-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LXuDHT7KQCZWvy6OLMnDNQoe2iMivlmoE8yvyv3PzCQadwYVanX2QNNdADx5q71Y 3LZ3DI/VWpREJQBTec4Mqg== /in/edgar/work/20000818/0000889812-00-003581/0000889812-00-003581.txt : 20000922 0000889812-00-003581.hdr.sgml : 20000922 ACCESSION NUMBER: 0000889812-00-003581 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000915 FILED AS OF DATE: 20000818 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WIRE ONE TECHNOLOGIES INC CENTRAL INDEX KEY: 0000746210 STANDARD INDUSTRIAL CLASSIFICATION: [5065 ] IRS NUMBER: 770312442 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: SEC FILE NUMBER: 000-25940 FILM NUMBER: 705414 BUSINESS ADDRESS: STREET 1: 225 LONG AVENUE CITY: HILLSIDE STATE: NJ ZIP: 07205 MAIL ADDRESS: STREET 1: 225 LONG AVENUE CITY: HILLSIDE STATE: NJ ZIP: 07205 FORMER COMPANY: FORMER CONFORMED NAME: VIEW TECH INC DATE OF NAME CHANGE: 19950418 DEF 14A 1 0001.txt DEFINITIVE PROXY STATEMENT WIRE ONE TECHNOLOGIES, INC. 225 Long Avenue Hillside, New Jersey 07205 August 18, 2000 To Our Stockholders: You are cordially invited to attend the 2000 Annual Meeting of Stockholders of Wire One Technologies, Inc., a Delaware corporation (the "Company" or "Wire One"), to be held at 8:30 a.m. local time, on Friday, September 15, 2000, at the Holiday Inn, 304 Route 22 West, Springfield, New Jersey 07081. Information about the meeting and the various matters on which the stockholders will act is included in the accompanying Notice of Annual Meeting of Stockholders and Proxy Statement. In addition, as you may know, Wire One was formed by the merger of All Communications Corporation ("ACC") into View Tech, Inc. ("VTI") in May 2000. Accordingly, we are enclosing the Form 10-Ks for 1999 for each of ACC and VTI, along with a Form 10-Q for the quarterly period ended June 30, 2000 for the Company. We hope you will be able to attend the Annual Meeting. Whether or not you expect to attend, it is important you complete, date, sign and return the proxy card in the enclosed envelope in order to make certain that your shares will be represented at the Annual Meeting. Sincerely, /s/ Richard Reiss Richard Reiss President and Chief Executive Officer WIRE ONE TECHNOLOGIES, INC. 225 Long Avenue Hillside, New Jersey 07205 ------------------------ NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD SEPTEMBER 15, 2000 ------------------------ The Annual Meeting of Stockholders of Wire One Technologies, Inc., a Delaware corporation (the "Company"), will be held at 8:30 a.m. local time on Friday, September 15, 2000, at the Holiday Inn, 304 Route 22 West, Springfield, New Jersey 07081, for the following purposes: 1. To elect two Class I Directors to the Board of Directors to serve a three year term each; 2. To adopt the 2000 Stock Incentive Plan; 3. To ratify the appointment of BDO Seidman, LLP as independent auditors of the Company for the fiscal year ending December 31, 2000; and 4. To transact such other business as may properly be brought before the meeting or any adjournment or postponement thereof. Stockholders of record of Wire One Technologies, Inc. common stock as of the close of business on August 15, 2000 are entitled to notice of, and to vote at, the Annual Meeting or any adjournment or postponement thereof. By order of the Board of Directors /s/ Richard Reiss ------------------------------------ Richard Reiss President and Chief Executive Officer Hillside, New Jersey Dated: August 18, 2000 WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY CARD. IF YOU LATER DESIRE TO REVOKE YOUR PROXY FOR ANY REASON, YOU MAY DO SO IN THE MANNER DESCRIBED IN THE ATTACHED PROXY STATEMENT. WIRE ONE TECHNOLOGIES, INC. 225 Long Avenue Hillside, New Jersey 07205 PROXY STATEMENT 2000 ANNUAL MEETING OF STOCKHOLDERS Wire One Technologies, Inc., a Delaware corporation ("Wire One" or the "Company"), is furnishing this proxy statement in a solicitation by our Board of Directors of proxies for use in voting at our 2000 Annual Meeting of Stockholders or any adjournment or postponement thereof (the "Annual Meeting"). Our Annual Meeting will be held at 8:30 a.m. local time on Friday, September 15, 2000, at the Holiday Inn, 304 Route 22 West, Springfield, New Jersey 07081. This proxy statement, the accompanying proxy card, the Form 10-Ks for 1999 for All Communications Corporation ("ACC") and View Tech, Inc. ("VTI") and the Form 10-Q for the Company for the quarterly period ended June 30, 2000 are first being mailed to stockholders on or about August 18, 2000. At the Annual Meeting, stockholders will be asked to consider and vote upon (1) the election of two directors each to serve a three year term as a Class I Director; (2) the approval of the 2000 Stock Incentive Plan; and (3) the ratification of the appointment of BDO Seidman, LLP as our independent auditors. At the Annual Meeting, stockholders may also be asked to consider and take action with respect to such other matters as may properly come before the Annual Meeting. Record Date; Quorum Only holders of record of the Company's common stock, par value $.0001 per share ("Common Stock"), at the close of business on August 15, 2000 (the "Record Date") are entitled to vote on the matters to be presented at the Annual Meeting. As of the Record Date, approximately 16,879,716 shares of Common Stock were issued and outstanding, each of which entitles its holder to cast one vote on each matter to be presented at the Annual Meeting. A quorum is present at the Annual Meeting if a majority of shares of Common Stock issued and outstanding and entitled to vote on the Record Date are represented in person or by proxy. If a quorum is not present, the Annual Meeting may be adjourned from time to time until a quorum is obtained. Voting Procedures The shares represented by the proxies received, properly dated and executed and not revoked will be voted at the Annual Meeting in accordance with the instructions of the stockholders. Properly executed proxies that do not contain voting instructions will be voted (1) in favor of the nominees for election as directors named below, (2) FOR adoption of the 2000 Stock Incentive Plan and (3) FOR ratification of BDO Seidman, LLP as our independent auditors and other matters which the proxy holders deem advisable during the Annual Meeting. Abstentions and broker "non-votes" will be treated as shares that are present and entitled to vote for purposes of determining the presence of a quorum and as unvoted for purposes of determining the approval of any matter submitted to the stockholders for a vote. A broker "non-vote" occurs when a nominee holding shares for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary power for that particular item and has not received instructions from the beneficial owner. Solicitation and Revocation Any stockholder who executes a proxy may revoke it at any time before it is voted by filing with the Secretary of the Company a written statement revoking such proxy. Stockholders should make such filing to the attention of Andrea Grasso, Secretary, Wire One Technologies, Inc., 225 Long Avenue, Hillside, New Jersey 07205. You may also revoke a proxy at any time before it is voted by executing and delivering a proxy bearing a later date or by voting in person at the Annual Meeting. Your attendance at the Annual Meeting will not by itself constitute revocation of a proxy. Wire One will bear the cost of the solicitation of proxies from its stockholders, including the cost of preparing, assembling and mailing the proxy solicitation materials. In addition to solicitation by mail, the directors, officers and employees of Wire One and its subsidiaries may solicit proxies from stockholders by 1 telephone or other electronic means or in person, but any such person will not be specifically compensated for such services. The Company will cause brokerage houses and other custodians, nominees and fiduciaries to forward solicitation materials to the beneficial owners of stock held of record by such persons. The Company will reimburse such custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses in doing so. American Stock Transfer and Trust has been engaged by the Company to aid in the distribution of the proxy materials and will be reimbursed for reasonable out-of-pocket expenses. Stockholder Proposals Proposals of stockholders intended to be presented at the Annual Meeting of Stockholders to be held in 2001 must be received by the Secretary, Wire One Technologies, Inc., 225 Long Avenue, Hillside, New Jersey 07205, no later than April 20, 2001. In addition, the Company's by-laws provide that, in order for a stockholder to nominate a person for election to the Board of Directors at an annual meeting of stockholders or to propose business for consideration at such meeting, such stockholder must give written notice to the Secretary of the Company not less than 60 days nor more than 90 days prior to the anniversary date of the immediately preceding annual meeting of stockholders; provided however, that in the event the annual meeting is called for a date that is not within 30 days before or after such anniversary date, notice by the stockholder in order to be timely must be received not later than the close of business on the 10th day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure of the date the annual meeting was made, whichever occurs first. 2 PROPOSAL #1 ELECTION OF DIRECTORS Our directors are divided into three classes. The number of directors is determined from time to time by our Board of Directors and currently is fixed at seven. A single class of directors is elected each year at the annual meeting of stockholders. Each director elected at an annual meeting will serve for a term ending at the third annual meeting of stockholders after his or her election and until his or her successor is elected and duly qualified. The directors to be elected at the Annual Meeting are Class I directors and are to serve until the 2003 annual meeting or until their respective successors are elected and duly qualified. The nominees who will stand for election are Eric Friedman and Andrea Grasso, both of whom are currently members of our Board of Directors. The two nominees receiving the highest number of affirmative votes will be elected as Class I directors. In the event any nominee is unable or unwilling to serve as a nominee, the Board of Directors may select a substitute nominee. If a substitute nominee is selected, proxies will be voted in favor of such nominee. Our Board of Directors has no reason to believe that Mr. Friedman or Ms. Grasso will be unable or unwilling to serve as a nominee or as a director if elected. The following table sets forth information with respect to the current directors, director nominees and executive officers.
Name Age Position with Company - ------------------------------------------------------ --- ------------------------------------------------------ Director Nominees - ----------------- Eric Friedman (2)(4) 52 Director Andrea Grasso 40 Secretary and Director Other Directors - -------------- Richard Reiss (1) 43 Chairman, President and Chief Executive Officer Robert B. Kroner (1) 70 Vice President and Director Louis Capolino (1)(2) 57 Director Dean Hiltzik (1)(3)(4) 46 Director Peter N. Maluso (1)(2)(3)(4) 45 Director Non-Director Executive Officers - ------------------------------- Christopher A. Zigmont 38 Chief Financial Officer, Vice President, Finance Leo Flotron 40 Executive Vice President and General Manager Video Communications Joseph Scotti 38 Executive Vice President and General Manager Enterprise Communications Scott Tansey 36 Vice President, Controller and Treasurer
- ------------------ (1) Member of the Executive Committee. (2) Member of the Audit Committee. (3) Member of the Compensation Committee. (4) Member of the Employee Stock Option Committee. Biographies Class I Director Nominees Eric Friedman, Director. Mr. Friedman serves on our Board of Directors. From December 1996 until May 2000, Mr. Friedman was a member of ACC's Board of Directors. He has served as Chief Financial Officer, Vice President and Treasurer of Chem International, Inc., a publicly held company, since June 1996. From June 1978 through May 1996, Mr. Friedman was a partner at Shachat and Simpson, a certified public accounting firm. Mr. Friedman received a B.S. degree from the University of Bridgeport and is a certified public accountant. 3 Andrea Grasso, Secretary and Director. Ms. Grasso is Wire One's Secretary and serves on our Board of Directors. From 1995 until May 2000, Ms. Grasso was ACC's Secretary and served on ACC's Board of Directors from 1996 until May 2000. Required Vote Directors must be elected by a plurality of the shares of our Common Stock present at the Annual Meeting in person or by proxy entitled to vote. THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE ELECTION OF EACH NOMINEE FOR DIRECTOR NAMED ABOVE. Directors whose Terms of Office Continue after the Annual Meeting Richard Reiss, Chairman of the Board of Directors, President and Chief Executive Officer. Mr. Reiss is Wire One's Chairman of the Board of Directors, President and Chief Executive Officer and served as ACC's Chairman of the Board of Directors, President and Chief Executive Officer from ACC's formation in 1991 until May 2000. Robert B. Kroner, Vice President and Director. Mr. Kroner is Wire One's Vice President and serves on our Board of Directors. From 1991 until May 2000, Mr. Kroner served on ACC's Board of Directors and served as Vice President and General Counsel of ACC from 1997 until May 2000. Prior to 1997, Mr. Kroner was self-employed as an attorney. Mr. Kroner received his LLB degree from Harvard Law School and holds an L.L.M. degree from New York University Graduate School of Law. Louis Capolino, Director. Mr. Capolino serves on our Board of Directors. From November 1999 until May 2000, Mr. Capolino was a member of ACC's Board of Directors. Since January 1995, Mr. Capolino has served as President of Comcap Corporation, a communications consulting company. Mr. Capolino received a B.S. degree in marketing from Montclair State University. Dean Hiltzik, Director. Mr. Hiltzik serves on our Board of Directors. From September 1999 until May 2000, Mr. Hiltzik was a member of ACC's Board of Directors. Mr. Hiltzik, a certified public accountant, is a partner and director of the securities practice at Schneider & Associates LLP ( "Schneider"), which he joined in 1979. Schneider provides tax and consulting services to the Company. Mr. Hiltzik received his B.A. from Columbia University in 1974 and his M.B.A. in Accounting from Hofstra University in 1979. Peter N. Maluso, Director. Mr. Maluso serves on our Board of Directors. From December 1996 until May 2000, Mr. Maluso was a member of ACC's Board of Directors. Since 1995, Mr. Maluso has been employed as a Principal at International Business Machines, Inc. ( "IBM "), responsible for IBM's Global Services Legacy Transformation Consulting practice in the northeastern United States. Prior thereto, from 1988 to 1995, Mr. Maluso was a Senior Manager for KPMG Peat Marwick's strategic services practice in New Jersey. Mr. Maluso received his B.A. degree in Economics from Muhlenberg College and holds an M.B.A. degree in Finance from Lehigh University. He is a certified public accountant. Executive Officers The following individuals are executive officers of the Company but are not Directors or Nominees for Director: Christopher Zigmont, Chief Financial Officer, Vice President, Finance. Mr. Zigmont is Wire One's Chief Financial Officer and Vice President, Finance. From June 1999 until May 2000, Mr. Zigmont served as VTI's Chief Financial Officer. From March 1990 to May 1999, Mr. Zigmont held various positions at BankBoston Corporation, most recently as Director, Finance. Prior to joining BankBoston Corporation, Mr. Zigmont was a Senior Audit Manager with the accounting and auditing firm of KPMG Peat Marwick. He received a B.S. degree in Business Administration with a double major in Accounting/Finance from Boston University, Boston, Massachusetts. Leo Flotron, Executive Vice President and General Manager Video Communications. Mr. Flotron is Wire One's Executive Vice President and General Manager Video Communications. From October 1995 until 4 May 2000, Mr. Flotron served as ACC's Vice President, Sales and Marketing of Videoconferencing Products, in charge of sales and marketing for videoconferencing and network products. From 1988 to 1995, Mr. Flotron held numerous positions with Sony Electronics, Inc., and has served as ACC's liaison with Sony throughout the United States. Mr. Flotron holds a B.S. degree in Business from the University of Massachusetts in Amherst, and an M.S. degree in Finance from Louisiana State University. Joseph Scotti, Executive Vice President and General Manager Enterprise Communications. Mr. Scotti is Wire One's Executive Vice President and General Manager Enterprise Communications. From August 1995 until May 2000, Mr. Scotti served as ACC's Vice President, Sales and Marketing of Voice Products, dealing with all aspects of voice communications. From 1990 to 1995, Mr. Scotti held numerous sales and sales management positions with Northern Telecom. Mr. Scotti received a B.S. degree in Marketing from St. Peters College. Scott Tansey, Vice President, Controller and Treasurer. Mr. Tansey is Wire One's Vice President, Controller and Treasurer. From 1996 until May 2000, Mr. Tansey held numerous positions at ACC, most recently as Chief Financial Officer. From 1992 until he joined ACC, Mr. Tansey served as Director, Finance and Administration, of Data Transmission Services, Inc., a closely-held long distance wireless data communications provider. Mr. Tansey received a B.S. degree in Accounting from Rider College, Lawrenceville, New Jersey, and an M.B.A. degree in Finance from Fairleigh Dickinson University, Madison, New Jersey. He is a certified public accountant. Meetings and Committees of the Board of Directors Our Board of Directors met seven times during the year ended December 31, 1999. The Board has an Executive Committee, Audit Committee, Compensation Committee and Stock Option Committee. All of the Directors attended each of the meetings of the Board and the committees thereof on which they served during 1999. Executive Committee We currently maintain an Executive Committee consisting of Richard Reiss, Peter Maluso, Louis Capolino, Robert Kroner and Dean Hiltzik. Each non-employee member of our Executive Committee receives options to purchase 500 shares of Common Stock for each meeting attended. The Executive Committee, to the extent permitted by law, has and may exercise when the Board of Directors is not in session all powers of the Board in the management of the business and affairs of the Company, except such committee does not have the power or authority to approve or recommend to the stockholders any action which must be submitted to stockholders for approval under the Delaware General Corporation Law. The Executive Committee did not meet during the year ended December 31, 1999. Audit Committee We currently maintain an Audit Committee consisting of Eric Friedman, Peter Maluso and Louis Capolino. Each member of our Audit Committee is "independent" as defined under the National Association of Securities Dealers' listing standards. Each non-employee member of our Audit Committee receives options to purchase 500 shares of Common Stock for each meeting attended. The Audit Committee consults and meets with the Company's auditors and its Chief Financial Officer and accounting personnel, reviews potential conflict of interest situations, where appropriate, and reports and makes recommendations to the full Board of Directors regarding such matters. The Audit Committee met two times during the year ended December 31, 1999, and all members attended the meetings. Compensation Committee We currently maintain a Compensation Committee consisting of Dean Hiltzik and Peter Maluso. Each non-employee member of our Compensation Committee receives options to purchase 500 shares of Common Stock for each meeting attended. The Compensation Committee is responsible for supervising the Company's executive compensation policies, reviewing officers' salaries, approving significant changes in employee benefits and recommending to the Board of Directors such other forms of remuneration as it deems appropriate. The 5 Compensation Committee met one time during the year ended December 31, 1999, and all members attended the meeting. Stock Option Committee We currently maintain an Employee Stock Option Committee consisting of Dean Hiltzik, Eric Friedman and Peter Maluso. Each non-employee member of our Employee Stock Option Committee receives options to purchase 500 shares of Common Stock for each meeting attended. The Stock Option Committee is responsible for administering Wire One's employee incentive plans and recommending to the Board of Directors such other forms of remuneration as it deems appropriate. The Stock Option Committee met three times during the year ended December 31, 1999, and all members attended the meetings. Audit Committee Report In December 1999, the Securities and Exchange Commission approved the amendments to The Nasdaq Stock Market, Inc.'s rules relating to the structure and membership on the audit committee of companies whose stock is traded on Nasdaq. In response to these new requirements, in May 2000, the Board adopted a charter for the Audit Committee, a copy of which is attached to this Proxy Statement as Appendix A. Pursuant to the charter, the Audit Committee makes recommendations as to the engagement and fees of the independent auditors, reviews the preparations for and the scope of the audit of Wire One's annual financial statements, reviews drafts of such statements and monitors the functioning of Wire One's accounting and internal control systems by meeting with representatives of management, the independent auditors and the internal auditors. The Audit Committee met with members of the engagement team of BDO Seidman, LLP ("BDO") in 2000 to review the results of the 1999 audit and to discuss the scope of the 2000 audit. During this meeting, the Audit Committee discussed the matters required to be discussed by Statement on Auditing Standards No. 1 with BDO. BDO delivered the written disclosures and letter required by Independence Standards Board Standard No. 1. This Standard requires auditors to communicate, in writing, at least annually, all relationships between the auditors and a company that, in the auditor's professional judgement, may reasonably be thought to affect the auditor's independence. The Audit Committee has received this disclosure and discussed with BDO its independence. Based upon its meetings with BDO and its review of the audited financial statements, the Audit Committee recommended to the Board that the audited financial statements be included in the Annual Report on Form 10-K. The Audit Committee plans to meet with BDO again in 2000 to review the scope of the 2000 audit. Submitted by the Audit Committee: Eric Friedman Peter Maluso Louis Capolino 6 EXECUTIVE COMPENSATION AND OTHER MATTERS Executive Compensation The table below summarizes information concerning the compensation paid by ACC during 1999 to ACC's Chief Executive Officer and ACC's three other most highly paid executive officers (collectively, the "Named Executive Officers"), each of whom are currently Named Executive Officers of Wire One.
Long-term compensation awards Annual compensation --------------------- --------------------- Securities underlying Name and Principal Position Year Salary($) Bonus($) options - ------------------------------------------------------------------ ---- --------- -------- --------------------- Richard Reiss, President, Chief Executive Officer and Chairman of the Board........................................... 1999 205,000 75,000 -- 1998 170,208 -- 80,000 1997 133,000 25,000 850,000 Leo Flotron, Executive Vice President............................. 1999 124,000 119,794 495,000 1998 114,000 82,285 20,000 1997 104,000 54,307 95,000 Joseph Scotti, Executive Vice President........................... 1999 124,000 119,794 495,000 1998 114,000 82,285 20,000 1997 104,000 54,307 95,000 Scott Tansey, Vice President, Controller and Treasurer............ 1999 100,000 25,000 165,000
Option Grants in 1999 The following table sets forth information regarding stock options granted pursuant to the ACC stock option plan during 1999 to each of the Named Executive Officers.
Potential realized value at assumed Percent of annual rates Number of total options Individual of stock price underlying granted to Grants Exercise appreciation options employees in or base price for option Name granted fiscal 1999 (per share) Expiration Date term - -------------------------------- ---------- ---------------- --------------- ----------------- -------------- 5% -- Richard Reiss................... -- --% $ -- -- $ -- Leo Flotron..................... 495,000 23.5 .568 January 11, 2004 358,763 Joseph Scotti................... 495,000 23.5 .568 January 11, 2004 358,763 Scott Tansey.................... 165,000 7.8 .568 January 11, 2004 119,588 Potential realized value at assumed annual rates of stock price appreciation for option Name term - -------------------------------- -------------- 10% --- Richard Reiss................... $ -- Leo Flotron..................... 452,714 Joseph Scotti................... 452,714 Scott Tansey.................... 150,905
Aggregated Option Exercises In Fiscal 1999 And Fiscal Year-End Option Values The following table sets forth information concerning the value of unexercised in-the-money options held by the Named Executive Officers as of December 31, 1999.
Number of securities Shares underlying Value of unexercised acquired on Value unexercised options at in-the-money Name exercise realized fiscal year-end options at fiscal year-end - ----------------------------------------- ----------- -------- ----------------------------- ----------------------------- Exercisable Unexercisable Exercisable Unexercisable ----------- ------------- ----------- ------------- Richard Reiss............................ -- -- 1,428,900 105,600 3,103,835 451,080 Leo Flotron.............................. -- -- 391,050 293,700 1,740,765 1,285,306 Joseph Scotti............................ -- -- 391,050 293,700 1,740,765 1,285,306 Scott Tansey............................. -- -- 219,450 143,550 953,490 587,371
7 Director Compensation Directors who are not executive officers or employees of Wire One receive a director's fee of options to purchase 1,000 shares of Common Stock for each board meeting attended, whether in person or by telephone, and options to purchase 4,000 shares of Common Stock for attendance in person at the annual meeting of stockholders. Employment Agreements We entered into employment agreements with each of Messrs. Reiss, Flotron and Scotti, effective January 1, 1997, pursuant to which Mr. Reiss serves as President and Chief Executive Officer, Mr. Flotron serves as Executive Vice President and General Manager Video Communications, and Mr. Scotti serves as Executive Vice President and General Manager Enterprise Communications. The following is a summary of the material terms and conditions of such agreements and is subject to the detailed provisions of the respective agreements attached as exhibits to the Registration Statement of the Company filed with the Securities and Exchange Commission (Registration No. 333-21069). Employment Agreement with Richard Reiss Mr. Reiss has an employment agreement, effective January 1, 1997, as amended in March 1997, which provides for a six-year term and an annual salary of $133,000 in the first year, increasing to $170,000 and $205,000 in the second and third years, respectively. In years four, five and six of the term, Mr. Reiss' base salary will be $205,000, but can be increased at the discretion of the Board's Compensation Committee. The agreement also provides for medical benefits, the use of an automobile, and grants of 1,237,500 non-qualified stock options, as well as 174,857 incentive stock options and 122,143 non-qualified stock options issuable under the ACC Plan, which plan has been assumed by the Company and is still in effect. Employment Agreements with Messrs. Flotron and Scotti Messrs. Flotron and Scotti have employment agreements effective January 1, 1997. Each of these agreements expires on December 31, 2000 and provides for an annual salary of $175,000. These agreements further provide for an incentive bonus equal to 1/2 of 1% of net sales payable twice yearly to each of Mr. Flotron and Mr. Scotti. Each employee is also entitled to a monthly automobile allowance. In consideration for extending the term of the agreements through December 31, 2000, ACC granted 352,186 options under the ACC Plan and an additional 142,814 options outside the ACC Plan to each of Mr. Flotron and Mr. Scotti to purchase shares of ACC common stock, which options vest over a twenty-three month period. These agreements may be terminated by the employee without cause upon written notice to the Company. Compensation Committee Report on Executive Compensation Scope of the Committee's Work The Compensation Committee of Wire One's Board of Directors has the authority and responsibility to establish the overall compensation strategy for Wire One, including salary and bonus levels, and to review and make recommendations to the Board with respect to the compensation of Wire One's executive officers. The current members of the Compensation Committee are Messrs. Hiltzik and Maluso, each of whom is a non-employee director within the meaning of Section 16 of the Exchange Act, and an "outside director" within the meaning of Section 162(m) of the Code. The Compensation Committee was established in 1999; prior thereto, compensation decisions and grants of stock options were made by the Board. Executive Compensation Philosophy and Policies Wire One's overall compensation philosophy is to provide a total compensation package that is competitive and enables Wire One to attract, motivate, reward and retain key executives and other employees who have the skills and experience necessary to promote the short and long-term financial performance and growth of the Company. 8 The Compensation Committee recognizes the critical role of its executive officers in the significant growth and success of the Company to date and its future prospects. Accordingly, Wire One's executive compensation policies are designed to (1) align the interests of executive officers and stockholders by encouraging stock ownership by executive officers and by making a significant portion of executive compensation dependent upon the Company's financial performance, (2) provide compensation that will attract and retain talented professionals, (3) reward individual results through base salary, annual cash bonuses, long-term incentive compensation in the form of stock options and various other benefits and (4) manage compensation based on skill, knowledge, effort and responsibility needed to perform a particular job successfully. In establishing salary, bonuses and long-term incentive compensation for its executive officers, the Compensation Committee takes into account both the position and expertise of a particular executive, as well as the Committee's understanding of competitive compensation for similarly situated executives in the Company's industry. Executive Compensation Base Salary. Salaries for executive officers for 1999 were generally determined by the Board of Directors on an individual basis at the time of hiring. The majority of Wire One's executives were hired prior to the formation of the Compensation Committee. For 2000, the Compensation Committee will review the base salaries of the executive officers by evaluating each executive's scope of responsibility, performance, prior experience and salary history, as well as the salaries for similar positions at comparable companies. Bonus. The amount of cash bonuses paid to executives was partially based upon the financial results of ACC and partially based on the decision of the Chief Executive Officer. Mssrs. Flotron and Scotti each received a bonus of $119,794 and Mr. Tansey received a bonus of $25,000, each for their services in 1999. Certain executive officers were also paid a bonus in the form of stock option grants. Pursuant to their employment agreements, Mssrs. Flotron and Scotti each received options to purchase 495,000 shares of ACC common stock. Also in 1999, Mr. Tansey received options to purchase 165,000 shares of ACC common stock. Long-Term Incentive Awards. The Compensation Committee believes that equity-based compensation in the form of stock options links the interests of executives with the long-term interests of Wire One's stockholders and encourages executives to remain in Wire One's employ. The Company grants stock options in accordance with its various stock option plans. Grants are awarded based on a number of factors, including the individual's level of responsibility, the amount and term of options already held by the individual, the individual's contributions to the achievement of Wire One's financial and strategic objectives, and industry practices and norms. Compensation of the Chief Executive Officer Mr. Reiss, who served as ACC's Chairman of the Board of Directors, President and Chief Executive Officer since its formation until May 2000, and has served as Wire One's President and Chief Executive Officer since its formation in May 2000, was paid a base salary of $205,000 in 1999. He was paid a cash bonus of $75,000 for his service to ACC in 1999. Effective January 1, 1997, we entered into an Employment Agreement with Mr. Reiss (see "Employment Agreements" above) pursuant to which he serves as President and Chief Executive Officer. Mr. Reiss' salary and other compensation and the terms of his employment agreement have been established by reference to the salaries and equity participations of other chief executive officers of companies in the Company's industry and in recognition of Mr. Reiss' unique skills and importance to the Company. Internal Revenue Code Section 162(m) Limitation Section 162(m) of the Internal Revenue Code, enacted in 1993, generally disallows a tax deduction to publicly held companies for compensation exceeding $1 million paid to certain of the Company's executive officers. The limitation applies only to compensation that is not considered to be performance-based. The non-performance based compensation paid to Wire One's executive officers in 1999 did not exceed the $1 million limit per officer. The 2000 Plan is structured so that any compensation deemed paid to an executive officer in 9 connection with the exercise of option grants made under that plan will qualify as performance-based compensation which will not be subject to the $1 million limitation. The Compensation Committee currently intends to limit the dollar amount of all other compensation payable to the Company's executive officers to no more than $1 million. The Compensation Committee is aware of the limitations imposed by Section 162(m), and the exemptions available therefrom, and will address the issue of deductibility when and if circumstances warrant. Submitted by the Compensation Committee: Dean Hiltzik Peter Maluso Compensation Committee Interlocks and Insider Participation Dean Hiltzik and Peter Maluso served on the Compensation Committee of the Board of Directors of ACC during 1999. No member of the Compensation Committee was at any time during 1999 or at any other time an officer or employee of ACC. We receive financial and tax services from an accounting firm in which Mr. Hiltzik is a partner (see "Certain Relationships and Related Transactions" below). No member of the Compensation Committee served on the board of directors or compensation committee of any entity which has one or more executive officers serving as a member of the Board or Compensation Committee. 10 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The landlord for our Hillside, New Jersey office is Vitamin Realty Associates, L.L.C. of which Eric Friedman, one of our directors, is a member. These premises consist of 8,491 square feet of office space and 13,730 square feet of secured warehouse facilities. The lease term is for five years and expires on May 31, 2002. The base rental for the premises during the term of the lease is $122,846 per year. In addition, Wire One must pay its share of the landlord's operating expenses (i.e., those costs or expenses incurred by the landlord in connection with the ownership, operation, management, maintenance, repair and replacement of the premises, including, among other things, the cost of common area electricity, operational services and real estate taxes). For the years ended December 31, 1999 and 1998, rent expense associated with this lease was $135,000 and $119,000, respectively. We believe that the lease reflects a fair rental value for the property and is on terms no less favorable than we could obtain in an arm's length transaction with an independent third party. We receive financial and tax services from an accounting firm in which Dean Hiltzik, one of the Company's directors, is a partner. Since Mr. Hiltzik became a director of ACC on September 15, 1999, we have incurred fees of approximately $50,000 in services received from this firm. 11 STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth information regarding the beneficial ownership of Common Stock as of August 11, 2000 by each of the following: o each person (or group within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934) known by us to own beneficially 5% or more of the Common Stock; o Wire One's directors and Named Executive Officers; and o all directors and executive officers of Wire One as a group. As used in this table, "beneficial ownership" means the sole or shared power to vote or direct the voting or to dispose or direct the disposition of any security. A person is considered the beneficial owner of securities that can be acquired within 60 days from the date of this proxy statement through the exercise of any option, warrant or right. Shares of Common Stock subject to options, warrants or rights which are currently exercisable or exercisable within 60 days are considered outstanding for computing the ownership percentage of the person holding such options, warrants or rights, but are not considered outstanding for computing the ownership percentage of any other person. The amounts and percentages are based upon 16,879,716 shares of Common Stock outstanding as of August 11, 2000.
Percentage Number of of Shares Outstanding Name and address of beneficial owners (1) Owned (2) Shares - ---------------------------------------------------------------------------------------- --------- ----------- Executive Officers and Directors: Richard Reiss........................................................................... 4,730,550(3) 28.0% Leo Flotron............................................................................. 734,250(4) 4.3 Joseph Scotti........................................................................... 734,250(4) 4.3 Robert B. Kroner........................................................................ 264,825(5) 1.6 Scott Tansey............................................................................ 237,600(6) 1.4 Peter N. Maluso......................................................................... 119,625(7) * Dean Hiltzik............................................................................ 104,510(8) * Eric Friedman........................................................................... 90,725(9) * Louis Capolino.......................................................................... 74,497(10) * Andrea Grasso........................................................................... 41,250 * Christopher A. Zigmont.................................................................. 40,625(11) * All directors and executive officers as a group (11 people)............................. 7,172,707 42.5
- ------------------ * Less than 1% (1) Unless otherwise noted, the address of each of the persons listed is c/o Wire One Technologies, Inc., 225 Long Avenue, Hillside, NJ 07205. (2) Unless otherwise indicated by footnote, the named persons have sole voting and investment power with respect to the shares of Common Stock beneficially owned. (3) Includes 1,455,300 shares subject to presently exercisable stock options and 82,500 shares held by a trust for the benefit of Mr. Reiss' children, of which he is the trustee. (4) Includes 404,250 shares subject to presently exercisable stock options. (5) Includes 17,325 shares subject to presently exercisable stock options. (6) Includes 234,300 shares subject to presently exercisable stock options. (7) Includes 37,625 shares subject to presently exercisable stock options. (8) Includes 96,200 shares subject to presently exercisable stock options. (9) Includes 36,800 shares subject to presently exercisable stock options. (10) Includes 12,375 shares subject to presently exercisable stock options. (11) Includes 40,625 shares subject to presently exercisable stock options. 12 Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), requires the Company's executive officers and directors and persons who beneficially own more than 10% of a registered class of our equity securities to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Executive officers, directors and greater than 10% stockholders are required by regulations of the Securities and Exchange Commission to furnish us with copies of all Section 16(a) reports they file. Based solely on our review of the copies of reports we received, or written representations that no such reports were required for those persons, we believe that, for 1999, all statements of beneficial ownership required to be filed with the Securities and Exchange Commission were filed on a timely basis. 13 PROPOSAL #2 ADOPTION OF STOCK INCENTIVE PLAN The stockholders are being asked to approve the adoption of our 2000 Stock Incentive Plan (the "2000 Plan"). The 2000 Plan was adopted by the Board of Directors in June 2000. Under the 2000 Plan, options and other equity rights, including stock appreciation rights ("SARs"), sales or bonuses of restricted stock, dividend equivalent rights, performance units or performance shares, or any combination of these, may be issued from time to time to key employees, directors and consultants who contribute to the management, growth and financial success of the Company. The purpose of the 2000 Plan is to attract and retain the best available personnel, to provide additional incentive to our directors, officers, employees and consultants and to promote the success of our business. We currently maintain the plans established by VTI and ACC prior to consummation of the Merger. The ACC Plan provides for the granting of options to officers, directors, employees and advisors of Wire One. Options are not exercisable for a period of one year from the date of grant. Thereafter, options may be exercised as determined by the Board of Directors at the date of grant, with maximum terms of ten and five years, respectively, for incentive stock options ("ISOs") issued to employees who are less than 10% stockholders and employees who are 10% stockholders. In addition, under the ACC Plan, no individual will be given the opportunity to exercise ISOs valued in excess of $100,000 in any calendar year unless and to the extent the options have first become exercisable in the preceding year. The maximum number of shares with respect to which options may be granted to an individual during any twelve-month period is 100,000. The ACC Plan will terminate in 2006. Substantially all 1,500,000 shares available under the ACC Plan are subject to outstanding options. ACC also issued approximately 1,609,000 non-qualified options. VTI had an Employee Stock Purchase Plan (the "Purchase Plan") under which up to 500,000 shares of VTI common stock could be purchased by eligible employees. Substantially all full-time employees were eligible to participate in the Purchase Plan. No additional shares may be purchased under this Plan. Wire One currently maintains five VTI stock option plans which generally require the exercise price of options to be not less than the estimated fair market value of the stock at the date of grant. Options vest over a maximum period of four years and may be exercised in varying amounts over their respective terms. In accordance with the provisions of such plans, all outstanding options became immediately exercisable upon the Merger. An aggregate of 1,922,000 shares of common stock were available under the five VTI stock option plans, all of which have been issued or are subject to outstanding options. The Board believes that the adoption of the 2000 Plan is necessary in order to have a sufficient reserve of Common Stock to provide option grants as an equity incentive to attract and retain the services of key individuals essential to the Company's long-term success. A summary of the terms of the 2000 Plan is provided below. The summary, however, is not intended to be a description of all the terms of the 2000 Plan. A copy of the 2000 Plan will be furnished by the Company to any stockholder upon written request to the Secretary of the Company at the corporate offices in Hillside, New Jersey. Available Shares Subject to adjustment to reflect certain corporate events, such as stock dividends, recapitalizations and business combinations, the maximum aggregate number of shares which may be issued pursuant to all awards is 3,000,000 shares. Any shares covered by an award, or portion of an award, which are forfeited or canceled, expire or are settled in cash, shall be deemed not to have been issued for purposes of determining the maximum aggregate number of shares which may be issued under the 2000 Plan. Administration Under the 2000 Plan, our Board of Directors, the Stock Option Committee or such other committee designated by the Board, administers the granting of stock and options to directors and officers in a way that allows these grants of stock to be exempt from Section 16(b) of the Securities Exchange Act and determines the provisions, terms and conditions of each award. When stock or options are granted to other participants in the 2000 Plan, our Board, the Stock Option Committee or such other committee designated by our Board administers 14 these awards and determines the provisions, terms and conditions of each award. Each entity, whether the Stock Option Committee, the Board or such other committee designated by the Board, will be referred to herein as the Administrator, and such Administrator will have complete discretion (subject to the provisions of the 2000 Plan) to authorize option grants under the 2000 Plan within the scope of its administrative jurisdiction. Eligibility All employees, officers, directors and consultants of the Company or any of its affiliates are eligible to participate in the 2000 Plan, although incentive stock options may be granted only to employees. As of July 31, 2000, approximately 200 employees and consultants would have been eligible to participate in the 2000 Plan. Form of Awards The 2000 Plan permits the grant of options and other equity rights, including SARs, sales or bonuses of restricted stock, dividend equivalent rights, performance units or performance shares, or any combination of these. Options may include nonstatutory stock options ("NSOs") as well as ISOs intended to qualify for special tax treatment. Options granted under our plans generally vest 25% per year annually over a four-year period. The term of an option will be determined by the Administrator, provided, however, that the term shall be no more than ten and five years, respectively, for ISOs issued to employees who are less than 10% stockholders and employees who are 10% stockholders. The exercise price or purchase price, if any, of 2000 Plan awards that are not incentive stock options will not be less than 85% of the fair market value of the stock unless otherwise determined by the Administrator. The exercise price or purchase price, if any, of 2000 Plan awards that are ISOs (a) granted to an employee who, at the time of such grant, owns stock representing more than 10% of the voting power of all classes of stock of the Company or any parent or subsidiary, shall be not less than 110% of the fair market value of the stock on the date of the grant or (b) granted to any employee other than an employee described in clause (a) above, shall be not less than 100% of the fair market value of the stock on the date of the grant. The form of payment for the shares of common stock when options are exercised or stock is purchased under a 2000 Plan award will be determined by the Administrator and may include cash, check, shares of common stock or the assignment of part of the proceeds from the sale of shares acquired upon exercise or purchase of the award. Where the award agreement permits the exercise or purchase of an award for a period of time following the recipient's termination of service with us, that award will terminate to the extent not exercised or purchased on the last day of the specified period or the last day of the original term of the award, whichever occurs first. Change of Control Subject to any action that may be required by the stockholders of the Company, the Administrator may proportionately adjust the number and price of outstanding awards, and the number of shares authorized for issuance under the 2000 Plan, in the event of a stock dividend, stock split, recapitalization or other corporate action having a similar effect on the capitalization of the Company. The Administrator may establish programs that provide for the exchange of awards for one or more other types of awards by certain employees, directors and consultants. In the event of a Change in Control (as defined in the 2000 Plan), all outstanding options will fully vest unless assumed by the successor corporation, and all unexercised options will terminate immediately prior to the closing of that transaction unless assumed by the successor corporation. After consummation of the transaction, if any employee grantee is terminated without Cause or quits for Good Reason (as such terms are defined in the 2000 Plan) within 12 months of the transaction, all of the employee grantee's outstanding options will immediately vest. Amendment, Suspension or Termination Unless terminated sooner, the 2000 Plan will terminate automatically in 2010. The Board has the authority to amend, suspend or terminate the 2000 Plan; however, to the extent necessary to comply with applicable laws, the Company will obtain stockholder approval of any amendment to the 2000 Plan in such manner and to such degree as required. 15 Transferability During their lifetime, those who hold ISOs granted under this plan cannot transfer these options other than by a will or the laws of descent upon the death of the option holder. No one is allowed to exercise ISOs except the person to whom the options were first issued while that person is alive. Other awards may be transferred during the lifetime of the grantee by gift or pursuant to a domestic relations order to members of the grantee's immediate family to the extent and in the manner determined by the Administrator. New Plan Benefits Because participation and the types of awards granted under the 2000 Plan are subject to the discretion of the Administrator, the benefits or amounts that will be received by participants in the future if the 2000 Plan is approved and the benefits that would have been received by such participants if the 2000 Plan had been in effect in 1999 are not currently determinable. To date, grants of 339,724 options have been made under the 2000 Plan, subject to stockholder approval of the 2000 Plan, as set forth below.
Number of Name and Position Dollar Value(1) Shares - ------------------------------------------------------------------ --------------- --------- Christopher Zigmont, Chief Financial Officer...................... $ 275,000 100,000 All non-executive employees, as a group........................... $ 659,241 239,724
- ------------------ (1) Based on $8.25, the price of our Common Stock on August 11, 2000. Federal Income Tax Consequences The following description of the tax consequences of options under the 2000 Plan is based on present Federal tax laws and does not purport to be a complete description of the tax consequences of the 2000 Plan. No tax consequences result from the grant of options which are intended to qualify as ISOs within the meaning of Section 422 of the Code. If an option holder acquires stock upon the exercise of an ISO, no income will be recognized by the option holder for ordinary income tax purposes (although the difference between the option exercise price and the fair market value of the stock subject to the option may result in alternative minimum tax liability to the option holder) and we will be allowed no deduction as a result of such exercise provided that the following conditions are met: (a) at all times during the period beginning on the date of grant of the ISO and ending on the day three months before the date of such exercise, the option holder is an employee of the Company or a subsidiary; and (b) the option holder makes no disposition of the stock within two years from the date the ISO was granted nor within one year after the exercise of the ISO. The three-month period in (a), above, is extended to one year in the event the option holder is disabled or dies. If the holder of an ISO sells stock after compliance with these conditions, any gain realized over the exercise price of the ISO ordinarily will be treated as long-term capital gain, and any loss will be treated as long-term capital loss, in the year of sale of the shares. No tax consequences result from the grant of NSOs. An option holder who exercises an NSO generally will realize compensation taxable as ordinary income in an amount equal to the difference between the option exercise price and the fair market value of the shares on the date of exercise, and the Company will be entitled to a deduction from income in the same amount in the year in which the exercise occurred. The option holder's basis in shares received in an exercise of an NSO with cash will be the fair market value of the shares on the date income was realized, and when the holder disposes of the shares, he or she will recognize capital gain or loss, either long-term or short-term, depending on the holding period of the shares. Although it is anticipated that certain awards under the 2000 Plan will, pursuant to Section 162(m) of the Code, meet the requirements to avoid a limit on deductibility, no assurances can be given that all awards will meet such requirements. Specifically, awards of restricted stock will be subject to the limitation on deductibility imposed by Section 162(m) of the Code. Required Vote An affirmative vote of the holders of a majority of the shares of our Common Stock present at the Annual Meeting in person or by proxy and entitled to vote is required for approval of the 2000 Plan. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE 2000 STOCK INCENTIVE PLAN. 16 PROPOSAL #3 RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS The Board of Directors of the Company has appointed the firm of BDO Seidman, LLP as independent auditors to audit the consolidated financial statements of the Company and its subsidiaries for the fiscal year ending December 31, 2000, subject to ratification by the stockholders of the Company. BDO audited both VTI's and ACC's financial statements for the fiscal year ending December 31, 1999. A member of BDO is expected to be present at the Annual Meeting, to be provided with an opportunity to make a statement if such member desires to do so and to be available to respond to appropriate questions from stockholders. Change of Auditors Arthur Andersen LLP ("Andersen") audited the financial statements of VTI for the fiscal years ended December 31, 1997 and 1998. On or about January 11, 2000, the Board of Directors of VTI, including all members of the Audit Committee of the Board of Directors of VTI, determined not to appoint Andersen to audit the financial statements of VTI for the fiscal year ended December 31, 1999 and authorized the retention of BDO to audit the financial statements of VTI for the fiscal year ended December 31, 1999. BDO was formally engaged by VTI in an engagement letter dated February 24, 2000. BDO was the independent accountant of ACC for the fiscal year ended December 31, 1999. During the two most recent fiscal years and the interim period subsequent to December 31, 1998, prior to engaging BDO, VTI did not consult with BDO regarding the application of accounting principles to a specified transaction, either completed or proposed; or the type of audit opinion that might be rendered on VTI's financial statements. During the two most recent fiscal years and the interim period subsequent to December 31, 1998, the reports of Andersen on VTI's financial statements did not contain any adverse opinions or disclaimers of opinion, and were not qualified or modified as to uncertainty, audit scope or accounting principles. During such periods, there have been no disagreements on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreement, if not resolved to Andersen's satisfaction, would have caused Andersen to make reference in connection with its reports to the subject matter of the disagreement. Required Vote Approval of the Independent Auditor Proposal requires the affirmative vote of a majority of the votes cast by holders of Common Stock present at the Annual Meeting in person or by proxy entitled to vote. THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE APPROVAL OF THE INDEPENDENT AUDITORS PROPOSAL. 17 Stock Performance Graph The graph below compares the cumulative total stockholder return on the Company's Common Stock with the cumulative total return on The Nasdaq National Market Index and a peer group selected by the Company on an industry and line-of-business basis. The period shown commences on December 29, 1995 and ends on December 31, 1999, the end of the Company's last fiscal year. The graph assumes an investment of $100 on December 29, 1995, and the reinvestment of any dividends. The comparisons in the graph below are based upon historical data and are not indicative of, nor intended to forecast, future performance of the Company's Common Stock. [Line Graph]
December December December December December 1995 1996 1997 1998 1999 -------- -------- -------- -------- -------- Wire One Technologies, Inc.*............................ 100.000 67.187 61.718 29.687 31.640 The Nasdaq National Market Index........................ 100.000 122.706 149.254 208.404 386.768 Nasdaq Telecommunications Index......................... 100.000 103.628 147.156 240.417 487.353
- ------------------ * The information provided in this Performance Chart relates to VTI only. Wire One was formed in May 2000 by the merger of ACC into VTI. 18 APPENDIX A CHARTER OF THE AUDIT COMMITTEE WIRE ONE TECHNOLOGIES, INC. PURPOSE AND AUTHORITY The audit committee (the "Committee") for Wire One Technologies, Inc., a Delaware corporation (the "Company"), is appointed by the Company's Board of Directors (the "Board") to assist the Board in monitoring (1) the integrity of the financial statements of the Company, (2) the compliance by the Company with legal and regulatory requirements and (3) the independence and performance of the Company's internal and external auditors. The Committee shall have the authority to retain special legal, accounting or other consultants to advise the Committee and, if necessary, to institute special investigations. The Committee may request any officer or employee of the Company or the Company's outside counsel or independent auditor to attend a meeting of the Committee or to meet with any members of, or consultants to, the Committee. In addition, the Committee shall undertake those specific duties and responsibilities listed below and such other duties as the Board shall from time to time prescribe. COMMITTEE MEMBERSHIP The Committee members (the "Members") shall be appointed by the Board and will serve at the discretion of the Board. The Committee will consist of at least three (3) members of the Board subject to the following requirements: (i) each of the Members must be able to read and understand fundamental financial statements, including the Company's balance sheet, income statement, and cash flow statement or must become able to do so within a reasonable time period after his or her appointment to the Committee; (ii) at least one (1) of the Members must have past employment experience in finance or accounting, requisite professional certification in accounting, or other comparable experience or background, including a current or past position as a chief executive or financial officer or other senior officer with financial oversight responsibilities; and (iii) each Member must be either (a) an independent director or (b) the Board must determine it to be in the best interests of the Company and its stockholders to have one (1) director who is not independent, and the Board must disclose the reasons for its determination in the Company's first annual proxy statement or information statement subsequent to such determination, as well as the nature of the relationship between the Company and director. Under such circumstances the Company may appoint one (1) director who is not independent to the Committee, so long as the director is not a current employee or officer, or an immediate family member of a current employee or officer. DUTIES AND RESPONSIBILITIES The Committee shall report, at least annually, to the Board. Further, the Committee shall: 1. Review and reassess the adequacy of this Charter annually and recommend any proposed changes to the Board for approval; 2. Review the annual audited financial statements with management, including a review of major issues regarding accounting and auditing principles and practices, and evaluate the adequacy of internal controls that could significantly affect the Company's financial statements; 3. Review an analysis prepared by management and the independent auditor of significant financial reporting issues and judgments made in connection with the preparation of the Company's financial statements; A-1 4. Review with management and the independent auditor the Company's quarterly financial statements prior to the filing of its Form 10-Q; 5. Meet periodically with management to review the Company's major financial risk exposures and the steps management has taken to monitor and control such exposures; 6. Review major changes to the Company's auditing and accounting principles and practices as suggested by the independent auditor, internal auditors or management; 7. Recommend to the Board the appointment of the independent auditor, which firm is ultimately accountable to the Committee and the Board; 8. Approve the fees to be paid to the independent auditor; 9. Receive periodic reports from the independent auditor regarding the auditor's independence consistent with Independence Standards Board Standard 1, discuss such reports with the auditor, and if deemed necessary by the Committee, take or recommend that the full Board take appropriate action to oversee the independence of the auditor; 10. Evaluate together with the Board the performance of the independent auditor and, if deemed necessary by the Committee, recommend that the Board replace the independent auditor; 11. Review the appointment of, and any replacement of, the senior internal auditing executive; 12. Review the significant reports to management prepared by the internal auditing department and management's responses; 13. Meet with the independent auditor prior to the audit to review the planning and staffing of the audit; 14. Obtain from the independent auditor assurance that Section 10A of the Securities Exchange Act of 1934 has not been implicated. 15. Obtain reports from management, the Company's senior internal auditing executive and the independent auditor that the Company's subsidiary/foreign affiliated entities are in conformity with applicable legal requirements, including the Foreign Corrupt Practices Act. 16. Discuss with the independent auditor the matters required to be discussed by Statement on Auditing Standards No. 61 relating to the conduct of the audit. 17. Review with the independent auditor any problems or difficulties the auditor may have encountered, any management letter provided by the auditor, and the Company's response to that letter. Such review should include: a. Any difficulties encountered in the course of the audit work, including any restrictions on the scope of activities or access to required information; b. Any changes required in the planned scope of the internal audit; and c. The internal audit department responsibilities, budget and staffing. 18. Prepare the report required by the rules of the Securities and Exchange Commission to be included in the Company's annual proxy statement in accordance with the requirements of Item 306 of Regulation S-K and Item 7(e)(3) of Schedule 14A; 19. Advise the Board with respect to the Company's policies and procedures regarding compliance with applicable laws and regulations; 20. Review with the Company's outside counsel legal matters that may have a material impact on the financial statements, the Company's compliance policies and any material reports or inquiries received from regulators or governmental agencies; 21. Review related party transactions for potential conflict of interest; and 22. Provide oversight and review of the Company's asset management policies, including an annual review of the Company's investment policies and performance for cash and short-term investments. While the Committee has the responsibilities and powers set forth in this Charter, it is not the duty of the Committee to plan or conduct audits or to determine that the Company's financial statements are complete and A-2 accurate and are in accordance with generally accepted accounting principles. This is the responsibility of management and the independent auditor. Nor is it the duty of the Committee to conduct investigations, to resolve disagreements, if any, between management and the independent auditor or to assure compliance with laws and regulations. MEETINGS The Committee will meet at least two times each year. The Committee may establish its own schedule which it will provide to the Board in advance. The Committee will meet at least annually with the chief financial officer, the senior internal auditing executive, and the independent auditor in separate executive sessions. The Committee will meet with the independent auditors of the Company, at such times as it deems appropriate, to review the independent auditor's examination and management report. MINUTES The Committee will maintain written minutes of its meetings, which minutes will be filed with the minutes of the meetings of the Board. A-3 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF WIRE ONE TECHNOLOGIES, INC. FOR THE 2000 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON SEPTEMBER 15, 2000 The undersigned stockholder of WIRE ONE TECHNOLOGIES, INC., a Delaware corporation, hereby acknowledges receipt of the Notice of Annual Meeting of Stockholders and Proxy Statement, each dated August 18, 2000, and hereby appoints Richard Reiss and Christopher Zigmont or any one of them, proxies, with full power to each of substitution, on behalf and in the name of the undersigned, to represent the undersigned at the 2000 Annual Meeting of Stockholders of WIRE ONE TECHNOLOGIES, INC. to be held on September 15, 2000 at 8:30 a.m., Eastern Standard Time, at the Holiday Inn, 304 Route 22 West, Springfield, New Jersey 07081 and at any adjournment or adjournments thereof, and to vote all shares of Common Stock which the undersigned would be entitled to vote if then and there personally present, on the matters set forth on the reverse side. (Continued and to be signed on the reverse side) Please date, sign and mail your proxy card back as soon as possible! Annual Meeting of Stockholders WIRE ONE TECHNOLOGIES, INC. September 15, 2000 Please Detach and Mail in the Envelope Provided - -------------------------------------------------------------------------------- A /X/ Please mark your votes as in this example. 1. PROPOSAL NO. 1: ELECTION OF CLASS I DIRECTORS: FOR all WITHHOLD Nominees: Eric Friedman nominees listed AUTHORITY Andrea Grasso at right (except to vote for all nominees as indicated) listed at right / / / / If you wish to withhold authority to vote for any individual nominee, write that nominee's name in the space below. - -------------------------------------------------------------------------------- 2. PROPOSAL NO. 2: APPROVAL AND RATIFICATION OF 2000 STOCK INCENTIVE PLAN: FOR AGAINST ABSTAIN / / / / / / 3. PROPOSAL NO. 3: APPROVAL AND RATIFICATION OF BDO SEIDMAN, LLP AS INDEPENDENT AUDITORS: FOR AGAINST ABSTAIN / / / / / / This proxy, when properly executed, will be voted in the manner directed herein by the undersigned shareholder. If no direction is made, this Proxy will be voted FOR nominees in Proposal No. 1 and FOR each of the Proposals Nos. 1, 2 and 3. Signature Signature Dated: , 2000 ----------------- ------------------ ----------- Note: This proxy should be marked, dated and signed by the stockholder(s) exactly as his or her name appears hereon, and returned promptly in the enclosed envelope. Persons signing in a fiduciary capacity should so indicate. If shares are held by joint tenants or as community property, both should sign. EX-99.1 2 0002.txt 2000 STOCK INCENTIVE PLAN WIRE ONE TECHNOLOGIES, INC. 2000 STOCK INCENTIVE PLAN 1. Purposes of the Plan. The purposes of this Stock Incentive Plan are to attract and retain the best available personnel, to provide additional incentive to Employees, Directors and Consultants and to promote the success of the Company's business. 2. Definitions. As used herein, the following definitions shall apply: (a) "Administrator" means the Board or any of the Committees appointed to administer the Plan. (b) "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 promulgated under the Exchange Act. (c) "Applicable Laws" means the legal requirements relating to the administration of stock incentive plans, if any, under applicable provisions of federal securities laws, state corporate and securities laws, the Code, the rules of any applicable stock exchange or national market system, and the rules of any foreign jurisdiction applicable to Awards granted to residents therein. (d) "Award" means the grant of an Option, SAR, Dividend Equivalent Right, Restricted Stock, Performance Unit, Performance Share, or other right or benefit under the Plan. (e) "Award Agreement" means the written agreement evidencing the grant of an Award executed by the Company and the Grantee, including any amendments thereto. (f) "Board" means the Board of Directors of the Company. (g) "Cause" means, with respect to the termination by the Company or a Related Entity of the Grantee's Continuous Service, that such termination is for "Cause" as such term is expressly defined in a then-effective written agreement between the Grantee and the Company or such Related Entity, or in the absence of such then-effective written agreement and definition, is based on, in the determination of the Administrator, the Grantee's: (i) refusal or failure to act in accordance with any specific, lawful direction or order of the Company or a Related Entity; (ii) unfitness or unavailability for service or unsatisfactory performance (other than as a result of Disability); (iii) performance of any act or failure to perform any act in bad faith and to the detriment of the Company or a Related Entity; (iv) dishonesty, intentional misconduct or material breach of any agreement with the Company or a Related Entity; or (v) commission of a crime involving dishonesty, breach of trust, or physical or emotional harm to any person. At least 30 days prior to the termination of the Grantee's Continuous Service pursuant to (i) or (ii) above, the Administrator shall provide the Grantee with notice of the Company's or such Related Entity's intent to terminate, the reason therefor, and an opportunity 1 for the Grantee to cure such defects in his or her service to the Company's or such Related Entity's satisfaction. During this 30 day (or longer) period, no Award issued to the Grantee under the Plan may be exercised or purchased. (h) "Change in Control" means a change in ownership or control of the Company effected through either of the following transactions: (i) the direct or indirect acquisition by any person or related group of persons (other than an acquisition from or by the Company or by a Company-sponsored employee benefit plan or by a person that directly or indirectly controls, is controlled by, or is under common control with, the Company) of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Company's outstanding securities pursuant to a tender or exchange offer made directly to the Company's stockholders which a majority of the Continuing Directors who are not Affiliates or Associates of the offeror do not recommend such stockholders accept, or (ii) a change in the composition of the Board over a period of thirty-six (36) months or less such that a majority of the Board members (rounded up to the next whole number) ceases, by reason of one or more contested elections for Board membership, to be comprised of individuals who are Continuing Directors. (i) "Code" means the Internal Revenue Code of 1986, as amended. (j) "Committee" means any committee appointed by the Board to administer the Plan. (k) "Common Stock" means the common stock of the Company. (l) "Company" means Wire One Technologies, Inc., a Delaware corporation. (m) "Consultant" means any person (other than an Employee or a Director, solely with respect to rendering services in such person's capacity as a Director) who is engaged by the Company or any Related Entity to render consulting or advisory services to the Company or such Related Entity. (n) "Continuing Directors" means members of the Board who either (i) have been Board members continuously for a period of at least thirty-six (36) months or (ii) have been Board members for less than thirty-six (36) months and were elected or nominated for election as Board members by at least a majority of the Board members described in clause (i) who were still in office at the time such election or nomination was approved by the Board. (o) "Continuous Service" means that the provision of services to the Company or a Related Entity in any capacity of Employee, Director or Consultant, is not interrupted or terminated. Continuous Service shall not be considered interrupted in the case of (i) any approved leave of absence, (ii) transfers among the Company, any Related Entity, or any successor, in any capacity of Employee, Director or Consultant, or (iii) any change in status as 2 long as the individual remains in the service of the Company or a Related Entity in any capacity of Employee, Director or Consultant (except as otherwise provided in the Award Agreement). An approved leave of absence shall include sick leave, military leave, or any other authorized personal leave. For purposes of each Incentive Stock Option granted under the Plan, if such leave exceeds ninety (90) days, and reemployment upon expiration of such leave is not guaranteed by statute or contract, then the Incentive Stock Option shall be treated as a Non-Qualified Stock Option on the day three (3) months and one (1) day following the expiration of such ninety (90) day period. (p) "Corporate Transaction" means any of the following transactions: (i) a merger or consolidation in which the Company is not the surviving entity, except for a transaction the principal purpose of which is to change the state in which the Company is incorporated; (ii) the sale, transfer or other disposition of all or substantially all of the assets of the Company (including the capital stock of the Company's subsidiary corporations); (iii) approval by the Company's shareholders of any plan or proposal for the complete liquidation or dissolution of the Company; (iv) any reverse merger in which the Company is the surviving entity but in which securities possessing more than fifty percent (50%) of the total combined voting power of the Company's outstanding securities are transferred to a person or persons different from those who held such securities immediately prior to such merger; or (v) acquisition by any person or related group of persons (other than the Company or by a Company-sponsored employee benefit plan) of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Company's outstanding securities (whether or not in a transaction also constituting a Change in Control), but excluding any such transaction that the Administrator determines shall not be a Corporate Transaction. (q) "Director" means a member of the Board or the board of directors of any Related Entity. (r) "Disability" means a Grantee would qualify for benefit payments under the long-term disability policy of the Company or the Related Entity to which the Grantee provides services regardless of whether the Grantee is covered by such policy. If the Company or the Related Entity to which the Grantee provides service does not have a long-term disability plan in place, "Disability" means that a Grantee is permanently unable to carry out the responsibilities and functions of the position held by the Grantee by reason of any medically determinable physical or mental impairment. A Grantee will not be considered to have incurred a Disability unless he or she furnishes proof of such impairment sufficient to satisfy the Administrator in its discretion. 3 (s) "Dividend Equivalent Right" means a right entitling the Grantee to compensation measured by dividends paid with respect to Common Stock. (t) "Employee" means any person, including an Officer or Director, who is an employee of the Company or any Related Entity. The payment of a director's fee by the Company or a Related Entity shall not be sufficient to constitute "employment" by the Company. (u) "Exchange Act" means the Securities Exchange Act of 1934, as amended. (v) "Fair Market Value" means, as of any date, the value of Common Stock determined as follows: (i) Where there exists a public market for the Common Stock, the Fair Market Value shall be (A) the closing price for a Share for the last market trading day prior to the time of the determination (or, if no closing price was reported on that date, on the last trading date on which a closing price was reported) on the stock exchange determined by the Administrator to be the primary market for the Common Stock or the Nasdaq National Market, whichever is applicable or (B) if the Common Stock is not traded on any such exchange or national market system, the average of the closing bid and asked prices of a Share on the Nasdaq Small Cap Market for the day prior to the time of the determination (or, if no such prices were reported on that date, on the last date on which such prices were reported), in each case, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; or (ii) In the absence of an established market for the Common Stock of the type described in (i), above, the Fair Market Value thereof shall be determined by the Administrator in good faith. (w) "Good Reason" means the occurrence after a Corporate Transaction, Change in Control or a Related Entity Disposition of any of the following events or conditions unless consented to by the Grantee: (i) (A) a change in the Grantee's status, title, position or responsibilities which represents an adverse change from the Grantee's status, title, position or responsibilities as in effect at any time within six (6) months preceding the date of a Corporate Transaction, Change in Control or Related Entity Disposition or at any time thereafter or (B) the assignment to the Grantee of any duties or responsibilities which are inconsistent with the Optionee's status, title, position or responsibilities as in effect at any time within six (6) months preceding the date of a Corporate Transaction, Change in Control or Related Entity Disposition or at any time thereafter; or (ii) reduction in the Grantee's base salary to a level below that in effect at any time within six (6) months preceding the date of a Corporate Transaction, Change in Control or Related Entity Disposition or at any time thereafter. (x) "Grantee" means an Employee, Director or Consultant who receives an Award pursuant to an Award Agreement under the Plan. 4 (y) "Immediate Family" means any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships, any person sharing the Grantee's household (other than a tenant or employee), a trust in which these persons have more than fifty percent (50%) of the beneficial interest, a foundation in which these persons (or the Grantee) control the management of assets, and any other entity in which these persons (or the Grantee) own more than fifty percent (50%) of the voting interests. (z) "Incentive Stock Option" means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code. (aa) "Non-Qualified Stock Option" means an Option not intended to qualify as an Incentive Stock Option. (bb) "Officer" means a person who is an officer of the Company or a Related Entity within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder. (cc) "Option" means an option to purchase Shares pursuant to an Award Agreement granted under the Plan. (dd) "Parent" means a "parent corporation," whether now or hereafter existing, as defined in Section 424(e) of the Code. (ee) "Performance Shares" means Shares or an Award denominated in Shares which may be earned in whole or in part upon attainment of performance criteria established by the Administrator. (ff) "Performance Units" means an Award which may be earned in whole or in part upon attainment of performance criteria established by the Administrator and which may be settled for cash, Shares or other securities or a combination of cash, Shares or other securities as established by the Administrator. (gg) "Plan" means this 2000 Stock Incentive Plan. (hh) "Related Entity" means any Parent, Subsidiary and any business, corporation, partnership, limited liability company or other entity in which the Company, a Parent or a Subsidiary holds a substantial ownership interest, directly or indirectly. (ii) "Related Entity Disposition" means the sale, distribution or other disposition by the Company, a Parent or a Subsidiary of all or substantially all of the interests of the Company, a Parent or a Subsidiary in any Related Entity effected by a sale, merger or consolidation or other transaction involving that Related Entity or the sale of all or substantially all of the assets of that Related Entity, other than any Related Entity Disposition to the Company, a Parent or a Subsidiary. 5 (jj) "Restricted Stock" means Shares issued under the Plan to the Grantee for such consideration, if any, and subject to such restrictions on transfer, rights of first refusal, repurchase provisions, forfeiture provisions, and other terms and conditions as established by the Administrator. (kk) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act or any successor thereto. (ll) "SAR" means a stock appreciation right entitling the Grantee to Shares or cash compensation, as established by the Administrator, measured by appreciation in the value of Common Stock. (mm) "Share" means a share of the Common Stock. (nn) "Subsidiary" means a "subsidiary corporation," whether now or hereafter existing, as defined in Section 424(f) of the Code. 3. Stock Subject to the Plan. (a) Subject to the provisions of Section 10, below, the maximum aggregate number of Shares which may be issued pursuant to all Awards (including Incentive Stock Options) is 3,000,000 Shares. The Shares to be issued pursuant to Awards may be authorized, but unissued, or reacquired Common Stock. (b) Any Shares covered by an Award (or portion of an Award) which is forfeited or canceled, expires or is settled in cash, shall be deemed not to have been issued for purposes of determining the maximum aggregate number of Shares which may be issued under the Plan. Shares that actually have been issued under the Plan pursuant to an Award shall not be returned to the Plan and shall not become available for future issuance under the Plan, except that if unvested Shares are forfeited, or repurchased by the Company at their original purchase price, such Shares shall become available for future grant under the Plan. 4. Administration of the Plan. (a) Plan Administrator. (i) Administration with Respect to Directors and Officers. With respect to grants of Awards to Directors or Employees who are also Officers or Directors of the Company, the Plan shall be administered by (A) the Board or (B) a Committee designated by the Board, which Committee shall be constituted in such a manner as to satisfy the Applicable Laws and to permit such grants and related transactions under the Plan to be exempt from Section 16(b) of the Exchange Act in accordance with Rule 16b-3. Once appointed, such Committee shall continue to serve in its designated capacity until otherwise directed by the Board. (ii) Administration With Respect to Consultants and Other Employees. With respect to grants of Awards to Employees or Consultants who are neither Directors nor Officers of the Company, the Plan shall be administered by (A) the Board or (B) a Committee 6 designated by the Board, which Committee shall be constituted in such a manner as to satisfy the Applicable Laws. Once appointed, such Committee shall continue to serve in its designated capacity until otherwise directed by the Board. The Board may authorize one or more Officers to grant such Awards and may limit such authority as the Board determines from time to time. (iii) Administration Errors. In the event an Award is granted in a manner inconsistent with the provisions of this subsection (a), such Award shall be presumptively valid as of its grant date to the extent permitted by the Applicable Laws. (b) Powers of the Administrator. Subject to Applicable Laws and the provisions of the Plan (including any other powers given to the Administrator hereunder), and except as otherwise provided by the Board, the Administrator shall have the authority, in its discretion: (i) to select the Employees, Directors and Consultants to whom Awards may be granted from time to time hereunder; (ii) to determine whether and to what extent Awards are granted hereunder; (iii) to determine the number of Shares or the amount of other consideration to be covered by each Award granted hereunder; (iv) to approve forms of Award Agreements for use under the Plan; (v) to determine the terms and conditions of any Award granted hereunder; (vi) to amend the terms of any outstanding Award granted under the Plan, provided that any amendment that would adversely affect the Grantee's rights under an outstanding Award shall not be made without the Grantee's written consent; (vii) to construe and interpret the terms of the Plan and Awards granted pursuant to the Plan, including without limitation, any notice of Award or Award Agreement, granted pursuant to the Plan; (viii) to establish additional terms, conditions, rules or procedures to accommodate the rules or laws of applicable foreign jurisdictions and to afford Grantees favorable treatment under such laws; provided, however, that no Award shall be granted under any such additional terms, conditions, rules or procedures with terms or conditions which are inconsistent with the provisions of the Plan; and (ix) to take such other action, not inconsistent with the terms of the Plan, as the Administrator deems appropriate. 5. Eligibility. Awards other than Incentive Stock Options may be granted to Employees, Directors and Consultants. Incentive Stock Options may be granted only to 7 Employees of the Company, a Parent or a Subsidiary. An Employee, Director or Consultant who has been granted an Award may, if otherwise eligible, be granted additional Awards. Awards may be granted to such Employees, Directors or Consultants who are residing in foreign jurisdictions as the Administrator may determine from time to time. 6. Terms and Conditions of Awards. (a) Type of Awards. The Administrator is authorized under the Plan to award any type of arrangement to an Employee, Director or Consultant that is not inconsistent with the provisions of the Plan and that by its terms involves or might involve the issuance of (i) Shares, (ii) an Option, a SAR or similar right with a fixed or variable price related to the Fair Market Value of the Shares and with an exercise or conversion privilege related to the passage of time, the occurrence of one or more events, or the satisfaction of performance criteria or other conditions, or (iii) any other security with the value derived from the value of the Shares. Such awards include, without limitation, Options, SARs, sales or bonuses of Restricted Stock, Dividend Equivalent Rights, Performance Units or Performance Shares, and an Award may consist of one such security or benefit, or two (2) or more of them in any combination or alternative. (b) Designation of Award. Each Award shall be designated in the Award Agreement. In the case of an Option, the Option shall be designated as either an Incentive Stock Option or a Non-Qualified Stock Option. However, notwithstanding such designation, to the extent that the aggregate Fair Market Value of Shares subject to Options designated as Incentive Stock Options which become exercisable for the first time by a Grantee during any calendar year (under all plans of the Company or any Parent or Subsidiary) exceeds $100,000, such excess Options, to the extent of the Shares covered thereby in excess of the foregoing limitation, shall be treated as Non-Qualified Stock Options. For this purpose, Incentive Stock Options shall be taken into account in the order in which they were granted, and the Fair Market Value of the Shares shall be determined as of the date the Option with respect to such Shares is granted. (c) Conditions of Award. Subject to the terms of the Plan, the Administrator shall determine the provisions, terms, and conditions of each Award including, but not limited to, the Award vesting schedule, repurchase provisions, rights of first refusal, forfeiture provisions, form of payment (cash, Shares, or other consideration) upon settlement of the Award, payment contingencies, and satisfaction of any performance criteria. The performance criteria established by the Administrator may be based on any one of, or combination of, increase in share price, earnings per share, total stockholder return, return on equity, return on assets, return on investment, net operating income, cash flow, revenue, economic value added, personal management objectives, or other measure of performance selected by the Administrator. Partial achievement of the specified criteria may result in a payment or vesting corresponding to the degree of achievement as specified in the Award Agreement. (d) Acquisitions and Other Transactions. The Administrator may issue Awards under the Plan in settlement, assumption or substitution for, outstanding awards or obligations to grant future awards in connection with the Company or a Related Entity acquiring 8 another entity, an interest in another entity or an additional interest in a Related Entity whether by merger, stock purchase, asset purchase or other form of transaction. (e) Deferral of Award Payment. The Administrator may establish one or more programs under the Plan to permit selected Grantees the opportunity to elect to defer receipt of consideration upon exercise of an Award, satisfaction of performance criteria, or other event that absent the election would entitle the Grantee to payment or receipt of Shares or other consideration under an Award. The Administrator may establish the election procedures, the timing of such elections, the mechanisms for payments of, and accrual of interest or other earnings, if any, on amounts, Shares or other consideration so deferred, and such other terms, conditions, rules and procedures that the Administrator deems advisable for the administration of any such deferral program. (f) Award Exchange Programs. The Administrator may establish one or more programs under the Plan to permit selected Grantees to exchange an Award under the Plan for one or more other types of Awards under the Plan on such terms and conditions as determined by the Administrator from time to time. (g) Separate Programs. The Administrator may establish one or more separate programs under the Plan for the purpose of issuing particular forms of Awards to one or more classes of Grantees on such terms and conditions as determined by the Administrator from time to time. (h) Early Exercise. The Award Agreement may, but need not, include a provision whereby the Grantee may elect at any time while an Employee, Director or Consultant to exercise any part or all of the Award prior to full vesting of the Award. Any unvested Shares received pursuant to such exercise may be subject to a repurchase right in favor of the Company or a Related Entity or to any other restriction the Administrator determines to be appropriate. (i) Term of Award. The term of each Award shall be the term stated in the Award Agreement, provided, however, that the term of an Incentive Stock Option shall be no more than ten (10) years from the date of grant thereof. However, in the case of an Incentive Stock Option granted to a Grantee who, at the time the Option is granted, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the term of the Incentive Stock Option shall be five (5) years from the date of grant thereof or such shorter term as may be provided in the Award Agreement. (j) Transferability of Awards. Incentive Stock Options may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Grantee, only by the Grantee; provided, however, that the Grantee may designate a beneficiary of the Grantee's Incentive Stock Option in the event of the Grantee's death on a beneficiary designation form provided by the Administrator. Other Awards may be transferred by gift or through a domestic relations order to members of the Grantee's Immediate Family to the extent provided in the Award Agreement or in the manner and to the extent determined by the Administrator. 9 (k) Time of Granting Awards. The date of grant of an Award shall for all purposes be the date on which the Administrator makes the determination to grant such Award, or such other date as is determined by the Administrator. Notice of the grant determination shall be given to each Employee, Director or Consultant to whom an Award is so granted within a reasonable time after the date of such grant. 7. Award Exercise or Purchase Price, Consideration and Taxes. (a) Exercise or Purchase Price. The exercise or purchase price, if any, for an Award shall be as follows: (i) In the case of an Incentive Stock Option: (A) granted to an Employee who, at the time of the grant of such Incentive Stock Option owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the per Share exercise price shall be not less than one hundred ten percent (110%) of the Fair Market Value per Share on the date of grant; or (B) granted to any Employee other than an Employee described in the preceding paragraph, the per Share exercise price shall be not less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant. (ii) In the case of a Non-Qualified Stock Option, the per Share exercise price shall be not less than eighty-five percent (85%) of the Fair Market Value per Share on the date of grant unless otherwise determined by the Administrator. (iii) In the case of other Awards, such price as is determined by the Administrator. (iv) Notwithstanding the foregoing provisions of this Section 7(a), in the case of an Award issued pursuant to Section 6(d), above, the exercise or purchase price for the Award shall be determined in accordance with the principles of Section 424(a) of the Code. (b) Consideration. Subject to Applicable Laws, the consideration to be paid for the Shares to be issued upon exercise or purchase of an Award including the method of payment, shall be determined by the Administrator (and, in the case of an Incentive Stock Option, shall be determined at the time of grant). In addition to any other types of consideration the Administrator may determine, the Administrator is authorized to accept as consideration for Shares issued under the Plan the following, provided that the portion of the consideration equal to the par value of the Shares must be paid in cash or other legal consideration permitted by the Delaware General Corporation Law: (i) cash; (ii) check; 10 (iii) delivery of Grantee's promissory note with such recourse, interest, security, and redemption provisions as the Administrator determines as appropriate; (iv) surrender of Shares or delivery of a properly executed form of attestation of ownership of Shares as the Administrator may require (including withholding of Shares otherwise deliverable upon exercise of the Award) which have a Fair Market Value on the date of surrender or attestation equal to the aggregate exercise price of the Shares as to which said Award shall be exercised (but only to the extent that such exercise of the Award would not result in an accounting compensation charge with respect to the Shares used to pay the exercise price unless otherwise determined by the Administrator); (v) with respect to Options, payment through a broker-dealer sale and remittance procedure pursuant to which the Grantee (A) shall provide written instructions to a Company designated brokerage firm to effect the immediate sale of some or all of the purchased Shares and remit to the Company, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate exercise price payable for the purchased Shares and (B) shall provide written directives to the Company to deliver the certificates for the purchased Shares directly to such brokerage firm in order to complete the sale transaction; or (vi) any combination of the foregoing methods of payment. (c) Taxes. No Shares shall be delivered under the Plan to any Grantee or other person until such Grantee or other person has made arrangements acceptable to the Administrator for the satisfaction of any foreign, federal, state, or local income and employment tax withholding obligations, including, without limitation, obligations incident to the receipt of Shares or the disqualifying disposition of Shares received on exercise of an Incentive Stock Option. Upon exercise of an Award, the Company shall withhold or collect from Grantee an amount sufficient to satisfy such tax obligations. 8. Exercise of Award. (a) Procedure for Exercise; Rights as a Stockholder. (i) Any Award granted hereunder shall be exercisable at such times and under such conditions as determined by the Administrator under the terms of the Plan and specified in the Award Agreement. (ii) An Award shall be deemed to be exercised when written notice of such exercise has been given to the Company in accordance with the terms of the Award by the person entitled to exercise the Award and full payment for the Shares with respect to which the Award is exercised, including, to the extent selected, use of the broker-dealer sale and remittance procedure to pay the purchase price as provided in Section 7(b)(v). Until the issuance (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company) of the stock certificate evidencing such Shares, no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to Shares subject to an Award, notwithstanding the exercise of an Option or other Award. The Company shall issue (or 11 cause to be issued) such stock certificate promptly upon exercise of the Award. No adjustment will be made for a dividend or other right for which the record date is prior to the date the stock certificate is issued, except as provided in the Award Agreement or Section 10, below. (b) Exercise of Award Following Termination of Continuous Service. (i) An Award may not be exercised after the termination date of such Award set forth in the Award Agreement and may be exercised following the termination of a Grantee's Continuous Service only to the extent provided in the Award Agreement. (ii) Where the Award Agreement permits a Grantee to exercise an Award following the termination of the Grantee's Continuous Service for a specified period, the Award shall terminate to the extent not exercised on the last day of the specified period or the last day of the original term of the Award, whichever occurs first. (iii) Any Award designated as an Incentive Stock Option to the extent not exercised within the time permitted by law for the exercise of Incentive Stock Options following the termination of a Grantee's Continuous Service shall convert automatically to a Non-Qualified Stock Option and thereafter shall be exercisable as such to the extent exercisable by its terms for the period specified in the Award Agreement. 9. Conditions Upon Issuance of Shares. (a) Shares shall not be issued pursuant to the exercise of an Award unless the exercise of such Award and the issuance and delivery of such Shares pursuant thereto shall comply with all Applicable Laws, and shall be further subject to the approval of counsel for the Company with respect to such compliance. (b) As a condition to the exercise of an Award, the Company may require the person exercising such Award to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required by any Applicable Laws. 10. Adjustments Upon Changes in Capitalization. Subject to any required action by the stockholders of the Company, the number of Shares covered by each outstanding Award, and the number of Shares which have been authorized for issuance under the Plan but as to which no Awards have yet been granted or which have been returned to the Plan, the exercise or purchase price of each such outstanding Award, as well as any other terms that the Administrator determines require adjustment shall be proportionately adjusted for (i) any increase or decrease in the number of issued Shares resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Shares, or similar event affecting the Shares, (ii) any other increase or decrease in the number of issued Shares effected without receipt of consideration by the Company, or (iii) as the Administrator may determine in its discretion, any other transaction with respect to Common Stock to which Section 424(a) of the Code applies or any similar transaction; provided, however that conversion of any convertible securities of the Company 12 shall not be deemed to have been "effected without receipt of consideration." Such adjustment shall be made by the Administrator and its determination shall be final, binding and conclusive. Except as the Administrator determines, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason hereof shall be made with respect to, the number or price of Shares subject to an Award. 11. Corporate Transactions/Changes in Control/Related Entity Dispositions. Except as may be provided in an Award Agreement: (a) In the event of any Corporate Transaction, each Award which is at the time outstanding under the Plan automatically shall become fully vested and exercisable and be released from any restrictions on transfer (other than transfer restrictions applicable to Options) and repurchase or forfeiture rights, immediately prior to the specified effective date of such Corporate Transaction, for all of the Shares at the time represented by such Award. Effective upon the consummation of the Corporate Transaction, all outstanding Awards under the Plan shall terminate. However, all such Awards shall not terminate if the Awards are, in connection with the Corporate Transaction, assumed by the successor corporation or Parent thereof. In addition, an outstanding Award under the Plan shall not so fully vest and be exercisable and released from such limitations if and to the extent: (i) such Award is, in connection with the Corporate Transaction, either assumed by the successor corporation or Parent thereof or replaced with a comparable Award with respect to shares of the capital stock of the successor corporation or Parent thereof or (ii) such Award is to be replaced with a cash incentive program of the successor corporation which preserves the compensation element of such Award existing at the time of the Corporate Transaction and provides for subsequent payout in accordance with the same vesting schedule applicable to such Award; provided, however, that such Award (if assumed), the replacement Award (if replaced), or the cash incentive program automatically shall become fully vested, exercisable and payable and be released from any restrictions on transfer (other than transfer restrictions applicable to Options) and repurchase or forfeiture rights immediately upon termination of the Grantee's Continuous Service (substituting the successor employer corporation for "Company or Related Entity" for the definition of "Continuous Service") if such Continuous Service is terminated by the successor company without Cause or voluntarily by the Grantee with Good Reason within twelve (12) months of the Corporate Transaction. The determination of Award comparability above shall be made by the Administrator. (b) Following a Change in Control (other than a Change in Control which also is a Corporate Transaction) and upon the termination of the Continuous Service of a Grantee if such Continuous Service is terminated by the Company or Related Entity without Cause or voluntarily by the Grantee with Good Reason within twelve (12) months of a Change in Control, each Award of such Grantee which is at the time outstanding under the Plan automatically shall become fully vested and exercisable and be released from any restrictions on transfer (other than transfer restrictions applicable to Options) and repurchase or forfeiture rights, immediately upon the termination of such Continuous Service. (c) Effective upon the consummation of a Related Entity Disposition, for purposes of the Plan and all Awards, the Continuous Service of each Grantee who is at the time engaged primarily in service to the Related Entity involved in such Related Entity Disposition 13 shall be deemed to terminate and each Award of such Grantee which is at the time outstanding under the Plan automatically shall become fully vested and exercisable and be released from any restrictions on transfer (other than transfer restrictions applicable to Options) and repurchase or forfeiture rights for all of the Shares at the time represented by such Award and be exercisable in accordance with the terms of the Award Agreement evidencing such Award. However, such Continuous Service shall be not be deemed to terminate if such Award is, in connection with the Related Entity Disposition, assumed by the successor entity or its Parent. In addition, such Continuous Service shall not be deemed to terminate and an outstanding Award under the Plan shall not so fully vest and be exercisable and released from such limitations if and to the extent: (i) such Award is, in connection with the Related Entity Disposition, either to be assumed by the successor entity or its parent or to be replaced with a comparable Award with respect to interests in the successor entity or its parent or (ii) such Award is to be replaced with a cash incentive program of the successor entity which preserves the compensation element of such Award existing at the time of the Related Entity Disposition and provides for subsequent payout in accordance with the same vesting schedule applicable to such Award; provided, however, that such Award (if assumed), the replacement Award (if replaced), or the cash incentive program automatically shall become fully vested, exercisable and payable and be released from any restrictions on transfer (other than transfer restrictions applicable to Options) and repurchase or forfeiture rights immediately upon termination of the Grantee's Continuous Service (substituting the successor employer entity for "Company or Related Entity" for the definition of "Continuous Service") if such Continuous Service is terminated by the successor entity without Cause or voluntarily by the Grantee with Good Reason within twelve (12) months of the Related Entity Disposition. The determination of Award comparability above shall be made by the Administrator. 12. Effective Date and Term of Plan. The Plan shall become effective upon the earlier to occur of its adoption by the Board or its approval by the stockholders of the Company. It shall continue in effect for a term of ten (10) years unless sooner terminated. Subject to Section 17, below, and Applicable Laws, Awards may be granted under the Plan upon its becoming effective. 13. Amendment, Suspension or Termination of the Plan. (a) The Board may at any time amend, suspend or terminate the Plan. To the extent necessary to comply with Applicable Laws, the Company shall obtain stockholder approval of any Plan amendment in such a manner and to such a degree as required. (b) No Award may be granted during any suspension of the Plan or after termination of the Plan. (c) Any amendment, suspension or termination of the Plan (including termination of the Plan under Section 12, above) shall not affect Awards already granted, and such Awards shall remain in full force and effect as if the Plan had not been amended, suspended or terminated, unless mutually agreed otherwise between the Grantee and the Administrator, which agreement must be in writing and signed by the Grantee and the Company. 14. Reservation of Shares. 14 (a) The Company, during the term of the Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan. (b) The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company's counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained. 15. No Effect on Terms of Employment/Consulting Relationship. The Plan shall not confer upon any Grantee any right with respect to the Grantee's Continuous Service, nor shall it interfere in any way with his or her right or the Company's right to terminate the Grantee's Continuous Service at any time, with or without cause. 16. No Effect on Retirement and Other Benefit Plans. Except as specifically provided in a retirement or other benefit plan of the Company or a Related Entity, Awards shall not be deemed compensation for purposes of computing benefits or contributions under any retirement plan of the Company or a Related Entity, and shall not affect any benefits under any other benefit plan of any kind or any benefit plan subsequently instituted under which the availability or amount of benefits is related to level of compensation. The Plan is not a "Retirement Plan" or "Welfare Plan" under the Employee Retirement Income Security Act of 1974, as amended. 17. Stockholder Approval. The grant of Incentive Stock Options under the Plan shall be subject to approval by the stockholders of the Company within twelve (12) months before or after the date the Plan is adopted excluding Incentive Stock Options issued in substitution for outstanding Incentive Stock Options pursuant to Section 424(a) of the Code. Such stockholder approval shall be obtained in the degree and manner required under Applicable Laws. The Administrator may grant Incentive Stock Options under the Plan prior to approval by the stockholders, but until such approval is obtained, no such Incentive Stock Option shall be exercisable. In the event that stockholder approval is not obtained within the twelve (12) month period provided above, all Incentive Stock Options previously granted under the Plan shall be exercisable as Non-Qualified Stock Options. 15 -----END PRIVACY-ENHANCED MESSAGE-----