-Com is asking its stockholders to
authorize the holder of any proxy solicited by the P-Com board of directors to
vote in favor of granting management the discretionary authority to adjourn the
P-Com annual meeting and any later adjournments of those meetings to a date or
dates not later than October 31, 2004 in order to enable the P-Com board of
directors to solicit additional proxies in favor of approving any proposal that
initially lacks a sufficient number of shares voting in its favor.
If the stockholders of P-Com approve the adjournment proposal, P-Com's
management could adjourn the meeting and any adjourned session of the meeting to
a date or dates not later than October 31, 2004 and use the additional time to
solicit additional proxies in favor of approving any proposal that initially
lacks a sufficient number of shares voting in its favor, including the
solicitation of proxies from stockholders that have previously voted against the
relevant proposal. Among other things, approval of the adjournment proposals
could mean that, even if P-Com has received proxies representing a sufficient
number of votes to defeat any particular proposal, P-Com's management could
adjourn the P-Com annual meeting without a vote on that proposal for up to 30
days and seek during that period to convince the holders of those shares to
change their votes in favor of that particular proposal.
23
APPROVALS REQUIRED
Approval of the adjournment proposal will require the affirmative vote
of the holders of a majority of the shares of P-Com common stock, Series C
Preferred Stock and Series D Preferred Stock present in person or represented by
proxy and entitled to vote at the annual meeting of stockholders.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The P-Com board of directors believes that, if the number of shares of
P-Com common stock, Series C Preferred Stock and Series D Preferred Stock voting
in favor of any proposal is insufficient to approve the proposal, it is in the
best interests of the P-Com stockholders to enable the board of directors, for a
limited period of time, to continue to seek additional votes in favor of the
proposal in order to obtain its approval.
The board of directors recommends that P-Com stockholders vote FOR the
proposal to grant P-Com's management the discretionary authority to adjourn the
P-Com annual meeting to a date or dates not later than October 31, 2004.
DIRECTORS AND OFFICERS
P-Com's board of directors is authorized to have seven directors. The
executive officers and directors of P-Com, their ages as of August 16, 2004,
their positions and their backgrounds are as follows:
Name Age Position
---- --- --------
George P. Roberts 71 Chairman of the Board
Samuel Smookler 63 Chief Executive Officer and Director
Daniel W. Rumsey 43 Acting Chief Financial Officer, Vice President and General Counsel
Don Meiners 42 Vice President - Operations
Carlos Belfiore 59 Vice President and Chief Technical Officer
Elsbeth B. Kahn 47 Vice President of Sales and Marketing - License Exempt Products
Randall L. Carl 42 Senior Vice President of Sales and Marketing, Licensed Products
Brian T. Josling 61 Director
John A. Hawkins 44 Director
Frederick Fromm 55 Director
R. Craig Roos 58 Director
The principal occupations of each executive officer and director of
P-Com for at least the last five years are as follows:
George P. Roberts. Mr. Roberts is a founder of P-Com and has served as
Chief Executive Officer and a Director from October 1991 to May 2001, and as
interim Chief Executive Officer since January 2002. Mr. Roberts resigned from
his position as interim Chief Executive Officer on September 1, 2003. Since
September 1993, he has also served as Chairman of the Board of Directors. Mr.
Roberts' term as a director of P-Com ends upon the 2005 Annual Meeting of
Stockholders.
Samuel Smookler. Mr. Smookler has served as Chief Executive Officer and
a Director of P-Com since September 2003. Mr. Smookler served as Chief Executive
Officer and Chairman of Maxima Corporation, a developer of high capacity optical
wireless transmission systems from August 2002 to August 2003. Mr. Smookler
served as Chief Executive Officer and as a director of Stratex Networks from May
2000 through December 2001. Prior to such appointment, he served as President
and Chief Operating Officer of Stratex Networks from January 1998. Mr. Smookler
was President and Chief Operating Officer of Signal Technology Corporation, a
manufacturer of electronic components and subsystems, from February 1997 to
January 1998. He served as Vice President and General Manager of the
Interconnection Products Division of Augat Corporation, a manufacturer of
telecommunications connection products, from November 1994 to February 1997. Mr.
Smookler served as General Manager of a division of M/A-COM, Inc., a
manufacturer of radio and microwave communications products, from February 1992
to November 1994.
24
Daniel W. Rumsey. Mr. Rumsey was appointed Vice President and General
Counsel in March 2003. In April 2003, he became Acting Chief Financial Officer
following the resignation of Leighton Stevenson. Prior to joining P-Com, Mr.
Rumsey was Vice President and General Counsel of Knowledge Kids Network, Inc., a
multi-media education company. Knowledge Kids Network is part of the Knowledge
Universe family of companies. Prior to joining Knowledge Kids Network, Mr.
Rumsey was the President and General Counsel of Aspen Learning Systems and
NextSchool, Inc., which he joined in February 1997. Mr. Rumsey sold Aspen
Learning Systems and NextSchool to Knowledge Kids Network in 1999. Mr. Rumsey
has an extensive legal and finance background, dating back to 1987 when he
served as a staff attorney in the U.S. Securities and Exchange Commission's
Division of Corporation Finance. He has also served as Assistant General Counsel
for Terra Industries, Inc. and Associate General Counsel and Corporate Secretary
of EchoStar Communications Corporation. Mr. Rumsey received his J.D. from the
University of Denver College of Law in 1985, and his B.S. from the University of
Denver in 1983.
Carlos Belfiore. Dr. Belfiore is currently Vice President -
Engineering, and Chief Technical Officer of P-Com. Prior to joining P-Com in
November 2003, he was an independent engineering consultant. Prior to that, Dr.
Belfiore held various management and technical leadership positions at Stratex
Networks, which he joined in 1988, including Senior Director IDU Development,
Director of New Technology Development, Director of Modem Development, and
Senior Scientist. Prior to joining Stratex, Dr. Belfiore was with the Microwave
Communication Division of Harris Corporation, serving as Manager of Advanced
Development and Principal Development Engineer. Dr. Belfiore received a Ph.D. in
electrical engineering from University of Minnesota in 1976.
Don Meiners. Mr. Meiners is currently Vice President - Operations of
P-Com, and has held a variety of management roles since he joined P-Com in 1992.
These include Vice President of Operations, Vice President Engineering, Vice
President Manufacturing and Vice President of Engineering Program Management.
Prior to P-Com, Mr. Meiners served in design engineering roles and project
management for Digital Microwave Corporation and Equitorial Inc. Mr. Meiners
graduated from the Missouri Institute Of Technology in 1983.
Randall L. Carl. Mr. Carl has held a variety of management roles since
he joined P-Com in 1992. These include Senior Vice President - Worldwide Sales,
Vice President of Sales Asia-Pacific, Vice President & General Manager of Point
- to - Point Business Unit, Vice President of Product Strategy and Vice
President of Marketing. In August 1998, Mr. Carl left P-Com to serve as the
Chief Operating Officer of Integrity International Holdings, Inc., a national
Internet service provider. In March 2000, Mr. Carl, left his position at
Integrity International Holdings, Inc. and returned to P-Com. Prior to P-Com,
Mr. Carl served in technical marketing and systems engineering roles for Digital
Microwave Corporation and Avantek Inc. Mr. Carl received his MBA from Santa
Clara University in 1987, and his BA in Business Administration from Azusa
Pacific University in 1984.
Elsbeth B. Kahn. Beth Kahn is currently Vice President - Sales and
Marketing - License Exempt Products, a position she has held since she joined
P-Com in April 2004. Prior to joining P-Com, Ms. Kahn was Chief Operating
Officer at Advanced Network Information, a data networking technical and sales
skills training company. Prior to joining Advanced Network Information in 2003,
Ms. Kahn was Vice President and General Manager at DMC Stratex Networks, where
she managed the profitability of three different product lines. Prior to joining
DMC Stratex Networks in 2000, she held several director positions in
manufacturing, marketing, development and business operations at Lucent
Technologies/AT&T. Earlier in her career, Ms. Kahn spent six years at Bell
Laboratories in the Microelectronics Business supporting digital radio, secure
telephony and multi-chip module products. Ms. Kahn received a Master's of
Science degree in Mechanical Engineering from the Massachusetts Institute of
Technology in 1983, and a Bachelor's of Science degree in Mechanical Engineering
from the University of Idaho in 1981, where she graduated Summa cum Laude.
Brian T. Josling. Mr. Josling has served as director of P-Com since
September 1999. Since December 2000 until November 2002, he has served as the
President of Fuel Cells, Canada, the Canadian Association of fuel cell and
hydrogen companies. Mr. Josling is a professional corporate director having
served on 12 boards in Canada and the United States from 1993 to present. He
also currently serves on the board of directors of Membrane Reactor Technology
Ltd., Wmode, Inc., and Conduit Ventures Ltd.
John A. Hawkins. Mr. Hawkins has served as a director of P-Com since
September 1991. He is a Managing Partner of Generation Partners, L.P., which he
co-founded in 1995. Generation Partners is a $325 million private equity firm
focused on providing equity capital for technology-oriented growth companies
through buyout, growth equity and venture capital investments. Mr. Hawkins
25
graduated with honors from Harvard College as a John Harvard Scholar in 1982,
and received his MBA from the Harvard Graduate School of Business in 1986.
Frederick Fromm. Mr. Fromm has served as a director of P-Com since June
2001. Since May 2003, Mr. Fromm has been President and Chief Executive Officer
of Gluon Networks, Inc. a telecommunications equipment company. From July 2000
to October 2001, he was President, and from Nov. 2001 to October 2002 he was
also Chief Executive Officer of Oplink Communications, Inc., an optical
components company. From October 1998 to July 2000 he was President and Chief
Executive Officer of Siemens Information and Communications, Inc, a
telecommunications equipment company. From October 1996 to October 1998 he was
President and Chief Executive Officer of Siemens Telecom Networks, Inc. a
telecommunications equipment company.
R. Craig Roos. Mr. Roos joined P-Com's Board of Directors in December
2003. Mr. Roos is founder and sole owner of Roos Capital Planners, Inc., which
he formed in 1979 and which specializes in advisory services to the
communications industry, primarily in the fixed and mobile wireless area. Mr.
Roos has served on the boards of several companies in the wireless,
communications, software, media, and telecommunications industries. He served as
chairman of MobileMedia Corporation from 1993 until 1995. Mr. Roos also was a
co-founder of Locate, a digital local access carrier specializing in high-speed
T-1 level radio carrier technologies. Mr. Roos has testified before the United
States Congress on telecommunications issues and is a former chairman of the
Alternative Local Telecommunications Trade Association. Mr. Roos currently
serves on the Board of Directors of SPEEDCOM Wireless Corporation.
BENEFICIAL OWNERSHIP OF SECURITIES
The following table presents information concerning the beneficial
ownership of P-Com's Common Stock, Series C Convertible Preferred Stock and
Series D Convertible Preferred Stock as of July 22, 2004 by each of the
following:
o each person known by P-Com to be the beneficial owner of 5% of
more of its outstanding shares of Common Stock, Series C
Convertible Preferred Stock or Series D Convertible Preferred
Stock;
o each of P-Com's named executive officers;
o each of P-Com's directors; and
o all of P-Com's executive officers and directors as a group.
Beneficial ownership is determined under the rules of the Securities
and Exchange Commission and generally includes voting or investment power over
securities. Except in cases where community property laws apply or as indicated
in the footnotes to this table, P-Com believes that each stockholder identified
in the table possesses sole voting and investment power over all shares of
Common Stock, Series C Convertible Preferred Stock and Series D Convertible
Preferred Stock shown as beneficially owned by that stockholder. Percentage of
beneficial ownership is based on 10,287,360 shares of Common Stock, 6,240 shares
of Series C Convertible Preferred Stock and 2,000 shares of Series D Convertible
Preferred Stock outstanding as of July 22, 2004. Shares of Common Stock subject
to warrants and options that are currently exercisable or exercisable within 60
days of July 22, 2004, are considered outstanding and beneficially owned by the
stockholder who holds those warrants or options for the purpose of computing the
percentage ownership of that stockholder but are not treated as outstanding for
the purpose of computing the percentage ownership of any other stockholder.
Unless otherwise indicated below, the address of each stockholder listed below
is 3175 S. Winchester Boulevard, Campbell, California 95008.
26
SERIES C CONVERTIBLE SERIES D CONVERTIBLE
COMMON STOCK PREFERRED STOCK PREFERRED STOCK
----------------------------------------- -------------------------- ---------------------------
SHARES
ISSUABLE
PURSUANT NUMBER OF
TO SHARES
WARRANTS BENEFICIALLY
AND OWNED
OPTIONS (INCLUDING
EXERCISABLE THE NUMBER
WITHIN 60 OF SHARES NUMBER OF NUMBER OF
DAYS OF SHOWN IN PERCENTAGE SHARES PERCENTAGE SHARES PERCENTAGE
NAME AND ADDRESS JULY THE FIRST OF SHARES BENEFICIALLY OF SHARES BENEFICIALLY OF SHARES
OF BENEFICIAL OWNER 22, 2004 COLUMN) OUTSTANDING OWNED(1) OUTSTANDING(3) OWNED(2) OUTSTANDING
---------------------------- ------------ ------------ ------------- ------------ ------------ ------------- ------------
North Sound Legacy Fund LLC
1209 Orange Street
Wilmington, DE 19801 (3) 1,018,449 1,018,449 9.9% 2,332 37.4% 142.00 7.1%
North Sound Legacy
Institutional Fund LLC
1209 Orange Street
Wilmington, DE 19801 (3) 1,018,449 1,018,449 9.9% 2,332 37.4% 877.33 43.9%
North Sound Legacy
International Fund Ltd.
Bison Court, Roadtown
Tortola, BVI
Wilmington, DE 19801 (3) 1,018,449 1,018,449 9.9% 2,332 37.4% 980.67 49.0%
SDS Capital Group SPC, Ltd. 317,333 887,181 8.6% -- -- -- --
53 Forest Avenue, 2nd Floor
Old Greenwich, CT 06870
S.A.C. Capital
Associates LLC
72 Cummings Point Road
Stamford, CT 06902 -- 569,631 5.5% -- -- -- --
John A. Hawkins 6,447 6,447 * -- -- -- --
Brian T. Josling (4) 10,936 14,803 * 9.33 * -- --
Frederick R. Fromm 6,421 13,345 * 9.32 * -- --
R. Craig Roos -- 17,333 * 23.33 * -- --
George P. Roberts 45,849 65,177 * 23.33 * -- --
Sam Smookler 50,889 60,055 * 23.33 * -- --
Daniel W. Rumsey 19,861 19,861 * -- -- -- --
Randall Carl 21,805 21,877 * -- -- -- --
Don Meiners 20,911 20,991 * -- -- -- --
Geoff Giese (5) 16,839 16,840 * -- -- -- --
All current directors and
executive officers as a
group (11 persons) 184,200 240,890 2.3% 88.64 1.4% -- --
* Less than 1%
(1) There are no outstanding warrants or options to purchase shares of Series C
Convertible Preferred Stock.
(2) There are no outstanding warrants or options to purchase shares of Series D
Convertible Preferred Stock.
(3) Includes shares beneficially owned by North Sound Legacy Fund LLC, North
Sound Legacy Institutional Fund LLC, and North Sound International Fund
Ltd.
(4) For purposes of determining beneficial ownership in accordance with Rule
13d-3 of the Securities Exchange Act of 1934, as amended, the total shares
of Series C Preferred Stock includes shares beneficially owned by Margaret
Josling and TKB Ventures Ltd.
(5) Mr. Giese's employment with P-Com was terminated effective August 6, 2004.
EXECUTIVE COMPENSATION AND RELATED INFORMATION
SUMMARY COMPENSATION TABLE
The following table provides certain information summarizing the
compensation earned for services rendered in all capacities to P-Com and its
subsidiaries for each of the last three fiscal years by its, "named executive
27
officers," who consist of P-Com's Chief Executive Officer and each of P-Com's
four other most highly compensated executive officers, who were executive
officers on December 31, 2003 and whose salary and bonus for the fiscal year
ended December 31, 2003 was in excess of $100,000. In addition, the table
includes two additional individuals who are former executive officers of P-Com
for whom disclosure would have been provided but for the fact that the
individual was not serving as an executive officer of P-Com at December 31,
2003.
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------
------------------------------------------------------- SECURITIES
SALARY BONUS OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR ($)(1) ($) COMPENSATION ($) OPTIONS (#) COMPENSATION ($)
------------------------------------ ------ ------- -------- ---------------- ------------ ----------------
George P. Roberts (2) 2003 49,377 -- 74,922(3)(4) 18,567 --
Chairman of the Board of Directors 2002 145,670 -- -- 30,515 --
and Former Chief Executive Officer 2001 355,175 -- -- -- --
Samuel Smookler 2003 139,569 -- 53,083(4) 80,000(5) --
Chief Executive Officer and Director 2002 -- -- -- -- --
2001 -- -- -- -- --
Daniel W. Rumsey 2003 104,369 -- -- 73,333 8,000(6)
Vice President, Acting Chief 2002 -- -- -- -- --
Financial Officer and General Counsel 2001 -- -- -- -- --
Don Meiners 2003 103,699 -- -- 73,333 --
Vice President - Operations 2002 115,617 -- -- 983 --
2001 142,104 -- -- 67 --
Randall L. Carl 2003 136,800 36,252 -- 73,600 --
Senior Vice President, Sales and 2002 158,650 11,400 -- 1,500 --
Marketing - Licensed Products 2001 232,077 -- -- 167 --
Geoffrey Giese (7) 2003 105,266 -- -- 56,667 --
Former Vice President of Sales and 2002 121,693 -- -- 750 --
Marketing - License Exempt Products 2001 142,245 -- -- 100 --
Alan T. Wright (8) 2003 98,787 -- -- -- 33,375(8)
Former Chief Operating Officer 2002 214,524 -- -- 2,167 --
2001 253,232 96,000 -- 900 --
Ben L. Jarvis (9) 2003 89,655 -- -- -- 19,810(9)
2002 203,807 -- -- 1,249 --
2001 242,019 -- -- 467 --
(1) Includes amounts deferred under P-Com's 401(k) Plan.
(2) Mr. Roberts resigned from his position as Chief Executive Officer effective
September 1, 2003. Mr. Roberts remains as Chairman of the board of directors of
P-Com.
(3) Mr. Roberts was provided with a leased company vehicle, resulting in
additional compensation to Mr. Roberts of $12,481, and was reimbursed for $9,358
for the payment of taxes related to the taxable value of the benefit.
(4) On October 8, 2003, Messrs. Roberts and Smookler each acquired 23.33 shares
of Series C Preferred Stock of P-Com convertible into 13,611 shares of Common
Stock, resulting in an effective purchase price of $3.00 per share of Common
Stock. The closing price per share of Common Stock as reported on the OTC
Bulletin Board on October 8, 2003 was $6.90 per share (as adjusted for the
1-for-30 reverse stock split effective July 19. 2004).
(5) Mr. Smookler was also granted a warrant to purchase 86,667 shares of P-Com
Common Stock on the same terms and conditions as this option.
(6) Prior to joining P-Com full time in April 2003, Mr. Rumsey was paid $8,000
as a consultant to P-Com.
(7) Mr. Giese's employment with P-Com was terminated effective August 6, 2004.
(8) Mr. Wright's employment with P-Com was terminated effective July 24, 2003.
Following Mr. Wright's termination of employment, Mr. Wright was paid severance
through the remainder of 2003.
(9) Mr. Jarvis' employment with P-Com was terminated effective June 30, 2003.
Following Mr. Jarvis' termination of employment, Mr. Jarvis was paid severance
through the remainder of 2003.
28
OPTION GRANTS IN LAST FISCAL YEAR
The following table contains information concerning the stock option
grants made to each of the named executive officers in the 2003 fiscal year. No
stock appreciation rights were granted to these individuals during such fiscal
year.
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM (1)
------------------------------------------------------------- ----------------------------
PERCENT OF
TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO
UNDERLYING EMPLOYEES
OPTIONS IN FISCAL EXERCISE EXPIRATION
NAME GRANTED (#)(2) YEAR PRICE ($/SH) DATE 5% ($) 10% ($)
---------------------- -------------- ------------ ------------ ----------- ----------- -----------
George P. Roberts 18,567 2.1% 3.30 08/13/13 38,532 97,649
Sam Smookler 80,000 9.0% 5.70 09/02/13 286,775 726,746
Don Meiners 73,333 8.2% 3.30 08/13/13 152,193 385,386
Geoffrey Giese 56,667 6.3% 3.30 08/13/13 117,603 298,030
Daniel W. Rumsey 73,333 8.2% 3.30 08/13/13 152,193 385,686
Randall L. Carl 73,333 8.2% 3.30 08/13/13 152,193 385,686
267 .02% 4.50 03/05/13 755 1,912
Alan T. Wright -- -- -- -- -- --
Ben L. Jarvis -- -- -- -- -- --
(1) There can be no assurance provided to any executive officer or any other
holder of P-Com's securities that the actual stock price appreciation over the
ten-year option term will be at the assumed 5% and 10% levels or at any other
defined level. Unless the market price of P-Com Common Stock appreciates over
the option term, no value will be realized from the option grants made to the
executive officers.
(2) Each option is immediately exercisable for all the option shares, but any
shares purchased under the option will be subject to repurchase by P-Com, at the
option exercise price paid per share, should the individual cease service with
P-Com prior to vesting in those shares. Twenty-five percent (25%) of the option
shares will vest upon the optionee's continuation in service through one year
following the grant date and the balance of the shares will vest in thirty-six
(36) successive equal monthly installments upon the optionee's completion of
each of the next thirty-six (36) months of service thereafter. The shares
subject to the option will immediately vest in full should (i) P-Com be acquired
by merger or asset sale in which the option is not assumed or replaced by the
acquiring entity or (ii) the optionee's employment be involuntarily terminated
within eighteen (18) months after certain changes in control or ownership of
P-Com.
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
The table below sets forth certain information with respect to P-Com's
named executive officers concerning the exercise of options during 2003 and
unexercised options held by such individuals as of the end of such fiscal year.
No SARs were exercised during 2003 nor were any SARs outstanding at the end of
such fiscal year.
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT FISCAL IN-THE-MONEY OPTIONS AT FISCAL
SHARES VALUE YEAR END(3) YEAR END ($) (1)
ACQUIRED ON REALIZED ------------------------------ ------------------------------
NAME EXERCISE (#) ($)(2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------------------- ------------ -------- ----------- ------------- ----------- -------------
George P. Roberts -- -- 39,093 21,911 -- 557
Sam Smookler -- -- -- 80,000 -- --
Don Meiners -- -- 1,838 73,460 -- 2,200
Geoffrey Giese -- -- 1,395 56,772 -- 1,700
Daniel W. Rumsey -- -- -- 73,333 -- 2,200
Randall L. Carl -- -- 1,757 74,176 -- 2,200
Alan T. Wright -- -- -- -- -- --
Ben L. Jarvis -- -- -- -- -- --
(1) Based on the fair market value of the option shares at the 2003 fiscal
year-end ($4.20 per share based on the closing selling price on the OTC Bulletin
Board as of December 31, 2003) less the exercise price.
(2) Based on the fair market value of the shares on the exercise date less the
exercise price paid for those shares.
(3) The options are immediately exercisable for all the options shares. However,
any shares purchased under the options are subject to repurchase by P-Com, at
the original exercise price paid per share, upon the optionee's cessation of
service prior to vesting in such shares.
29
DIRECTOR COMPENSATION
Non-employee directors do not receive cash compensation for their
services as directors.
Under the Automatic Option Grant Program as now contained in P-Com's
1995 Plan, each individual who first joins the board of directors as a
non-employee director will receive, at the time of such initial election or
appointment, an automatic option grant to purchase 267 shares of common stock,
provided such person has not previously been in P-Com's employ. In addition, on
the date of each annual stockholders meeting, each individual who continues to
serve as a non-employee director, whether or not such individual is standing for
re-election at that particular annual meeting, will be granted an option to
purchase 27 shares of common stock, provided such individual has not received an
option grant under the Automatic Option Grant Program within the preceding six
months. Each grant under the Automatic Option Grant Program will have an
exercise price per share equal to 100% of the fair market value per share of
P-Com common stock on the grant date, and will have a maximum term of ten (10)
years, subject to earlier termination should the optionee cease to serve as a
board of directors member. The Automatic Option Grant Program will be terminated
if the 2004 Equity Incentive Plan is adopted by P-Com's stockholders.
On August 13, 2003, under the Discretionary Option Grant Program, each
member of the board of directors received a discretionary option grant of 18,567
shares of common stock at an exercise price of $3.30 per share. The option grant
will vest with respect to 25% of the option shares upon the optionee's
completion of one year of service as a director. The remaining option shares
will vest in a series of thirty-six successive equal monthly installments upon
the completion of each additional month of service as a director, such date
measured from the anniversary date of the vesting commencement date. Under the
2004 Equity Incentive Plan, if adopted by P-Com's stockholders, the Compensation
Committee will have the authority to continue making discretionary option grants
such as these.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AGREEMENTS AND CHANGE OF CONTROL
AGREEMENTS
The Compensation Committee of the Board of Directors, as Plan
Administrator of the 1995 Stock Option/Stock Issuance Plan, has the authority to
provide for accelerated vesting of the shares of Common Stock subject to any
outstanding options held by the Chief Executive Officer and any other executive
officer or any unvested share issuances actually held by such individual, in
connection with certain changes in control of P-Com or the subsequent
termination of the officer's employment following the change in control event.
P-Com entered into certain benefits agreements, with Messrs. Ben L.
Jarvis, formerly Executive Vice President and General Manager, P-Com Network
Services, Inc., and Alan T. Wright, P-Com's former Chief Operating Officer,
dated April 8, 2002. Each of these agreements provided for the following
benefits should the officers' employment terminate involuntarily:
o salary continuation payments in an aggregate amount equal to the
greater of the officers' annual base salary in effect immediately
prior to the involuntary termination of the officer's base salary
in effect as of January 1, 2002;
o unvested options held by the officers will continue to vest for a
period of one year following the date of the involuntary
termination, and all vested but unexercised options will remain
exercisable until the expiration of the one-year period following
the date of the involuntary termination;
o a lump sum payment for all unpaid vacation days accrued by the
officer through the date of the involuntary termination; and
o indemnification of the officer to the same extent provided for
other officers and directors under P-Com's certificate of
incorporation, bylaws, indemnification agreements and insurance
policies.
Mr. Jarvis' employment with P-Com was terminated effective June 30,
2003. In connection with his termination, Mr. Jarvis entered into a letter
agreement with P-Com, dated August 18, 2003, thereby terminating his benefits
agreement dated April 18, 2002. The letter agreement provides for (a) severance
30
payments totaling $122,040.06 in bi-weekly installments, beginning July 1, 2003
and ending July 1, 2005; (b) an amount equal to the cost to P-Com to continue
health care benefits under COBRA for a period of nine (9) months, such payments
to be paid in lieu of payments made by P-Com to continue his health care
benefits under COBRA; and (c) all outstanding unvested options to acquire Common
Stock on the termination date shall continue to vest and shall remain
exercisable until June 30, 2004. In the event that Mr. Jarvis finds employment
paying an annual salary equal to half of the aggregate severance payment during
the twelve months following July 1, 2003, the severance and COBRA payments shall
terminate.
Mr. Wright's employment with P-Com was terminated effective July 24,
2003. In connection with his termination, Mr. Wright entered into a letter
agreement with P-Com, dated August 18, 2003, thereby terminating his benefits
agreement, dated April 18, 2002. The letter agreement provides for (a) severance
payments totaling $133,500 in bi-weekly installments, beginning July 11, 2003
and ending July 11, 2005; (b) P-Com shall pay continuation of health benefits
under COBRA for a period of twelve (12) months from the date of termination. In
the event that Mr. Wright finds employment paying an annual salary equal to half
of the aggregate severance payment during the twelve months following August 1,
2003, the severance and COBRA payments shall terminate.
P-Com entered into an Employment and Continuity of Benefits Agreement
with George P. Roberts, dated May 31, 2001, outlining his continued employment
with P-Com as Chairman of the Board following his resignation as Chief Executive
Officer on May 30, 2001. The agreement provided for (a) an employment period
commencing May 31, 2001 through May 30, 2002. Should this agreement remain in
effect through May 30, 2002 then Mr. Roberts' employment under this agreement
shall automatically renew for another one-year term commencing May 31, 2002 and
continuing through May 30, 2003, unless written notice of non-renewal is
received from Mr. Roberts on or before May 1, 2002; (b) termination of
employment may be effected by (1) resignation by Mr. Roberts with at least 60
days prior written notice, (2) termination for cause by majority vote of the
Board, or (3) failure of P-Com's stockholders to re-elect Mr. Roberts to the
Board; (c) cash compensation will be paid to Mr. Roberts' in a base salary in
accordance with P-Com's payroll practices for salaried employees; (d) a target
bonus equal to a percentage of Mr. Roberts base salary may be earned in
accordance with P-Com's management incentive program, and shall be determined by
the Board; (e) throughout the employment period, Mr. Roberts shall be eligible
to participate in all benefit plans that are made available to P-Com's
executives and for which Mr. Roberts qualifies.
P-Com has entered into a letter agreement with George P. Roberts, dated
April 28, 2003, thereby extending the employment period under the Employment and
Continuity of Benefits Agreement with Mr. Roberts through May 30, 2005. The
letter agreement provides for the amendment of the Employment and Continuity of
Benefits Agreement upon the assignment of a new Chief Executive Officer of
P-Com. Effective September 1, 2003, due his resignation and the appointment of a
new Chief Executive Officer of P-Com, Mr. Roberts' salary will amount to half
his salary prior to recent reductions, with one half of the salary, $188,000,
paid in cash, and the other half paid in Common Stock of P-Com.
P-Com entered into an agreement with Sam Smookler, President and Chief
Executive Officer of P-Com, dated July 25, 2003, providing for the employment of
Mr. Smookler as President and Chief Executive Officer for a period of two years.
The agreement further provides for the payment to Mr. Smookler of a salary of
$36,000 per month beginning September 1 and continuing through December 31,
2003. Beginning January 1, 2004, Mr. Smookler is to be paid a base salary of
$250,000 per year. On September 2, 2004, Mr. Smookler will be paid a cash bonus
equal to 50% of his base salary. The agreement also provides for the grant of an
option to purchase 2% of P-Com's total number of shares of Common Stock issued
and outstanding as of September 2, 2003. By agreement with the Board of
Directors, this number was fixed at 166,667 shares, which amount was reduced to
80,000 due to limitations in P-Com's 1995 Stock Option/Stock Issuance Plan.
P-Com granted Mr. Smookler a warrant to purchase 86,667 shares of Common Stock,
thereby making up the difference between the 166,667 shares granted by the Board
of Directors, and the 80,000 actually issued under the Plan. In the event Mr.
Smookler's employment is terminated at any time following a change in control of
P-Com, P-Com is obligated to pay Mr. Smookler his base salary for a period of
two years, and his options shall automatically accelerate so that each option
becomes fully vested and immediately exercisable for the total number of shares
subject to the option. A change in control will be deemed to occur under the
agreements upon: (a) a merger or consolidation in which P-Com is not the
surviving entity; (b) the sale, transfer or other disposition of all or
substantially all of the assets of P-Com in complete liquidation or dissolution
of P-Com; (c) a reverse merger in which P-Com is the surviving entity but in
which securities representing fifty percent (50%) or more of the total combined
voting power of P-Com's outstanding securities are transferred to persons
different from the persons holding those securities immediately prior to such
merger; and the acquisition, directly or indirectly by any person or related
31
group of persons of beneficial ownership of securities possessing more than
thirty percent (30%) of P-Com's outstanding voting securities pursuant to a
tender or exchange offer made directly to P-Com's stockholders. Similarly, in
the event Mr. Smookler's employment with P-Com is involuntarily terminated
without cause, P-Com is obligated to pay him his base salary for a period of one
year, and his options shall continue to vest in accordance with the terms and
conditions contained therein for a period of two years following the date of his
termination.
P-Com entered into an agreement with Mr. Smookler on June 25, 2004
providing for the issuance of 166,667 warrants to purchase P-Com's common stock
at the market price on the issuance date. Upon the achievement of two
performance criteria, the warrants will become exercisable. First, P-Com must
have a cash balance of at least $2,000,000 at the end of the 2004 fiscal year.
In the event that P-Com does achieve this criterion, the number of warrants that
will become executable is determined by P-Com's revenue level achieved for
fiscal year 2004. Hence, if the revenue achieved is at least: a) $30,000,000,
then 66,667 warrants will be eligible; or b) $33,000,000, then 100,000 warrants
will be eligible; or c) $36,000,000, then 133,333 warrants will be eligible; or
d) $40,000,000, then 166,667 warrants will be eligible. One-fourth of the
eligible warrants shall become executable upon the completion of twelve months
of continuous service measured from the date of grant (the "Initial Vesting
Period") and the balance of the eligible warrants shall become executable in
thirty-six successive equal monthly installments subject to Mr. Smookler's
continued services after the end of the Initial Vesting Period.
P-Com entered into an agreement with Daniel Rumsey, its Vice President,
General Counsel and Acting Chief Financial Officer, on April 4, 2003. Under the
terms of the agreement, in the event Mr. Rumsey's employment with P-Com
terminates at any time by reason of an involuntary termination, P-Com is
obligated to pay him severance equal to the higher of his base salary on the
date of the agreement, or his base salary on the date of his involuntary
termination, which amount is obligated to be paid in a series of successive
biweekly installments over the twelve month period measured from the date of his
involuntary termination. At the time of his involuntary termination, each
unvested option granted to Mr. Rumsey shall continue to vest, and such options
plus options already vested but unexercised as of the date of his involuntary
termination shall continue to be exercisable in accordance with the 1995 Stock
Option/Stock Issuance Plan from the date of involuntary termination to the first
anniversary date thereof. For purposes of the agreement, an involuntary
termination shall mean the termination of his employment with P-Com (i)
involuntarily upon his discharge or dismissal; or (ii) voluntarily following his
resignation following (a) a change in level of management to which he reports,
(b) a decrease or material change in his responsibilities, or (c) a reduction in
his base salary.
P-Com entered into an agreement with Dr. Carlos Belfiore, its Vice
President of Engineering and Chief Technical Officer, on October 20, 2003. Under
the terms of the agreement, Dr. Belfiore is paid a base salary of $138,000 per
year. Dr. Belfiore is also paid a cash bonus equal to 30% of his base salary on
January 15, 2005. In the event his employment ceases prior to January 15, 2005,
the amount of his bonus will be pro-rated for the number of days he is employed
by P-Com since October 20, 2003. The agreement also provides for the grant of an
option to purchase 91,667 shares of Common Stock of P-Com, which amount was
reduced to 80,000 due to limitations in P-Com's 1995 Stock Option/Stock Issuance
Plan. P-Com granted Dr. Belfiore a warrant to purchase 11,667 shares of Common
Stock, thereby making up the difference between the 91,667 shares granted by the
Board of Directors, and the 80,000 actually issued under the Plan. In the event
Dr. Belfiore's employment is terminated at any time without cause, P-Com is
obligated to pay Dr. Belfiore his salary for six months following such
termination, and all options previously granted to Dr. Belfiore continue to vest
in accordance with their terms and conditions for a period of two years
following the date of such termination.
P-Com entered into an agreement with Elsbeth Kahn, its Vice-President -
Sales and Marketing - License-Exempt Products on April 7, 2004. Under the terms
of the agreement, Ms. Kahn is paid a base salary of $150,000 per year. Beginning
with fiscal year 2004, Ms. Kahn will receive an annual cash bonus equal to 50%
of her base salary for each fiscal year in which P-Com meets or exceeds its
stated goals, as set by the President at the beginning of each fiscal year. Ms.
Kahn's bonus for fiscal year 2004 shall be pro-rated for the number of days she
is employed by P-Com for calendar year 2004 and she is guaranteed a minimum
bonus of $20,000 for the year 2004. The agreement also provides for the grant of
an option to purchase 60,000 shares of Common Stock of P-Com. In the event Ms.
Kahn's employment is terminated at any time without cause, P-Com is obligated to
pay Ms. Kahn her salary for six months following such termination, and all
32
options previously granted to Ms. Kahn continue to vest in accordance with their
terms and conditions for a period of two years following the date of such
termination.
Following a change in control of P-Com, P-Com is obligated to pay Dr.
Belfiore and Ms. Kahn their respective base salaries for a period of one year,
and their respective options shall automatically accelerate so that each option
becomes fully vested and immediately exercisable for the total number of shares
subject to the option. A change in control will be deemed to occur under the
agreements upon: (a) a merger or consolidation in which P-Com is not the
surviving entity; (b) the sale, transfer or other disposition of all or
substantially all of the assets of P-Com in complete liquidation or dissolution
of P-Com; (c) a reverse merger in which P-Com is the surviving entity but in
which securities representing fifty percent (50%) or more of the total combined
voting power of P-Com's outstanding securities are transferred to persons
different from the persons holding those securities immediately prior to such
merger; and (d) the acquisition, directly or indirectly by any person or related
group of persons of beneficial ownership of securities possessing more than
thirty percent (30%) of P-Com's outstanding voting securities pursuant to a
tender or exchange offer made directly to P-Com's stockholders.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of our Board of Directors currently consists
of Mr. Fromm and Mr. Hawkins. Neither of these individuals was an officer or
employee of P-Com at any time during the 2002 Fiscal Year or at any other time,
nor did they have a business relationship with P-Com. No executive officer of
P-Com has ever served as a member of the board of directors or compensation
committee of any other entity that has or has had one or more executive officers
serving as a member of our Board of Directors or Compensation Committee.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION
The Compensation Committee of the Board of Directors is responsible for
establishing the base salary and incentive cash bonus programs for our executive
officers. The Committee also has the exclusive responsibility for the
administration of our 1995 Stock Option/Stock Issuance Plan, under which grants
may be made to executive officers and other key employees of P-Com.
The Compensation Committee is comprised of two non-employee directors,
none of whom has any interlocking or other type of relationship that would call
into question his or her independence as a committee member. The members of
P-Com's Compensation Committee are Messrs. Frederick Fromm and John A. Hawkins.
In determining compensation, the Compensation Committee has access, for
comparison purposes, to compensation surveys for similar technology companies,
with which P-Com competes in the recruitment of its personnel, and national
compensation information, as well as other executive compensation data and
surveys. On issues related to executive compensation, the Compensation Committee
consults with the Chief Executive Officer. The following report of the
Compensation Committee describes P-Com's compensation policies during the fiscal
year ended December 31, 2003 as they affected P-Com's Chief Executive Officer
and other executive officers.
The Committee's objective in determining executive compensation is to
provide our executive officers and other key employees with competitive
compensation opportunities based upon their contribution to the financial
success of P-Com, the enhancement of corporate and stockholder values, the
market levels of compensation in effect at companies with which P-Com competes
for executive talent, the personal performance of such individuals and, most
importantly in 2003, the financial resources of P-Com. The Committee may,
however, in its discretion, apply different factors in setting executive
compensation for future fiscal years.
The compensation package for each executive officer is comprised of
cash compensation and long-term equity incentive awards. Cash compensation
consists of base salary and annual performance awards.
Cash Compensation
A key objective of our current executive compensation program is to
position its key executives to earn cash compensation reflective of peer groups
in the current industry climate. During 2003, base salaries to P-Com's executive
officers remained unchanged, reflecting the extreme economic conditions in the
sector in which P-Com operated in 2003, and the deteriorating financial
33
condition of P-Com through much of the year. The base salaries paid to executive
officers in 2003 reflect a 30% reduction in base salaries taken in 2002, when
each executive officer's salary was reduced along with all exempt employees of
P-Com. These reductions were necessary in order for P-Com to retain cash and
consummate the restructuring of P-Com, which was completed in the first quarter
of 2004. As a result of P-Com's restructuring efforts, no performance awards
were paid to executive officers in 2003 - other than to P-Com's sales executive,
Randall L. Carl, who was paid sales performance awards totaling $36,252 in 2003.
Long-Term Incentive Awards
Equity incentives are provided primarily through stock option grants
under the 1995 Plan. The grants are designed to align the interests of each
executive officer with those of the stockholders and provide each individual
with a significant incentive to manage P-Com from the perspective of an owner
with an equity stake in the business. Each grant allows the individual to
acquire shares of our common stock at a fixed price per share (the market price
on the grant date) over a specified period of time (up to 10 years). The shares
subject to each option generally vest in installments over a two-to-four-year
period, contingent upon the executive officer's continued employment with P-Com.
Accordingly, the option will provide a return to the executive officer only if
the executive officer remains employed by P-Com during the applicable vesting
period, and then only if the market price of the underlying shares appreciates
over the option term.
The number of shares subject to each option grant is set at a level
intended to create a meaningful opportunity for stock ownership based on the
officer's current position with P-Com, the base salary associated with that
position, the individual's potential for increased responsibility and promotion
over the option term, the individual's personal performance in recent periods,
and other factors determined important by the Committee. The Committee also
takes into account the recommendations of the Chief Executive Officer of P-Com,
in determining the recipients and size of each grant.
For 2003, the Committee's stock option grants largely reflected the
substantial reductions in base salaries of executive officers of P-Com that
occurred during 2002, which remained unchanged in 2003, and the Committee's
desire to retain the executive officers essential to the attainment of P-Com's
performance and restructuring goals.
Chief Executive Officer's Compensation
George P. Roberts. Mr. George Roberts was elected interim Chief
Executive Officer effective January 2002 and served in that capacity until
September 1, 2003, when his successor, Samuel Smookler, was appointed President
and Chief Executive Officer. To ensure Mr. Roberts' continued employment with
P-Com pending the appointment of his successor, P-Com entered into an agreement
with Mr. Roberts, dated April 28, 2003, thereby extending his employment through
May 30, 2005. The agreement provided for the payment of Mr. Roberts' salary, as
Chairman of P-Com, following the appointment of a new Chief Executive Officer,
one half in cash, and the other half in stock. Among the factors considered by
the Committee in determining the compensation payable to Mr. Roberts are his
contributions to P-Com during 2003 during the continued downturn in the
industry, and in connection with the restructuring of P-Com, when Mr. Roberts
provided services to P-Com for nominal consideration, and the expected
contributions of Mr. Roberts to P-Com as Chairman of the Board of Directors.
Samuel Smookler. Mr. Samuel Smookler joined P-Com as President and
Chief Executive Officer on September 1, 2003. In setting Mr. Smooker's
compensation, including his bonus for 2003-2004, the Compensation Committee
considered Mr. Smookler's industry experience, the scope of his
responsibilities, the Board's confidence in Mr. Smookler to lead P-Com beyond
the restructuring and to return P-Com to profitability, and the recommendation
of the Chairman and interim Chief Executive Officer. Mr. Smookler's compensation
in 2003 reflects amounts paid to Mr. Smookler designed to replace the income Mr.
Smookler would have otherwise received from his former employer if he had not
joined P-Com. This payment was required to successfully recruit Mr. Smookler to
P-Com. In determining Mr. Smookler's stock option grant, the Committee
considered the percentage ownership interest typically offered chief executive
officers of similarly situated companies, the anticipated impact of the
restructuring on the issued and outstanding capital of P-Com, and the relative
number of options granted to other executive officers of P-Com. Mr. Smookler and
members of the Compensation Committee are currently discussing whether
34
additional stock options should be awarded to Mr. Smookler in light of the
substantial impact on the issued and outstanding capital stock of P-Com
following the restructuring.
In the Committee's view, the total compensation package provided to
Messrs. Smookler and Roberts for the 2003 fiscal year is appropriate in the
markets the industry served, in light of P-Com's current performance.
Compliance with Internal Revenue Code Section 162(m)
Section 162(m) of the Internal Revenue Code, enacted in 1993, generally
disallows a tax deduction to publicly held companies for compensation exceeding
$1.0 million paid to certain of the corporation's executive officers. The
limitation applies only to compensation that is not considered to be
performance-based. The non-performance based compensation to be paid to our
executive officers for the 2003 fiscal year did not exceed the $1.0 million
limit per officer, nor is it expected that the non-performance based
compensation to be paid to our executive officers for fiscal year 2004 will
exceed that limit. Options granted under our 1995 Plan are structured so that
any compensation deemed paid to an executive officer in connection with the
exercise of those options will qualify as performance-based compensation that
will not be subject to the $1.0 million limitation. Because it is very unlikely
that the cash compensation payable to any of our executive officers in the
foreseeable future will approach the $1.0 million limit, the Compensation
Committee has decided at this time not to take any other action to limit or
restructure the elements of cash compensation payable to our executive officers.
The Compensation Committee will reconsider this decision should the individual
compensation of any executive officer ever approach the $1.0 million level.
It is the opinion of the Compensation Committee that the executive
compensation policies and programs in effect for our executive officers provide
an appropriate level of total remuneration which properly aligns our performance
and the interests of our stockholders with competitive and equitable executive
compensation in a balanced and reasonable manner, for both the short and
long-term.
COMPENSATION COMMITTEE
Frederick Fromm
John A. Hawkins
AUDIT COMMITTEE REPORT
For the year ended December 31, 2003, the Audit Committee has reviewed
and discussed the audited financial statements with management and the
independent auditors, Aidman Piser & Company. The Audit Committee discussed with
the independent auditors the matters required to be discussed by the Statement
of Auditing Standards No. 61, and reviewed the results of the independent
auditors' examination of the financial statements.
The Committee also reviewed the written disclosures and the letter from
the independent auditors required by Independence Standards Board Standard No.
1, discussed with the auditors the auditors' independence, and satisfied itself
as to the auditors' independence.
Based on the above reviews and discussions, the Audit Committee
recommended to the Board of Directors that the audited financial statements be
included in the Annual Report on Form 10-K for the year ended December 31, 2003,
for filing with the Securities and Exchange Commission.
Notwithstanding anything to the contrary set forth in any of the
Company's previous filings under the Securities Act of 1933 or the Securities
Exchange Act of 1934 that might incorporate future filings made by the Company
under those statutes, in whole or in part, this report shall not be deemed to be
incorporated by reference into any such filings, nor will this report be
incorporated by reference into any future filings made by the Company under
those statutes.
AUDIT COMMITTEE
Brian T. Josling
Frederick Fromm
R. Craig Roos
35
STOCK PERFORMANCE GRAPH
The graph depicted below shows a comparison of cumulative total
stockholder returns for P-Com, the Standard & Poor's 500 Index and the Standard
& Poor's Communications Equipment Manufacturers Index.
TOTAL STOCKHOLDER RETURN
[TABLE BELOW REPRESENTS A LINE CHART IN THE ORIGINAL DOCUMENT.]
S&P Communications
S&P 500 Equipment P-Com Inc
------- ------------------ ---------
Dec-98 $171.48 $229.55 $26.90
Mar-99 180.02 245.67 51.48
Jun-99 192.71 319.12 35.34
Sep-99 180.67 319.15 47.26
Dec-99 207.56 504.15 59.70
Mar-00 212.32 490.43 124.89
Jun-00 206.68 445.65 38.40
Sep-00 204.68 356.84 44.73
Dec-00 188.66 220.55 20.68
Mar-01 166.29 124.61 8.65
Jun-01 176.03 101.58 3.71
Sep-01 150.19 72.08 1.82
Dec-01 166.24 81.25 2.23
Mar-02 166.70 62.24 1.35
Jun-02 144.36 42.19 0.49
Sep-02 119.42 31.27 0.28
Dec-02 129.50 37.23 0.26
Mar-03 125.42 38.36 0.20
Jun-03 144.73 42.90 0.13
Sep-03 148.56 50.71 0.30
Dec-03 166.65 61.85 0.20
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires P-Com's directors and executive officers, and person
who beneficially own more than 10% of the Common Stock, to file with the SEC
initial reports of beneficial ownership ("Form 3") and reports of changes in
beneficial ownership of Common Stock and other equity securities of P-Com ("Form
4"). Officers, directors and greater than 10% stockholders of P-Com are required
by SEC rules to furnish to P-Com copies of all Section 16(a) reports that they
file. To P-Com's knowledge, based solely on a review of the copies of such
reports furnished to P-Com and written representations that no other reports
were required, all Section 16(a) filing requirements applicable to its officers,
directors and greater than 10% beneficial owners were complied with for fiscal
2003, except that one Form 3 and one Form 4 was not timely filed for Mr. Roos,
one Form 4 was not timely filed for Mr. Smookler, two Form 4's were not timely
filed for Mr. Roberts, one Form 4 was not timely filed for Mr. Fromm and one
Form 4 was not timely filed for Mr. Josling.
SUBMISSION OF STOCKHOLDER PROPOSALS
Pursuant to Rule 14a-8 under the Exchange Act, stockholders may present
proper proposals for inclusion in P-Com's proxy statement and for consideration
at the next annual meeting of its stockholders by submitting their proposals to
P-Com in a timely manner. Each stockholder may submit no more than one proposal,
and that proposal, including any accompanying supporting statement, may not
exceed 500 words. Additionally, eligibility to submit a proposal must be
demonstrated by the stockholder by delivering to P-Com a written statement from
36
the record holder of the stockholder's securities, verifying that, at the time
the proposal was submitted, the stockholder, for at least one year, continuously
held at least 1% P-Com's outstanding voting securities or voting securities with
a market value of at least $2,000. The stockholder must also submit a written
statement stating that the stockholder intends to continue to hold the
securities through the date of the meeting of the stockholders.
P-Com stockholders who, in accordance with Securities and Exchange
Commission Rule 14a-8, wish to present proposals for inclusion in the proxy
materials to be distributed in connection with the 2005 annual meeting must
submit their proposals so that they are received at P-Com's principal executive
offices no later than the close of business on June 1, 2005. Stockholder
proposals should be addressed to: P-Com, Inc., 3175 S. Winchester Boulevard,
Campbell, California 95008, Attention: Corporate Secretary.
INCORPORATION OF OTHER DOCUMENTS BY REFERENCE
The SEC allows P-Com to "incorporate by reference" information that it
files with the SEC, which means that P-Com can disclose important information to
you by referring you to those documents. You may read and copy any materials we
file with the SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. You may obtain information on the operation of the
Public Reference Room by calling the SEC at 1-800-SEC-0330. The information
incorporated by reference is an important part of this proxy statement. We
incorporate by reference P-Com's Annual Report on Form 10-K for the year ended
December 31, 2003, filed with the SEC on March 30, 2004, under Item 13(b) of
Schedule 14A of Regulation 14A under the Securities Exchange Act of 1934, as
amended. A copy of the Annual Report on Form 10-K is enclosed with this proxy
statement.
OTHER MATTERS
P-Com knows of no other matters that will be presented for
consideration at the annual meeting of P-Com stockholders. If any other matters
properly come before the annual meeting of P-Com stockholders, it is the
intention of the persons named in the enclosed form of proxy to vote the shares
they represent as the board of directors of P-Com may recommend. Discretionary
authority with respect to such other matters is granted by the execution of the
enclosed proxy.
THE BOARD OF DIRECTORS OF P-COM, INC.
Dated: September 3, 2004
37
APPENDIX A
P-COM, INC.
2004 EQUITY INCENTIVE PLAN
TABLE OF CONTENTS
Page
----
ARTICLE 1 INTRODUCTION.........................................................1
ARTICLE 2 DEFINITIONS..........................................................1
ARTICLE 3 ADMINISTRATION.......................................................4
3.1 Committee Composition........................................4
3.2 Committee Responsibilities...................................4
3.3 Committee for Non-Officer Grants.............................5
3.4 Scope of Discretion..........................................5
3.5 Unfunded Plan................................................5
ARTICLE 4 STOCK AVAILABLE FOR GRANTS...........................................5
4.1 Basic Limitation.............................................5
4.2 Additional Stock.............................................5
4.3 Dividend Equivalents.........................................6
ARTICLE 5 ELIGIBILITY..........................................................6
ARTICLE 6 OPTIONS..............................................................6
6.1 Option Agreement.............................................6
6.2 Number of Shares.............................................6
6.3 Exercise Price...............................................6
6.4 Exercisability and Term......................................7
6.5 Incentive Stock Options......................................7
6.6 Effect of Change in Control..................................8
6.7 Effect of Termination of Service.............................8
6.8 Nonassignability of Options..................................9
6.9 Modification or Assumption of Options........................9
-i-
6.10 Buyout Provisions............................................9
ARTICLE 7 PAYMENT FOR OPTION STOCK............................................10
7.1 General Rule................................................10
7.2 Surrender of Stock..........................................10
7.3 Exercise/Sale...............................................10
7.4 Exercise/Pledge.............................................10
7.5 Promissory Note.............................................10
7.6 Other Forms of Payment......................................10
ARTICLE 8 STOCK APPRECIATION RIGHTS...........................................11
8.1 SAR Agreement...............................................11
8.2 Number of Shares............................................11
8.3 Exercise Price..............................................11
8.4 Exercisability and Term.....................................11
8.5 Effect of Change in Control.................................11
8.6 Exercise of SARs............................................11
8.7 Nonassignability of SARs....................................12
8.8 Modification or Assumption of SARs..........................12
ARTICLE 9 RESTRICTED STOCK....................................................12
9.1 Restricted Stock Agreement..................................12
9.2 Purchase Price..............................................12
9.3 Payment for Awards..........................................12
9.4 Vesting Conditions..........................................12
9.5 Voting and Dividend Rights..................................13
9.6 Nonassignability of Restricted Stock........................13
ARTICLE 10 STOCK UNITS........................................................13
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10.1 Stock Unit Agreement........................................13
10.2 Payment for Awards..........................................13
10.3 Vesting Conditions..........................................13
10.4 Voting and Dividend Rights..................................14
10.5 Form and Time of Settlement of Stock Units..................14
10.6 Death of Recipient..........................................14
10.7 Creditors' Rights...........................................14
10.8 Nonassignability of Stock Units.............................14
ARTICLE 11 PROTECTION AGAINST DILUTION........................................15
11.1 Adjustments.................................................15
11.2 Dissolution or Liquidation..................................15
11.3 Reorganizations.............................................15
ARTICLE 12 DEFERRAL OF AWARDS.................................................16
ARTICLE 13 PAYMENT OF DIRECTOR'S FEES IN SECURITIES...........................16
13.1 Effective Date..............................................16
13.2 Elections to Receive Non-Statutory Stock Options,
Restricted Stock or Stock Units.............................16
13.3 Number and Terms of Non-Statutory Stock Options,
Restricted Stock or Stock Units.............................16
ARTICLE 14 LIMITATION ON RIGHTS...............................................17
14.1 Retention Rights............................................17
14.2 Stockholders' Rights........................................17
14.3 Regulatory Requirements.....................................17
ARTICLE 15 WITHHOLDING TAXES..................................................17
15.1 General.....................................................17
15.2 Stock Withholding...........................................17
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ARTICLE 16 FUTURE OF THE PLAN.................................................18
16.1 Term of the Plan............................................18
16.2 Amendment or Termination....................................18
ARTICLE 17 ADDITIONAL PROVISIONS..............................................18
17.1 Financial Statements........................................18
17.2 Governing Law...............................................18
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P-COM, INC.
2004 EQUITY INCENTIVE PLAN
ARTICLE 1
INTRODUCTION
The purpose of this P-Com, Inc. 2004 Equity Incentive Plan is
to offer certain Employees, Outside Directors, and Consultants the opportunity
to acquire a proprietary interest in the Company by the grant of Awards in the
form of Options (which may constitute Non-Statutory Stock Options and Incentive
Stock Options), Restricted Stock, Stock Appreciation Rights, or Stock Units.
Through the Plan, the Company and its Related Corporations seek to attract,
motivate, and retain highly competent persons. The success of the Company and
its Related Corporations are dependent upon the efforts of these persons.
ARTICLE 2
DEFINITIONS
As used herein, the following definitions shall apply.
"Award" shall mean any award of an Option, SAR, Restricted
Stock, or Stock Unit under the Plan.
"Board" shall mean the Board of Directors of the Company.
"Cause" shall mean: (i) the unauthorized use or disclosure of
the confidential information or trade secrets of the Company, which use or
disclosure causes material harm to the Company; (ii) conviction of, or a plea of
"guilty" or "no contest" to, a felony under the laws of the United States or any
State thereof; (iii) gross negligence; (iv) willful misconduct; or (v) a failure
to perform assigned duties that continues after the Participant has received
written notice of such failure from the Board. The foregoing, however, shall not
be deemed an exclusive list of all acts or omissions that the Company (or
Related Corporation employing the Participant) may consider as grounds for the
discharge of the Participant without Cause.
"Change in Control" shall mean:
(i) The consummation of a merger or consolidation of
the Company with or into another entity or any other corporate
reorganization, if persons who were not stockholders of the Company
immediately prior to such merger, consolidation or other reorganization
own immediately after such merger, consolidation, or other
reorganization 50% or more of the voting power of the outstanding
securities of (A) the continuing or surviving entity or (B) any direct
or indirect parent corporation of such continuing or surviving entity;
(ii) The sale, transfer, or other disposition of all
or substantially all of the Company's assets;
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(iii) A change in the composition of the Board, as a
result of which fewer than a majority of the incumbent directors are
directors who either (A) had been directors of the Company on the date
24 months prior to the date of the event that may constitute a Change
in Control (the "original directors") or (B) were elected, or nominated
for election, to the Board with the affirmative votes of at least a
majority of the original directors who were still in office at the time
of the election or nomination; or
(iv) Any transaction as a result of which any person
is the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company representing
at least 51% of the total voting power represented by the Company's
then outstanding voting securities. For purposes of this Paragraph
(iv), the term "person" shall have the same meaning as used in Sections
13(d) and 14(d) of the Exchange Act but shall exclude (A) a trustee or
other fiduciary holding securities under an employee benefit plan of
the Company or of a Related Corporation and (B) a corporation owned
directly or indirectly by the stockholders of the Company in
substantially the same proportions as their ownership of the Common
Stock of the Company.
A transaction shall not constitute a Change in Control if its sole purpose is to
change the state of the Company's incorporation or to create a holding company
that will be owned in substantially the same proportions by the persons who held
the Company's securities immediately before such transaction.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Committee" shall mean a committee of the Board, as described
in Article 3.
"Common Stock" shall mean one share of the common stock of the
Company.
"Company" shall mean P-Com, Inc., a Delaware corporation.
"Consultant" shall mean any natural person who performs bona
fide services for the Company or a Related Corporation as a consultant or
advisor, excluding Employees and Outside Directors.
"Disability" shall mean total and permanent disability as
defined in Section 22(e)(3) of the Code.
"Employee" shall mean any individual who is a common-law
employee of the Company or a Related Corporation.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
"Exercise Price," in the case of an Option, shall mean the
amount for which one share of Common Stock may be purchased upon exercise of
such Option, as specified in the applicable Option Agreement. "Exercise Price,"
in the case of a SAR, shall mean an amount, as specified in the applicable SAR
Agreement, which is subtracted from the Fair Market Value of one share of Common
Stock in determining the amount payable upon exercise of such SAR.
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"Fair Market Value" shall mean the market price of Common
Stock, determined by the Committee in good faith on such basis as it deems
appropriate. Whenever possible, the determination of Fair Market Value by the
Committee shall be based on the prices reported in The Wall Street Journal. Such
determination shall be conclusive and binding on all persons.
"Incentive Stock Option" shall mean an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code.
"Involuntary Termination" shall mean the termination of the
Participant's Service by reason of:
(i) The involuntary discharge of the Participant by
the Company (or the Related Corporation employing him or her) for
reasons other than Cause; or
(ii) The voluntary resignation of the Participant
following (A) a material adverse change in his or her title, stature,
authority or responsibilities with the Company (or the Related
Corporation employing him or her), (B) a material reduction in his or
her base salary or (C) receipt of notice that his or her principal
workplace will be relocated by more than 30 miles.
"Non-Statutory Stock Option" shall mean an Option not
intended to qualify as an Incentive Stock Option.
"Option" shall mean an Incentive Stock Option or a
Non-Statutory Stock Option granted under the Plan and entitling the holder to
purchase Common Stock.
"Option Agreement" shall mean a written agreement that
evidences an Option in such form as the Committee shall approve from time to
time.
"Optioned Stock" shall mean the Common Stock subject to an
Option.
"Optionee" shall mean an individual, trust, or estate who
holds an Option or SAR.
"Outside Director" shall mean a member of the Board who is not
an Employee.
"Participant" shall mean an individual, trust, or estate who
holds an Award.
"Plan" shall mean this P-Com, Inc. 2004 Equity Incentive Plan,
as amended from time to time.
"Related Corporation" shall mean any parent or subsidiary (as
defined in Sections 424(e) and (f) of the Code) of the Company.
"Restricted Stock" shall mean Common Stock awarded under the
Plan.
"Restricted Stock Agreement" shall mean the agreement between
the Company and the recipient of Restricted Stock that contains the terms,
conditions, and restrictions pertaining to such Restricted Stock.
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"SAR Agreement" shall mean the agreement between the Company
and an Optionee that contains the terms, conditions, and restrictions pertaining
to his or her SAR.
"Service" shall mean the performance of services for the
Company (or any Related Corporation) by an Employee, Outside Director, or
Consultant, as determined by the Committee in its sole discretion. Service shall
not be considered interrupted in the case of: (i) a change of status (i.e., from
Employee to Consultant, Outside Director to Consultant, or any other
combination); (ii) transfers between locations of the Company or between the
Company and any Related Corporation; or (iii) a leave of absence approved by the
Company or a Related Corporation. A leave of absence approved by the Company or
a Related Corporation shall include sick leave, military leave, or any other
personal leave approved by an authorized representative of the Company or a
Related Corporation.
"Stock Appreciation Right" or "SAR" shall mean a stock
appreciation right granted under the Plan.
"Stock Unit" shall mean a bookkeeping entry representing the
equivalent of one share of Common Stock, as awarded under the Plan.
"Stock Unit Agreement" shall mean the agreement between the
Company and the recipient of a Stock Unit that contains the terms, conditions
and restrictions pertaining to such Stock Unit.
"10% Stockholder" shall mean the owner of stock (as determined
under Section 424(d) of the Code) possessing more than 10% of the total combined
voting power of all classes of stock of the Company (or any Related
Corporation).
"Termination Date" shall mean the date on which a
Participant's Service terminates, as determined by the Committee in its sole
discretion.
ARTICLE 3
ADMINISTRATION
3.1 COMMITTEE COMPOSITION. The Committee shall administer the
Plan. The Committee shall consist exclusively of two or more directors of the
Company, who shall be appointed by the Board. In addition, the composition of
the Committee shall satisfy:
(i) Such requirements as the Securities and Exchange
Commission may establish for administrators acting under plans intended
to qualify for exemption under Rule 16b-3 (or its successor) under the
Exchange Act; and
(ii) Such requirements as the Internal Revenue
Service may establish for outside directors acting under plans intended
to qualify for exemption under Section 162(m)(4)(C) of the Code.
3.2 COMMITTEE RESPONSIBILITIES. The Committee shall: (i)
select the Employees, Outside Directors, and Consultants who are to receive
Awards under the Plan; (ii) determine the type, number, vesting requirements,
and other features and conditions of such Awards; (iii) interpret the Plan; and
-4-
(iv) make all other decisions relating to the operation of the Plan. The
Committee may adopt such rules or guidelines as it deems appropriate to
implement the Plan.
3.3 COMMITTEE FOR NON-OFFICER GRANTS. The Board may also
appoint a secondary committee of the Board, which shall be composed of one or
more directors of the Company who need not satisfy the requirements of Section
3.1. Such secondary committee may administer the Plan with respect to Employees
and Consultants who are not considered officers or directors of the Company
under Section 16 of the Exchange Act, may grant Awards under the Plan to such
Employees and Consultants and may determine all features and conditions of such
Awards. Within the limitations of this Section, any reference in the Plan to the
Committee shall include such secondary committee.
3.4 SCOPE OF DISCRETION. On all matters for which the Plan
confers the authority, right or power on the Board, the Committee, or a
secondary committee to make decisions, that body may make those decisions in its
sole and absolute discretion. Those decisions will be final, binding and
conclusive. In making its decisions, the Board, Committee or secondary committee
need not treat all persons eligible to receive Awards, all Participants, or all
Awards the same way. Notwithstanding anything herein to the contrary, and except
as provided in Section 16.2, the discretion of the Board, Committee or secondary
committee is subject to the specific provisions and specific limitations of the
Plan, as well as all rights conferred on specific Participants by Award
agreements and other agreements entered into pursuant to the Plan.
3.5 UNFUNDED PLAN. The Plan shall be unfunded. Although
bookkeeping accounts may be established with respect to Participants, any such
accounts will be used merely as a convenience. The Company shall not be required
to segregate any assets on account of the Plan, the grant of Awards, or the
issuance of Common Stock. The Company and the Committee shall not be deemed to
be a trustee of stock or cash to be awarded under the Plan. Any obligations of
the Company to any Participant shall be based solely upon contracts entered into
under the Plan. No such obligations shall be deemed to be secured by any pledge
or other encumbrance on any assets of the Company. Neither the Company nor the
Committee shall be required to give any security or bond for the performance of
any such obligations.
ARTICLE 4
STOCK AVAILABLE FOR GRANTS
4.1 BASIC LIMITATION. Common Stock issued pursuant to the Plan
may be authorized but unissued stock or treasury stock. The aggregate number of
shares of Common Stock that may be issued under the Plan pursuant to all types
of Awards shall not exceed 3,000,000 subject to Section 4.2. The limitations of
this Section 4.1 shall be subject to adjustment pursuant to Article 11.
4.2 ADDITIONAL STOCK. If Restricted Stock or Common Stock
issued upon the exercise of Options are forfeited, then such Common Stock shall
again become available for Awards under the Plan. If Options, SARs, or Stock
Units are forfeited or terminate for any other reason before being exercised,
then the corresponding Common Stock shall again become available for Awards
-5-
under the Plan. If Stock Units are settled, then only the number of Common Stock
(if any) actually issued in settlement of such Stock Units shall reduce the
number available under Section 4.1 and the balance shall again become available
for Awards under the Plan. If SARs are exercised, then only the number of Common
Stock (if any) actually issued in settlement of such SARs shall reduce the
number available under Section 4.1 and the balance shall again become available
for Awards under the Plan. Notwithstanding the foregoing, the aggregate number
of Common Stock that may be issued under the Plan upon the exercise of Incentive
Stock Options shall not be increased when Restricted Stock or other Common Stock
are repurchased.
4.3 DIVIDEND EQUIVALENTS. Any dividend equivalents paid or
credited under the Plan shall not be applied against the number of Common Stock
available for Awards.
ARTICLE 5
ELIGIBILITY
The persons eligible to participate in the Plan shall be
limited to Employees, Outside Directors, and Consultants who have the potential
to impact the long-term success of the Company and/or its Related Corporations
and who have been selected by the Committee to participate in the Plan.
ARTICLE 6
OPTIONS
6.1 OPTION AGREEMENT. Each Option shall be evidenced by an
Option Agreement, in the form approved by the Committee and may contain such
provisions as the Committee deems appropriate; provided, however, that each
Option Agreement shall comply with the terms specified below. Each Option
Agreement evidencing an Incentive Stock Option shall, in addition, be subject to
Section 6.5.
6.2 NUMBER OF SHARES. Each Option Agreement shall specify the
number of shares of Common Stock subject to the Option and shall provide for the
adjustment of such number in accordance with Article 11. Options granted to any
Optionee in a single fiscal year of the Company shall not cover more than
833,333 shares of Common Stock. The limitations set forth in the preceding
sentence shall be subject to adjustment in accordance with Article 11.
6.3 EXERCISE PRICE.
(i) So long as the issuance and sale of securities
under this Plan require qualification under the California Corporate
Securities Law of 1968, the Exercise Price of an Option shall be
determined by the Committee but shall not be less than 85% (or 110% in
the case of a person who owns on the date of grant of such Option,
securities of the Company possessing more than 10% of the total
combined voting power of all classes of stock of the Company or any
Related Corporation) of the Fair Market Value of a share of Common
Stock on the date of grant of such Option.
(ii) In the event that the issuance and sale of
securities under this Plan no longer require qualification under the
California Corporate Securities Law of 1968, (i) the Exercise Price of
-6-
an Option shall be determined by the Committee but shall not be less
than 85% of the Fair Market Value of a share of Common Stock on the
date of grant of such Option, and (ii) in the case of a Non-Statutory
Stock Option, an Option Agreement may specify an Exercise Price that
varies in accordance with a predetermined formula.
6.4 EXERCISABILITY AND TERM. Each Option Agreement shall
specify the date or event when all or any installment of the Option is to become
exercisable; provided, however, that so long as the issuance and sale of
securities under this Plan require qualification under the California Corporate
Securities Law of 1968, an Option awarded to anyone other than an officer,
director or Consultant of the Company shall vest at a rate of at least 20% per
year. The Option Agreement shall also specify the term of the Option; provided,
however, that no Option shall have a term in excess of 10 years measured from
the date of grant of such Option. An Option Agreement may provide for
accelerated exercisability in the event of the Optionee's death, disability, or
other events and may provide for expiration prior to the end of its term in the
event of the termination of the Optionee's Service.
6.5 INCENTIVE STOCK OPTIONS. The terms specified below shall
be applicable to all Incentive Stock Options, and these terms shall, as to such
Incentive Stock Options, supercede any conflicting terms in Article 6. Options
which are specifically designated as Non-Statutory Stock Options when issued
under the Plan shall not be subject to the terms of this Section.
(i) Eligibility. Incentive Stock Options may only be
granted to Employees.
(ii) Exercise Price. The Exercise Price of an
Incentive Stock Option shall not be less than 100% of the Fair Market
Value of a share of Common Stock on the date of grant of such Option,
except as otherwise provided in Subsection (d) below.
(iii) Dollar Limitation. In the case of an Incentive
Stock Option, the aggregate Fair Market Value of the Optioned Stock
(determined as of the date of grant of each Incentive Stock Option)
with respect to Incentive Stock Options granted to any Employee under
the Plan (or any other option plan of the Company or any Related
Corporation) that may for the first time become exercisable as
Incentive Stock Options during any one calendar year shall not exceed
the sum of $100,000. An Incentive Stock Option is considered to be
first exercisable during a calendar year if the Incentive Stock Option
will become exercisable at any time during the year, assuming that any
condition on the Optionee's ability to exercise the Incentive Stock
Option related to the performance of services is satisfied. If the
Optionee's ability to exercise the Incentive Stock Option in the year
is subject to an acceleration provision, then the Incentive Stock
Option is considered first exercisable in the calendar year in which
the acceleration provision is triggered. To the extent the Employee
holds two or more Incentive Stock Options which become exercisable for
the first time in the same calendar year, the foregoing limitation on
the exercisability of such Options as Incentive Stock Options shall be
applied on the basis of the order in which such Incentive Stock Options
are granted. However, because an acceleration provision is not taken
-7-
into account prior to its triggering an Incentive Stock Option that
becomes exercisable for the first time during a calendar year by
operation of such provision does not affect the application of the
$100,000 limitation with respect to any Incentive Stock Option (or
portion thereof) exercised prior to such acceleration. Any Incentive
Stock Options in excess of such limitation shall automatically be
treated as Non-Statutory Stock Options.
(iv) 10% Stockholder. If any Employee to whom an
Incentive Stock Option is granted is a 10% Stockholder, then the
Exercise Price shall not be less than 110% of the Fair Market Value of
a share of Common Stock on the date of grant of such Option, and the
Option term shall not exceed five years measured from the date of grant
of such Option.
(v) Change in Status. In the event of an Optionee's
change of status from Employee to Consultant or to Outside Director, an
Incentive Stock Option held by the Optionee shall cease to be treated
as an Incentive Stock Option and shall be treated for tax purposes as a
Non-Statutory Stock Option three months and one day following such
change of status.
(vi) Approved Leave of Absence. If an Optionee is on
an approved leave of absence, and the Optionee's reemployment upon
expiration of such leave is not guaranteed by statute or contract,
including Company policies, then on the 91st day of such leave any
Incentive Stock Option held by the Optionee shall cease to be treated
as an Incentive Stock Option and shall be treated for tax purposes as a
Non-Statutory Stock Option.
6.6 EFFECT OF CHANGE IN CONTROL. The Committee may determine,
at the time of granting an Option or thereafter, that such Option shall become
exercisable as to all or part of the Common Stock subject to such Option in the
event that a Change in Control occurs with respect to the Company or in the
event that the Optionee is subject to an Involuntary Termination after a Change
in Control. However, in the case of an Incentive Stock Option, the acceleration
of exercisability shall not occur without the Optionee's written consent. In
addition, acceleration of exercisability may be required under Section 11.3.
6.7 EFFECT OF TERMINATION OF SERVICE. So long as the issuance
and sale of securities under this Plan require qualification under the
California Corporate Securities Law of 1968, Options granted under the Plan
shall be subject to the following provisions:
(i) Termination of Service. Upon termination of an
Optionee's Service, other than due to death, Disability, or Cause, the
Optionee may exercise his/her Option (i) at any time on or prior to the
date determined by the Committee, which date shall be at least 30 days
subsequent to the Optionee's Termination Date (but in no event later
than the expiration of the term of such Option), and (ii) only to the
extent that the Optionee was entitled to exercise such Option on the
Termination Date. If, on the Termination Date, the Optionee is not
entitled to exercise the Optionee's entire Option, the Optioned Stock
covered by the unexercisable portion of the Option shall revert to the
Plan. If, after termination of Service, the Optionee does not exercise
-8-
his/her Option within the time specified herein, the Option shall
terminate, and the Optioned Stock shall revert to the Plan.
(ii) Disability of Optionee. In the event of
termination of an Optionee's Service due to his/her Disability, the
Optionee may exercise his/her Option (i) at any time on or prior to the
date determined by the Committee, which date shall be at least six
months subsequent to the Termination Date (but in no event later than
the expiration date of the term of his/her Option), and (ii) only to
the extent that the Optionee was entitled to exercise such Option on
the Termination Date. To the extent the Optionee is not entitled to
exercise the Option on the Termination Date, or if the Optionee does
not exercise the Option to the extent so entitled within the time
specified herein, the Option shall terminate, and the Optioned Stock
shall revert to the Plan.
(iii) Death of Optionee. In the event that an
Optionee dies while in Service, the Optionee's Option may be exercised
by the Optionee's estate or by a person who has acquired the right to
exercise the Option by bequest or inheritance (i) at any time on or
prior to the date determined by the Committee, which date shall be at
least six months subsequent to the date of death (but in no event later
than the expiration date of the term of his/her Option), and (ii) only
to the extent that the Optionee was entitled to exercise the Option at
the date of death. If, at the time of death, the Optionee was not
entitled to exercise his/her entire Option, the Optioned Stock covered
by the unexercisable portion of the Option shall immediately revert to
the Plan. If, after death, the Optionee's estate or a person who
acquires the right to exercise the Option by bequest or inheritance
does not exercise the Option within the time specified herein, the
Option shall terminate, and the Optioned Stock shall revert to the
Plan.
6.8 NONASSIGNABILITY OF OPTIONS. Except as determined by the
Committee, no Option shall be assignable or otherwise transferable by the
Participant except by will or by the laws of descent and distribution. No rights
under an Incentive Stock Option may be transferred by the Participant, other
than to a trust where under Section 671 of the Code and other applicable law the
Participant is considered the sole beneficial owner of the option while it is
held in trust, or by will or the laws of descent and distribution.
6.9 MODIFICATION OR ASSUMPTION OF OPTIONS. Within the
limitations of the Plan, the Committee may modify, extend or assume outstanding
options or may accept the cancellation of outstanding options (whether granted
by the Company or by another issuer) in return for the grant of new options for
the same or a different number of shares and at the same or a different exercise
price. The foregoing notwithstanding, no modification of an Option shall,
without the consent of the Optionee, alter or impair his or her rights or
obligations under such Option.
6.10 BUYOUT PROVISIONS. The Committee may at any time (i)
offer to buy out for a payment in cash or cash equivalents an Option previously
granted or (ii) authorize an Optionee to elect to cash out an Option previously
granted, in either case at such time and based upon such terms and conditions as
the Committee shall establish.
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ARTICLE 7
PAYMENT FOR OPTION STOCK
7.1 GENERAL RULE. The entire Exercise Price of Common Stock
issued upon exercise of Options shall be payable in cash or cash equivalents at
the time when such Common Stock are purchased, except as follows:
(i) In the case of an Incentive Stock Option granted
under the Plan, payment shall be made only pursuant to the express
provisions of the applicable Option Agreement. The Option Agreement may
specify that payment may be made in any form(s) described in this
Article.
(ii) In the case of a Non-Statutory Stock Option, the
Committee may at any time accept payment in any form(s) described in
this Article.
7.2 SURRENDER OF STOCK. To the extent that this Section is
applicable, all or any part of the Exercise Price may be paid by surrendering,
or attesting to the ownership of, Common Stock that are already owned by the
Optionee. Such Common Stock shall be valued at their Fair Market Value on the
date when the new Common Stock are purchased under the Plan. The Optionee shall
not surrender, or attest to the ownership of, Common Stock in payment of the
Exercise Price if such action would cause the Company to recognize compensation
expense (or additional compensation expense) with respect to the Option for
financial reporting purposes.
7.3 EXERCISE/SALE. To the extent that this Section is
applicable, all or any part of the Exercise Price and any withholding taxes may
be paid by delivering (on a form prescribed by the Company) an irrevocable
direction to a securities broker approved by the Company to sell all or part of
the Common Stock being purchased under the Plan and to deliver all or part of
the sales proceeds to the Company; provided, that such payment would not cause
the Company to violate Section 402 of the Sarbanes-Oxley Act of 2002, as
determined by the Committee in its sole discretion.
7.4 EXERCISE/PLEDGE. To the extent that this Section is
applicable, all or any part of the Exercise Price and any withholding taxes may
be paid by delivering (on a form prescribed by the Company) an irrevocable
direction to pledge all or part of the Common Stock being purchased under the
Plan to a securities broker or lender approved by the Company, as security for a
loan, and to deliver all or part of the loan proceeds to the Company; provided,
that such payment would not cause the Company to violate Section 402 of the
Sarbanes-Oxley Act of 2002, as determined by the Committee in its sole
discretion.
7.5 PROMISSORY NOTE. To the extent that this Section is
applicable, and consistent with applicable laws, regulations and rules, all or
any part of the Exercise Price and any withholding taxes may be paid by
delivering (on a form prescribed by the Company) a full-recourse promissory
note. However, the par value of the Common Stock being purchased under the Plan,
if newly issued, shall be paid in cash or cash equivalents.
7.6 OTHER FORMS OF PAYMENT. To the extent that this Section is
applicable, all or any part of the Exercise Price and any withholding taxes may
be paid in any other form that is consistent with applicable laws, regulations,
and rules.
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ARTICLE 8
STOCK APPRECIATION RIGHTS
8.1 SAR AGREEMENT. Each grant of a SAR under the Plan shall be
evidenced by a SAR Agreement between the Optionee and the Company. Such SAR
shall be subject to all applicable terms of the Plan and may be subject to any
other terms that are not inconsistent with the Plan. The provisions of the
various SAR Agreements entered into under the Plan need not be identical.
8.2 NUMBER OF SHARES. Each SAR Agreement shall specify the
number of Common Stock to which the SAR pertains and shall provide for the
adjustment of such number in accordance with Article 11. SARs granted to any
Optionee in a single fiscal year of the Company shall in no event pertain to
more than 833,333 shares of Common Stock. The limitations set forth in the
preceding sentence shall be subject to adjustment in accordance with Article 11.
8.3 EXERCISE PRICE. Each SAR Agreement shall specify the
Exercise Price. A SAR Agreement may specify an Exercise Price that varies in
accordance with a predetermined formula while the SAR is outstanding.
8.4 EXERCISABILITY AND TERM. Each SAR Agreement shall specify
the date when all or any installment of the SAR is to become exercisable. The
SAR Agreement shall also specify the term of the SAR. The grant or vesting of
the SAR may be made contingent on the achievement of performance conditions. A
SAR Agreement may provide for accelerated exercisability in the event of the
Optionee's death, disability, or other events and may provide for expiration
prior to the end of its term in the event of the termination of the Optionee's
Service. SARs may be awarded in combination with Options, and such an Award may
provide that the SARs will not be exercisable unless the related Options are
forfeited. A SAR granted under the Plan may provide that it will be exercisable
only in the event of a Change in Control.
8.5 EFFECT OF CHANGE IN CONTROL. The Committee may determine,
at the time of granting a SAR or thereafter, that such SAR shall become fully
exercisable as to all Common Stock subject to such SAR in the event that the
Company is subject to a Change in Control or in the event that the Optionee is
subject to an Involuntary Termination after a Change in Control. In addition,
acceleration of exercisability may be required under Section 11.3.
8.6 EXERCISE OF SARS. Upon exercise of a SAR, the Optionee (or
any person having the right to exercise the SAR after his or her death) shall
receive from the Company (i) Common Stock, (ii) cash or (iii) a combination of
Common Stock and cash, as the Committee shall determine. The amount of cash
and/or the Fair Market Value of Common Stock received upon exercise of SARs
shall, in the aggregate, be equal to the amount by which the Fair Market Value
(on the date of surrender) of the Common Stock subject to the SARs exceeds the
Exercise Price. If, on the date when a SAR expires, the Exercise Price under
such SAR is less than the Fair Market Value on such date but any portion of such
SAR has not been exercised or surrendered, then such SAR shall automatically be
deemed to be exercised as of such date with respect to such portion.
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8.7 NONASSIGNABILITY OF SARS. Except as determined by the
Committee, no SAR shall be assignable or otherwise transferable by the
Participant except by will or by the laws of descent and distribution.
8.8 MODIFICATION OR ASSUMPTION OF SARS. Within the limitations
of the Plan, the Committee may modify, extend or assume outstanding SARs or may
accept the cancellation of outstanding SARs (whether granted by the Company or
by another issuer) in return for the grant of new SARs for the same or a
different number of shares and at the same or a different exercise price. The
foregoing notwithstanding, no modification of a SAR shall, without the consent
of the Optionee, alter or impair his or her rights or obligations under such
SAR.
ARTICLE 9
RESTRICTED STOCK
9.1 RESTRICTED STOCK AGREEMENT. Each grant of Restricted Stock
under the Plan shall be evidenced by a Restricted Stock Agreement between the
recipient and the Company. Such Restricted Stock shall be subject to all
applicable terms of the Plan and may be subject to any other terms that are not
inconsistent with the Plan. The provisions of the various Restricted Stock
Agreements entered into under the Plan need not be identical.
9.2 PURCHASE PRICE. So long as the issuance and sale of
securities under this Plan require qualification under the California Corporate
Securities Law of 1968, the purchase price for a Restricted Stock Award shall be
(i) determined by the Committee, but shall not be less than 85% (or 100% in the
case of a person who owns on the date of grant of such Restricted Stock Award,
securities of the Company possessing more than 10% of the total combined voting
power of all classes of stock of the Company or any Related Corporation) of the
Fair Market Value of a share of Common Stock on the date of grant of such
Restricted Stock Award; and (ii) payable only in cash, cash equivalents, or
full-recourse promissory notes.
9.3 PAYMENT FOR AWARDS. Subject to Section 9.2 and the
following sentence, Restricted Stock may be sold or awarded under the Plan for
such consideration as the Committee may determine, including (without
limitation) cash, cash equivalents, full-recourse promissory notes, past
services and future services. To the extent that an Award consists of newly
issued Restricted Stock, the consideration shall consist exclusively of cash,
cash equivalents or past services rendered to the Company (or a Related
Corporation) or, for the amount in excess of the par value of such newly issued
Restricted Stock, full-recourse promissory notes, as the Committee may
determine.
9.4 VESTING CONDITIONS. Each Award of Restricted Stock may or
may not be subject to vesting. Vesting shall occur, in full or in installments,
upon satisfaction of the conditions specified in the Restricted Stock Agreement.
The Committee may include among such conditions the requirement that the
performance of the Company or a business unit of the Company for a specified
period of one or more years equal or exceed a target determined in advance by
the Committee. Such target shall be based on one or more of the criteria set
forth in Appendix A. The Committee shall identify such target not later than the
90th day of such period. In no event shall the number of Restricted Stock which
are subject to performance-based vesting conditions and which are granted to any
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Participant in a single fiscal year of the Company exceed 833,333, subject to
adjustment in accordance with Article 11. A Restricted Stock Agreement may
provide for accelerated vesting in the event of the Participant's death,
disability or retirement or other events. The Committee may determine, at the
time of granting Restricted Stock or thereafter, that all or part of such
Restricted Stock shall become vested in the event that a Change in Control
occurs with respect to the Company or in the event that the Participant is
subject to an Involuntary Termination after a Change in Control.
9.5 VOTING AND DIVIDEND RIGHTS. The holders of Restricted
Stock awarded under the Plan shall have the same voting, dividend and other
rights as the Company's other stockholders. A Restricted Stock Agreement,
however, may require that the holders of Restricted Stock invest any cash
dividends received in additional Restricted Stock. Such additional Restricted
Stock shall be subject to the same conditions and restrictions as the Award with
respect to which the dividends were paid.
9.6 NONASSIGNABILITY OF RESTRICTED STOCK. Except as determined
by the Committee, no Restricted Stock shall be assignable or otherwise
transferable by the Participant except by will or by the laws of descent and
distribution until such time as the Restricted Stock has vested.
ARTICLE 10
STOCK UNITS
10.1 STOCK UNIT AGREEMENT. Each grant of Stock Units under the
Plan shall be evidenced by a Stock Unit Agreement between the recipient and the
Company. Such Stock Units shall be subject to all applicable terms of the Plan
and may be subject to any other terms that are not inconsistent with the Plan.
The provisions of the various Stock Unit Agreements entered into under the Plan
need not be identical. Stock Units may be granted in consideration of a
reduction in the recipient's other compensation.
10.2 PAYMENT FOR AWARDS. To the extent that an Award is
granted in the form of Stock Units, no cash consideration shall be required of
the Award recipients.
10.3 VESTING CONDITIONS. Each Award of Stock Units may or may
not be subject to vesting. Vesting shall occur, in full or in installments, upon
satisfaction of the conditions specified in the Stock Unit Agreement. The
Committee may include among such conditions the requirement that the performance
of the Company or a business unit of the Company for a specified period of one
or more years equal or exceed a target determined in advance by the Committee.
Such target shall be based on one or more of the criteria set forth in Appendix
A. The Committee shall determine such target not later than the 90th day of such
period. In no event shall the number of Stock Units which are subject to
performance-based vesting conditions and which are granted to any Participant in
a single fiscal year of the Company exceed 833,333, subject to adjustment in
accordance with Article 11. A Stock Unit Agreement may provide for accelerated
vesting in the event of the Participant's death, disability or retirement or
other events. The Committee may determine, at the time of granting Stock Units
or thereafter, that all or part of such Stock Units shall become vested in the
event that the Company is subject to a Change in Control or in the event that
the Participant is subject to an Involuntary Termination after a Change in
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Control. In addition, acceleration of vesting may be required under Section
11.3.
10.4 VOTING AND DIVIDEND RIGHTS. The holders of Stock Units
shall have no voting rights. Prior to settlement or forfeiture, any Stock Unit
awarded under the Plan may, at the Committee's discretion, carry with it a right
to dividend equivalents. Such right entitles the holder to be credited with an
amount equal to all cash dividends paid on one Common Stock while the Stock Unit
is outstanding. Dividend equivalents may be converted into additional Stock
Units. Settlement of dividend equivalents may be made in the form of cash, in
the form of Common Stock, or in a combination of both, as determined by the
Committee. Prior to distribution, any dividend equivalents that are not paid
shall be subject to the same conditions and restrictions as the Stock Units to
which they attach.
10.5 FORM AND TIME OF SETTLEMENT OF STOCK UNITS. Settlement of
vested Stock Units may be made in the form of (i) cash, (ii) Common Stock or
(iii) any combination of both, as determined by the Committee. The actual number
of Stock Units eligible for settlement may be larger or smaller than the number
included in the original Award, based on predetermined performance factors.
Methods of converting Stock Units into cash may include (without limitation) a
method based on the average Fair Market Value of Common Stock over a series of
trading days. Vested Stock Units may be settled in a lump sum or in
installments. The distribution may occur or commence when all vesting conditions
applicable to the Stock Units have been satisfied or have lapsed, or it may be
deferred to any later date. The amount of a deferred distribution may be
increased by an interest factor or by dividend equivalents. Until an Award of
Stock Units is settled, the number of such Stock Units shall be subject to
adjustment pursuant to Article 11.
10.6 DEATH OF RECIPIENT. Any Stock Units Award that becomes
payable after the recipient's death shall be distributed to the recipient's
beneficiary or beneficiaries. Each recipient of a Stock Units Award under the
Plan shall designate one or more beneficiaries for this purpose by filing the
prescribed form with the Company. A beneficiary designation may be changed by
filing the prescribed form with the Company at any time before the Award
recipient's death. If no beneficiary was designated or if no designated
beneficiary survives the Award recipient, then any Stock Units Award that
becomes payable after the recipient's death shall be distributed to the
recipient's estate.
10.7 CREDITORS' RIGHTS. A holder of Stock Units shall have no
rights other than those of a general creditor of the Company. Stock Units
represent an unfunded and unsecured obligation of the Company, subject to the
terms and conditions of the applicable Stock Unit Agreement.
10.8 NONASSIGNABILITY OF STOCK UNITS. Except as determined by
the Committee, no Stock Unit Award shall be assignable or otherwise transferable
by the Participant except by will or by the laws of descent and distribution.
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ARTICLE 11
PROTECTION AGAINST DILUTION
11.1 ADJUSTMENTS. In the event of a subdivision of the
outstanding Common Stock, a declaration of a dividend payable in Common Stock,
or a combination or consolidation of the outstanding Common Stock (by
reclassification or otherwise) into a lesser number of Common Stock,
corresponding adjustments shall automatically be made in each of the following:
(i) The number of Options, Restricted Stock, SARs,
and Stock Units available for future Awards under Article 4;
(ii) The limitations set forth in Sections 6.2, 8.2,
9.4, and 10.3;
(iii) The number of Common Stock covered by each
outstanding Option and SAR;
(iv) The Exercise Price under each outstanding Option
and SAR; or
(v) The number of Stock Units included in any prior
Award that has not yet been settled.
In the event of a declaration of an extraordinary dividend payable in a form
other than Common Stock in an amount that has a material effect on the price of
Common Stock, a recapitalization, a spin-off or a similar occurrence, the
Committee shall make such adjustments as it, in its sole discretion, deems
appropriate in one or more of the foregoing. Except as provided in this Article
11, a Participant shall have no rights by reason of any issuance by the Company
of stock of any class or securities convertible into stock of any class, any
subdivision or consolidation of shares of stock of any class, the payment of any
stock dividend or any other increase or decrease in the number of shares of
stock of any class.
11.2 DISSOLUTION OR LIQUIDATION. To the extent not previously
exercised or settled, Options, SARs and Stock Units shall terminate immediately
prior to the dissolution or liquidation of the Company.
11.3 REORGANIZATIONS. In the event that the Company is a party
to a merger or other reorganization, outstanding Awards shall be subject to the
agreement of merger or reorganization. Such agreement shall provide for (i) the
continuation of the outstanding Awards by the Company, if the Company is a
surviving corporation, (ii) the assumption of the outstanding Awards by the
surviving corporation or its parent or subsidiary, (iii) the substitution by the
surviving corporation or its parent or subsidiary of its own awards for the
outstanding Awards, (iv) full exercisability or vesting and accelerated
expiration of the outstanding Awards or (v) settlement of the full value of the
outstanding Awards in cash or cash equivalents followed by cancellation of such
Awards.
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ARTICLE 12
DEFERRAL OF AWARDS
The Committee (in its sole discretion) may permit or require a
Participant to:
(i) Have cash that otherwise would be paid to such
Participant as a result of the exercise of a SAR or the settlement of
Stock Units credited to a deferred compensation account established for
such Participant by the Committee as an entry on the Company's books;
(ii) Have Common Stock that otherwise would be
delivered to such Participant as a result of the exercise of an Option
or SAR converted into an equal number of Stock Units; or
(iii) Have Common Stock that otherwise would be
delivered to such Participant as a result of the exercise of an Option
or SAR or the settlement of Stock Units converted into amounts credited
to a deferred compensation account established for such Participant by
the Committee as an entry on the Company's books. Such amounts shall be
determined by reference to the Fair Market Value of such Common Stock
as of the date when they otherwise would have been delivered to such
Participant.
A deferred compensation account established under this Article may be credited
with interest or other forms of investment return, as determined by the
Committee. A Participant for whom such an account is established shall have no
rights other than those of a general creditor of the Company. Such an account
shall represent an unfunded and unsecured obligation of the Company and shall be
subject to the terms and conditions of the applicable agreement between such
Participant and the Company. If the deferral or conversion of Awards is
permitted or required, the Committee (in its sole discretion) may establish
rules, procedures and forms pertaining to such Awards, including (without
limitation) the settlement of deferred compensation accounts established under
this Article 12.
ARTICLE 13
PAYMENT OF DIRECTOR'S FEES IN SECURITIES
13.1 EFFECTIVE DATE. No provision of this Article shall be
effective unless and until the Board has determined to implement such provision.
13.2 ELECTIONS TO RECEIVE NON-STATUTORY STOCK OPTIONS,
RESTRICTED STOCK OR STOCK UNITS. An Outside Director may elect to receive his or
her annual retainer payments and/or meeting fees from the Company in the form of
cash, Non-Statutory Stock Options, Restricted Stock or Stock Units, or a
combination thereof, as determined by the Board. Such Non-Statutory Stock
Options, Restricted Stock and Stock Units shall be issued under the Plan. An
election under this Article shall be filed with the Company on the prescribed
form.
13.3 NUMBER AND TERMS OF NON-STATUTORY STOCK OPTIONS,
RESTRICTED STOCK OR STOCK UNITS. The number of Non-Statutory Stock Options,
Restricted Stock or Stock Units to be granted to Outside Directors in lieu of
annual retainers and meeting fees that would otherwise be paid in cash shall be
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calculated in a manner determined by the Board. The Board shall also determine
the terms of such Non-Statutory Stock Options, Restricted Stock or Stock Units.
ARTICLE 14
LIMITATION ON RIGHTS
14.1 RETENTION RIGHTS. Neither the Plan nor any Award granted
under the Plan shall be deemed to give any individual a right to remain an
Employee, Outside Director, or Consultant. The Company and its Related
Corporations reserve the right to terminate the Service of any Employee, Outside
Director, or Consultant at any time, with or without Cause, subject to
applicable laws, the Company's certificate of incorporation and by-laws and a
written employment agreement (if any).
14.2 STOCKHOLDERS' RIGHTS. A Participant shall have no
dividend rights, voting rights, or other rights as a stockholder with respect to
any Common Stock covered by his or her Award prior to the time when a stock
certificate for such Common Stock is issued or, if applicable, the time when he
or she becomes entitled to receive such Common Stock by filing any required
notice of exercise and paying any required Exercise Price. No adjustment shall
be made for cash dividends or other rights for which the record date is prior to
such time, except as expressly provided in the Plan.
14.3 REGULATORY REQUIREMENTS. Any other provision of the Plan
notwithstanding, the obligation of the Company to issue Common Stock under the
Plan shall be subject to all applicable laws, rules and regulations and such
approval by any regulatory body as may be required. The Company reserves the
right to restrict, in whole or in part, the delivery of Common Stock pursuant to
any Award prior to the satisfaction of all legal requirements relating to the
issuance of such Common Stock, to their registration, qualification or listing
or to an exemption from registration, qualification or listing.
ARTICLE 15
WITHHOLDING TAXES
15.1 GENERAL. To the extent required by applicable federal,
state, local, or foreign law, a Participant or his or her successor shall make
arrangements satisfactory to the Company for the satisfaction of any withholding
tax obligations that arise in connection with the Plan. The Company shall not be
required to issue any Common Stock or make any cash payment under the Plan until
such obligations are satisfied.
15.2 STOCK WITHHOLDING. To the extent that applicable law
subjects a Participant to tax withholding obligations, the Committee may permit
such Participant to satisfy all or part of such obligations by having the
Company withhold all or a portion of any Common Stock that otherwise would be
issued to him or her or by surrendering all or a portion of any Common Stock
that he or she previously acquired. Such Common Stock shall be valued at their
Fair Market Value on the date when they are withheld or surrendered.
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ARTICLE 16
FUTURE OF THE PLAN
16.1 TERM OF THE PLAN. The Plan shall become effective as of
the earliest date on which the Plan has been adopted by the Board and approved
by the Company's stockholders. Unless sooner terminated by the Board, the Plan
shall continue until the day prior to the tenth anniversary of the date on which
the Board adopted the Plan or the date on which the stockholders of the Company
approved the Plan, which ever is earlier. When the Plan terminates, no Awards
shall be granted under the Plan thereafter. The termination of the Plan shall
not affect any shares of Common Stock previously issued or any Awards previously
granted under the Plan.
16.2 AMENDMENT OR TERMINATION. The Board may, at any time and
for any reason, amend or terminate the Plan. An amendment of the Plan shall be
subject to the approval of the Company's stockholders only to the extent
required by applicable laws, regulations or rules.
ARTICLE 17
ADDITIONAL PROVISIONS
17.1 FINANCIAL STATEMENTS. The Company's annual financial
statements are included in the Company's Annual Reports on Form 10-K, copies of
which are publicly available, at no cost, at the Securities and Exchange
Commission's website located at http://www.sec.gov. Upon request by any
Participant, the Company shall provide such Participant with a copy of the
Company's most recent Annual Report on Form 10-K, as filed with the Securities
and Exchange Commission.
17.2 GOVERNING LAW. The Plan shall be governed by, and
construed in accordance with, the laws of the State of Delaware (except their
choice-of-law provisions).
P-COM, INC.
Date: ___________________________ By:
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Its:
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APPENDIX B
AUDIT COMMITTEE CHARTER
I. ORGANIZATION
This Audit Committee Charter governs the operations of the Audit
Committee. The Committee shall review and reassess the charter at least annually
and obtain the approval of the Board of Directors. The Committee shall be
members of, and appointed by, the Board of Directors and shall comprise at least
two directors, each of whom are independent of management and the Company.
Members of the Committee shall be considered independent as long as they do not
accept any consulting, advisory, or other compensatory fee from the Company and
are not an affiliated person of the Company or its subsidiaries, and meet the
independence requirements of the stock exchange listing standards. All Committee
members shall be financially literate.
II. PURPOSE
The Committee shall provide assistance to the Board of Directors in
fulfilling their oversight responsibility to the shareholders, potential
shareholders, the investment community, and others relating to: the integrity of
the Company's financial statements; the financial reporting process; the systems
of internal accounting and financial controls; the performance of the Company's
internal audit function and independent auditors; the independent auditor's
qualifications and independence; and the Company's compliance with ethics
policies and legal and regulatory requirements. In so doing, it is the
responsibility of the Committee to maintain free and open communication between
the Committee, independent auditors, and management of the Company.
In discharging its oversight role, the Committee is empowered to
investigate any matter brought to its attention with full access to all books,
records, facilities, and personnel of the Company and the authority to engage
independent counsel and other advisers as it determines necessary to carry out
its duties.
III. DUTIES AND RESPONSIBILITIES
The primary responsibility of the Audit Committee is to oversee the
Company's financial reporting process on behalf of the Board and report the
results of their activities to the Board. While the Audit Committee has the
responsibilities and powers 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. Management is responsible for the
preparation, presentation, and integrity of the Company's financial statements
and for the appropriateness of the accounting principles and reporting policies
that are used by the Company. The independent auditors are responsible for
auditing the Company's financial statements and for reviewing the Company's
unaudited interim financial statements.
The Committee, in carrying out its responsibilities, believes its
policies and procedures should remain flexible, in order to best react to
changing conditions and circumstances. The Committee should take appropriate
actions to set the overall corporate "tone" for quality financial reporting,
sound business risk practices, and ethical behavior. The following shall be the
principal duties and responsibilities of the Audit Committee. These are set
forth as a guide with the understanding that the Committee may supplement them
as appropriate.
The Committee shall be directly responsible for the appointment and
termination (subject, if applicable, to shareholder ratification), compensation,
and oversight of the work of the independent auditors, including resolution of
disagreements between management and the auditor regarding financial reporting.
The Committee shall pre-approve all audit and non-audit services provided by the
independent auditors and shall not engage the independent auditors to perform
the specific non-audit authority to a member of the Audit Committee. The
decisions of any audit Committee member to whom pre-approval authority is
delegated must be presented to full Audit Committee at its next scheduled
meeting.
At least annually, the Committee shall obtain and review a report by
the independent auditors describing:
o The firm's internal quality control procedures.
o 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.
o All relationships between the independent auditor and the Company
(to assess the auditor's independence).
In addition, the Committee shall set clear hiring policies for
employees or former employees of the independent auditors that meet the SEC
regulations and stock exchange listing standards, if and when applicable.
The Committee shall discuss with the independent auditors the overall
scope and plans for their respective audits, including the adequacy of staffing
and compensation. Also, the Committee shall discuss with management, and the
independent auditors the adequacy and effectiveness of the accounting and
financial controls, including the Company's policies and procedures to assess,
monitor, and manage business risk, and legal and ethical compliance programs
(e.g., Company's Code of Conduct).
The Committee shall meet separately periodically with management, and
the independent auditors to discuss issues and concerns warranting Committee
attention. The Committee shall provide sufficient opportunity for the
independent auditors to meet privately with the members of the Committee. The
Committee shall review with the independent auditor any audit problems or
difficulties and management's responses.
The Committee shall receive regular reports from the independent
auditor or the critical policies and practices of the Company, and all
alternative treatments of financial information within generally accepted
accounting principles that have been discussed with management.
The Committee shall review management's assertion on its assessment of
the effectiveness of internal controls as of the end of the most recent fiscal
year and the independent auditors' report on management's assertion, when that
requirement becomes effective.
The Committee shall review and discuss earnings press releases, as well
as financial information and earnings guidance provided to analysts and rating
agencies.
The Committee shall review the interim financial statements and
disclosures under Management's Discussion and Analysis of Financial Condition
and Results of Operations with management and the independent auditors prior to
the filing of the Company's Quarterly Report on Form 10-Q. Also, the Committee
shall discuss the results of the quarterly review and any other matters required
to be communicated to the Committee by the independent auditors under generally
accepted auditing standards. The Chair of the Committee may represent the entire
Committee for the purposes of this review.
The Committee shall review with management and the independent auditors
the financial statements and disclosures under Management's Discussion and
Analysis of Financial Conditions and Results of Operations to be included in the
Company's Annual Report on Form 10-K (or the annual report to shareholders if
distributed prior to the filing of Form 10-K), including their judgment about
the quality, not just the acceptability, of accounting principles, the
reasonableness of significant judgments, and the clarity of the disclosures in
the financial statements. Also, the Committee shall discuss the results of the
annual audit and any other matters required to be communicated to the Committee
by the independent auditors under generally accepted auditing standards.
The Committee shall establish procedures for the receipts, retentions,
and treatment of complaints received by the Company regarding accounting,
internal accounting controls, or auditing matters, and the confidential,
anonymous submission by employees of the Company of concerns regarding
questionable accounting or auditing matters.
The Committee shall receive corporate attorneys' reports of evidence of
a material violation of securities laws or breaches of fiduciary duty.
The Committee also prepares its report to be included in the Company's
annual proxy statement, as required by SEC regulations.
The Committee shall perform an evaluation of its performance at least
annually to determine whether it is functioning effectively.