<PAGE> 1
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 [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
VISUAL NETWORKS, 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:
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[ ] 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:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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<PAGE> 2
VISUAL NETWORKS, INC.
2092 GAITHER ROAD
ROCKVILLE, MD 20850-4013
(301) 296-2300
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 26, 1999
The annual meeting of stockholders of Visual Networks, Inc., a Delaware
corporation (the "Company"), will be held on Wednesday, May 26, 1999, at 10:00
a.m., local time, at the offices of Piper & Marbury L.L.P., 1200 Nineteenth
Street, N.W., Washington, D.C. 20036-2430 for the following purposes:
1. To elect two (2) directors to serve until the 2002 annual meeting of
stockholders, and until their successors are elected and duly qualified;
2. To adopt the Visual Networks, Inc. 1999 Employee Stock Purchase Plan;
3. To approve an amendment and restatement of our certificate of
incorporation;
4. To ratify the appointment of Arthur Andersen LLP as our independent
auditors for the year ending December 31, 1999; and
5. To transact such other business as may properly come before the annual
meeting and any adjournment or postponement thereof.
The foregoing matters are described in more detail in the enclosed proxy
statement. The board of directors has fixed the close of business on April 9,
1999, as the record date for the determination of the stockholders entitled to
notice of, and to vote at, the annual meeting and any postponement or
adjournment thereof. Only those stockholders of record of the Company as of the
close of business on that date will be entitled to vote at the annual meeting or
any postponement or adjournment thereof.
By Order of the Board of Directors,
/s/ NANCY A. SPANGLER
--------------------------------------
Nancy A. Spangler
Secretary
Rockville, Maryland
May 7, 1999
<PAGE> 3
VISUAL NETWORKS, INC.
2092 GAITHER ROAD
ROCKVILLE, MARYLAND 20850-4013
(301) 296-2300
PROXY STATEMENT
Your vote at the annual meeting is important to us. Please vote your shares
of common stock by completing the enclosed proxy card and returning it to us in
the enclosed envelope. This proxy statement has information about the annual
meeting and was prepared by our management for the board of directors. This
proxy statement and the accompanying proxy card are first being mailed to you on
or about May 7, 1999.
GENERAL INFORMATION ABOUT VOTING
Who can vote?
You can vote your shares of common stock if our records show that you owned
the shares on April 9, 1999. A total of 20,353,512 shares of common stock can
vote at the annual meeting. You get one vote for each share of common stock. The
enclosed proxy card shows the number of shares you can vote.
How do I vote by proxy?
Follow the instructions on the enclosed proxy card to vote on each proposal
to be considered at the annual meeting. Sign and date the proxy card and mail it
back to us in the enclosed envelope. The proxyholders named on the proxy card
will vote your shares as you instruct. If you sign and return the proxy card but
do not vote on a proposal, the proxyholders will vote for you on that proposal.
Unless you instruct otherwise, the proxyholders will vote for each of the two
director nominees and for each of the other proposals to be considered at the
meeting.
What if other matters come up at the annual meeting?
The matters described in this proxy statement are the only matters we know
will be voted on at the annual meeting. If other matters are properly presented
at the meeting, the proxyholders will vote your shares as they see fit.
Can I change my vote after I return my proxy card?
Yes. At any time before the vote on a proposal, you can change your vote
either by giving our secretary a written notice revoking your proxy card or by
signing, dating, and returning to us a new proxy card. We will honor the proxy
card with the latest date.
Can I vote in person at the annual meeting rather than by completing the proxy
card?
Although we encourage you to complete and return the proxy card to ensure
that your vote is counted, you can attend the annual meeting and vote your
shares in person.
What do I do if my shares are held in "street name"?
If your shares are held in the name of your broker, a bank, or other
nominee, that party should give you instructions for voting your shares.
<PAGE> 4
How are votes counted?
We will hold the annual meeting if holders of a majority of the shares of
common stock entitled to vote either sign and return their proxy cards or attend
the meeting. If you sign and return your proxy card, your shares will be counted
to determine whether we have a quorum even if you abstain or fail to vote on any
of the proposals listed on the proxy card.
If your shares are held in the name of a nominee, and you do not tell the
nominee how to vote your shares (so-called "broker nonvotes"), the nominee can
vote them as it sees fit only on matters that are determined to be routine, and
not on any other proposal. Broker nonvotes will be counted as present to
determine if a quorum exists but will not be counted as present and entitled to
vote on any nonroutine proposal, like the adoption of our Employee Stock
Purchase Plan.
Who pays for this proxy solicitation?
We do. In addition to sending you these materials, some of our employees
may contact you by telephone, by mail, or in person. None of these employees
will receive any extra compensation for doing this.
PROPOSAL NO 1: ELECTION OF DIRECTORS
Our board of directors is divided into three classes. The number of
directors is determined from time to time by the board of directors and is
currently fixed at seven (7) members. A single class of directors is elected
each year at the annual meeting. Subject to transition provisions, each director
elected at each such meeting will serve for a term ending on the date of the
third annual meeting of stockholders after his election and until his successor
has been elected and duly qualified.
Two directors are to be elected at this annual meeting to serve until the
2002 annual meeting, and until their successors are elected and duly qualified.
In the event either nominee is unable or unwilling to serve as a nominee, the
proxies may be voted for any substitute nominee designated by the present board
of directors or the proxy holders to fill such vacancy, or the board of
directors may be reduced in accordance with our bylaws. The board of directors
has no reason to believe that the persons named will be unable or unwilling to
serve as nominees or as directors if elected.
Set forth below is certain information concerning the nominees and the
other incumbent directors:
DIRECTORS TO BE ELECTED AT THE 1999 ANNUAL MEETING
MARC F. BENSON, age 49, has been a director since December 1994. Since July
1992, he has been a principal and partner of Mid-Atlantic Venture Funds,
formerly NEPA Venture Funds, a venture capital fund.
THEODORE R. JOSEPH, age 59, has been a director since December 1995. He has
been the Chief Executive Officer and a director of Response Networks, Inc., a
supplier of application service level management software, since February 1999.
He has also been a director of Realty Wave, Inc., a developer and marketer of
client/server 3D software applications, since December 1998. From December 1997
until January 1999, Mr. Joseph was the Vice President of Worldwide OEM Sales for
NetManage, Inc., a provider of personal computer (pc) connectivity solutions and
from December 1994 until December 1997, he was the President, Chief Executive
Officer and a director of Relay Technology, Inc., a provider of mobile and
connectivity software. From March 1993 until August 1994, Mr. Joseph was the
Chairman of the Board, President and Chief Executive Officer of Bridge Builder
Technologies, Inc., a graphical user interface application development company.
2
<PAGE> 5
DIRECTORS WHOSE TERMS EXPIRE IN 2000
TED H. MCCOURTNEY, age 60, has been a director since January 1996. He has
been a general partner of Venrock Associates, a venture capital fund, since
1970. He is also a director of MedPartners, Inc., a physician practice
management company, NTL, Inc., a telecommunications company, and Corecomm, Ltd.,
a telecommunications services company.
WILLIAM J. SMITH, age 64, has been a director since March 1997. Since
November 1997, he has been Vice President, Sales of FlowWise Networks, Inc., an
IP switching technology company. From August 1992 to October 1997, he was the
Senior Vice President, Sales and Marketing of Premisys Communications, Inc., an
integrated digital access company.
SCOTT E. STOUFFER, age 38, has been our Chairman of the board of directors,
President and Chief Executive Officer since our inception in 1993.
DIRECTORS WHOSE TERMS EXPIRE IN 2001
GRANT G. BEHRMAN, age 45, has been a director since September 1996. He has
been a managing partner of Behrman Capital, a venture capital fund, since
February 1991.
THOMAS A. SMITH, age 36, has been a director since September 1995. He has
been a consultant to Mid-Atlantic Venture Funds Management Company, the
management company for NEPA Venture Fund II, L.P., a venture capital fund, since
January 1998 and a general partner of Mid-Atlantic Venture Funds III, L.P. since
April 1998. He has also been a general partner of Edison Venture Fund, a venture
capital fund, since June 1993, and has been an employee of Edison Management
Company, the management company for Edison Venture Fund III L.P., since October
1990.
Unless marked otherwise, proxies received will be voted for the election of
the nominees named above.
RECOMMENDATION OF THE BOARD OF DIRECTORS
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE NOMINEES
NAMED ABOVE.
THE BOARD OF DIRECTORS AND COMMITTEES
Our board of directors met four times during 1998. All directors attended
all meetings of the board and the meetings of the committees of the board of
directors on which they served.
The Audit Committee currently consists of Theodore Joseph, Ted McCourtney
and Thomas Smith and met four times during 1998. The Audit Committee recommends
the firm to be appointed as independent auditors to audit our financial
statements, discusses the scope and results of the audit with the independent
auditors, reviews with our management and the independent auditors our interim
and year-end operating results, considers the adequacy of the internal
accounting controls and audit procedures and reviews the non-audit services to
be performed by our independent auditors.
The Compensation Committee currently consists of Marc Benson, Theodore
Joseph and Thomas Smith and met six times during 1998. The Compensation
Committee reviews and recommends the compensation arrangements for our
management and administers our stock option plans.
The board of directors currently does not have a nominating committee or a
committee performing the functions of a nominating committee. Although there are
no formal procedures for you to nominate persons to serve as directors, the
board of directors will consider recommendations from you, which should be
addressed to our secretary, Nancy A. Spangler, c/o Piper & Marbury L.L.P., 1200
Nineteenth Street, N.W., Washington, D.C. 20036-2430.
3
<PAGE> 6
Directors who are not currently employees of the Company (the "Eligible
Directors") receive awards of stock options under our Amended and Restated 1997
Directors' Stock Option Plan for their service on the board of directors. The
Eligible Directors received grants of 24,000 shares upon the closing of our
initial public offering in February 1998, and will receive grants of 6,000
options at each annual meeting of stockholders while they serve as directors.
EXECUTIVE OFFICERS
In addition to Scott Stouffer, the following are our executive officers:
PETER J. MINIHANE, age 50, has been our Executive Vice President, Chief
Financial Officer and Treasurer since October 1997. From June 1997 to October
1997, he was our Senior Vice President, Chief Financial Officer and Treasurer.
From August 1985 to May 1997, he was Executive Vice President, Chief Financial
Officer and Treasurer of Microcom, Inc., a remote access technology company.
HENRY A. CHELI, age 49, has been our Senior Vice President, North American
Enterprise and Channel Sales since January 1999. Prior to that, from March 1997,
he was our Senior Vice President, Market Operations. From June 1994 to March
1997, he was Senior Vice President of America's Product Business for Racal
Datacom Inc., a telecommunications, electronics and technology company. From
December 1993 to June 1994, he was General Manager and Corporate Vice President,
Network Products Division of Andrew Corporation, Inc., a communications hardware
company.
GREGORY J. LANGFORD, age 49, has been our Senior Vice President, Product
Operations since November 1997. From November 1996 to November 1997, he was our
Vice President, Product Management and Planning. From February 1995 to August
1996, he was Vice President, Marketing of IPC Information Systems, Inc., a
provider of telecommunications products and services to the financial services
industry. From January 1991 to January 1995, Mr. Langford was Vice President,
Marketing of Integrated Network Corporation, a broadband networking company.
ROBERT C. TROUTMAN, age 43, has been our Senior Vice President, Advance
Planning since October 1997. From our inception in 1993 to October 1997, he was
Vice President, Engineering and Manufacturing.
PATRICIA L. COTTER, age 40, has been our Vice President, Manufacturing
since September 1996. From October 1993 to September 1996, she was Director of
Corporate Programs at Stratus Computer, Inc., a provider of fault tolerant
computers.
Our officers are elected by the board of directors on an annual basis and
serve until their successors have been duly elected and qualified.
There are no family relationships among any of the directors or executive
officers of the Company.
4
<PAGE> 7
EXECUTIVE COMPENSATION
The following summary compensation table sets forth the compensation paid
by us during the last three completed years to our chief executive officer and
the other four most highly compensated executive officers whose total
compensation for services in all capacities exceeded $100,000 during 1998, whom
we refer to as our Named Executive Officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION SECURITIES
--------------------------------- UNDERLYING
YEAR SALARY BONUS(1) OTHER OPTIONS
---- -------- -------- ------- ------------
<S> <C> <C> <C> <C> <C>
Scott E. Stouffer....................... 1998 $200,000 $42,109 $ 1,600(2) --
Chairman of the Board, President and 1997 165,000 71,880 --(3) --
Chief Executive Officer 1996 125,000 48,756 3,090 40,600
Peter J. Minihane....................... 1998 140,000(4) 37,832 --(6) --
Executive Vice President, Chief 1997 100,550(5) 45,939 92,951 175,000
Financial Officer and Treasurer
Henry A. Cheli.......................... 1998 150,000(5) 4,602 44,000(7) --
Senior Vice President, North American 1997 119,048 82,618 96,697(8) 135,000
Enterprise and Channel Sales
Gregory J. Langford..................... 1998 135,000(9) 29,878 --(6) --
Senior Vice President, Product 1997 125,000 50,940 61,662 35,000
Operations 1996 14,147 4,167 -- 65,000
Robert C. Troutman...................... 1998 150,000 29,878 1,500(3) --
Senior Vice President, Advance Planning 1997 140,000 61,366 --(3) --
1996 110,925 39,482 3,090 35,000
</TABLE>
- -------------------------
(1) Reflects bonuses earned in the fiscal year indicated, paid during the
following fiscal year.
(2) Consists of payment for an annual physical examination.
(3) Consists of payment of legal fees related to estate planning.
(4) Mr. Minihane received a $120,000 annual salary for the period starting from
January 1, 1998 to June 30, 1998. From July 1, 1998 to December 31, 1998, he
received an annual salary of $160,000.
(5) The salaries paid to Mr. Minihane and Mr. Cheli are for the periods from
their respective dates of employment, June 15, 1997 and March 20, 1997.
(6) Consists of relocation payments.
(7) Consists of commissions.
(8) Consists of commissions of $40,000 and relocation payments of $56,697.
(9) The salary paid to Mr. Langford in 1996 is for the period from his date of
employment, November 1996.
OPTIONS GRANTED IN 1998
We did not grant any options to our Named Executive Officers during 1998.
5
<PAGE> 8
OPTION EXERCISES IN 1998 AND YEAR-END VALUE TABLE
The following table provides information concerning option exercises in
1998 and unexercised options held as of December 31, 1998, by our Named
Executive Officers.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS AT OPTIONS AT
SHARES DECEMBER 31, 1998 DECEMBER 31, 1998(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
EXERCISE RECEIVED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Scott E. Stouffer.............. -- $ -- 46,349 16,900 $1,731,299 $ 630,201
Peter J. Minihane.............. -- -- 52,528 122,472 1,877,876 4,378,374
Henry A. Cheli................. 30,000 42,900 17,250 87,750 622,208 3,165,143
Gregory J. Langford............ 9,433 22,807 19,639 70,928 703,020 2,518,099
Robert C. Troutman............. -- -- 20,675 14,325 771,384 534,466
</TABLE>
- -------------------------
(1) Calculated on the basis of $37.50 per share, the closing price of our common
stock on the Nasdaq National Market on December 31, 1998, less the exercise
price payable for such shares, multiplied by the number of shares underlying
the option.
PERFORMANCE GRAPH
The following graph shows an 11 month comparison of cumulative total return
on our common stock, based on the market price of our stock assuming
reinvestment of dividends, with a return of the S&P Communications Equipment
Index and the Nasdaq Stock Market (U.S.) Index, for the period beginning
February 6, 1998, the day our common stock began trading, through December 31,
1998.
[GRAPH]
<TABLE>
<CAPTION>
2/6/98 12/31/98
<S> <C> <C>
Visual Networks, Inc. 100 300
NASDAQ Stock Market (U.S.) 100 137
S & P Communications Equipment 100 167
</TABLE>
6
<PAGE> 9
EMPLOYMENT ARRANGEMENTS
We have employment agreements with Scott Stouffer and Robert Troutman,
dated December 15, 1994. These agreements provide that Mr. Stouffer and Mr.
Troutman receive current annual salaries of $200,000 and $150,000, respectively,
which are reviewed by our board of directors annually, plus an annual bonus and
reimbursement of certain expenses. These individuals are also entitled to
participate in our health, life or accident insurance plans or programs which we
make available to our other similarly situated employees. Mr. Stouffer and Mr.
Troutman are entitled to 20 business days sabbatical every four years of
employment which we also make available to similarly situated employees.
These agreements continue on a year-to-year basis, renewing each December
15 unless terminated (1) upon 90 days notice from either the individual or by us
prior to the end of the then-current term; (2) by death; (3) due to disability;
(4) by us without cause upon 45 days prior written notice to the individual; or
(5) by us for cause upon 30 days prior written notice, or in the case of
embezzlement or theft, immediately without notice. Upon termination without
cause by us, we will pay the individual severance equal to six months base
salary.
Each agreement contains a covenant not to compete which provides that for a
period of 24 months (decreasing to 12 months after the individual has been an
employee for four years) after his termination for any reason, the individual is
subject to a non-solicitation restriction and will not compete with us or accept
employment with one of our competitors. The agreements also contain
confidentiality and assignment of inventions provisions.
In March 1997, Mr. Cheli entered into an employment arrangement with us
that currently provides for an annual base salary of $150,000, in addition to
certain other benefits. His compensation may increase based on our 1999
financial performance. Upon termination of employment by us without cause, he is
entitled to receive the compensation and benefits which would otherwise be
payable to him for a maximum of six months following such termination. We
granted Mr. Cheli an option to purchase 135,000 shares of common stock at an
exercise price of $1.43 per share, vesting 20% on the first anniversary of the
date of grant and in equal monthly increments over the next four years. Upon a
change in control, his options will automatically vest 100%.
In November 1996, Mr. Langford entered into an employment arrangement with
us which currently provides for an annual base salary of $135,000 in addition to
certain other benefits. His compensation may increase based on our 1999
financial performance. Upon termination of employment by us without cause, he is
entitled to receive the compensation and benefits which would otherwise be
payable to him for a maximum of six months following such termination. Mr.
Langford was granted options to purchase 49,000 shares of common stock in
November 1996 at an exercise price of $1.43 per share, vesting 25% on the second
anniversary of the date of grant and in equal monthly increments over the next
three years, options to purchase 16,000 shares of common stock in December 1996
at an exercise price of $1.43 per share, vesting in equal monthly increments
over five years, options to purchase 35,000 shares of common stock in August
1997 at an exercise price of $3.00 per share, vesting in equal monthly
increments over five years, and options to purchase 25,000 shares of common
stock in February 1999 at an exercise price of $31.50 per share, vesting in
equal monthly increments over three years. Fifty percent of Mr. Langford's
unvested options vest upon a change of control.
In June 1997, Mr. Minihane entered into an employment arrangement with us
which currently provides for an annual base salary of $160,000, in addition to
certain other benefits. His compensation may increase based on our 1999
financial performance. Upon termination of employment by us without cause, Mr.
Minihane is entitled to receive the compensation and benefits which would
otherwise be payable to him for a maximum of six months following such
termination. He was granted options to purchase 175,000 shares of common stock
in June 1997 at an exercise price of $1.75 per share, vesting 20% on the first
anniversary of the date of grant and in equal monthly increments over the next
four years, and options to purchase 50,000 shares of common stock in February
1999 at an exercise price of $31.50 per share, vesting in equal monthly
increments over three years. All of his unvested options vest upon a change of
7
<PAGE> 10
control. Upon commencement of his employment, Mr. Minihane purchased 25,000
shares of our common stock at $1.75 per share.
Our employment agreement with each of Messrs. Cheli, Langford and Minihane
contains general non-solicitation and non-competition provisions applicable
during the period of their employment with us and for one year thereafter.
COMPENSATION COMMITTEE REPORT ON
EXECUTIVE COMPENSATION
The Compensation Committee of our board of directors reviews and recommends
the compensation arrangements for our executives and administers our stock
option plans. The Compensation Committee, established in December 1994,
comprises three members, all of whom are outside directors. None of the
directors has any interlocking or other relationship with us that would call
into question his independence as a Compensation Committee member.
The Compensation Committee seeks to achieve three broad goals in connection
with our executive compensation programs and decisions regarding individual
compensation. First, the Compensation Committee structures executive
compensation programs in a manner that the Committee believes will enable us to
attract and retain key executives. Second, the Compensation Committee
establishes compensation programs that are designed to reward executives for the
achievement of our specified business objectives. By tying compensation in part
to particular goals, the Compensation Committee believes that a
performance-oriented environment is created for our executives. Finally, our
executive compensation programs are intended to provide executives with an
equity interest in the Company so as to link a portion of the compensation of
our executives with the performance of our common stock.
The compensation programs for our executives established by the
Compensation Committee consist of three elements tied to the foregoing
objectives: base salary, annual cash bonus, and stock-based equity incentives
achieved primarily through participation in our 1994 Stock Option Plan and 1997
Omnibus Stock Plan. In establishing base salaries for executives, the
Compensation Committee monitors standards at comparable companies, particularly
those that are in the same industry or related industries and/or are located in
the same general geographical area as us, considers historic salary levels of
the individual and the nature of the individual's responsibilities and compares
the individual's base salary with those of our other executives. To the extent
determined appropriate, the Compensation Committee also considers general
conditions and our financial performance in establishing base salaries of
executives. In deciding to award options, the Compensation Committee also
considers the number of options outstanding or previously granted and the
aggregate size of current awards.
For the year ended December 31, 1998, increases in the base salaries and
bonuses of Messrs. Stouffer, Minihane, Langford and Troutman were tied to
performance-oriented goals set by the Compensation Committee earlier in the
year. Each individual met or exceeded performance goals established by the
Compensation Committee for 1998.
In determining compensation for Mr. Stouffer, the Compensation Committee
reviewed how chief executive officers of companies in the same industry as ours
are compensated and considered the expanded responsibilities of Mr. Stouffer in
light of the fact that we are now a public company. With regard to the 1998
bonus awarded to Mr. Stouffer, the Compensation Committee considered our actual
performance against the goals set out in our business plan and other qualitative
objectives that had been previously discussed.
While no stock options were granted in 1998, the Compensation Committee did
grant options in February 1999 to Messrs. Langford and Minihane which are
designed to be a meaningful portion of their overall compensation and to
reinforce our goal of retaining key executives.
8
<PAGE> 11
Based on its evaluation of the performance of the executive officers, the
Compensation Committee believes that our executive officers are committed to
achieving positive long-term financial performance and enhanced stockholder
value, and that the compensation policies and programs discussed in this report
have motivated our executive officers to work toward these goals.
Section 162(a) of the Internal Revenue Code disallows a tax deduction to
public corporations for compensation over $1,000,000 paid in any year to the
corporation's chief executive officer or to any of the four other most highly
compensated executive officers. The statute exempts qualifying performance-based
compensation from the deduction limit if certain requirements are met. The
Compensation Committee currently intends to structure its executive-compensation
packages to meet these requirements.
Marc F. Benson
Theodore R. Joseph
Thomas A. Smith
COMPENSATION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION
The Compensation Committee of the board of directors was formed in December
1994, and the current members of the Compensation Committee are Messrs. Benson,
Joseph and Thomas Smith. None of the members was, during 1998, one of our
officers or employees at any time.
9
<PAGE> 12
PRINCIPAL STOCKHOLDERS
The following table shows the number of shares of our common stock
beneficially owned as of March 31, 1999 by:
- each person who we know beneficially owns more than 5% of the common
stock;
- each director;
- each of our Named Executive Officers; and
- the directors and executive officers as a group.
Unless otherwise indicated (i) the persons named in the table have sole
voting and investment power with respect to all shares of common stock shown as
beneficially owned by them, subject to community property laws where applicable,
and (ii) the address for the persons named in the table is 2092 Gaither Road,
Rockville, Maryland 20850-4013.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED SHARES OUTSTANDING(1)
------------------------ ------------------ ---------------------
<S> <C> <C>
Putnam Investments, Inc.(2)............................... 2,706,727 13.3
One Post Office Square
Boston, Massachusetts 02109
Venrock Entities(3)....................................... 1,020,092 5.0
30 Rockefeller Plaza, Suite 5508
New York, New York 10112
FMR Corp.(4).............................................. 2,177,700 10.7
82 Devonshire Street
Boston, Massachusetts 02109
Grant G. Behrman(5)....................................... 25,891 *
Marc F. Benson(6)......................................... 18,971 *
Henry A. Cheli(7)......................................... 9,000 *
Theodore R. Joseph(8)..................................... 55,299 *
Gregory J. Langford(9).................................... 33,999 *
Ted H. McCourtney(10)..................................... 1,089,717 5.4
Peter J. Minihane(11)..................................... 25,273 *
Thomas A. Smith(12)....................................... 458,007 2.3
William J. Smith(13)...................................... 33,003 *
Scott E. Stouffer(14)..................................... 1,244,425 6.1
Robert C. Troutman(15).................................... 397,140 2.0
All executive officers and directors
as a group (12 persons)(16)............................. 3,395,319 16.5
</TABLE>
- -------------------------
* Less than 1%.
(1) As of March 31, 1999, we had outstanding 20,339,214 shares of common stock.
The persons named in this table have sole voting power with respect to all
shares of common stock. In computing the number of shares beneficially
owned by a person and the percentage ownership of that person, shares of
common stock, which that person could purchase by exercising outstanding
options and options which will become exercisable within 60 days of March
31, 1999, are deemed outstanding. Such shares, however, are not deemed
outstanding for the purpose of computing the percentage ownership of any
other person.
(2) Represents 2,447,827 shares of common stock beneficially owned by Putnam
Investment Management, Inc. (of which 2,230,337 are held by Putnam OTC &
Emerging Growth Fund) and 258,900 shares of common stock beneficially owned
by The Putnam Advisory Company, Inc.
(3) Represents 630,076 shares of common stock beneficially owned by Venrock
Associates and 390,016 shares of common stock beneficially owned by Venrock
Associates II, L.P. Mr. McCourtney is a general partner of both Venrock
Associates and Venrock Associates II, L.P. Mr. McCourtney has shared voting
and investment power over the shares held by Venrock but disclaims
beneficial ownership thereof except to the extent of his proportionate
partnership interest therein.
(4) Fidelity Management & Research Company, a wholly-owned subsidiary of FMR
Corp., is the beneficial owner of 2,177,700 shares of common stock as a
result of acting as investment adviser to various investment companies
registered under the Investment Company Act of 1940. The ownership
10
<PAGE> 13
of one investment company, Fidelity Growth Company Fund, amounts to
1,052,800 shares of the common stock. Edward C. Johnson III, FMR Corp. and
the funds each has sole power to dispose of the 2,177,700 shares owned by
the Fidelity Funds. Neither FMR Corp. nor Edward C. Johnson III, Chairman
of FMR Corp., has the sole power to vote or direct the voting of the shares
owned directly by the Fidelity Funds, which power resides with the Funds'
Boards of Trustees. Fidelity carries out the voting of the shares under
written guidelines established by the Funds' Boards of Trustees.
(5) Represents 4,258 shares of common stock held by Mr. Behrman, 13,499 shares
of common stock issuable upon exercise of options held by him, 2,238 shares
of common stock held by his wife, 2,238 shares of common stock held by his
minor son, 2,238 shares of common stock held by his minor daughter, and
1,420 shares of common stock held by Behrman Brothers, L.P., which Mr.
Behrman may be deemed to beneficially own by virtue of his status as a
General Partner of the entity. Mr. Behrman has shared voting and investment
power over shares held by Behrman Brothers, L.P., but disclaims beneficial
ownership thereof except to the extent of his proportionate partnership
interest therein.
(6) Represents 5,472 shares of common stock and 13,499 shares of common stock
issuable upon exercise of options.
(7) Represents 9,000 shares of common stock issuable upon exercise of options.
(8) Represents 1,000 shares of common stock held by Mr. Joseph's wife, 11,400
shares of common stock held by his IRA, and 42,899 shares of common stock
issuable upon exercise of options.
(9) Represents 26,310 shares of common stock and 7,689 shares of common stock
issuable upon exercise of options.
(10) Represents 56,126 shares of common stock held by Mr. McCourtney, 13,499
shares of common stock issuable upon exercise of options held by him,
630,076 shares of common stock beneficially owned by Venrock Associates,
and 390,016 shares of common stock beneficially owned by Venrock Associates
II, L.P. Mr. McCourtney is a general partner of both Venrock Associates and
Venrock Associates II, L.P. He has shared voting and investment power over
the shares held by Venrock but disclaims beneficial ownership thereof
except to the extent of his proportionate partnership interest therein.
(11) Represents 25,273 shares of common stock issuable upon exercise of options.
(12) Represents 6,079 shares of common stock held by Mr. Smith, 13,499 shares of
common stock issuable upon exercise of options held by him, and 438,429
shares of common stock beneficially owned by Edison Venture Fund III, L.P.
which Mr. Smith may be deemed to beneficially own by virtue of his status
as a general partner of Edison. He has shared voting and investment power
over shares held by Edison but disclaims beneficial ownership thereof
except to the extent of his proportionate partnership interest therein.
(13) Represents 10,504 shares of common stock and 22,499 shares of common stock
issuable upon exercise of options.
(14) Includes 475,386 shares of common stock held by Mr. Stouffer, 243,923
shares of common stock held by the Scott E. Stouffer GRAT, 475,387 shares
of common stock held by his wife, and 49,729 shares of common stock
issuable upon exercise of options.
(15) Includes 319,746 shares of common stock held by Mr. Troutman, 46,854 shares
held by the Robert C. Troutman GRAT, 7,000 shares held by Mr. Troutman as
custodian for each of two children, and 23,540 shares of common stock
issuable upon exercise of stock options.
(16) Includes an aggregate of 239,219 shares of common stock issuable upon
exercise of options.
11
<PAGE> 14
PROPOSAL NO. 2: ADOPTION OF VISUAL NETWORKS, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
The board of directors proposes that you approve the adoption of the Visual
Networks, Inc. 1999 Employee Stock Purchase Plan (the "Plan") pursuant to which
shares of our common stock would be made available for purchase by our eligible
employees. The following summary of the principal features of the Plan is a fair
and complete summary and it is qualified in its entirety by the full text of the
Plan, which appears as Exhibit A to this proxy statement.
GENERAL
The purpose of the Plan is to promote the success of our Company and
enhance our value by providing eligible employees the opportunity to purchase
our common stock so as to increase their interests in our success and encourage
them to remain as employees. The Plan is intended to qualify as an employee
stock purchase plan under Section 423 of the Internal Revenue Code.
The Plan authorizes the purchase of up to 400,000 shares of common stock by
eligible employees. However, the number of shares available for purchase under
the Plan will be adjusted for stock dividends, stock splits, reclassifications
and other changes affecting our common stock. The shares available for purchase
under the Plan may, in the discretion of our board of directors, be authorized
but unissued shares of common stock, shares purchased on the open market, or
shares from any other proper source.
ADMINISTRATION
The Plan will be administered by our board of directors or a committee
appointed by our board. Subject to the terms of the Plan, the administrator has
authority to interpret the Plan, make, amend and rescind all rules and
regulations for the operation of the Plan, take any other actions and make all
other determinations necessary or desirable to administer and operate the Plan.
ELIGIBILITY TO PARTICIPATE
All of our employees and all employees of any of our subsidiaries that are
designated by the administrator as a participating employer under the Plan are
eligible to participate in the Plan, subject to such further eligibility
requirements as may be specified by the administrator consistent with Section
423 of the Internal Revenue Code. However, any employee that owns, directly or
indirectly, 5% or more of the total combined voting power or value of our stock
or the stock of any of our subsidiaries, is not eligible. As of April 1, 1999,
approximately 181 employees would be eligible to participate in the Plan.
PURCHASES OF COMMON STOCK UNDER THE PLAN
Eligible employees receive options to purchase common stock pursuant to the
Plan. The options are to be granted to each eligible employee on the first day
of each calendar year on which Nasdaq is open for trading, or any other date
specified by the administrator. Options remain outstanding for a period
determined by the administrator not to exceed 27 months. Unless the
administrator determines otherwise, consecutive option periods of equal duration
will be established.
An individual must be employed as an eligible employee by us or a
designated subsidiary on the first trading day of an option period in order to
be granted an option for that option period. In the case of an individual who
first becomes an eligible employee after the first trading day of an option
period, the administrator may designate a subsequent day within the option
period upon which the employee will be granted an option that will have a
duration equal to the balance of that option period.
Each option provides the employee the right to purchase, on the last day of
the option period, up to a maximum number of shares of common stock specified by
the administrator. However, no employee may
12
<PAGE> 15
purchase in one calendar year shares of common stock having an aggregate fair
market value in excess of $25,000. The purchase price for each share of common
stock under an option will be determined by the administrator, in its
discretion, prior to the beginning of the applicable option period. However, the
purchase price will never be less than 85% of the fair market value of the
common stock on the first or last day of the option period, whichever is lower,
and will never be less than the par value of the common stock. For this purpose,
"fair market value" on a particular date means the average of the high and low
sale prices per share of common stock as reflected on the principal consolidated
transaction reporting system for securities listed on any national securities
exchange or other market quotation system on which the common stock may be
principally listed or quoted or, if there are no transactions on that date, then
such average for the preceding trading day upon which transactions occurred. On
April 15, 1999, the closing price of our common stock, as quoted on Nasdaq, was
$34.50. All eligible employees granted options under the Plan for an option
period shall have the same rights and privileges with respect to such options.
To facilitate payment of the purchase price of options, the administrator,
at its discretion, may permit eligible employees to authorize payroll deductions
to be made on each payday during an option period, and/or to contribute cash or
cash-equivalents to us, up to a maximum amount determined by the administrator.
We will maintain bookkeeping accounts for all employees who authorize payroll
deductions or make cash contributions. Interest will not be paid on any employee
accounts, unless the administrator determines otherwise. The administrator will
establish rules and procedures regarding elections to authorize payroll
deductions, changes in such elections, timing and manner of cash contributions,
and withdrawals from employee accounts.
Amounts credited to employee accounts on the last trading day of an option
period will be applied to the payment of the purchase price of outstanding
options. Options will be exercised on the close of business on the last trading
day of an option period; however, options of any participant who terminates
employment for any reason before such date, or who is no longer an eligible
employee on such date, will terminate unexercised. In accordance with rules
established by the administrator, the purchase price of common stock subject to
an option shall be paid (1) from funds credited to an eligible employee's
account, (2) by a broker-assisted cashless exercise in accordance with
Regulation T of the Board of Governors of the Federal Reserve System, or (3) by
such other method as the administrator may determine from time to time. Options
will be exercised only to the extent the purchase price is paid with respect to
whole shares of common stock. Any balance remaining in an employee's account at
the end of an option period will be carried forward automatically for the next
option period. If an employee is not an eligible employee with respect to the
next option period, any remaining balance will be promptly refunded.
Because the number of shares of our common stock that may be purchased by
any participant in the Plan is based on the fair market value of such shares on
future dates and on the participant's decision to purchase shares, the benefits
or amounts that will be received by participants are not currently determinable.
No purchases will be made under the Plan prior to approval of the Plan by the
stockholders.
AMENDMENT AND TERMINATION
Our board of directors may amend the Plan at any time for any reason,
except that (1) if the approval of any such amendment by our stockholders is
required by Section 423 of the Internal Revenue Code, such amendment will not be
effected without such approval, and (2) no amendment may be made that would
cause the Plan to fail to comply with Section 423 of the Internal Revenue Code
unless expressly so provided by our board of directors.
Our board of directors, in its sole discretion, may terminate the Plan at
any time and for any reason. In the event the Plan is terminated, all
outstanding options shall immediately terminate and all amounts in an eligible
employee's account under the plan shall be promptly refunded.
13
<PAGE> 16
TAX ASPECTS
The Plan is intended to qualify as an "employee stock purchase plan" under
the provisions of Section 423 of the Internal Revenue Code. As such, neither the
grant of options to purchase shares under each option period nor the actual
purchase of shares at the close of the option period will result in taxable
income to the employee or a deduction to us.
If an employee disposes of shares acquired under the Plan (including by way
of gift) within two years after the commencement date of the option period under
which the shares are purchased or within one year after the shares are
purchased, there will be a "disqualifying disposition" of the shares. Upon a
disqualifying disposition, the employee must recognize ordinary income equal to
the excess of the fair market value of the shares on their purchase date over
the purchase price paid to acquire the shares. This excess will be taxed as
ordinary income in the year of the disqualifying disposition even if no gain is
realized on the disposition or a gift of the shares is made. Any gain realized
on a disqualifying disposition in excess of the fair market value of the shares
on the purchase date generally will be treated as long-term or short-term
capital gain, depending on the holding period for such shares. If the shares are
sold for less than their fair market value measured as of the purchase date, the
same amount of ordinary income is attributed to the employee and a capital loss
is recognized equal to the difference between the fair market value of the
shares on the exercise date and the sale price. We will have a corresponding tax
deduction at the time of the disqualifying disposition equal to the amount of
ordinary income recognized by the employee.
If an employee disposes of shares acquired under the Plan other than in a
disqualifying disposition (i.e., the disposition occurs after the holding
periods described above have been satisfied), the employee recognizes (1)
ordinary income equal to the difference between the employee's purchase price
and the fair market value of the shares on the commencement date of the option
period under which the shares were purchased, or, if less, the difference
between the amount realized by the employee in the disposition and the purchase
price of the shares, and (2) a long-term capital gain for any additional gain
realized by the employee in the disposition. If an employee sells the shares and
the sale price is less than the purchase price, then there is no ordinary income
recognized and the employee recognizes a capital loss for the difference between
the sale price and the purchase price. We will not have a corresponding tax
deduction for the ordinary income recognized by the employee if there is not a
disqualifying disposition.
Participants must notify us in writing within 30 days after they sell or
otherwise transfer shares purchased under the Plan.
REQUIRED VOTE
Approval of the adoption of the Plan requires an affirmative vote by a
majority of the total votes cast on the proposal in person or by proxy and
entitled to vote. Broker nonvotes and abstentions are not treated as votes cast
for this purpose and have no effect on the outcome of the vote.
RECOMMENDATION OF THE BOARD OF DIRECTORS
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE ADOPTION OF
THE VISUAL NETWORKS, INC. 1999 EMPLOYEE STOCK PURCHASE PLAN.
14
<PAGE> 17
PROPOSAL NO. 3: APPROVAL OF AN AMENDMENT AND RESTATEMENT
OF OUR CERTIFICATE OF INCORPORATION
We are requesting our stockholders to approve an amendment and restatement
of our certificate of incorporation, the full text of which is set forth in
Exhibit B to this proxy statement. Our authorized capital stock consists, and
will consist after the filing of the amended and restated certificate of
incorporation, of 50,000,000 shares of common stock and 5,000,000 shares of
preferred stock. We do not have any preferred stock outstanding at this time.
At December 31, 1997, before we became a publicly held corporation, we had
an aggregate of 7,575,543 shares of convertible preferred stock outstanding. In
February 1998, when we went public, all of the then outstanding preferred stock
was converted into 10,605,735 shares of common stock and was canceled upon
conversion. The proposed amended and restated certificate of incorporation
removes all references to the convertible preferred stock that was canceled upon
closing of the initial public offering and was not considered by our board of
directors to be authorized at anytime after we went public. The 5,000,000 shares
of preferred stock reserved for issuance by our board will continue to be
authorized.
REQUIRED VOTE
Approval of the proposed amendment and restatement of our certificate of
incorporation requires the affirmative vote of the holders of a majority of the
shares of our common stock present at the annual meeting in person or by proxy
and entitled to vote.
RECOMMENDATION OF THE BOARD OF DIRECTORS
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE PROPOSED
AMENDMENT AND RESTATEMENT OF OUR CERTIFICATE OF INCORPORATION.
15
<PAGE> 18
PROPOSAL NO. 4: RATIFICATION OF APPOINTMENT OF AUDITORS
Arthur Andersen LLP has served as our independent auditors since August
1997 and has been selected by our board of directors as our independent auditors
for the year ending December 31, 1999. In the event that ratification of this
selection of auditors is not approved by a majority of the shares of common
stock voting thereon, management will review its future selection of auditors.
Representatives of Arthur Andersen LLP are expected to be present at the
annual meeting and will have the opportunity to make a statement if they desire
to do so. They are also expected to be available to respond to appropriate
questions.
In August 1997, our board dismissed our former auditors. From our inception
and throughout the time they were retained by us, the former auditors did not
disagree with us on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure or any reportable events.
The former auditors' reports on our financial statements contained no adverse
opinion or disclaimer of opinion and were not qualified or modified as to
uncertainty, audit scope or accounting principles. Prior to retaining Arthur
Andersen LLP, we had not consulted with Arthur Andersen LLP on any accounting,
auditing or reporting matter.
Unless marked to the contrary, proxies received will be voted FOR
ratification of the appointment of Arthur Andersen LLP as the independent
auditors for the current year.
REQUIRED VOTE
The ratification of the appointment of Arthur Andersen LLP as our
independent auditors for the year ending December 31, 1999 requires the
affirmative vote of the holders of a majority of the shares of our common stock
present at the annual meeting in person or by proxy and entitled to vote.
RECOMMENDATION OF THE BOARD OF DIRECTORS
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF THE
APPOINTMENT OF ARTHUR ANDERSEN LLP AS OUR INDEPENDENT AUDITORS.
STOCKHOLDER PROPOSALS
To be considered for presentation to the annual meeting to be held in 2000,
a stockholder proposal must be received by Peter J. Minihane, Chief Financial
Officer, Visual Networks, Inc., 2092 Gaither Road, Rockville, Maryland
20850-4013, or by our corporate secretary, Nancy A. Spangler, c/o Piper &
Marbury L.L.P., 1200 Nineteenth Street N.W., Washington, D.C. 20036-2430, no
later than December 1, 1999.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Our directors and executive officers must file reports with the Securities
and Exchange Commission indicating the number of shares of our common stock they
beneficially own and any changes in their beneficial ownership. Copies of these
reports must be provided to us. Based on our review of these reports and written
representations from the persons required to file them, we believe each of our
directors and executive officers filed all the required reports during 1998,
except for one Form 4 which was filed late by Mr. Cheli. To our knowledge,
during 1998, no other person subject to the reporting requirement of Section
16(a) failed to file or was delinquent in filing a required report.
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<PAGE> 19
OTHER MATTERS
Our board of directors knows of no other business which will be presented
to the annual meeting. If any other business is properly brought before the
annual meeting, proxies in the enclosed form will be voted in respect thereof in
accordance with the judgments of the persons voting the proxies.
It is important that the proxies be returned promptly and that your shares
be represented. You are urged to sign, date and promptly return the enclosed
proxy card in the enclosed envelope.
We have filed an Annual Report on Form 10-K for the year ended December 31,
1998 with the Securities and Exchange Commission. You may obtain, free of
charge, a copy of the Form 10-K by writing to Peter J. Minihane, our Chief
Financial Officer, at Visual Networks, Inc., 2092 Gaither Road, Rockville,
Maryland 20850-4013. Our Form 10-K is also available through our website at
www.visualnetworks.com.
By Order of the Board of Directors
/s/ NANCY A. SPANGLER
--------------------------------------
Nancy A. Spangler
Secretary
Dated: May 7, 1999
Rockville, Maryland
17
<PAGE> 20
EXHIBIT A
VISUAL NETWORKS, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
EFFECTIVE APRIL 7, 1999
The Plan provides eligible employees of Visual Networks, Inc. (the
"CORPORATION") and certain of its subsidiaries with opportunities to purchase
shares of the Corporation's Common Stock, $0.01 par value per share (the "COMMON
STOCK"). The Plan is intended to benefit the Corporation by increasing the
employees' interest in the Corporation's growth and success and encouraging
employees to remain in the employ of the Corporation or its participating
subsidiaries. The Plan is intended to constitute an "employee stock purchase
plan" within the meaning of Section 423 of the Internal Revenue Code of 1986, as
amended (the "CODE"), and shall be so applied and interpreted.
1. Shares Subject to the Plan. Subject to adjustment as provided herein,
the aggregate number of shares of Common Stock that may be made available for
purchase under the Plan is 400,000 shares. The shares purchased under the Plan
may, in the discretion of the board of directors of the Corporation (the
"BOARD"), be authorized but unissued shares of Common Stock, shares purchased on
the open market, or shares from any other proper source.
2. Administration. The Plan will be administered by the Board or by a
committee appointed by the Board (the "ADMINISTRATOR"). The Administrator has
authority to interpret the Plan, to make, amend and rescind all rules and
regulations for the administration and operation of the Plan, and to make all
other determinations necessary or desirable in administering and operating the
Plan, all of which will be final and conclusive. No member of the Administrator
shall be liable for any action or determination made in good faith with respect
to the Plan.
3. Eligibility. All employees of the Corporation, including directors who
are employees, and all employees of any subsidiary of the Corporation (as
defined in Code Section 424(f)), now or hereafter existing, that is designated
by the Administrator from time to time as a participating employer under the
Plan (a "DESIGNATED SUBSIDIARY"), are eligible to participate in the Plan,
subject to such further eligibility requirements as may be specified by the
Administrator consistent with Code Section 423.
4. Options to Purchase Common Stock.
(a) Options ("OPTIONS") will be granted pursuant to the Plan to each
eligible employee on the first day on which the National Association of
Securities Dealers Automated Quotation ("NASDAQ") system is open for trading
("TRADING DAY") on or after January 1 of each year, or such other date specified
by the Administrator. Each Option will terminate on the last Trading Day of a
period specified by the Administrator (each such period referred to herein as an
"OPTION PERIOD"). No Option Period shall be longer than 27 months in duration.
Unless the Administrator determines otherwise, subsequent Option Periods of
equal duration will follow consecutively thereafter, each commencing on the
first Trading Day immediately after the expiration of the preceding Option
Period.
(b) An individual must be employed as an eligible employee by the
Corporation or a Designated Subsidiary on the first Trading Day of an Option
Period in order to be granted an Option for that Option Period. However, the
Administrator may designate any subsequent Trading Day(s) (each such designated
Trading Day referred to herein as an "INTERIM TRADING DAY") in an Option Period
upon which Options will be granted to eligible employees who first commence
employment with, or first become eligible employees of, the Corporation or a
Designated Subsidiary after the first Trading Day of the Option Period. In such
event, the Interim Trading Day shall constitute the first Trading Day of the
Option Period for all Options granted on such day for all purposes under the
Plan.
<PAGE> 21
(c) Each Option represents a right to purchase on the last Trading Day of
the Option Period, at the Purchase Price hereinafter provided for, whole shares
of Common Stock up to such maximum number of shares specified by the
Administrator on or before the first day of the Option Period. All eligible
employees granted Options under the Plan for an Option Period shall have the
same rights and privileges with respect to such Options. The purchase price of
each share of Common Stock (the "PURCHASE PRICE") subject to an Option will be
determined by the Administrator, in its discretion, on or before the beginning
of the Option Period; provided, however, that the Purchase Price for an Option
with respect to any Option Period shall never be less than the lesser of 85
percent of the Fair Market Value of the Common Stock on the (i) first Trading
Day of the Option Period or (ii) last Trading Day of the Option Period, and
shall never be less than the par value of the Common Stock.
(d) For purposes of the Plan, "FAIR MARKET VALUE" on a Trading Day means
the average of the high and low sale prices per share of Common Stock as
reflected on the principal consolidated transaction reporting system for
securities listed on any national securities exchange or other market quotation
system on which the Common Stock may be principally listed or quoted or, if
there are no transactions on a Trading Day, then such average for the preceding
Trading Day upon which transactions occurred.
(e) Notwithstanding any provision in this Plan to the contrary, no employee
shall be granted an Option under this Plan if such employee, immediately after
the Option would otherwise be granted, would own 5% or more of the total
combined voting power or value of the stock of the Corporation or any
subsidiary. For purposes of the preceding sentence, the attribution rules of
Code Section 424(d) will apply in determining the stock ownership of an
employee, and all stock which the employee has a contractual right to purchase
will be treated as stock owned by the employee.
(f) Notwithstanding any provision in this Plan to the contrary, no employee
may be granted an Option which permits his rights to purchase Common Stock under
this Plan and all other stock purchase plans of the Corporation and its
subsidiaries to accrue at a rate which exceeds $25,000 of the fair market value
of such Common Stock (determined at the time such Option is granted) for each
calendar year in which the Option is outstanding at any time, as required by
Code Section 423.
5. Payroll Deductions and Cash Contributions.
To facilitate payment of the Purchase Price of Options, the Administrator,
in its discretion, may permit eligible employees to authorize payroll deductions
to be made on each payday during the Option Period, and/or to contribute cash or
cash-equivalents to the Corporation, up to a maximum amount determined by the
Administrator. The Corporation will maintain bookkeeping accounts for all
employees who authorize payroll deduction or make cash contributions. Interest
will not be paid on any employee accounts, unless the Administrator determines
otherwise. The Administrator shall establish rules and procedures, in its
discretion, from time to time regarding elections to authorize payroll
deductions, changes in such elections, timing and manner of cash contributions,
and withdrawals from employee accounts. Amounts credited to employee accounts on
the last Trading Day of an Option Period will be applied to the payment of the
Purchase Price of outstanding Options pursuant to Section 6 below.
6. Exercise of Options; Purchase of Common Stock. Options shall be
exercised on the close of business on the last Trading Day of the Option Period.
In accordance with rules established by the Administrator, the Purchase Price of
Common Stock subject to an option shall be paid (i) from funds credited to an
eligible employee's account, (ii) by a broker-assisted cashless exercise in
accordance with Regulation T of the Board of Governors of the Federal Reserve
System, or (iii) by such other method as the Administrator shall determine from
time to time. Options shall be exercised only to the extent the Purchase Price
is paid with respect to whole shares of Common Stock. Any balance remaining in
an employee's account at the end of an Option Period after such purchase of
Common Stock will be carried forward automatically into the employee's account
for the next Option Period unless the employee is not an eligible employee with
respect to the next Option Period, in which case such amount will be promptly
refunded.
- 2 -
<PAGE> 22
7. Issuance of Certificates. As soon as practicable following the end of
each Option Period, certificates representing shares of Common Stock purchased
under the Plan for such Option Period will be issued only in the name of the
employee, in the name of the employee and another person of legal age as joint
tenants with rights of survivorship, or (in the Administrator's sole discretion)
in the street name of a brokerage firm, bank or other nominee holder designated
by the employee.
8. Rights on Retirement, Death, Termination of Employment, or Termination
of Status as Eligible Employee. In the event of an employee's termination of
employment or termination of status as an eligible employee prior to the last
Trading Day of an Option Period (whether as a result of the employee's voluntary
or involuntary termination, retirement, death or otherwise), any outstanding
Option granted to him will immediately terminate, no further payroll deduction
will be taken from any pay due and owing to the employee and the balance in the
employee's account will be paid to the employee or, in the event of the
employee's death, (a) to the executor or administrator of the employee's estate
or (b) if no such executor or administrator has been appointed to the knowledge
of the Administrator, to such other person(s) as the Administrator may, in its
discretion, designate. If, prior to the last Trading Day of an Option Period,
the Designated Subsidiary by which an employee is employed will cease to be a
subsidiary of the Corporation, or if the employee is transferred to a subsidiary
of the Corporation that is not a Designated Subsidiary, the employee will be
deemed to have terminated employment for the purposes of this Plan.
9. Optionees Not Stockholders. Neither the granting of an Option to an
employee nor the deductions from his pay will constitute such employee a
stockholder of the shares of Common Stock covered by an Option under this Plan
until such shares have been purchased by and issued to him.
10. Options Not Transferable. Options under this Plan are not transferable
by a participating employee other than by will or the laws of descent and
distribution, and are exercisable during the employee's lifetime only by the
employee.
11. Withholding of Taxes. To the extent that a participating employee
realizes ordinary income in connection with the purchase, sale or other transfer
of any shares of Common Stock purchased under the Plan or the crediting of
interest to the employee's account, the Corporation may withhold amounts needed
to cover such taxes from any payments otherwise due and owing to the
participating employee or from shares that would otherwise be issued to the
participating employee hereunder. Any participating employee who sells or
otherwise transfers shares purchased under the Plan must, within 30 days of such
sale or transfer, notify the Corporation in writing of the sale or transfer.
12. Application of Funds. All funds received or held by the Corporation
under the Plan may be used for any corporate purpose until applied to the
purchase of Common Stock and/or refunded to participating employees and can be
commingled with other general corporate funds. Participating employees' accounts
will not be segregated.
13. Effect of Changes in Capitalization.
(a) Changes in Stock. If the number of outstanding shares of Common Stock
is increased or decreased or the shares of Common Stock are changed into or
exchanged for a different number or kind of shares or other securities of the
Corporation by reason of any recapitalization, reclassification, stock split,
reverse split, combination of shares, exchange of shares, stock dividend, or
other distribution payable in capital stock, or other increase or decrease in
such shares effected without receipt of consideration by the Corporation
occurring after the effective date of the Plan, the number and kind of shares
that may be purchased under the Plan shall be adjusted proportionately and
accordingly by the Corporation. In addition, the number and kind of shares for
which Options are outstanding shall be similarly adjusted so that the
proportionate interest, if any, of a participating employee immediately
following such event shall, to the extent practicable, be the same as
immediately prior to such event. Any such adjustment in outstanding Options
shall not change the aggregate Purchase Price payable by a participating
employee
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<PAGE> 23
with respect to shares subject to such Options, but shall include a
corresponding proportionate adjustment in the Purchase Price per share.
(b) Reorganization in Which the Corporation Is the Surviving
Corporation. Subject to Subsection (c) of this Section 13, if the Corporation
shall be the surviving corporation in any reorganization, merger or
consolidation of the Corporation with one or more other corporations, all
outstanding Options under the Plan shall pertain to and apply to the securities
to which a holder of the number of shares of Common Stock subject to such
Options would have been entitled immediately following such reorganization,
merger or consolidation, with a corresponding proportionate adjustment of the
Purchase Price per share so that the aggregate Purchase Price thereafter shall
be the same as the aggregate Purchase Price of the shares subject to such
Options immediately prior to such reorganization, merger or consolidation.
(c) Reorganization in Which the Corporation Is Not the Surviving
Corporation or Sale of Assets or Stock. Upon any dissolution or liquidation of
the Corporation, or upon a merger, consolidation or reorganization of the
Corporation with one or more other corporations in which the Corporation is not
the surviving corporation, or upon a sale of all or substantially all of the
assets of the Corporation to another corporation, or upon any transaction
(including, without limitation, a merger or reorganization in which the
Corporation is the surviving corporation) approved by the Board that results in
any person or entity owning more than 50 percent of the combined voting power of
all classes of stock of the Corporation, the Plan and all Options outstanding
hereunder shall terminate, except to the extent provision is made in writing in
connection with such transaction for the continuation of the Plan and/or the
assumption of the Options theretofore granted, or for the substitution for such
Options of new Options covering the stock of a successor corporation, or a
parent or subsidiary thereof, with appropriate adjustments as to the number and
kinds of shares and exercise prices, in which event the Plan and Options
theretofore granted shall continue in the manner and under the terms so
provided. In the event of any such termination of the Plan, the Option Period
shall be deemed to have ended on the last Trading Day prior to such termination,
and, unless the Administrator determines otherwise in its discretion, each
participating employee shall have the ability to choose either to (i) have all
monies then credited to such employee's account (including interest, to the
extent any has accrued) returned to such participating employee or (ii) exercise
his Options in accordance with Section 6 on such last Trading Day; provided,
however, that if a participating employee does not exercise his right of choice,
his Options shall be deemed to have been automatically exercised in accordance
with Section 6 on such last Trading Day. The Administrator shall send written
notice of an event that will result in such a termination to all participating
employees not later than the time at which the Corporation gives notice thereof
to its stockholders.
(d) Adjustments. Adjustments under this Section 13 related to stock or
securities of the Corporation shall be made by the Administrator, whose
determination in that respect shall be final, binding, and conclusive.
(e) No Limitations on Corporation. The grant of an Option pursuant to the
Plan shall not affect or limit in any way the right or power of the Corporation
to make adjustments, reclassifications, reorganizations or changes of its
capital or business structure or to merge, consolidate, dissolve or liquidate,
or to sell or transfer all or any part of its business or assets.
14. Amendment of the Plan. The Board may at any time, and from time to
time, amend this Plan in any respect, except that (a) if the approval of any
such amendment by the stockholders of the Corporation is required by Code
Section 423, such amendment will not be effected without such approval, and (b)
in no event may any amendment be made which would cause the Plan to fail to
comply with Code Section 423 unless expressly so provided by the Board.
15. Insufficient Shares. In the event that the total number of shares of
Common Stock specified in elections to be purchased under any Option plus the
number of shares purchased under all Options previously granted under this Plan
exceeds the maximum number of shares issuable under this Plan, the Administrator
will allot the shares then available on a pro rata basis. Any funds then
remaining in a
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<PAGE> 24
participating employee's account after purchase of the employee's pro-rata
number of shares will be refunded.
16. Termination of the Plan. This Plan may be terminated at any time by
the Board. Except as otherwise provided in Section 13(c) hereof, upon
termination of this Plan all outstanding Options shall immediately terminate and
amounts in the employees' accounts will be promptly refunded.
17. Governmental Regulations.
(a) The Corporation's obligation to sell and deliver Common Stock under
this Plan is subject to listing on a national stock exchange or quotation on
Nasdaq and the approval of all governmental authorities required in connection
with the authorization, issuance or sale of such stock.
(b) The Plan will be governed by the laws of the State of Delaware except
to the extent that such law is preempted by federal law.
18. Effective Date. The Plan is effective as of the date on which it was
approved by the Board of Directors of the Corporation, subject to the approval
of the stockholders of the Corporation within 12 months of the effective date.
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<PAGE> 25
EXHIBIT B
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
VISUAL NETWORKS, INC.
Pursuant to Section 242
Of the Corporation Law of the
State of Delaware
Visual Networks, Inc. (hereinafter called the "Corporation"), organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, does hereby certify as follows:
The date of incorporation of the Corporation is December 13, 1994.
At a meeting of the Board of Directors of the Corporation a resolution was
duly adopted, pursuant to Section 242 of the General Corporation Law of the
State of Delaware, setting forth an amended and restated Certificate of
Incorporation of the Corporation and declaring said amendment and restatement to
be advisable. The stockholders of the Corporation duly approved said proposed
amendment and restatement by the affirmative vote of the holders of at least a
majority of the Common Stock present at the Annual Meeting of Stockholders in
accordance with Sections 211 and 242 of the General Corporation Law of the State
of Delaware. The resolutions setting forth the amendment and restatement are as
follows:
RESOLVED: That the Certificate of Incorporation of the Corporation be and
hereby is amended and restated as follows:
FIRST: The name of the Corporation is Visual Networks, Inc. The date of
filing of its original Certificate of Incorporation with the Secretary of State
was December 13, 1994.
SECOND: This Amended and Restated Certificate of Incorporation restates and
integrates and further amends the Certificate of Incorporation of the
Corporation and all prior amendments thereto by deleting from the Certificate of
Incorporation, as amended, all provisions thereof and substituting in lieu
thereof the Amended and Restated Certificate of Incorporation set forth in
Paragraph 3 below.
THIRD: The text of the Certificate of Incorporation as amended or
supplemented heretofore is further amended and restated hereby to read as herein
set forth in full:
1. Name. The name of the corporation is Visual Networks, Inc.
2. Registered Office and Agent. The address of its registered office in
the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the
City of Wilmington, County of New Castle. The name of its registered agent at
such address is Corporation Trust Company.
3. Purpose. The purposes for which the Corporation is formed are to engage
in any lawful act or activity for which corporations may be organized under the
General Corporation Law of Delaware, and to possess and exercise all of the
powers and privileges granted by such law and other laws of Delaware.
4. Authorized Capital. The total number of shares of all classes of stock
which the Corporation shall have authority to issue is 55,000,000 shares, of
which (i) 50,000,000 shall be shares of common stock, par value $0.01 per share
(the "Common Stock"), and (ii) 5,000,000 shall be shares of preferred stock, par
value $0.01 per share (the "Preferred Stock").
<PAGE> 26
A. Common Stock
(1) General. The voting, dividend and liquidation rights of the holders of
the Common Stock are subject to and qualified by the rights of the holders of
the Preferred Stock of any series as may be designated by the Board of Directors
upon any issuance of the Preferred Stock of any series.
(2) Voting. The holders of the Common Stock are entitled to one vote for
each share held at all meetings of stockholders. There shall be no cumulative
voting.
(3) Dividends. Dividends may be declared and paid on the Common Stock from
funds lawfully available therefor as and when determined by the Board of
Directors and subject to any preferential dividend rights of any then
outstanding Preferred Stock.
(4) Liquidation. Upon the dissolution or liquidation of the Corporation,
whether voluntary or involuntary, holders of Common Stock will be entitled to
receive all assets of the Corporation available for distribution to its
stockholders, subject to any preferential rights of any then outstanding
Preferred Stock.
(5) Redemption. The Common Stock is not redeemable.
B. Preferred Stock. The Board of Directors expressly is authorized,
subject to limitations prescribed by the Delaware General Corporation Law and
the provisions of this Amended and Restated Certificate of Incorporation of the
Corporation, to provide, by resolution and by filing a certificate pursuant to
the Delaware General Corporation Law, for the issuance from time to time of the
shares of Preferred Stock in one or more series, to establish from time to time
the number of shares to be included in each such series, and to fix the
designation, powers, preferences and other rights of the shares of each such
series and to fix the qualifications, limitations and restrictions thereon,
including, but without limiting the generality of the foregoing, the following:
(1) the number of shares constituting that series and the distinctive
designation of that series;
(2) the dividend rate on the shares of that series, whether dividends shall
be cumulative, and, if so, from which date or dates, and the relative rights of
priority, if any, of payment of dividends on shares of that series;
(3) whether that series shall have voting rights, in addition to the voting
rights provided by law, and, if so, the terms of such voting rights;
(4) whether that series shall have conversion privileges, and, if so, the
terms and conditions of such conversion, including provision for adjustment of
the conversion rate in such events as the Board of Directors shall determine;
(5) whether or not the shares of that series shall be redeemable, and, if
so, the terms and conditions of such redemption, including the dates upon or
after which they shall be redeemable, and the amount per share payable in case
of redemption, which amount may vary under different conditions and at different
redemption rates;
(6) whether that series shall have a sinking fund for the redemption or
purchase of shares of that series, and, if so, the terms and amount of such
sinking fund;
(7) the rights of the shares of that series in the event of voluntary or
involuntary liquidation, dissolution or winding up of the Corporation, and the
relative rights of priority, if any, of payment of shares of that series; and
(8) any other relative powers, preferences, and rights of that series, and
qualifications, limitations or restrictions on that series.
5. Term. The Corporation is to have perpetual existence.
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<PAGE> 27
6. Bylaws. The bylaws of the corporation may be altered, amended or
repealed by the vote of a majority of all of the directors or by the vote of
holders of a majority of the stock entitled to vote.
7. Limitation on Liability. No director of the Corporation shall be
personally liable to the Corporation or to any stockholder of the Corporation
for monetary damages for breach of fiduciary duty as a director, provided that
this provision shall not limit the liability of a director (i) for any breach of
the director's duty of loyalty to the Corporation of its stockholders, (ii) for
acts or omissions not in good faith or which involved intentional misconduct or
a knowing violation of law, (iii) under Section 174 of the General Corporation
Law of Delaware, or (iv) for any transaction from which the director derived an
improper personal benefit.
If the General Corporation Law of Delaware or any other statute of the
State of Delaware hereafter is amended to authorize the further elimination or
limitation of the liability of directors of the Corporation, then the liability
of a director of the Corporation shall be limited to the fullest extent
permitted by the statutes of the State of Delaware, as so amended, and such
elimination or limitation of liability shall be in addition to, and not in lieu
of, the limitation on the liability of a director provided by the foregoing
provisions of this Article 7.
Any repeal of or amendment to this Article 7 shall be prospective only and
shall not adversely affect any limitation on the liability of a director of the
Corporation existing at the time of such repeal or amendment.
8. Election of Directors.
(A) General. Elections of directors need not be by written ballot unless
the by-laws of the Corporation shall so provide. Except as otherwise provided in
this Certificate of Incorporation or a certificate of designation relating to
the rights of the holders of any class or series of Preferred Stock, voting
separately by class or series, to elect additional directors under specified
circumstances, the number of directors of the Corporation shall be as fixed from
time to time by or pursuant to the by-laws of the Corporation. No director of
the Corporation need be a stockholder of the Corporation.
(B) Classification. The Board of Directors shall be classified with
respect to the time for which they severally hold office into three separate
classes, Class I, Class II and Class III, which shall be as nearly equal in
number as possible, and shall be adjusted from time to time in the manner
specified in the bylaws of the Corporation to maintain such proportionality.
Each initial director in Class I shall hold office for a term expiring at the
2000 annual meeting of stockholders. Each initial director in Class II shall
hold office initially for a term expiring at the 1999 annual meeting of
stockholders. Each initial director in Class III shall hold office for a term
expiring at the 2001 annual meeting of stockholders. Notwithstanding the
foregoing provisions of this Article 8, each director shall serve until such
director's successor is duly elected and qualified or until such director's
earlier death, resignation or removal. At each annual meeting of stockholders,
the successors to the class of directors whose term expires at that meeting
shall be elected to hold office for a term expiring at the annual meeting of
stockholders held in the third year following the year of their election and
until their successors have been duly elected and qualified or until any such
director's earlier death, resignation or removal.
9. Meetings of Stockholders. Meetings of stockholders may be held within
or without the State of Delaware, as the bylaws of the Corporation may provide.
At such time as the Corporation shall be subject to the reporting requirements
of the Securities Exchange Act of 1934, as amended, any action required or
permitted to be taken by the stockholders of the Corporation must be effected at
a duly called annual or special meeting of stockholders, and may not be effected
by any consent in writing by such stockholders, unless such consent is
unanimous.
10. Corporate Records. The books of the Corporation may be kept (subject
to any provision contained in applicable statutes) outside the State of Delaware
at such place or places as may be designated from time to time by the Board of
Directors or in the bylaws of the Corporation.
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<PAGE> 28
11. Right to Amend. The Corporation reserves the right to amend, alter,
change or repeal any provision contained in this Certificate of Incorporation
and in any certificate amendatory hereof, in the manner now or hereafter
prescribed by statute, and all rights conferred upon stockholders or others
hereunder or thereunder are granted subject to this reservation.
12. Indemnification. The Corporation shall, to the fullest extent
permitted by Section 145 of the General Corporation Law of Delaware, as amended
from time to time, indemnify each person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that he is or was, or has agreed to become, a director or officer of
the Corporation, or is or was serving, or has agreed to serve, at the request of
the Corporation, as a director, officer or trustee of, or in a similar capacity
with, another corporation, partnership, joint venture, trust or other enterprise
(including any employee benefit plan), or by reason of any action alleged to
have been taken or omitted in such capacity, against all expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him or on his behalf in connection with such action, suit
or proceeding and any appeal therefrom.
Indemnification may include payment by the Corporation of expenses in
defending an action or proceeding in advance of the final disposition of such
action or proceeding upon receipt of an undertaking by the person indemnified to
repay such payment if it is ultimately determined that such person is not
entitled to indemnification under this Article 12, which undertaking may be
accepted without reference to the financial ability of such person to make such
repayment.
The Corporation shall not indemnify any such person seeking indemnification
in connection with a proceeding (or part thereof) initiated by such person
unless the initiation thereof was approved by the Board of Directors of the
Corporation.
The indemnification rights provided in this Article 12 (i) shall not be
deemed exclusive of any other rights to which those indemnified may be entitled
under any law, agreement or vote of stockholders or disinterested directors or
otherwise and (ii) shall inure to the benefit of the heirs, executors and
administrators of such persons. The Corporation may, to the extent authorized
from time to time by its Board of Directors, grant indemnification rights to
other employees or agents of the Corporation or other persons serving the
Corporation and such rights may be equivalent to, or greater or less than, those
set forth in this Article 12.
FOURTH: This Amended and Restated Certificate of Incorporation shall be
effective as of the date set forth below.
FIFTH: This Amended and Restated Certificate of Incorporation has been
advised by the Board of Directors and approved by the holders of at least a
majority of the outstanding capital stock of the Corporation present at the
Annual Meeting in person or by proxy.
IN WITNESS WHEREOF, Visual Networks, Inc. has caused this Certificate to be
signed by Scott E. Stouffer, its President this day of , 1999.
VISUAL NETWORKS, INC.
By:
------------------------------------
Scott E. Stouffer
President
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<PAGE> 29
PROXY
VISUAL NETWORKS, INC.
2092 GAITHER ROAD
ROCKVILLE, MARYLAND 20850-4013
SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF THE STOCKHOLDERS
The undersigned hereby appoints Scott Stouffer, Peter Minihane and Nancy
Spangler, each with the power to appoint his or her substitute, and hereby
authorizes them to represent and to vote, as designated on the reverse side,
all shares of common stock of Visual Networks, Inc. (the "Company") held of
record by the undersigned on April 9, 1999 at the Annual Meeting of
Stockholders to be held on May 26, 1999 at 10:00 a.m., local time, at the
offices of Piper & Marbury L.L.P., 1200 Nineteenth Street, N.W., Washington,
D.C. 20036-2430, and any adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED. IF NO
DIRECTION IS GIVEN WITH RESPECT TO A PARTICULAR PROPOSAL, THIS PROXY WILL BE
VOTED FOR SUCH PROPOSAL.
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY CARD PROMPTLY, USING THE
ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
<PAGE> 30
<TABLE>
<S> <C>
FOR AGAINST ABSTAIN
[X] Please mark 2. Adoption of the Visual Networks, Inc.
vote as in 1999 Employee Stock Purchase Plan. [ ] [ ] [ ]
this example
3. Approval of Amended and Restated Certificate
1. Election of Directors to serve until 2002. of Incorporation. [ ] [ ] [ ]
Nominees: Marc F. Benson and Theodore R. Joseph
FOR WITHHELD 4. Ratification of the appointment of
[ ] [ ] Aruthur Andersen LLP as independent
auditors. [ ] [ ] [ ]
[ ]
----------------------------------------- 5. In their discretion, the proxies are authorized to vote upon
For both nominees except as noted above any other business that may properly come before the meeting.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
Please sign exactly as your name appears hereon. Joint owners each should
sign. Executors, administrators, trustees, guardians or other fiduciaries
should give full title as such. If signing for a corporation, please sign
in full corporate name by a duly authorized officer.
Signature: Date: Signature: Date:
------------------------------- ------------ -------------------------------- ------------
</TABLE>
