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:
[x] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 14a-11 or Section 240.14a-12.
P-COM, INC.
--------------------------------------------------------------------------------
(Name of Registrant as Specified in Charter)
Payment of Filing Fee (Check the appropriate box)
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
--------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
--------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
--------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
--------------------------------------------------------------------------------
(5) Total fee paid: $
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date filed:
------------------------------------------
[GRAPHIC OMITTED]
--------------------------------------------------------------------------------
June __, 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 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 August 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:
August __, 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 "PCOM" and on June __, 2004, the closing price of P-Com's common
stock was $0.__ per share.
THE BOARD OF DIRECTORS OF P-COM RECOMMENDS THAT THE STOCKHOLDERS OF P-COM
VOTE (I) FOR THE REMOVAL OF CERTAIN LIMITATIONS ON THE EXERCISE OF P-COM'S
OUTSTANDING WARRANTS; (II) FOR THE ADOPTION OF P-COM'S 2004 EQUITY INCENTIVE
PLAN, (III) FOR THE ELECTION OF P-COM'S DIRECTOR NOMINEES TO THE BOARD OF
DIRECTORS OF P-COM, (IV) FOR THE RATIFICATION OF THE APPOINTMENT OF AIDMAN PISER
& COMPANY AS INDEPENDENT AUDITORS OF P-COM AND (V) 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 June __, 2004, and was first mailed to
stockholders of P-Com on or about June __, 2004.
[GRAPHIC OMITTED]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST __ , 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 August __, 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 the removal of certain limitations on the exercise of
P-Com's outstanding warrants.
2. To adopt P-Com's 2004 Equity Incentive Plan which shall replace
P-Com's 1995 Stock Option/Stock Issuance Plan.
3. 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.
4. To ratify the appointment of Aidman Piser & Company as independent
auditors of P-Com for the fiscal year ending December 31, 2004.
5. To grant P-Com's management the discretionary authority to adjourn the
annual meeting to a date or dates not later than August 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.
6. 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 June __,
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
June __, 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
(1-877-799-8683) 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
----
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.......................4
PROPOSAL TO REMOVE LIMITATIONS ON EXERCISE OF P-COM'S OUTSTANDING WARRANTS.....5
Background..................................................................5
Proposal to Permit Removal of Limitation on Exercise of Warrants............5
Purpose of and Rationale for Proposal.......................................6
Additional Working Capital..................................................6
Effect of Proposal..........................................................7
Approvals Required..........................................................7
Recommendation of P-Com's Board of Directors................................8
PROPOSAL TO ADOPT THE 2004 EQUITY INCENTIVE PLAN.................... ..........8
Equity Incentive Awards.....................................................8
Share Reserve...............................................................8
Changes in Capitalization...................................................8
Eligibility.................................................................9
Valuation...................................................................9
Stock Options...............................................................9
Restricted Stock...........................................................12
Stock Units................................................................12
Change in Control..........................................................13
Amendment and Termination..................................................14
Federal Income Tax Consequences............................................14
Accounting Treatment.......................................................16
New Plan Benefits..........................................................16
Approvals Required.........................................................17
Recommendation of P-Com's Board of Directors...............................17
PROPOSAL TO ELECT P-COM'S DIRECTOR NOMINEES TO THE P-COM BOARD OF DIRECTORS...17
General.................................................................. .17
Nominees for Term Ending Upon the 2004 Annual Meeting of Stockholders......17
Continuing Director for Term Ending Upon the 2005 Annual Meeting of
Stockholders.............................................................17
Continuing Director for Term Ending Upon the 2006 Annual Meeting of
Stockholders.............................................................18
Board Committees and Meetings..............................................18
Stockholder Communications with the Board of Directors.....................19
Approvals Required.........................................................19
Recommendation of the Board of Directors...................................19
PROPOSAL TO RATIFY THE SELECTION OF ITS INDEPENDENT AUDITORS..................19
General....................................................................19
Principal Accountant Fees and Services.....................................19
Approvals Required.........................................................20
Recommendation of the Board of Directors...................................20
PROPOSAL TO GRANT P-COM'S MANAGEMENT THE DISCRETIONARY AUTHORITY TO
ADJOURN THE ANNUAL MEETING..................................................21
Approvals Required.........................................................21
Recommendation of the Board of Directors...................................21
DIRECTORS AND OFFICERS........................................................21
BENEFICIAL OWNERSHIP OF SECURITIES............................................23
EXECUTIVE COMPENSATION AND RELATED INFORMATION................................25
Summary Compensation Table.................................................25
Option Grants in Last Fiscal Year..........................................26
Aggregated Option Exercises and Fiscal Year-End Option Values..............26
Director Compensation......................................................27
Employment Contracts, Termination of Employment Agreements and
Change of Control Agreements.............................................27
Compensation Committee Interlocks and Insider Participation................30
Report of the Compensation Committee of the Board of Directors
on Executive Compensation................................................30
AUDIT COMMITTEE REPORT........................................................33
Stock Performance Graph....................................................33
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.......................34
SUBMISSION OF STOCKHOLDER PROPOSALS...........................................34
INCORPORATION OF OTHER DOCUMENTS BY REFERENCE.................................35
OTHER MATTERS.................................................................35
APPENDIX A - 2004 EQUITY INCENTIVE PLAN
APPENDIX B - AUDIT COMMITTEE CHARTER
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 August
__, 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
June __, 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 the removal of certain limitations on the exercise of
P-Com's outstanding warrants.
2. To adopt P-Com's 2004 Equity Incentive Plan which will supersede and
replace P-Com's 1995 Stock Option/Stock Issuance Plan.
3. 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.
4. To ratify the appointment of Aidman Piser & Company as independent
auditors of P-Com for the fiscal year ending December 31, 2004.
5. To grant P-Com's management the discretionary authority to adjourn the
annual meeting to a date or dates not later than August 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.
6. 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
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.
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 August 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 June __, 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 _____ shares of P-Com common stock were issued and outstanding and
held by approximately _____ 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 _____ shares of P-Com Series C Preferred Stock were issued and
outstanding and held by approximately ____ 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.
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 removal of certain limitations on the exercise
of P-Com's outstanding warrants (Proposal 1) 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 2)
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;
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
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 _____ outstanding shares of P-Com common stock, approximately
_____ 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 approximately __% of the _____ 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 __% of the _______
shares of Series C Preferred Stock outstanding on that date.
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
3,668,000 shares of common stock at an initial exercise price of $0.12 per share
and (ii) Series B Warrants to purchase 5,132,000 shares of common stock at an
initial exercise price of $0.20 per share. Both the Series A Warrants and Series
B Warrants have a term of three years. As of June __, 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 69,597,062 shares of common stock at an initial exercise price of $0.15
per share, increasing to $0.18 per share one year after their respective dates
of issuance, and (ii) Series C-2 Warrants to purchase 69,597,062 shares of
common stock at an initial exercise price of $0.18 per share, increasing to
$0.22 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
June __, 2004, none of the outstanding Series C-1 Warrants or Series C-2
Warrants had 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.
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
4.999% 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 4.999% 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 4.999% 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 March 31, 2004, P-Com had negative working capital of $4.1 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 June __, 2004 was $0.__ per share, which is significantly
higher 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, P-Com is offering its
warrant holders more favorable terms upon which they can exercise their
warrants, including a reduced exercise price. (In no event will the modified
exercise terms provide for the issuance of a greater number of shares of common
stock upon exercise of any outstanding warrant.) However, some of P-Com's
warrant holders are currently unable to take advantage of this offer because the
4.999% and 9.999% exercise limitations described above prevent 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 intends to issue promissory notes to certain warrant
holders who are currently prevented from exercising their warrants by the 4.999%
and 9.999% exercise limitations described above. P-Com and these warrant holders
have tentatively agreed that the aggregate principal amount represented by these
promissory notes will be approximately $1.3 million, which is the same amount
that P-Com would have received if these warrant holders were permitted to fully
exercise their warrants at the reduced exercise prices currently being offered
to P-Com's other warrant holders. If P-Com's stockholders approve this proposal
to permit the removal of the 4.999% and 9.999% exercise limitations from P-Com's
outstanding warrants, those warrant holders to whom the promissory notes are
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 are issued will be unable to exercise their warrants and
P-Com will be required to repay its indebtedness under the promissory notes.
Additional Shares Available for Corporate Purposes
P-Com is authorized to issue a total of 700 million shares of common stock.
Of this amount, approximately _____ million shares of common stock are currently
outstanding and approximately _____ 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 _____ 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 4.999% and 9.999% exercise limitations
described above. If these warrant holders were permitted to fully exercise their
warrants at the more favorable exercise prices currently being offered to
P-Com's other warrant holders, the total number of shares of P-Com common stock
actually issued to these warrant holders would be approximately _____ million
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 _____ shares of common stock, and the concurrent
cancellation of warrants to purchase ____ 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 _____
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 _____ million 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 4.999% 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 4.999% 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 4.999% 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 plans to address its immediate working capital
needs by issuing promissory notes in the aggregate principal amount of
approximately $1.3 million. These promissory notes will be issued to those
warrant holders who are currently prevented from exercising their warrants by
the 4.999% and 9.999% exercise limitations. If P-Com's stockholders approve this
proposal to permit the removal of the 4.999% 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 4.999% 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.
The existence of the 4.999% 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 4.999% 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 4.999%
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 4.999% 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 4.999%
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)
a stock options, (ii) a 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.
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 75,000,000 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 75,000,000
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 May 20, 2004, 7 executive officers, 4 non-employee directors and 164
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 June___, 2004, the last reported sale
price of P-Com common stock was $0.___ 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 25,000,000 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.
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.
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 25,000,000
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.
Modification and Assumption of Options
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 25,000,000 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.
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 25,000,000
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.
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
(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.
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 25,000,000 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 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.
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.
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 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
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 August 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 August 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.
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 August 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 May 20, 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 41 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.
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
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 May 20, 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 269,933,863 shares of Common Stock, 6,427
shares of Series C Convertible Preferred Stock and 2,000 shares of Series D
Convertible Preferred Stock outstanding as of May 20, 2004. Shares of Common
Stock subject to warrants and options that are currently exercisable or
exercisable within 60 days of May 20, 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.
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 MAY THE FIRST OF SHARES BENEFICIALLY OF SHARES BENEFICIALLY OF SHARES
OF BENEFICIAL OWNER 20, 2004 COLUMN) OUTSTANDING OWNED (1) OUTSTANDING OWNED (2) OUTSTANDING
---------------------------- ------------ ------------ ------------- ------------ ------------ ------------- ------------
North Sound Legacy Fund LLC
1209 Orange Street
Wilmington, DE 19801 (3) 26,723,452 26,723,452 9.9% 2,332 36.3% 142.00 7.1%
North Sound Legacy
Institutional Fund LLC
1209 Orange Street
Wilmington, DE 19801 (3) 26,723,452 26,723,452 9.9% 2,332 36.3% 877.33 43.9%
North Sound Legacy
International Fund Ltd.
Bison Court, Roadtown
Tortola, BVI
Wilmington, DE 19801 (3) 26,723,452 26,723,452 9.9% 2,332 36.3% 980.67 49.0%
SA. C. Capital
Associates LLC
72 Cummings Point Road
Stamford, CT 06902 -- 17,088,952 6.3%
John A. Hawkins 40,900 40,900 * -- -- -- --
Brian T. Josling (4) 175,568 291,566 * 9.33 -- -- --
Frederick R. Fromm 170,604 280,465 * 9.32 -- -- --
R. Craig Roos 326,668 601,663 * 23.33 -- -- --
George P. Roberts 1,547,179 1,882,014 * 23.33 -- -- --
Sam Smookler 326,668 601,663 23.33
Randall Carl 62,103 62,103 * -- -- -- --
Elsbeth B. Kahn -- -- *
Daniel W. Rumsey -- -- *
All current directors and
executive officers as a
group (11 persons) 2,714,817 3,827,652 1.4% 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.
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
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) 557,000 --
Chairman of the Board of Directors 2002 145,670 -- -- 915,443 --
and Former Chief Executive Officer 2001 355,175 -- -- -- --
Samuel Smookler 2003 139,569 -- 53,083(4) 2,400,000(5) --
Chief Executive Officer and Director 2002 -- -- -- -- --
2001 -- -- -- -- --
Daniel W. Rumsey 2003 104,369 -- -- 2,200,000 8,000(6)
Vice President, Acting Chief 2002 -- -- -- -- --
Financial Officer and General Counsel 2001 -- -- -- -- --
Don Meiners 2003 103,699 -- -- 2,200,000 --
Vice President - Operations 2002 115,617 -- -- 29,497 --
2001 142,104 -- -- 2,000 --
Randall L. Carl 2003 136,800 36,252 -- 2,208,000 --
Senior Vice President, Sales and 2002 158,650 11,400 -- 45,000 --
Marketing - Licensed Products 2001 232,077 -- -- 5,000 --
Geoffrey Giese 2003 105,266 -- -- 1,700,000 --
Vice President of Sales and Marketing 2002 121,693 -- -- 22,500 --
-- License Exempt Products 2001 142,245 -- -- 3,000 --
Alan T. Wright (7) 2003 98,787 -- -- -- 33,375(7)
Former Chief Operating Officer 2002 214,524 -- -- 65,000 --
2001 253,232 96,000 -- 27,000 --
Ben L. Jarvis (8) 2003 89,655 -- -- -- 19,810(8)
2002 203,807 -- -- 37,479 --
2001 242,019 -- -- 14,000 --
(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 408,335 shares of Common
Stock, resulting in an effective purchase price of $0.10 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 $0.23 per share.
(5) Mr. Smookler was also granted a warrant to purchase 2,600,000 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 $8,000
as a consultant to P-Com.
(7) Mr. Wright's employment with P-Com was terminated effective July 24, 2003.
Following Mr. Wright's termination of employment, Mr. Wright was paid severance
through the remainder of 2003.
(8) Mr. Jarvis' employment with P-Com was terminated effective June 30, 2003.
Following Mr. Jarvis' termination of employment, Mr. Jarvis was paid severance
through the remainder of 2003.
OPTION GRANTS IN LAST FISCAL YEAR
The following table contains information concerning the stock option grants
made to each of the named executive officers in the 2003 fiscal year. No stock
appreciation rights were granted to these individuals during such fiscal year.
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM (1)
------------------------------------------------------------- ----------------------------
PERCENT OF
TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO
UNDERLYING EMPLOYEES
OPTIONS IN FISCAL EXERCISE EXPIRATION
NAME GRANTED (#)(2) YEAR PRICE ($/SH) DATE 5% ($) 10% ($)
---------------------- -------------- ------------ ------------ ----------- ----------- -----------
George P. Roberts 557,000 2.1% .11 08/13/13 38,532 97,649
Sam Smookler 2,400,000 9.0% .19 09/02/13 286,775 726,746
Don Meiners 2,200,000 8.2% .11 08/13/13 152,193 385,386
Geoffrey Giese 1,700,000 6.3% .11 08/13/13 117,603 298,030
Daniel W. Rumsey 2,200,000 8.2% .11 08/13/13 152,193 385,686
Randall L. Carl 2,200,000 8.2% .11 08/13/13 152,193 385,686
8,000 .02% .15 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 -- -- 1,172,790 657,320.80 -- 16,710
Sam Smookler -- -- -- 2,400,000 -- --
Don Meiners -- -- 55,149 2,203,790 -- 66,000
Geoffrey Giese -- -- 41,837 1,703,163 -- 51,000
Daniel W. Rumsey -- -- -- 2,200,000 -- 66,000
Randall L. Carl -- -- 52,707 2,225,293 -- 66,000
Alan T. Wright -- -- -- -- -- --
Ben L. Jarvis -- -- -- -- -- --
(1) Based on the fair market value of the option shares at the 2003 fiscal
year-end ($0.14 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.
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 8,000 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 800 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
557,000 shares of common stock at an exercise price of $0.11 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 has entered into severance agreements (the "Agreements") with George
Roberts, Chairman of the Board of Directors and former Chief Executive Officer,
and Ben L. Jarvis, formerly Executive Vice President and General Manager, P-Com
Network Services, Inc., (individually, the "Officer" and collectively the
"Officers"), dated May 31, 2001, and December 7, 2000 respectively. Each of
these Agreements provided for the following benefits should the Officer's
employment terminate, either voluntarily or involuntarily, for any reason within
twenty-four (24) months following a change in control: (a) a severance payment
in an amount equal to two (2) times his annual rate of base salary; (b) a bonus
for Mr. Roberts in an amount equal to the target bonus specified for the fiscal
year in which involuntary termination occurs; (c) the shares subject to each
outstanding option held by the Officer (to the extent not then otherwise fully
vested) will automatically vest so that each such option will become immediately
exercisable for all the option shares as fully-vested shares; and (d) P-Com
will, at its own expense, provide Mr. Roberts and his dependents continued
health care coverage for their lives. A change in control will be deemed to
occur under the Agreements upon: (a) an asset purchase or consolidation in which
securities possessing fifty percent (50%) or more of the total combined voting
power of P-Com's outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior to such
transaction, (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 hostile take-over of P-Com, whether effected through a tender offer for more
than twenty-five percent (25%) of P-Com's outstanding voting securities or a
change in the majority of the Board by one or more contested elections for Board
membership; or (d) the acquisition, directly or indirectly by any person or
related group of persons (other than P-Com or a person that directly or
indirectly controls, is controlled by, or is under common control with, P-Com),
of beneficial ownership (within the meaning of Rule 13d-3 of the Securities
Exchange Act of 1934) of securities possessing more than thirty percent (30%) of
the total combined voting power of P-Com's outstanding securities pursuant to a
tender or exchange offer made directly to P-Com's stockholders. In addition,
each Officer will be entitled to a full tax gross-up to the extent one or more
of the severance benefits provided under his Agreement are deemed to constitute
excess parachute payments under the federal income tax laws.
In addition to the above severance agreements, P-Com also entered into
certain benefits agreements, with Messrs. Jarvis 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 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 5,000,000 shares, which amount was reduced
to 2,400,000 due to limitations in P-Com's 1995 Stock Option/Stock Issuance
Plan. P-Com granted Mr. Smookler a warrant to purchase 2,600,000 shares of
Common Stock, thereby making up the difference between the 5,000,000 shares
granted by the Board of Directors, and the 2,400,000 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 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 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 2,750,000 shares of Common Stock of P-Com, which amount was
reduced to 2,400,000 due to limitations in P-Com's 1995 Stock Option/Stock
Issuance Plan. P-Com granted Dr. Belfiore a warrant to purchase 350,000 shares
of Common Stock, thereby making up the difference between the 2,750,000 shares
granted by the Board of Directors, and the 2,400,000 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 1,800,000 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 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
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 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
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.
[THE FOLLOWING DATA IS PRESENTED AS A LINE CHART IN THE PRINTED DOCUMENT]
TOTAL RETURN INDEX
S&P
Communications
Quarter Ending S&P 500 Equipment P-Com
------------- ------- -------------- -------
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
TOTAL RETURN %
S&P
Communications
Quarter Ending S&P 500 Equipment P-Com
------------- ------- -------------- -------
Dec-98 21.30% 55.40% 2.00%
Mar-99 4.98% 7.02% 91.37%
Jun-99 7.05% 29.90% -31.35%
Sep-99 -6.24% 0.01% 33.73%
Dec-99 14.88% 57.97% 26.34%
Mar-00 2.29% -2.72% 109.19%
Jun-00 -2.66% -9.13% -69.26%
Sep-00 -0.97% -19.93% 16.48%
Dec-00 -7.82% -38.19% -53.77%
Mar-01 -11.86% -43.50% -58.16%
Jun-01 5.85% -18.48% -57.07%
Sep-01 -14.68% -29.04% -50.91%
Dec-01 10.69% 12.72% 22.22%
Mar-02 0.28% -23.40% -39.39%
Jun-02 -13.40% -32.21% -64.00%
Sep-02 -17.28% -25.88% -43.06%
Dec-02 8.44% 19.06% -7.32%
Mar-03 -3.15% 3.03% -21.05%
Jun-03 15.39% 11.82% -36.67%
Sep-03 2.65% 18.21% 131.58%
Dec-03 12.18% 21.97% -34.09%
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
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 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 __________, 2004. 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: June __, 2004
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
-ii-
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
-iii-
ARTICLE 16 FUTURE OF THE PLAN.................................................18
16.1 Term of the Plan....................................................18
16.2 Amendment or Termination............................................18
ARTICLE 17 LIMITATION ON PAYMENTS.............................................18
17.1 Scope of Limitation.................................................18
17.2 Basic Rule..........................................................18
17.3 Reduction of Payments...............................................18
17.4 Overpayments and Underpayments......................................19
17.5 Related Corporations................................................19
ARTICLE 18 ADDITIONAL PROVISIONS..............................................19
18.1 Financial Statements................................................19
18.2 Governing Law.......................................................19
-iv-
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;
-1-
(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.
-2-
"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.
-3-
"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 (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.
-4-
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 (i) 75,000,000 plus (ii) the additional Common Stock
described in 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 under the
-5-
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
25,000,000 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
-6-
Law of 1968, (i) the Exercise Price of 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
-7-
provision is not taken 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 his/her Option
within the time specified herein, the Option shall terminate, and the Optioned
Stock shall revert to the Plan.
-8-
(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.
-9-
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.
-10-
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
25,000,000 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.
-11-
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 Participant in
-12-
a single fiscal year of the Company exceed 25,000,000, 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 25,000,000, 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
Control. In addition, acceleration of vesting may be required under Section
11.3.
-13-
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.
-14-
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, 9.3, 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.
-15-
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 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.
-16-
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.
-17-
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:
------------------------------- -----------------------------------
Its:
----------------------------------
-18-
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 shall 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.