Terayon posted two new SEC documents on 5/15/00
I don't know if their incentive plan is unusual, but it does make interesting reading.
Terayon proxy:
freeedgar.com
Approval of amendments to the Company's 1997 Equity Incentive Plan, as amended
. . . Stockholders are requested in this Proposal 2 to approve the amendments to the 1997 Incentive Plan, as amended. The amendments to the 1997 Incentive Plan include increasing the number of shares of Common Stock from a total of 6,600,000 to 10,370,000 and an increase in the number of shares of Common Stock each January 1, through and including January 1, 2007, by the lesser of (i) 5% of the Common Stock outstanding on such January 1 or (ii) 3,000,000 shares. The affirmative vote of the holders of a majority of the shares present in person or represented by proxy and entitled to vote at the meeting will be required to approve the amendments to the 1997 Incentive Plan. Abstentions will be counted toward the tabulation of votes cast on proposals presented to the stockholders and will have the same effect as negative votes. Broker non-votes are counted towards a quorum, but are not counted for any purpose in determining whether this matter has been approved. . . .
Subject to this Proposal, an aggregate of 10,370,000 shares of Common Stock is reserved for issuance under the 1997 Incentive Plan. That number will be increased each January 1, through and including January 1, 2007, by the lesser of (i) 5% of the Common Stock outstanding on such January 1 or (ii) 3,000,000 shares. If awards granted under the 1997 Incentive Plan expire or otherwise terminate without being exercised, the shares of Common Stock not acquired pursuant to such awards again becomes available for issuance under the 1997 Incentive Plan. If the Company reacquires unvested stock issued under the 1997 Incentive Plan, the reacquired stock will again become available for reissuance under the 1997 Incentive Plan. . . .
Repricing. In the event of a decline in the value of the Company's Common Stock, the Board has the authority to offer participants the opportunity to replace outstanding higher priced options with new lower priced options. To the extent required by Section 162(m) of the Code, a repriced option is deemed to be canceled and a new option granted. Both the option deemed to be canceled and the new option deemed to be granted will be counted against the Section 162(m) Limitation. . . .
Option Exercise. Options granted under the 1997 Incentive Plan may become exercisable in cumulative increments ("vest") as determined by the Board. Shares covered by currently outstanding options under the 1997 Incentive Plan typically vest at the rate of 20% on the first anniversary of the date of grant and 1/60th per month thereafter during the participant's employment by, or service as a director or consultant to, the Company or an affiliate (collectively, "service"). Shares covered by options granted in the future under the 1997 Incentive Plan may be subject to different vesting terms. The Board has the power to accelerate the time during which an option may vest or be exercised. In addition, options granted under the 1997 Incentive Plan may permit exercise prior to vesting, but in such event the participant may be required to enter into an early exercise stock purchase agreement that allows
the Company to repurchase unvested shares, generally at their exercise price, should the participant's service terminate before vesting. To the extent provided by the terms of an option, a participant may satisfy any federal, state or local tax withholding obligation relating to the exercise of such option by a cash payment upon exercise, by authorizing the Company to withhold a portion of the stock otherwise issuable to the participant, by delivering already-owned Common Stock of the Company or by a combination of these means. . . .
The Board may suspend or terminate the 1997 Incentive Plan without stockholder approval or ratification at any time or from time to time. Unless sooner terminated, the 1997 Incentive Plan will terminate on March 25, 2007. . . .
1995 Stock Option Plan. The Company has a 1995 Stock Option Plan (the "1995 Plan"). The 1995 Plan is administered by the Board, unless the Board delegates administration to a committee comprised of members of the Board. Under the 1995 Plan, stock options and awards may be granted to employees, directors and consultants. Only employees may receive incentive stock options; employees, directors and consultants may receive non-statutory stock options and stock awards other than incentive stock options. The exercise price of incentive stock options granted under the 1995 Plan must be at least equal to the fair market value of the Common Stock on the date of grant, while the exercise price of nonstatutory options must equal at least 85% of such market value. Generally, the right to exercise 20% of the total number of shares granted vest 12 months after the date of the option grant, with the remainder vesting monthly over four years thereafter, such that an option is fully vested on the fifth anniversary of the date of the option grant. Options and awards granted under the Plan must be exercised within ten years of the date of grant. The other terms of the 1995 Plan are substantially similar to the terms of the 1997 Incentive Plan.
As of May 5, 2000, 3,173,918 shares of Common Stock had been issued upon the exercise of options under the 1995 Plan, 703,202 shares of Common Stock were subject to outstanding options and 362,373 shares of Common Stock remained available for future grant. The 1995 Plan will terminate in March 2005 unless terminated by the Board of Directors before then. No stock option grants have
been issued from the 1995 Plan since June 1998.
1999 Non-Officer Equity Incentive Plan. In addition to the 1995 Plan and the 1997 Incentive Plan, the Company may also grant stock options to non-officer employees under its 1999 Non-Officer Equity Incentive Plan (the "Non-Officer Plan"). The Non-Officer Plan authorized the issuance of 12,000,000 shares of the Company's Common Stock. Only employees of the Company who are not officers or directors are eligible to receive options under the Non-Officer Plan, unless the option is an inducement essential to an officer's entering into an employment contract with the Company. Options granted under the Non-Officer Plan are not intended by the Company to qualify as incentive stock options under the Code. As of May 5, 2000, awards (net of cancelled or expired awards) covering an aggregate of 5,179,206 shares of Common Stock had been granted under the Non-Officer Plan and 6,759,950 shares remained available for future grant under the Non-Officer Plan. As of May 5, 2000 options to purchase a total of 946,000 shares had been granted outside of the 1995 Plan, the 1997 Incentive Plan and the Non-Officer Plan (including the shares issued pursuant to the Non-Employee Director Plan) and were outstanding. . . .
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Lots of options vesting 60 days after March 10, 2000:
Beneficial
Ownership(1)
---------------------
Number of Percent of
Beneficial Owner Shares Total
---------------- ---------- ----------
Shaw Communications Inc. (2)............................ 6,072,318 10.5%
630 Third Ave., S.W., Suite 900 Calgary, Alberta T2P 4L4
Rogers Communications, Inc.............................. 3,687,618 6.4%
333 Bloor Street East Toronto, Ontario M4W 1G9
Shlomo Rakib............................................ 3,200,000 5.5%
Dr. Zaki Rakib.......................................... 3,200,000 5.5%
Michael D'Avella (2) (3)................................ 6,115,018 10.6%
Alek Krstajic (4)....................................... 3,687,618 6.4%
Christopher J. Schaepe (5).............................. 242,992 *
Mark A. Stevens (6)..................................... 151,482 *
Lewis Solomon........................................... 60,000 *
Brian Bentley (7)....................................... 0 *
Ray M. Fritz (8)........................................ 289,658 *
Dennis Picker (9)....................................... 246,236 *
All executive officers and directors as a group
(9 persons) (10)....................................... 16,971,390 29.2%
* Less than one percent.
(1) This table is based upon information supplied by officers, directors and principal stockholders and Schedules 13D and 13G filed with the Securities and Exchange Commission. Unless otherwise indicated in the footnotes to this table and subject to community property laws where applicable, the Company believes that all of the stockholders named in the table have sole voting power and dispositive power with respect to all shares of stock shown as beneficially owned by them. Applicable percentages are based on 57,823,648 shares outstanding on March 10, 2000. In computing the number of shares indicated as beneficially owned by a person and the percentage of ownership of that person, shares of Common Stock subject to options held by that person that are exercisable within 60 days are deemed outstanding. These shares, however, are not deemed outstanding for the purpose of computing the percentage of ownership of any other person.
(2) Shares beneficially owned includes 72,318 shares issuable pursuant to a warrant exercisable within 60 days of March 10, 2000.
(3) Shares beneficially owned includes 6,072,318 shares held by Shaw Communications Inc. Mr. D'Avella, a director of the Company, is the Senior Vice President, Planning for Shaw. Also includes 40,700 shares issuable upon early exercise of options vesting through April 2001, of which 17,202 will be fully vested and no longer subject to repurchase within 60 days of March 10, 2000. Mr. D'Avella may be deemed to have voting and investment power over the shares held by Shaw. He disclaims beneficial ownership as to all shares held by Shaw.
(4) Shares beneficially owned includes 3,687,618 shares held by Rogers Communications Inc. Mr. Krstajic, a director of the Company, is the Senior Vice President Interactive Services, Sales and Product Development for Rogers Communications, Inc. Mr. Krstajic may be deemed to have voting and investment power over the shares held by Rogers. He disclaims beneficial ownership as to all shares held by Rogers.
(5) Shares beneficially owned includes 225,168 shares held by entities associated with Weiss, Peck & Greer, LLC., 10,000 of which are subject to repurchase by the Company within 60 days of March 10, 2000. Christopher J. Schaepe, a director of the Company, is a General Partner of WPG Venture Partners III, L.P., the fund investment advisory member of the entities associated with Weiss, Peck & Greer. Mr. Schaepe may be deemed to have voting and investment power over the shares held by the entities associated with Weiss, Peck & Greer. He disclaims beneficial ownership except to the extent of his pecuniary interest therein.
(6) 10,000 of these shares are subject to repurchase by the Company within 60 days of March 10, 2000.
(7) Mr. Bentley is no longer an employee of the Company.
(8) Shares beneficially owned includes 266,002 shares are currently issuable upon the early exercise of options, 32,002 of which will be fully vested and no longer subject to repurchase within 60 days of March 10, 2000. Also includes 21,666 additional shares of which Mr. Fritz has an option to acquire.
(9) Shares beneficially owned includes 30,664 shares subject to repurchase by the Company within 60 days of March 10, 2000 and 56,002 shares are issuable upon early exercise of options vesting through May 2001. Includes 70,006 shares issuable upon the early exercise of options vesting through May 2003, of which 20,732 shares will be fully vested and no longer subject to repurchase within 60 days of March 10, 2000. Also includes 10,834 additional shares of which Mr. Picker has an option to acquire.
(10) Shares beneficially owned includes (i) 432,770 shares issuable upon the early exercise of options vesting through July 2003, 69,916 of which will be fully vested and no longer subject to repurchase within 60 days of March 10, 2000, (ii) 50,664 shares subject to repurchase by the Company within 60 days of March 10, 2000, (iii) 32,500 additional shares of which all directors and officers as a group have options to acquire within 60 days of March 10, 2000 and (iv) 72,318 shares issuable pursuant to warrants exercisable within 60 days of March 10, 2000.
10-Q, dated 5/15/00
freeedgar.com
. . .In October 1999, a customer (the "Customer") of the Company entered into an agreement (the "Agreement") with Telegate Ltd. ("Telegate") whereby the Customer committed to an investment in Telegate in connection with the acquisition of all the outstanding shares of Telegate by the Company. The Customer committed to provide this investment in the event that the acquisition of Telegate by the Company were not to have closed. In consideration of the Customer entering into this Agreement, the Company agreed to issue a warrant to purchase 1,000,000 shares of the Company's common stock to be issued on the date of the Telegate closing. In January 2000, the Company issued the Customer a warrant to purchase 1,000,000 shares of
the Company's common stock at a price of $61.50 per share, the closing price of the Company's common stock on the date the warrant was issued. The warrant is fully vested, non- forfeitable, and immediately exercisable and has a term of three years. The fair value of the warrant, determined as approximately $34.6 million using the Black Sholes model, was included in the Telegate purchase price and was associated with the value of the customer relationship. The value of the warrant will result in a non-cash charge to cost of goods sold over the three-year term of the warrant. For the three months ended March 31, 2000, the Company incurred approximately $2.9 million in amortization expense related to the Agreement.. . .
On March 18, 1999, the Company entered into a one-year Product Development Assistance Agreement ("Development
Agreement") with Rogers Communications Inc. ("Rogers Communications"). Under the terms of the Development Agreement, Rogers Communications is obligated to provide the Company assistance with the characterization and testing of the Company's subscriber-end and head-end voice-over-cable equipment. In addition, Rogers Communications is obligated to provide the Company with technology to assist the Company in connection with its efforts to develop high quality, field proven technology solutions that are DOCSIS-compliant and packet cable-compliant. In consideration of Rogers Communications entering into the Development Agreement, the Company issued Rogers Communications two fully vested and non-forfeitable warrants, each to purchase 1,000,000 shares of common stock. One warrant provided for an exercise price of $1.00 per share and one warrant provided for an exercise price of $37.00 per share. The fair value of the two warrants is estimated to be
approximately $45,000,000 and resulted in a noncash charge included in operations over the one-year term of the Development Agreement. For the three months ended March 31, 2000, the Company incurred approximately $9,600,000 of product development expense related to the Development Agreement. In March 2000, Rogers Communications exercised the warrants on a cashless basis, resulting in the issuance of 1,843,809 shares of the Company's common stock and no proceeds to the Company.
On March 18, 1999, the Company also entered into a Supply Agreement with Rogers Cablevision Limited ("Rogers
Cablevision"), a subsidiary of Rogers Communications. Under the Supply Agreement, the Company agreed to make available to Rogers Cablevision its current TeraLink Gateway, TeraLink 1000 Master Controller, TeraPro Cable Modems and specified software. The Company also committed to certain product pricing and specifications. Under the terms of the Supply Agreement, Rogers Cablevision retains the right to return to the Company all product purchased until certain conditions are met by the Company. Rogers Cablevision has waived all rights of return under the Supply Agreement; accordingly, the only rights of return available to Rogers Cablevision are those provided under the Company's standard warranty policy. For the three months ended March 31, 2000, the Company recognized approximately $14,700,000 in revenues from sales to Rogers.
In the following description of the Telegate acquisition, I don't understand the customer agreement. Is this a payment to secure business?
6. Business Combination
In October 1999, the Company entered into a Share Purchase Agreement (the "Telegate Agreement") to acquire Telegate
Ltd, an Israeli company. Telegate produces telephony and data access platforms that are deployed by service providers to deliver efficient carrier-class voice services over cable. Telegate also provides in-home networking capability for telephony and data, based on the Digital Enhanced Cordless Telephony (DECT) standard. The transaction was completed on January 2, 2000.
In accordance with the Telegate Agreement, the former shareholders and vested optionholders of Telegate received a
total of 2,200,000 shares of the Company's common stock and a cash payment equal to Telegate's net current assets at closing in excess of $2,000,000. The Company issued 2,200,000 shares of common stock and paid approximately $2,500,000 in cash on January 2, 2000. In addition, the Company issued a warrant to purchase 1,000,000 shares of the Company's common stock, estimated at $34.6 million under the terms of an agreement between Telegate and a customer of the Company. (See note 2.) The value of the warrant was included in the purchase price and was associated with the value of the customer relationship.
The acquisition was accounted for under the purchase method of accounting. The purchase price was allocated to the
assets acquired and liabilities assumed based on a determination from an independent appraisal of their respective fair values. The approximate purchase price was determined to be $140,000,000. The consolidation of the assets and liabilities significantly affected the Company's balance sheet at March 31, 2000, as depicted in the following tables
Purchase Price......................... $138,067
Estimated transaction and other direct acquisition costs..................... 1,929
------------
$139,996
=============
The purchase total price was allocated as follows:
Historical net tangible assets of Telegate at January 2, 2000.................. ($5,580)
Convertible Loans...................... 12,482
------------
6,902
Intangible assets acquired:
Customer relationship.................. 34,580
Developed technology................... 21,100
Assembled workforce.................... 4,200
In-process research and development.... 6,750
Goodwill............................... 66,631
Deferred tax liability................. (167)
------------
Total.................................. $139,996
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The document folds Telegate revenues in with Terayon's so there's no way to know what it contributes to the bottom line --- or top line, for that matter.
Pat |
