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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
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14a-6(e)(2))
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AVISTAR COMMUNICATIONS CORPORATION
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(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
AVISTAR COMMUNICATIONS CORPORATION
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(NAME OF PERSON(S) FILING PROXY STATEMENT)
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AVISTAR COMMUNICATIONS CORPORATION
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SUPPLEMENT TO PROXY STATEMENT FOR
2001 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 12, 2001
The following supplements and amends the Proxy Statement of Avistar
Communications Corporation (the "Company") dated April 25, 2001 for the Annual
Meeting of Stockholders to be held on June 12, 2001, including, without
limitation, the sections "Information Concerning the Nominees and Incumbent
Directors" and "Compensation of Directors" described on pages 5 and 8 of the
Proxy Statement, respectively. Capitalized terms used in this Supplement unless
otherwise specified have the same meanings given them in the Proxy Statement.
In connection with the amendment of the "Compensation of Directors"
section, the stockholders of the Company are requested to approve amendments to
the Company's 2000 Director Option Plan (the "Director Plan") (i) increasing the
initial grant to the Company's nonemployee directors to 25,000 shares of Common
Stock and the annual grant of stock options to the Company's nonemployee
directors to 6,000 shares of Common Stock, (ii) providing a one-time grant of
60,000 shares of Common Stock to each of the Company's current nonemployee
directors, and (iii) increasing the maximum aggregate number of shares which
could be optioned and sold under the Director Plan and the automatic annual
increase thresholds. All other terms of the Director Plan continue in full force
and effect.
On April 27, 2001, the Company announced the retirement of R. Stephen
Heinrichs, Chief Financial Officer and Corporate Secretary. Effective
immediately, William L. Campbell, an Executive Vice President and a director of
the Company, was appointed as Acting Chief Financial Officer and Acting
Corporate Secretary.
PROPOSAL FOUR
AMENDMENT OF THE 2000 DIRECTOR OPTION PLAN
The stockholders previously approved the Director Plan. At the Annual
Meeting, the stockholders are being asked to approve the amendment of the
Director Plan. The Director Plan was adopted by the Board of Directors of the
Company and its stockholders in April 2000, and became effective in connection
with the Company's August 2000 initial public offering. As of the Record Date,
102,000 shares have been reserved for issuance under the Director Plan and
24,000 shares of the Company's Common Stock were subject to outstanding options.
No shares of Common Stock have been purchased under the Director Plan.
On May 17, 2001, the Board of Directors of the Company, including a
majority of the disinterested directors, approved an amendment to the Director
Plan to increase the Initial Grant to nonemployee directors from 12,000 shares
of Common Stock to 25,000 shares of Common Stock and to increase the annual
option grant to nonemployee directors from 3,000 shares of Common Stock to 6,000
shares of Common Stock. This amendment to the Director Plan was adopted for the
purposes of attracting the best available people to serve as nonemployee
directors, providing additional incentive to the nonemployee directors and
encouraging their continued service on the board of directors.
Additionally, the Board of Directors of the Company, including a majority
of the disinterested directors, also approved an amendment of the Director Plan
to provide a one-time grant equal to 60,000 shares of Common Stock (an
"Additional Grant") to each of the Company's nonemployee directors currently
serving on the board of directors, including Messrs. Brody, Latta, Metcalfe and
Solo, but excluding Mr. Heinrichs. The Additional Grant will be made at an
exercise price per share equal to fair market value on the date of the 2001
Annual Meeting of Stockholders and become exercisable at a rate of one-fourth of
the shares on each anniversary of such date. This amendment was adopted for the
purpose of equalizing the treatment of current
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nonemployee directors with future nonemployee directors as well as encouraging
the continued service of the existing nonemployee directors.
In connection with the amendment of the Director Plan as described above,
the Board of Directors of the Company further approved an amendment of the
Director Plan such that the aggregate number of shares which may be optioned and
sold under the Director Plan is 300,000 shares, with increases on January 1 of
each year of the lesser of (i) 30,000 shares, (ii) 0.20% of the Company's
outstanding Common Stock on the last day of the immediately preceding fiscal
year or (iii) an amount determined by the Board of Directors of the Company.
Prior to such amendment, the aggregate number of shares which could be optioned
and sold under the Director Plan was 90,000 shares, with increases on January 1
of each year of the least of (i) 12,000 shares, (ii) 0.20% of the Company's
outstanding Common Stock on the last day of the immediately preceding fiscal
year or (iii) an amount determined by the Board of Directors of the Company.
The essential terms of the Director Plan, as amended, are summarized as
follows:
PURPOSE
The purposes of the Director Plan are to attract and retain the best
available personnel for nonemployee directors, to provide additional incentive
to the nonemployee directors of the Company and to encourage their continued
service on the Board.
ADMINISTRATION
The Plan provides that all option grants to nonemployee directors shall be
automatic and nondiscretionary.
ELIGIBILITY
The Plan provides that options under the Director Plan may be granted only
to nonemployee directors. Each nonemployee director is entitled to be
automatically granted an option to purchase 25,000 shares of Common Stock on the
date he or she first becomes a nonemployee director, other than those persons
who were previously employee directors. Additionally, each nonemployee director
is entitled to be automatically granted an option to purchase 6,000 shares of
Common Stock on the date of the next meeting of the Board following each Annual
Meeting of Stockholders, provided that as of the date of grant he or she is a
nonemployee director and he or she has served on the Board for at least six
months.
AVAILABLE SHARES
The aggregate number of shares which could be optioned and sold under the
Director Plan is 300,000 shares, with increases on January 1 of each year of the
lesser of (i) 30,000 shares, (ii) 0.20% of the Company's outstanding Common
Stock on the last day of the immediately preceding fiscal year or (iii) an
amount determined by the Board of Directors.
TERMS OF OPTIONS
Each option is evidenced by a stock option agreement between the Company
and the nonemployee director to whom such option is granted and is subject to
the following additional terms and conditions:
(1) EXERCISE OF THE OPTION: An option is exercised by giving written
notice of exercise to the Company, specifying the number of shares of
Common Stock to be purchased and tendering payment to the Company of the
purchase price. Payment for shares issued upon exercise of an option may
consist of (i) cash, (ii) check, (iii) other shares which (x) in the case
of shares acquired upon exercise of an option either have been owned by the
optionee for more than six months on the date of surrender, and (y) have a
fair market value on the date of surrender equal to the aggregate exercise
price of the shares as to which said option shall be exercised, (iv)
consideration received under a cashless exercise program implemented by the
Company or (v) any combination of the foregoing methods of payment.
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Options may be exercised at any time prior to their termination, on or
following the date such options are first exercisable. An option may not be
exercised for a fraction of a share.
(2) OPTION PRICE: The exercise price per share of options granted
under the Director Plan shall be 100% of the fair market value per share on
the date of each grant. The fair market value is defined as the closing
price per share of the Common Stock on the date of grant as reported on the
Nasdaq National Market.
(3) TERMINATION OF EMPLOYMENT: The Director Plan provides that if the
optionee's status as a nonemployee director of the Company is terminated
for any reason, other than death or disability, options may be exercised
not later than three months after such termination and may be exercised
only to the extent the options were exercisable on the date of termination.
(4) DEATH: If an optionee should die while a nonemployee director of
the Company, options may be exercised by his or her estate or a person who
acquired the right to exercise the option by bequest or inheritance within
twelve months following the date of death, but only to the extent that the
optionee would have been entitled to exercise the option as of the date of
death.
(5) DISABILITY: If the optionee ceases to be a nonemployee director as
a result of total or permanent disability, options may be exercised within
twelve months following the date of termination, but only to the extent the
optionee would have been entitled to exercise the option as of the date of
termination.
(6) TERMINATION OF OPTIONS: The term shall be no more than ten years
from the date of grant. No option may be exercised by any person after such
expiration.
(7) NONTRANSFERABILITY OF OPTIONS: An option is nontransferable by the
optionee, other than by will or the laws of descent or distribution, and is
exercisable only by the optionee during his or her lifetime or, in the
event of death, by a person who acquires the right to exercise the option
by bequest or inheritance or by reason of the death of the optionee.
(8) RIGHTS UPON EXERCISE: Until an option has been properly exercised,
that is, proper written notice and full payment have been received by the
Company, and a stock certificate evidencing the option shares has been
issued, no rights to vote or receive dividends or any other rights as a
stockholder shall exist with respect to the optioned stock, notwithstanding
the exercise of the option.
ADJUSTMENT UPON CHANGES IN CAPITALIZATION
In the event any change, such as a stock split or dividend, is made in the
Company's capitalization which results in an increase or decrease in the number
of outstanding shares of Common Stock without receipt of consideration by the
Company, an appropriate adjustment shall be made in the option price and in the
number of shares subject to each option. In the event of the proposed
dissolution or liquidation of the Company, all outstanding options, to the
extent not previously exercised, automatically terminate immediately prior to
the consummation of such proposed action. In the event of a merger of the
Company with or into another corporation, or the sale of substantially all of
the assets of the Company, all outstanding options may be assumed or an
equivalent option substituted by the successor corporation. If the option is not
assumed or substituted, the nonemployee director shall have the right to
exercise his or her option as to all or any part of the optioned stock,
including shares as to which it would not otherwise be exercisable. In such
event, the board of directors shall notify the nonemployee director that the
option shall be fully exercisable for 15 days from the date of such notice, and
the option shall terminate upon the expiration of such period.
AMENDMENT AND TERMINATION
The board of directors may amend the Director Plan at any time or may
terminate it without approval of the stockholders, provided, however, that
stockholder approval is required to the extent necessary and desirable to comply
with any applicable law, regulation or stock exchange rule. However, no action
by the board of directors or the stockholders may alter or impair any option
previously granted under the Director Plan without the consent of the optionee.
In any event, the Director plan will terminate in April 2010.
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TAX INFORMATION
Options granted under the Director Plan are nonstatutory options which are
options that do not qualify as incentive stock options. An optionee will not
recognize any taxable income at the time he or she is granted a nonstatutory
option. However, upon its exercise, the optionee will recognize ordinary income
generally measured as the excess of the then fair market value of the shares
purchased over the purchase price and may be subject to tax withholding by the
Company. Upon resale of such shares by the optionee, any difference between the
sales price and the optionee's purchase price, to the extent not recognized as
taxable income as described above, will be treated as long-term or short-term
capital gain or loss, depending on the holding period.
The Company will be entitled to a tax deduction in the same amount as the
ordinary income recognized by the optionee with respect to shares acquired upon
exercise of a nonstatutory option.
The foregoing is only a summary of the effect of federal income taxation
upon the optionee and the Company with respect to the grant and exercise of
options under the Director Plan, does not purport to be complete, and does not
discuss the tax consequences of the optionee's death or the income tax laws of
any municipality, state or foreign country in which an optionee may reside.
PARTICIPATION IN THE DIRECTOR PLAN
Please see the section under the caption "Compensation of Directors"
described on page 8 of the Proxy Statement for further information with respect
to option grants made to the Company's nonemployee directors during 2000.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR" THE
AMENDMENT OF THE 2000 DIRECTOR OPTION PLAN.
Except as supplemented and amended as described above, the Proxy Statement
remains in the same form as it was first distributed to the Company's
stockholders on April 25, 2001.
This Supplement is being mailed to the Company's stockholders entitled to
vote at the meeting on or about May 18, 2001.
By Order of the Board of Directors,
/s/ GERALD J. BURNETT
Gerald J. Burnett
Chairman of the Board, President and
Chief Executive Officer
Redwood Shores, California
May 18, 2001
YOUR VOTE IS IMPORTANT
YOU ARE REQUESTED TO COMPLETE, SIGN AND DATE THE ENCLOSED SUPPLEMENTAL
PROXY CARD AS PROMPTLY AS POSSIBLE AND RETURN IT IN THE ENCLOSED ENVELOPE.
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