SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [_]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, For Use of the
[X] Definitive Proxy Statement Commission Only (as permitted
[X] Definitive Additional Materials by Rule 14a-6(e)(2))
[_] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
VideoServer, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
- --------------------------------------------------------------------------------
1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
- --------------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
5) Total fee paid:
[_] Fee paid previously with preliminary materials:
- --------------------------------------------------------------------------------
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
1) Amount previously paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
[LOGO]
April 13, 1999
Dear Shareholder:
You are cordially invited to attend the 1999 Annual Meeting of Shareholders
of VideoServer, Inc., which will be held at the offices of the Company, 63 Third
Avenue, Burlington, Massachusetts 01803, on Wednesday, May 12, 1999 at 9:00
a.m., EDT.
The Notice of Annual Meeting of Shareholders and a Proxy Statement, which
describe the formal business to be conducted at the meeting, accompany this
letter. The Company's Annual Report to Shareholders is also enclosed for your
information.
All shareholders are invited to attend the Annual Meeting. To ensure your
representation at the Annual Meeting, however, you are urged to vote by proxy by
following one of these steps as promptly as possible:
(A) Complete, date, sign and return the enclosed Proxy Card (a
postage-prepaid envelope is enclosed for that purpose); or
(B) Vote via the Internet (see instructions on the enclosed Proxy Card); or
(C) Vote via telephone (toll free) in the United States or Canada (see
instructions on the enclosed Proxy Card).
The Internet and telephone voting procedures are designed to authenticate
shareholders' identities, to allow shareholders to vote their shares and to
confirm that their instructions have been properly recorded. Specific
instructions to be followed by any registered shareholder interested in voting
via the Internet or telephone are set forth in the Proxy Card. Your shares
cannot be voted unless you date, sign, and return the enclosed proxy card, vote
via the Internet or telephone or attend the annual meeting in person. Regardless
of the number of shares you own, your careful consideration of, and vote on, the
matters before the shareholders is important.
Shareholders may also observe and participate in the meeting, but not vote,
via multipoint video conference. If you desire to participate in the Meeting in
this fashion, please contact the Investor Relations department of the Company,
at 781-505-2192.
Very truly yours,
Khoa D. Nguyen
President and
Chief Executive Officer
VIDEOSERVER, INC.
63 Third Avenue
Burlington, Massachusetts 01803
----------
NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS
----------
TO OUR SHAREHOLDERS:
The Annual Meeting of Shareholders (the "Meeting") of VideoServer, Inc., a
Delaware corporation (the "Company"), will be held on Wednesday, May 12, 1999 at
9:00 a.m., EDT, at the offices of the Company, 63 Third Avenue, Burlington,
Massachusetts 01803. The purposes of the Meeting shall be:
1. To elect two Class I directors to hold office for a three year term and
until their successors have been duly elected and qualified.
2. To approve an amendment to the Employee Stock Purchase Plan, increasing
the number of shares available for purchase by 300,000.
3. To ratify the appointment of the firm of Ernst & Young LLP, as
independent auditors for the Company for the fiscal year ending
December 31, 1999.
Shareholders of record on the books of the Company at the close of business
on March 26, 1999 will be entitled to notice of and to vote at the Meeting.
Please sign, date, and return the enclosed proxy card in the enclosed
envelope, or vote via telephone or the Internet (pursuant to the instructions on
the enclosed Proxy Card) at your earliest convenience. If you return the proxy
or vote via telephone or the Internet, you may nevertheless attend the Meeting
and vote your shares in person.
Shareholders may also observe and participate in the meeting, but not vote,
via multipoint video conference. If you desire to participate in the Meeting in
this fashion, please contact the Investor Relations department of the Company,
at 781-505-2192.
All shareholders of the Company are cordially invited to attend the
Meeting.
By Order of the Board of Directors
Paul L. Criswell
Assistant Secretary
Burlington, Massachusetts
April 13, 1999
- --------------------------------------------------------------------------------
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. WHETHER OR NOT
YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN, DATE, AND MAIL THE ENCLOSED PROXY
IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED FROM WITHIN THE
UNITED STATES.
- --------------------------------------------------------------------------------
VIDEOSERVER, INC.
63 Third Avenue
Burlington, Massachusetts 01803
--------------
PROXY STATEMENT
--------------
Annual Meeting of Shareholders To Be Held on May 12, 1999
Proxies enclosed with this Proxy Statement are solicited by the Board of
Directors of VideoServer, Inc., a Delaware corporation (the "Company"), for use
at the Annual Meeting of Shareholders (the "Meeting") to be held on Wednesday,
May 12, 1999 at 9:00 a.m., EDT, at the offices of the Company, 63 Third Avenue,
Burlington, Massachusetts 01803, and any adjournments thereof.
Registered shareholders can vote their shares via (1) a toll-free telephone
call from the U.S. or Canada, or (2) the Internet or (3) by mailing their signed
proxy card. The telephone and Internet voting procedures are designed to
authenticate shareholders' identities, to allow shareholders to vote their
shares and to confirm that their instructions have been properly recorded. The
Company has been advised by counsel that the procedures that have been put in
place are consistent with the requirements of applicable law. Specific
instructions to be followed by any registered shareholder interested in voting
via telephone or the Internet are set forth on the enclosed proxy card.
Shares represented by duly executed proxies received by the Company prior
to the Meeting will be voted as instructed in the proxy on each matter submitted
to the vote of shareholders. If any duly-executed proxy is returned without
voting instructions, the persons named as proxies thereon intend to vote all
shares represented by such proxy FOR the election of the nominees for director
named below, FOR approval of the amendment to the Employee Stock Purchase Plan
and FOR the ratification of selection of auditors described in this Proxy
Statement. This Proxy Statement and the proxy enclosed herewith were first
mailed to shareholders on or about April 13, 1999.
Any shareholder may revoke a proxy at any time prior to its exercise by
delivering a later-dated proxy, by making an authorized telephone or Internet
communication on a later date in accordance with the instructions on the
enclosed Proxy Card, by written notice of revocation to the Secretary of the
Company at the address of the Company set forth above, or by voting in person at
the Meeting. If a shareholder does not intend to attend the Meeting, any written
proxy or notice should be returned for receipt by the Company, and any
telephonic or Internet vote should be made, not later than the close of business
on May 11, 1999. The persons named in the proxies are employees of the Company.
The Company will bear the cost of solicitation of proxies relating to the
Meeting.
Only shareholders of record as of the close of business on March 26, 1999
(the "Record Date") will be entitled to notice of and to vote at the Meeting and
any adjournments thereof.
As of the Record Date there were 13,458,096 shares (excluding treasury
shares) of the Company's Common Stock, $.01 par value (the "Common Stock"),
issued and outstanding. Such shares of Common Stock are the only voting
securities of the Company. Shareholders are entitled to cast one vote for each
share of Common Stock held of record on the Record Date.
The Board of Directors of the Company (the "Board of Directors") is not
aware of any other matters to be presented at the Meeting. If any other matter
should be presented at the Meeting upon which a vote properly may be taken,
shares represented by all duly executed proxies received by the Company will be
voted with respect thereto in accordance with the best judgment of the persons
named in the proxies. An Annual Report to Shareholders, containing financial
statements for the fiscal year ended December 31, 1998, preceded or accompanies
this Proxy Statement.
The mailing address of the Company's principal executive offices is 63
Third Avenue, Burlington, Massachusetts 01803.
2
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of February 1, 1999 (i) by each
person who is known by the Company to own beneficially more than five percent
(5%) of the Company's Common Stock, (ii) by each of the Company's directors,
(iii) by each of the Named Executive Officers (as defined under "Summary
Compensation" below) and (iv) by all directors and executive officers as a
group.
Shares Beneficially Owned
-------------------------
Directors, Officers and 5% Shareholders Number Percent
- ---------------------------- -------- -------
Wellington Management Company LLP (1) ............... 1,643,380 12.35%
75 State Street
Boston, Massachusetts 02109
State of Wisconsin Investment Board (2) ............. 1,358,800 10.21%
121 East Wilson Street
Madison, Wisconsin 53707
Kopp Investment Advisors, Inc. (3) .................. 1,124,400 8.5%
7701 France Avenue South, Suite 500
Edina, Minnesota 55435
Vanguard Explorer Fund Inc. (4) ..................... 1,004,200 7.55%
P.O. Box 2600
Valley Forge, Pennsylvania 19482
Robert L. Castle .................................... 134,503 1%
Paul Ferri (5) ...................................... 34,910 *
William E. Foster (6) ............................... 35,500 *
Steven C. Walske (7) ................................ 32,500 *
Khoa D. Nguyen (8) .................................. 140,001 1%
Dane A. Donaldson(9) ................................ 9,374 *
Martin R. Falaro (10) ............................... 14,237 *
Robert Lamkin ....................................... --
Stephen J. Nill (11) ................................ 92,184 *
All executive officers and directors as a group ..... 536,031 4%
(11 persons)(12)
- ----------
* Less than 1%
(1) Based on information contained in Schedule 13G/A filed by Wellington
Management Company LLP on February 10, 1999.
(2) Based on information contained in Schedule 13G/A filed by the State of
Wisconsin Investment Board, on February 2, 1999.
(3) Based on information contained in Schedule 13G/A filed by Kopp Investment
Advisors, Inc. on February 4, 1999.
(4) Based on information contained in Schedule 13G filed by Vanguard Explorer
Fund Inc. on February 12, 1999.
(5) Includes 22,500 shares that Mr. Ferri has the right to acquire within 60
days of February 1, 1998 by the exercise of stock options.
(6) Includes 22,500 shares that Mr. Foster has the right to acquire within 60
days of February 1, 1998 by the exercise of stock options.
(7) Includes 22,500 shares that Mr. Walske has the right to acquire within 60
days of February 1, 1999 by the exercise of stock options.
(8) Includes 90,001 shares that Mr. Nguyen has the right to acquire within 60
days of February 1, 1999 by the exercise of stock options.
(9) Includes 9,000 shares that Mr. Donaldson has the right to acquire within 60
days of February 1, 1999 by the exercise of stock options.
3
(10) Includes 13,353 shares that Mr. Falaro has the right to acquire within 60
days of February 1, 1999 by the exercise of stock options.
(11) Includes 49,501 shares that Mr. Nill has the right to acquire within 60
days of February 1, 1999 by the exercise of stock options.
(12) Includes 263,980 shares that directors and executive officers of the
Company have the right to acquire within 60 days of February 1, 1999 by the
exercise of stock options.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
CONCERNING DIRECTORS AND EXECUTIVE OFFICERS
Summary Compensation
The following table sets forth information concerning the annual and
long-term compensation in each of the last three fiscal years for the Company's
Chief Executive Officer(1) and the next four most highly compensated executive
officers (the "Named Executive Officers").
Annual Compensation
--------------------
Long Term
Compensation All Other
Name and Principal Position Year Salary ($)(5) Bonus($) Options(#) Compensation($)
- --------------------------- ---- ------------- -------- ------------ ---------------
Khoa D. Nguyen .................................. 1998 200,000 120,000 150,000 --
President and 1997(2) 52,000 -- 225,000(7) --
Chief Executive Officer (1)
4/9/98 - Present
Robert L. Castle ................................ 1998 165,016 -- --
President and 1997 195,000 30,000 70,000 2,280(6)
Chief Executive Officer (1) 1996 192,718 90,000 60,000 --
1/1/98 - 4/8/98
Dane A. Donaldson ............................... 1998 140,000 57,500 10,000 2,370(6)
Vice President of Customer 1997(2) 16,372 -- 30,000(7) --
Service
Martin R. Falaro ................................ 1998 156,000 70,000 20,000 2,400(6)
Vice President of Marketing and 1997(2) 35,000 -- 42,500(7) 525(6)
Business Development
Robert Lamkin ................................... 1998(2) 212,953(4) -- 50,000(7) --
Vice President of Sales (3)
Stephen J. Nill ................................. 1998 170,002 93,500 40,000 2,400(6)
Vice President of Finance, 1997 172,155 15,000 30,000 2,400(6)
Chief Financial Officer, 1996 149,940 51,150 25,000 --
Treasurer, and Secretary
- ----------
(1) Effective April 9, 1998, the Board named Khoa D. Nguyen, previously the
Company's Executive Vice President and Chief Operating Officer, as
President and Chief Executive Officer. Robert L. Castle continued as an
employee of the Company until October, 1998, and has assumed the role of
Chairman of the Board.
(2) Messrs. Nguyen, Falaro, and Donaldson commenced their employment with
VideoServer during the year in 1997 and Mr. Lamkin during the year in 1998.
(3) Mr. Lamkin's employment with the Company ceased in January 1999.
(4) Consists of $136,667 in base salary and $76,286 in commissions.
(5) Salary includes amount deferred by the named executive officers under the
Company's 401(k) Plan and salary and bonus include amounts deferred by the
named executive officer under deferred compensation agreements.
(6) Represents the dollar amount of the Company's matching contribution under
the Company's 401(k) Plan.
(7) Represents options granted to Mr. Nguyen, Mr. Falaro Mr. Donaldson or Mr.
Lamkin upon their commencement of employment.
4
Options Grants in Last Fiscal Year
The following table sets forth information concerning individual stock
option grants made to each of the Named Executive Officers during fiscal 1998.
Individual Grants
----------------------------------------------------
Potential
Realizable Value at
Percent of Assumed Annual Rates of
Total Options Stock Price Appreciation
Granted to Exercise for Option Term (1)
Options Employees in Price Expiration --------------------
Name Granted (#) Fiscal Year ($/Sh) (2) Date 5% 10%
- ---- ----------- ----------- ---------- ---- -------- ---------
Khoa D. Nguyen 150,000 15.5% $7.81 6/4/08 $736,750 1,867,069
Robert L. Castle -- -- -- -- -- --
Dane A. Donaldson 10,000 1% $7.81 6/4/08 $49,116 $124,471
Martin R. Falaro 20,000 2% $7.81 6/4/08 $98,233 $248,942
Robert Lamkin 50,000 5% $7.81 (3)
Stephen J. Nill 40,000 4% $7.81 6/4/08 $196,467 $497,885
- ----------
(1) Potential gains are net of exercise price, but before taxes associated with
exercise. These amounts represent certain assumed rates of appreciation
only, based on the Securities and Exchange Commission rules. Actual gains,
if any, on stock option exercises are dependent on the future performance
of the Common Stock, the timing of such exercises and the option holder's
continued employment through the vesting period. The amounts reflected in
this table may not accurately reflect or predict the actual value of the
stock options.
(2) All options were granted at fair market value as determined by the Board of
Directors of the Company on the date of the grant.
(3) Mr. Lamkin's options terminated, prior to becoming exerciseable, upon his
cessation of employment with the Company in January 1999.
Aggregated Option Exercises In Last Fiscal Year And Fiscal Year-End Option
Values
The following table sets forth information concerning each exercise of
stock options by each of the Named Executive Officers during fiscal 1998 and the
value of unexercised "in-the-money" options at the end of that fiscal year.
Number of Value of
Shares Unexercised Options at Unexercised in-the-Money
Acquired on Value Fiscal Year-End Options at Fiscal Year-End(1)
Name Exercise (#) Realized ($) Exercisable/Unexercisable(#) Exercisable/Unexercisable ($)
---- ------------ ------------ ---------------------------- -----------------------------
Khoa D. Nguyen -- -- 71,250/303,750 $531,131/$2,544,243
Robert L. Castle 45,250 $198,694 0 0
Dane Donaldson -- -- 7,000/33,000 $30,815/$176,085
Martin Falaro -- -- 10,318/52,182 $63,832/$370,592
Robert Lamkin -- -- (2) (2)
Stephen J. Nill -- -- 44,625/70,375 $401,400/$574,949
- --------
(1) Based on the closing price on the NASDAQ National Market System for a share
of Common Stock on December 31, 1998 of $18.375.
(2) Mr. Lamkin's options terminated upon his cessation of employment with the
Company in January 1999.
Other Benefit Plans
The Company currently provides certain benefits to its eligible employees
(including its executive officers) through the benefit plans described below:
1991 Stock Incentive Plan. The Company maintains the VideoServer, Inc.
Amended and Restated 1991 Stock Incentive Plan (the "Stock Incentive Plan") to
attract and retain the best available personnel for positions of substantial
responsibility and to provide additional incentives to certain employees and
consultants to contribute to
5
the success of the Company. The Stock Incentive Plan is administered by a
committee of the Board of Directors that consists of independent directors.
1995 Employee Stock Purchase Plan. The Company maintains the 1995 Employee
Stock Purchase Plan (the "Employee Plan") to provide incentive to employees and
to encourage ownership of Common Stock by all eligible employees of the Company
and its subsidiaries. Employees of the Company may participate in the Employee
Plan by authorizing payroll deductions generally over a six month period, with
the proceeds being used to purchase shares of Common Stock for the participant
at a discounted price. The Employee Plan is intended to be an "employee stock
purchase plan" under Section 423 of the Internal Revenue Code.
Savings Plan. The Company sponsors a savings plan for its employees which
has been qualified under Section 401(k) of the Internal Revenue Code. Eligible
employees are permitted to contribute to the 401(k) plan through payroll
deductions within statutory and plan limits. Contributions from the Company are
made at the discretion of the Board of Directors. Beginning in 1997, the Board
of Directors authorized the Company to match a portion of its employees'
contributions to the plan, and in both 1997 and 1998 the Company made a matching
contribution of 30% of employee contributions, up to contributions of 5% of the
employee's gross compensation. The Company maintains comparable plans under
local laws and regulations for its non-U.S. employees.
Employment Agreements
The Company has entered into an agreement with Mr. Nguyen that provides for
certain benefits in the event of a termination of his employment without cause
and upon the occurrence of certain events. Under the agreement, in the event the
Company elects to terminate Mr. Nguyen's employment or to diminish his status,
other than for cause, Mr. Nguyen shall be entitled to receive, (i) for a period
of twelve months a salary equal to the highest annualized salary rate in effect
for him within the previous twelve months and (ii) his then-current targeted
annual incentive bonus. The agreement also provides for certain benefits in the
event of a change in control. In the event of a change in control, the
outstanding options held by Mr. Nguyen under the Company's option plans shall
become exercisable in full. The agreement further provides that if Mr. Nguyen is
terminated or his status is diminished (other than for cause) within twenty four
months after a change in control, Mr. Nguyen is entitled to an immediate payment
of two times his base compensation for the fiscal year immediately preceding the
termination or change, plus two times his targeted annual bonus for the fiscal
year then in effect.
The Company has entered into an agreement with Mr. Nill that provides for
substantially the same benefits as provided to Mr. Nguyen (based on Mr. Nill's
salary, bonus and options) under the same circumstances as described for Mr.
Nguyen above.
Compensation Committee Report on Executive Compensation
The Company's executive compensation program is administered by the
Compensation Committee of the Board of Directors (the "Committee"). The
Committee, which is composed of two independent directors, establishes and
administers the Company's executive compensation policies and plans and
administers the Company's stock option and other equity-related employee
compensation plans. The Committee considers internal and external information in
determining officers' compensation, including outside survey data.
Compensation Philosophy
The Company's compensation policies for executive officers are based on the
belief that the interests of executives should be closely aligned with those of
the Company's shareholders. The compensation policies are designed to achieve
the following objectives:
o Offer compensation opportunities that attract highly qualified
executives, reward outstanding initiative and achievement, and retain
the leadership and skills necessary to build long-term shareholder
value;
o Maintain a significant portion of executives' total compensation at
risk, tied to both the annual and long-term financial performance of
the Company and the creation of shareholder value; and
o Further the Company's short and long-term strategic goals and values by
aligning compensation with business objectives and individual
performance.
6
Compensation Program
The Company's executive compensation program has three major integrated
components, base salary, annual incentive awards, and long term incentives.
Base Salary. Base salary levels for executive officers are determined
annually by reviewing the competitive pay practices of networking
companies of similar size and market capitalization, the skills,
performance level, and contribution to the business of individual
executives, and the needs of the Company. Overall, the Committee believes
that base salaries for executive officers are approximately competitive
with median base salary levels for similar positions in these networking
companies.
Incentive Awards. The Company's executive officers are eligible to receive
cash bonus awards designed to motivate executives to attain short-term and
longer-term corporate and individual management goals. The Committee
establishes quarterly and annual incentive opportunities for each
executive officer in relation to his or her base salary. Awards under this
program are based on the attainment of specific Company performance
measures established by the Compensation Committee early in the fiscal
year, and by the achievement of specified individual objectives and the
degree to which each executive officer contributes to the overall success
of the Company and the management team. In 1998 the formula for these
bonuses was based on a combination of individual objectives and Company
revenue and profitability objectives. The Company's performance generally
met the objectives set by the Committee in 1998.
Long Term Incentives. The Committee believes that stock options are an
excellent vehicle for compensating its officers and employees. The Company
provides long term incentives through its Amended and Restated 1991 Stock
Incentive Plan, the purpose of which is to create a direct link between
executive compensation and increases in shareholder value. Stock options
are granted at fair market value and vest in installments, generally over
five years. When determining option awards for an executive officer, the
Committee considers the executive's current contribution to Company
performance, the anticipated contribution to meeting the Company's
long-term strategic performance goals, and industry practices and norms.
Long-term incentives granted in prior years and existing levels of stock
ownership are also taken into consideration. Because the receipt of value
by an executive officer under a stock option is dependent upon an increase
in the price of the Company's Common Stock, this portion of the
executive's compensation is directly aligned with an increase in
shareholder value.
Chief Executive Officer Compensation
The Chief Executive Officer's base salary, annual incentive award and
long-term incentive compensation are determined by the Committee based upon the
same factors as those employed by the Committee for executive officers
generally. Mr. Nguyen's annualized base salary for the year ended December 31,
1998 was $200,000, and Mr. Castle was paid a total of $88,683 for the period in
which he served as CEO, from January 1 to April 9, 1998. The Chief Executive
Officer may also be entitled to an annual cash bonus depending on the Company's
achievement of certain performance objectives, including certain growth
milestones in sales and earnings during a fiscal year, as compared to the
preceding fiscal year. Any such cash bonus will be computed on a formula basis
established by the Committee. For the year ended December 31, 1998, Mr. Nguyen
was paid a cash bonus of $120,000, and Mr. Castle was not paid a cash bonus.
Section 162(m) of the Internal Revenue Code limits the tax deduction to $1
million for compensation paid to certain executives of public companies. Having
considered the requirements of Section 162(m), the Committee believes that
grants made pursuant to the Company's Amended and Restated 1991 Stock Incentive
Plan meet the requirement that such grants be "performance based" and are,
therefore, exempt from the limitations on deductibility. Historically, the
combined salary and bonus of each executive officer has been well below the $1
million limit. The Committee's present intention is to comply with Section
162(m) unless the Committee feels that required changes would not be in the best
interest of the Company or its shareholders.
Respectfully Submitted by the Compensation Committee,
Paul J. Ferri
Steven C. Walske
7
Compensation Committee Interlocks and Insider Participation
The Compensation Committee was formed on February 1, 1995. No member of the
Compensation Committee was or is an officer or employee of the Company or any of
its subsidiaries.
Compensation of Directors
In April 1995, the Company's Board of Directors and shareholders approved
the Amended and Restated 1994 Non-Employee Director Stock Option Plan (the
"Director Plan"). The Director Plan provides that each non-employee director of
the Company be granted an option to acquire 15,000 shares of common stock on the
date that person becomes a director, and annually be granted, beginning with the
January 1 falling at least 12 months after a Director's initial grant, an option
to purchase an additional 3,000 shares. Options are granted at a price equal to
the fair market value on the date of grant. The option becomes exercisable over
a four-year period, and the term of the option is ten years from the date of
grant.
Pursuant to the Director Plan, on January 1, 1999 Messrs. Castle, Ferri,
Foster, and Walske were each granted an option to acquire 3,000 shares at an
exercise price of $18.00 per share, the fair market value on the date of grant.
In March 1999 the Board approved an amendment to the Director Plan,
authorizing and granting to each non-employee member of the Board a one-time,
fully-vested 7,000 share stock option, at the fair market value of the stock on
the date of the grant. Pursuant to this amendment, Messrs. Castle, Ferri, Foster
and Walske were each granted an option to acquire 7,000 shares at an exercise
price of $7.813, the fair market value on the date of grant.
The Company pays each Director a fee of $2,000, (1) per official meeting of
the Board attended by such Director, and (2) per official Committee meeting
attended by such Director, if the Committee meeting is held on a separate day
from a Board meeting.
Section 16(a) - Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities and Exchange Act of 1934, as amended,
requires the Company's officers, directors, and persons who own more than ten
percent (10%) of a registered class of the Company's equity securities to file
reports of ownership on Forms 3, 4, and 5 with the Securities and Exchange
Commission and the Company. Based on the Company's review of copies of such
forms, each officer, director and 10% holder complied with his/her obligations
in a timely fashion with respect to transactions in securities of the Company
during the year ended December 31, 1998.
8
Stock Performance Graph
The following graph compares the cumulative total returns for VideoServer's
Common Stock with the comparable return for the NASDAQ Stock Market Index and
the NASDAQ Electronic Components Stock Index (SIC Code 367), as calculated by
the Center for Research in Security Prices at the University of Chicago,
Graduate School of Business, for the period beginning May 25, 1995 (the date on
which VideoServer's Common Stock was first registered with the SEC) and ending
December 31, 1998.
[THE TABLE BELOW WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL]
VIDEOSERVER, INC. NASDAQ STOCK SIC CODE 367
MARKET INDEX
5/25/95 $100 $100 $100
12/29/95 $185 $121 $102
12/31/96 $250 $149 $176
12/31/97 $93 $182 $185
12/31/98 $108 $253 $286
This graph assumes the investment of $100 in VideoServer's Stock, the
NASDAQ Index and the NASDAQ Electronic Components Stock Index as of May 25, 1995
(the date on which VideoServer's Common Stock was first registered with the SEC)
and assumes dividends were reinvested. Additional measurement points are at the
remaining year ends thereafter -- December 31, 1995, December 31, 1996, December
31, 1997 and December 31, 1998.
PROPOSAL NO. 1 -- ELECTION OF DIRECTORS
The Board of Directors is divided into three classes. Each class serves a
three-year term. The Class I Directors' terms will expire at the Meeting. All
directors will hold office until their successors have been duly elected and
qualified.
The Board's nominees for Class I Directors are Robert L. Castle and Paul J.
Ferri. Shares represented by all proxies received by the Board of Directors and
not marked so as to withhold authority to vote for Messrs. Castle and Ferri will
be voted FOR the election of the nominees. Messrs. Castle and Ferri will be
elected to hold office until the Annual Meeting of Shareholders to be held in
2002 and until their respective successors are duly elected and qualified. The
nominees have indicated their willingness to serve, if elected; however, if
either of them should be unable or unwilling to serve, the proxies will be voted
for the election of a substitute nominee designated by the Board of Directors or
for fixing the number of directors at a lesser number.
The following table sets forth for the nominees to be elected at the
Meeting and for each director whose term of office will extend beyond the
Meeting, his age, the position(s) currently held by each nominee or director
with the Company, the year such nominee or director was first elected a
director, the year each nominee's or director's term will expire and the class
of director of each nominee or director.
9
Position(s) Director Year Term Class of
Nominee or Director's Name Age Held Since Will Expire Director
------------------------- ----- --------- ------- ---------- -------
Robert L. Castle 49 Chairman 1992 2002 I
Paul J. Ferri 60 Director 1991 2002 I
William E. Foster 54 Director 1994 2000 II
Khoa D. Nguyen 45 President, Chief 1997 2001 III
Executive Officer,
and Director
Steven C. Walske 47 Director 1994 2001 III
Robert L. Castle has served as a Director since March 1992 and as Chairman
of the Board of Directors since April 1998. He served as President of the
Company from February 1992 until April 1998, and as Chief Executive Officer of
the Company from March 1993 to April 1998. Prior to joining the Company, Mr.
Castle was employed for eight years at FileNet Corporation, a supplier of
document imaging equipment, in various positions including Senior Vice President
of Marketing from October 1990 to February 1992 and Vice President of Marketing
from December 1987 to October 1990. Previously, Mr. Castle held marketing and
general management positions at Basic Four Corp., a developer of software
applications, and Sycor, Inc., a developer and manufacturer of data-entry
terminals.
Paul J. Ferri has been a Director of the Company since March 1991. He has
served as a General Partner of Matrix Partners, a venture capital firm, since
1982. Mr. Ferri also serves as a director of Applix, Inc., BancTec. Inc., and
Tech Force Corp.
William E. Foster has been a Director of the Company since November 1994.
Mr. Foster is a founder and was Chairman of the Board of Stratus Computer, Inc.,
a manufacturer of continuously available computer platforms, from 1980 to 1998.
He was Chief Executive Officer of Stratus Computer, Inc. from 1980 to 1997. Mr.
Foster also serves as a director of Avid Technology, Inc.
Khoa D. Nguyen has been a Director of the Company since December 1997. Mr.
Nguyen was named President and Chief Executive Officer of the Company effective
April 9, 1998. Previously, he had been Executive Vice President and Chief
Operating Officer of the Company since September 1997. Prior to joining the
company Mr. Nguyen had been employed at PictureTel Corporation, a
videoconferencing company, where he served as Vice President of Engineering from
January 1993 to February 1994, and as Chief Technology Officer and General
Manager of the Group Systems and Networking Products divisions from February
1994 to August 1996. From August 1991 to December 1992, he was Vice President of
Engineering at VTEL Corporation, a videoconferencing company. Previously, Mr.
Nguyen held various research and development positions at IBM Corporation.
Steven C. Walske has been a Director of the Company since July 1994. He has
been Chairman of the Board and Chief Executive Officer of Parametric Technology
Corporation, a supplier of mechanical design and manufacturing software, since
August 1994. Previously, he had been President and Chief Executive Officer of
Parametric since 1986. Mr. Walske also serves as a director of Synopsys, Inc.
and Object Design, Inc..
Board Meetings and Committees
The Board of Directors held a total of eight meetings during the year ended
December 31, 1998. During that period the Audit Committee of the Board held two
meetings and the Compensation Committee of the Board held five meetings. Each of
the directors attended at least seventy-five percent (75%) of the meetings of
the Board of Directors and committees of the Board on which the director served
during the year.
The Compensation Committee consists of Messrs. Ferri and Walske. The
Compensation Committee determines the compensation of the Company's senior
management and administers the Company's stock option plans. The Audit Committee
comprises Messrs. Ferri, Foster, and Walske. The Audit Committee recommends
engagement of the Company's independent auditors, consults with the Company's
auditors concerning the scope of the audit, reviews the results of their
examination, reviews and approves any material accounting policy changes
affecting the Company's operating results, and reviews the Company's financial
controls.
The Board of Directors has no standing nominating committee.
10
Certain Transactions
No transactions occuring between January 1, 1998 and the date hereof are to
be reported in this section.
The Board of Directors unanimously recommends a vote "FOR" the election of the
nominees listed above.
PROPOSAL NUMBER 2, APPROVAL OF AMENDMENT TO
EMPLOYEE STOCK PURCHASE PLAN
In March 1999, the Board of Directors adopted an Amendment to the Employee
Stock Purchase Plan ("ESPP") increasing the number of shares available for
purchase by 300,000 to 600,000 shares. As of March 1999, of the 300,000 shares
originally authorized under the ESPP, only 50,450 shares remained available for
issuance under further offerings. The Board of Directors recommends approval of
the amendment because it believes that the availability of an employee stock
purchase plan is an important factor in the Company's ability to attract and
retain employees and provide an incentive to them to exert their best efforts
for the Company. Approval of the stockholders is sought to meet the stockholder
approval requirements of the ESPP and Rule 16(b)-3 of the Securities and
Exchange Act of 1934.
The ESPP is intended to qualify as an employee stock purchase plan within
the meaning of Section 423 of the Internal Revenue Code. As such, no income is
taxable to a participant until shares which have been purchased are sold, and
the federal tax treatment upon sale depends upon whether the shares have been
held for two years following the beginning of the applicable offering period and
one year from the date of purchase. If shares are held for those periods, there
is no compensation deduction for the Company. The purpose of the ESPP is to
provide employees of the Company (of which there were 270 as of December 31,
1998) an opportunity to participate in the growth and development of the Company
through the purchase of common stock. The plan is implemented by one or more
offerings from time to time and for such offering period(s) as determined by the
Board of Directors. Each offering period shall be no longer than twenty-seven
months. The price at which common stock is purchased under the plan is the lower
of 85% of its fair market value at the commencement of an offering period or 85%
of its fair market value on the last day of the offering period. Employees make
purchases under the ESPP by authorizing the Company to withhold from their pay
an amount between 2% and 10% of the employee's annual rate of compensation at
the time the option is granted, not to exceed $25,000 in any one year. The
following table sets forth the number of shares purchased under the ESPP during
the fiscal year ended December 31, 1998 by the named executive officers, the
current executive officers as a group, and the non-executive officer employees.
Name and Principal Position Number of Shares
-------------------- -------------
Khoa D. Nguyen, President and Chief Executive Officer ........ --
4/9/98 to Present
Robert L. Castle President and Chief Executive Officer ....... --
1/1/98 -- 4/8/98
Dane A. Donaldson ............................................ --
Vice President of Customer Service
Martin R. Falaro ............................................. 828
Vice President of Marketing and Business Development
Robert Lamkin ................................................ --
Vice President of Sales (3)
Stephen J. Nill .............................................. 2,029
Vice President of Finance, Chief Financial Officer
Treasurer, and Secretary
Current Executive Officers as a Group ........................ 5,185
Non-executive Officer Employees .............................. 90,986
The Board of Directors unanimously recommends a vote "FOR" approval of the
Amendment
PROPOSAL NO. 3 -- RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors has appointed the firm of Ernst & Young LLP,
certified public accountants, to serve as independent auditors for the fiscal
year ending December 31, 1999. Ernst & Young LLP has served as the Company's
independent auditors since 1993. It is expected that a member of the firm of
Ernst & Young LLP will be present at the Meeting and will be available to make a
statement and to respond to appropriate questions. If the
11
shareholders do not ratify the selection of Ernst & Young LLP, the Board of
Directors may consider selection of other independent certified public
accountants to serve as independent auditors, but no assurances can be made that
the Board of Directors will do so or that any other independent certified public
accountants would be willing to serve.
The Board of Directors unanimously recommends a vote "FOR" the ratification of
the appointees.
VOTING PROCEDURES
The affirmative vote of a plurality of the shares of the Company's Common
Stock present or represented at the Meeting and entitled to vote is required for
the election of each Class I Director and the affirmative vote of a majority of
such shares is required for approval of the Amendment to the Stock Purchase Plan
and the ratification of the appointment of the Company's auditors. For purposes
of determining whether a proposal has received a majority vote, abstentions will
be included in the vote totals, with the results that an abstention will have
the same effect as a negative vote. In instances where brokers are prohibited
from exercising discretionary authority for beneficial holders who have not
returned a proxy (so-called "broker non-votes"), those shares will not be
included in the vote totals and, therefore, will have no effect on the outcome
of the vote. Shares that abstain or for which the authority to vote is withheld
on certain matters will, however, be treated as present for quorum purposes on
all matters.
OTHER BUSINESS
The Board of Directors knows of no business which will be presented for
consideration at the Meeting other than that stated above. If other business
should come before the Meeting, the persons named in the proxies solicited
hereby, each of whom is an employee of the Company, may vote all shares subject
to such proxies with respect to any such business in the best judgment of such
persons.
SHAREHOLDER PROPOSALS
It is currently contemplated that the 2000 Annual Meeting of Shareholders
will be held on or about May 17, 2000. Proposals of shareholders intended for
inclusion in the proxy statement to be furnished to all shareholders entitled to
vote at the next annual meeting of the Company must be received at the Company's
principal executive offices not later than December 15, 1999. It is suggested
that proponents submit their proposals by certified mail, return receipt
requested.
Dated: April 13, 1999
12
VIDEOSERVER, INC.
1995 EMPLOYEE STOCK PURCHASE PLAN
AMENDMENT NUMBER 1
This Amendment Number 1 effective this 18th day of March, 1999 amends the
VideoServer, Inc. 1995 Employee Stock Purchase Plan (the "Plan").
Section 6 of the Plan is hereby amended to read as follows:
6. Shares of Stock Subject to the Plan. No more than an aggregate of 600,000
shares of Stock may be issued or delivered pursuant to the exercise of Options
granted under the Plan (such maximum number of shares taking into account the
effects of the one-for-two reverse stock split referred to above, and subject to
automatic proportionate adjustment in the event of any other stock dividend,
stock split, stock combination, recapitalization or other similar event
affecting the Common Stock and to adjustments made in accordance with Section
9.7.) Shares to be delivered upon exercise of Options may be either shares of
Stock that are authorized but unissued or shares of Stock held by the Company in
its treasury. If an Option expires or terminates for any reason without having
been exercised in full, the unpurchased shares subject to the Option will become
available for other Options granted under the Plan. At all times during which
Options are outstanding, the Company will reserve and keep available sufficient
shares of Stock to cover the exercise in full of such Options, and will pay all
fees and expenses incurred by the Company in connection therewith.
Except as amended herein, the Plan shall remain in force and effect, in
accordance with its terms.
VIDEOSERVER, INC.
1995 EMPLOYEE STOCK PURCHASE PLAN
1. Definitions. As used in this 1995 Employee Stock Purchase Plan of
VideoServer, Inc., the following terms have the respective meanings ascribed to
them below:
(a) Base Compensation means annual or annualized base compensation,
exclusive of overtime, bonuses, contributions to employee benefit plans, and
other fringe benefits.
(b) Beneficiary means, with respect to any Participating Employee, the
person designated as beneficiary on such Participating Employee's Membership
Agreement or other form provided by the Company for such purpose, or if no such
beneficiary is named, the person to whom the Option is transferred by will or
under the applicable laws of descent and distribution.
(c) Board means the board of directors of the Company, except that if and
for so long as the board of directors of the Company has delegated its authority
with respect to the Plan to the Committee pursuant to Section 4, then all
references in this Plan to the Board will be deemed to refer to the Committee
acting in such capacity.
(d) Code means the Internal Revenue Code of 1986, as amended.
(e) Company means VideoServer, Inc., a Delaware corporation.
(f) Committee means the Compensation Committee of the Board.
(g) Effective Date means the effective date of the Company's registration
statement on Form S-1, File No. 33-91132, under the Securities Act of 1938, as
amended.
(h) Eligible Employee means a person who is eligible under the provisions
of Section 7 to receive an Option as of a particular Offering Commencement Date.
(i) Employer means, as to any particular Offering Period, the Company and
any Related Corporation that is designated by the Board as a corporation whose
Eligible Employees are to receive Options as of that Period's Offering
Commencement Date.
-2-
(j) Market Value means, as of the Offering Commencement Date of the first
Offering Period under this Plan, the initial public offering price at which
shares of Stock are offered to the public, as specified in the Company's
registration statement on Form S-1 referred to above, and as of any other
particular date, (i) if the Stock is listed on a national securities exchange,
the closing price of the Stock on such exchange on such date, (ii) if the Stock
is not listed on a national securities exchange but is quoted through the
National Association of Securities Dealers, Inc., Automated Quotation ("NASDAQ")
National Market System or any successor thereto, the last sale price of the
Stock so quoted on such date, and (iii) if the Stock is not listed on a national
securities exchange or quoted through the NASDAQ National Market System or any
successor thereto, but is quoted through NASDAQ other than through the National
Market System, or is otherwise publicly traded, the average of the closing bid
and asked prices of the Stock so quoted or otherwise reported on such date.
(k) Membership Agreement means an agreement whereby a Participating
Employee authorizes an Employer to withhold payroll deductions from his or her
Base Compensation.
(l) Offering Commencement Date means the first business day of an Offering
Period on which Options are granted to Eligible Employees.
(m) Offering Period means (i) in the case of the initial Offering Period
hereunder, the period running from the Effective Date to January 31, 1996, and
(ii) in the case of each subsequent Offering Period, a semi-annual period
running from February 1 to the next following July 31 or from August 1 to the
next following January 31; during which options will be offered under the Plan
pursuant to a determination by the Board.
(n) Offering Termination Date means the last business day of an Offering
Period, on which Options must, if ever, be exercised.
(o) Option means an option to purchase shares of Stock granted under the
Plan.
(p) Option Shares means shares of Stock purchasable under an Option.
(q) Participating Employee means an Eligible Employee to whom an Option is
granted.
(r) Plan means this 1995 Employee Stock Purchase Plan of the Company, as
amended from time to time.
-3-
(s) Related Compensation means any corporation that is or during the term
of the Plan becomes a parent corporation of the Company, as defined in Section
424(e) of the Code, or a subsidiary corporation of the Company, as defined in
Section 424(f) of the Code.
(t) Stock means the common stock, $0.01 par value per share, of the
Company, to be authorized upon stockholder approval of certain amendments to the
Company's Amended and Restated Certificate of Incorporation, authorized by the
Board on April 12, 1995, authorizing a one-for-two reverse stock split and
setting the par value of the Company's Common Stock at $0.01, and the filing
with the Delaware Secretary of State of an appropriate certificate of amendment
to such Amended and Restated Certificate of Incorporation effecting such
changes.
2. Purpose of the Plan. The Plan is intended to encourage ownership of
Stock by employees of the Company and any Related Corporations and to provide an
additional incentive for the employees to promote the success of the business of
the Company and any Related Corporations. It is intended that the Plan qualify
as an "employee stock purchase plan" within the meaning of Section 423 of the
Code.
3. Term of the Plan. The Plan will become effective on the Effective Date.
No Option may be granted under the Plan after January 31, 2005.
4. Administration of the Plan. The Plan will be administered by the Board.
The Board will determine which semi-periods will be Offering Periods in
accordance with Section 8, and which (if any) Related Corporations will be
Employers as to each Offering Period. The Board will have authority to interpret
the Plan, to prescribe, amend, and rescind rules and regulations relating to the
Plan, to determine the terms of Options granted under the Plan, and to make all
other determinations necessary or advisable for the administration of the Plan.
All determinations of the Board under the Plan will be final and binding as to
all persons having or claiming any interest in or arising out of the Plan. The
Board may delegate all or any portion of its authority with respect to the Plan,
to the Committee, and thereafter until such delegation is revoked by the Board
all powers under the plan delegated to the Committee will be exercised by the
Committee.
5. Termination and Amendment of Plan. The Board may terminate or amend the
Plan at any time; provided, however, that the Board may not, without approval by
the holders of a majority of the outstanding shares of Stock, increase the
maximum number of shares of Stock purchasable under the Plan or change the
description of employees or classes of employees eligible to receive Options.
Without limiting the generality of the foregoing, but subject to the
-4-
foregoing proviso, the Board may amend the Plan from time to time to increase or
decrease the length of any future Offering Periods and to make all required
conforming changes to the Plan. No termination or amendment of the Plan may
adversely affect the rights of a Participating Employee with respect to any
Option held by the Participating Employee prior to such termination or
amendment.
6. Shares of Stock Subject to the Plan. No more than an aggregate of
300,000 hares of Stock may be issued or delivered pursuant to the exercise of
Options granted under the Plan (such maximum number of shares taking into
account the effects of the one-for-two reverse stock split referred to above,
and subject to automatic proportionate adjustment in the event of any other
stock dividend, stock split, stock combination, recapitalization, or other
similar event affecting the Common Stock and to adjustments made in accordance
with Section 9.7). Shares to be delivered upon exercise of Options may be either
shares of Stock that are authorized but unissued or shares of Stock held by the
Company in its treasury. If an Option expires or terminates for any reason
without having been exercised in full, the unpurchased shares subject to the
Option will become available for other Options granted under the Plan. At all
times during which Options are outstanding, the Company will reserve and keep
available sufficient shares of Stock to cover the exercise in full of such
Options, and will pay all fees and expenses incurred by the Company in
connection therewith.
7. Persons Eligible to Receive Options. Each employee of an Employer will
be granted an Option on each Offering Commencement Date on which such employee
meets all of the following requirements:
(a) The employee is customarily employed by an Employer for more than
twenty hours per week and for more than five months per calendar year.
(b) The employee will not, after grant of the Option, own Stock possessing
five percent or more of the total combined voting power or value of all classes
of stock of the Company or of any Related Corporation. For purposes of this
paragraph (b), the rules of Section 424(d) of the Code will apply in determining
the Stock ownership of the employee, and Stock that the employee may purchase
under outstanding options will be treated as Stock owned by the employee.
(c) Upon grant of the Option, the employee's rights to purchase Stock under
all employee stock purchase plans (as defined in Section 423(b) of the Code) of
the Company and its Related Corporations will not accrue at a rate exceeding
$25,000 of Market Value of Stock (determined as of the grant date) for each
calendar year in which such Option is outstanding at any time. The
-5-
accrual of rights to purchase Stock will be determined in accordance with
Section 423(b)(8) of the Code.
8. Offering Commencement Dates. Options will be granted on the first
business day of the period running from the Effective Date to January 31, 1996,
and of each semi-annual period running from February 1 to the next following
July 31 or from August 1 to the next following January 31, that is designated by
the Board as an Offering Period. Following the initial Offering Period under the
Plan (i.e., the period running from the Effective Date to January 31, 1996), all
succeeding semi-annual periods described above will be deemed Offering Periods
without need of further Board action unless and until contrary action will have
been taken by the Board prior to the beginning of what would otherwise be an
Offering Period.
9. Terms and Conditions of Options.
9.1 General. All Options granted on a particular Offering Commencement Date
will comply with the terms and conditions set forth in Sections 9.2 through
9.11. Subject to Sections 7(c) and 9.9, each Option granted on a particular
Offering Commencement Date will entitle the Participating Employee to purchase
that number of shares of Stock equal to the result of $12,500 (or such lesser
amount as is selected by he Board, prior to the applicable Offering Commencement
Date, and applied uniformly during the Offering Period then beginning) divided
by the market Value of one such share on the Offering Commencement Date and then
rounded down, if necessary, to the nearest whole number.
9.2 Purchase Price. The purchase price of each Option Share will be 85% of
the lesser of (a) the Market Value of a share of Stock as of the Offering
Commencement Date or (b) the Market Value of a share of Stock as of the Offering
Termination Date.
9.3 Restrictions on Transfer.
(a) Options may not be transferred otherwise than by will or pursuant to
applicable laws of descent and distribution. During the lifetime of a
Participating Employee, such Participating Employee's Options may not be
exercised by anyone other than such Participating Employee.
(b) The Optionee will agree in the Membership Agreement to notify the
Company of any transfer of Option Shares within two years of the Offering
Commencement Date for such Options Shares. The Company will have the right to
place a legend on all stock certificates representing Option Shares instructing
the transfer agent to notify the Company of any transfer of such Options Shares.
-6-
The Company will also have the right to place a legend on all stock certificates
representing Option Shares setting forth or referring to the restriction on
transferability of such Options Shares.
9.4 Expiration. Each Option will expire at the close of business on the
Offering Termination Date or on such earlier date as may result from the
operation of Sections 9.5 or 9.6.
9.5 Termination of Employment of Optionee. If a Participating Employee
ceases for any reason (other than death) to be continuously employed by an
Employer, whether due to voluntary severance, involuntary severance, transfer,
or disaffiliation of a Related Corporation with the Company, his or her Option
will immediately expire, and the Participating Employee's accumulated payroll
deductions will be returned by the Company. For purposes of this Section 9.5, a
Participating Employee will be deemed to be employed throughout any leave of
absence for military service, illness, or other bona fide purpose that does not
exceed the longer of ninety days or the period during which the Participating
Employee's reemployment rights are guaranteed by statute (including without
limitation the Veterans Reemployment Rights Act or similar statute relating to
military service) or by contract. If the Participating Employee does not return
to active employment prior to the termination of such period, his or her
employment will be deemed to have ended on the ninety-first day of such leave of
absence (or such longer period guaranteed by statute or by contract as provided
above).
9.6 Death of Optionee. If a Participating Employee dies, his or her
Beneficiary will be entitled to withdraw the Participating Employee's
accumulated payroll deductions, or to purchase shares on the Offering
Termination Date to the extent that the Participating Employee would be so
entitled had he or she continued to be employed by an Employer. The number of
shares purchasable will be limited by the amount of the Participating Employee's
accumulated payroll deductions as of the date of his or her death. Accumulated
payroll deductions will be applied by the Company toward the purchase of shares
only if the Participating Employee's Beneficiary submits to the Employer not
later than the Offering Termination Date a written request that the deductions
be so applied. Accumulated payroll deductions not withdrawn or applied to the
purchase of shares will be delivered by the Company to the Beneficiary within a
reasonable time after the Offering Termination Date.
9.7 Capital Changes Affecting the Stock. In the event that, between the
Offering Commencement Date and the Offering Termination Date with respect to an
Option, a stock dividend is paid or becomes payable in respect of the Stock, or
there occurs a split-up or contraction in the number of shares of
-7-
Stock, the number of shares of Stock for which the Option may thereafter be
exercised and the price to be paid for each such share will both be
proportionately adjusted. In the event that, after the Offering Commencement
Date, there occurs a reclassification or change of outstanding shares of Stock
or a consolidation or merger of the Company with or into another corporation or
a sale or conveyance, substantially as a whole, of the property of the Company,
the Participating Employee will be entitled on the Offering Termination Date to
receive shares of Stock or other securities equivalent in kind and value to the
shares of Stock he or she would have held if he or she had exercised the Option
in full immediately prior to such reclassification, change, consolidation,
merger, sale, or conveyance and had continued to hold such shares (together with
all other shares and securities thereafter issued in respect thereof) until the
Offering Termination Date. In the event that there is to occur a
recapitalization involving an increase in the par value of the Stock that would
result in a par value exceeding the exercise price under an outstanding Option,
the Company will notify the affected Participating Employee of such proposed
recapitalization immediately upon its being recommended by the Board to the
Company's shareholders, after which the Participating Employee will have the
right to exercise his or her Option prior to such recapitalization; if the
Participating Employee fails to exercise the Option prior to recapitalization,
the exercise price under the Option will be appropriately adjusted. In the event
that, after the Offering Commencement Date, there occurs a dissolution or
liquidation of the Company, except pursuant to a transaction to which Section
424(a) of the Code applies, each Option will terminate, but the Participating
Employee will have the right to exercise his or her Option prior to such
dissolution or liquidation.
9.8 Payroll Deductions. A Participating Employee may purchase shares under
his or her Option during any particular Offering Period by completing and
returning to the Company at least 15 days prior to the beginning of such
Offering Period a Membership Agreement indicating a percentage (which will be a
full integer between two and ten, inclusive) of his or her Base Compensation
that is to be withheld each pay period (not to exceed an aggregate of $12,500 in
any Offering Period). No Participating Employee will be permitted to change the
percentage of Base Compensation withheld during an Offering Period. However, not
more than once per Offering Period the Participating Employee may cancel his or
her Agreement, and withdraw all (but not less than all) of his or her
accumulated payroll deductions, by submitting a written request therefor to the
Company not later than the close of business on the Offering Termination Date.
The percentage of Base Compensation withheld may be changed from one Offering
Period to another.
9.9 Exercise of Options. On the Offering Termination Date the Participating
Employee may purchase the number of shares purchasable by his
-8-
or her accumulated payroll deductions, or if less, the maximum number of shares
subject to the Option as provided in Section 9.1, provided that:
(a) If the total number of shares that all Optionees elect to purchase,
together with any shares already purchased under the Plan, exceeds the total
number of shares that may be purchased under the Plan pursuant to Section 6, the
number of shares that each Optionee is permitted to purchase will be decreased
pro rata based on the Participating Employee's accumulated payroll deductions in
relation to all accumulated payroll deductions currently being withheld under
the Plan.
(b) If the number of shares purchasable includes a fraction, such number
will be adjusted to the next smaller whole number and the purchase price will be
adjusted accordingly.
Accumulated payroll deductions not withdrawn prior to the offering Termination
Date will be automatically applied by the Company toward the purchase of Options
Shares, or to the extent in excess of the aggregate purchase price of the shares
then purchasable by the Participating Employee, refunded to the Participating
Employee, except that where such excess is less than the purchase price for a
single share of Stock on the Offering Termination Date, such excess will not be
refunded but instead will be carried over and applied to the purchase of shares
in the first following Offering Period (subject to the possibility of withdrawal
by the Participating Employee during such Offering Period in accordance with the
terms of the Plan).
9.10 Delivery of Stock. Except as provided below, within a reasonable time
after the Offering Termination Date, the Company will deliver or cause to be
delivered to the Participating Employee a certificate or certificates for the
number of shares purchased by the Participating Employee. A stock certificate
representing the number of Shares purchased will be issued in the participant's
name only, or if his or her Membership Agreement so specified, in the name of
the employee and another person of legal age as joint tenants with rights of
survivorship. If any law or applicable regulation of the Securities and Exchange
Commission or other body having jurisdiction in the premises will require that
the Company or the Participating Employee take any action in connection with the
shares being purchased under the Option, delivery of the certificate or
certificates for such shares will be postponed until the necessary action will
have been completed, which action will be taken by the Company at its own
expense, without unreasonable delay. The Optionee will have to rights as a
shareholder in respect of shares for which he or she has not received a
certificate.
-9-
9.11 Return of Accumulated Payroll Deductions. In the event that the
Participating Employee or the Beneficiary is entitled to the return of
accumulated payroll deductions, whether by reason of voluntary withdrawal,
termination of employment, or death, or in the event that accumulated payroll
deductions exceed the price of shares purchased, such amount will be returned by
the Company to the Participating Employee or the Beneficiary, as the case may
be, not later than within a reasonable time following the Offering Termination
Date applicable to the Option Period in which such deductions were taken.
Accumulated payroll deductions held by the Company will not bear interest nor
will the Company be obligated to segregate the same from any of its other
assets.
DETACH HERE
|X| Please mark
votes as in
this example.
1. Election of two Class I Directors.
Nominees: (01) Robert L. Castle and (02) Paul J. Ferri
FOR WITHHELD
|_| |_|
|_| ______________________________________
For all nominees except as noted above
2. Approval of Amendment to Employee FOR AGAINST ABSTAIN
Stock Purchase Plan. |_| |_| |_|
3. Ratification of Appointment of FOR AGAINST ABSTAIN
Independent Accountants. |_| |_| |_|
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournments
thereof.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT |_|
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY FORM PROMPTLY USING THE ENCLOSED
SELF-ADDRESSED ENVELOPE.
Please sign exactly as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such. If shares are held of record by a corporation, please sign
in full corporate name by president or other authorized officer. Partnerships
should sign in partnership name by an authorized signatory.
DETACH HERE
PROXY
VIDEOSERVER, INC.
This proxy is Solicited on Behalf of the Board of Directors
of the Company for its Annual Meeting
May 12, 1999
The undersigned hereby appoints Paul L. Criswell and Stephen J. Nill as
proxies, each with full power of substitution, and hereby authorizes them or
either of them to represent and to vote as designated below all shares of Common
Stock of VideoServer, Inc., held of record by the undersigned on March 26, 1999
at the Annual Meeting of Stockholders to be held at the Offices of the Company,
63 Third Avenue, Burlington, Massachusetts on May 12, 1999 and at any
adjournments or postponements thereof.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN THE MANNERS DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL
BE VOTED "FOR" THE ELECTION OF DIRECTORS AND "FOR" THE OTHER PROPOSALS.
- ----------- -----------
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE