<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] CONFIDENTIAL, FOR USE OF THE
[_] Preliminary Proxy Statement COMMISSION ONLY
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
MMC NETWORKS, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
REGISTRANT
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: ________
(2) Aggregate number of securities to which transaction applies: ___________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): _____________
(4) Proposed maximum aggregate value of transaction: _______________________
(5) Total fee paid: ________________________________________________________
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
N/A
(1) Amount Previously Paid: ________________________________________________
N/A
(2) Form, Schedule or Registration Statement No.: __________________________
N/A
(3) Filing Party: __________________________________________________________
N/A
(4) Date Filed: ____________________________________________________________
<PAGE>
MMC NETWORKS, INC.
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 28, 1998
----------------
TO THE STOCKHOLDERS OF MMC NETWORKS, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of MMC
Networks, Inc., a Delaware corporation (the "Company"), will be held on
Thursday, May 28, 1998, at 1:00 p.m., local time, at the executive offices of
the Company located at 1134 East Arques Avenue, Sunnyvale, CA 94086 ((408)
731-1600), for the following purposes:
1. To elect two Class I directors to serve for three-year terms and until
their successors are duly elected and qualified;
2. To ratify the appointment of Price Waterhouse LLP as the independent
accountants of the Company for the fiscal year ending December 31, 1998;
and
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on April 8, 1998 are
entitled to notice of, and to vote at, the meeting and any adjournment
thereof.
All stockholders are cordially invited to attend the meeting in person.
HOWEVER, TO ENSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE URGED TO MARK,
SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE IN THE
POSTAGE PREPAID ENVELOPE ENCLOSED FOR THAT PURPOSE. You may revoke your proxy
at any time before it has been voted, and if you attend the meeting you may
vote in person even if you have previously returned your proxy card. Your
prompt cooperation will be greatly appreciated.
Sincerely,
Uday Bellary
Vice President, Finance,
Chief Financial Officer and
Assistant Secretary
Sunnyvale, California
April 17, 1998.
<PAGE>
----------------
PROXY STATEMENT
----------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of MMC Networks, Inc., a Delaware
corporation (the "Company") for use at the Annual Meeting of Stockholders (the
"Annual Meeting") to be held on May 28, 1998 at 1:00 p.m. local time, or at
any adjournment thereof, for the purposes set forth herein and in the
accompanying Notice of Annual Meeting of Stockholders. The Annual Meeting will
be held at the Company's executive offices located at 1134 East Arques Avenue,
Sunnyvale, California 94086 ((408) 731-1600).
These proxy solicitation materials were mailed on or about April 17, 1998 to
all stockholders entitled to vote at the meeting.
RECORD DATE AND OUTSTANDING SHARES
Stockholders of record at the close of business on April 8, 1998 (the
"Record Date") are entitled to notice of and to vote at the Annual Meeting.
At the Record Date, 29,302,721 shares of the Company's Common Stock, $0.001
par value, were outstanding and held by approximately 165 stockholders of
record. The only persons known by the Company to be the beneficial owners of
more than 5% of the Company's Common Stock as of the Record Date were
Institutional Venture Partners, U.S. Venture Partners, Alexander Joffe,
Prabhat K. Dubey and Amos Wilnai.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Company a written
notice of revocation or a duly executed proxy bearing a later date or by
attending the meeting and voting in person.
VOTING AND SOLICITATION
On all matters, each share has one vote. The cost of this solicitation will
be borne by the Company. The Company will reimburse brokerage firms and other
persons representing beneficial owners of shares for their expenses in
forwarding solicitation material to such beneficial owners in accordance with
applicable regulations. Proxies may also be solicited by certain of the
Company's directors, officers and regular employees, without additional
compensation, personally or by telephone, electronic mail or facsimile.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
The required quorum for the transaction of business at the Annual Meeting is
a majority of the shares of Common Stock issued and outstanding on the Record
Date. Shares that are voted "FOR," "AGAINST" or "WITHHELD FROM" a matter are
treated as being present at the meeting for purposes of establishing a quorum
and are also treated as shares represented and voting at the Annual Meeting
(the "Votes Cast") with respect to such matter.
While there is no definitive statutory or case law authority in Delaware as
to the proper treatment of abstentions, the Company believes that abstentions
should be counted for purposes of determining both the presence or absence of
a quorum for the transaction of business and the total number of Votes Cast
with respect to a particular matter. In the absence of controlling precedent
to the contrary, the Company intends to treat abstentions in this manner.
However, because directors are elected by a plurality vote, abstentions in the
election
<PAGE>
of directors have no import once a quorum exists. In a 1988 Delaware case,
Berlin v. Emerald Partners, the Delaware Supreme Court held that, while broker
non-votes may be counted for purposes of determining the presence or absence
of a quorum for the transaction of business, broker non-votes should not be
counted for purposes of determining the number of Votes Cast with respect to
the particular proposal on which the broker has expressly not voted. Broker
non-votes with respect to proposals set forth in this Proxy Statement will
therefore not be considered "Votes Cast" and, accordingly, will not affect the
determination as to whether the requisite majority of Votes Cast has been
obtained with respect to a particular matter.
This Proxy Statement and form of proxy were first sent or given to
stockholders on or about April 17, 1998, together with the Notice of Annual
Meeting of Stockholders.
STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company that are intended to be presented
by such stockholders at the Company's next Annual Meeting of Stockholders must
be received by the Company no later than November 1, 1998 in order to be
considered for possible inclusion in the Company's proxy statement and form of
proxy relating to that meeting.
2
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of Common Stock of
the Company as of the Record Date of (i) each person known by the Company to
beneficially own more than 5% of the Company's Common Stock, (ii) each
director, (iii) the executive officers of the Company named in the Summary
Compensation Table below, and (iv) all directors and executive officers as a
group:
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
BENEFICIALLY OWNED(1)
---------------------
PERCENT OF
NAME OF BENEFICIAL OWNER NUMBER TOTAL
------------------------ ---------- ----------
<S> <C> <C>
Institutional Venture Partners(2)..................... 5,408,662 18.1%
3000 Sand Hill
Bldg. 2, Suite 290
Menlo Park, CA 94025
U.S. Venture Partners(3).............................. 5,406,962 18.1%
2180 Sand Hill Road, Suite 300
Menlo Park, CA 94025
Amos Wilnai (4)....................................... 1,737,226 5.8%
1134 East Arques Avenue
Sunnyvale, CA 94086
Prabhat K. Dubey (5).................................. 1,800,000 6.0%
1134 East Arques Avenue
Sunnyvale, CA 94086
Alexander Joffe(6).................................... 1,963,625 6.6%
Sena C. Reddy(7)...................................... 100,000 *
John A. Teegen(8)..................................... 90,000 *
John G. Adler......................................... -- *
Irwin Federman(9)..................................... 1,300 *
Andrew S. Rappaport................................... 227,500 *
Geoffrey Y. Yang(10).................................. 3,000 *
William R. Walker(11)................................. 84,375 *
All directors and executive officers as a group (12
persons)(12)......................................... 16,936,475 56.8%
</TABLE>
- --------
*Less than 1%.
(1) Except pursuant to applicable community property laws or as indicated in
the footnotes to this table, to the Company's knowledge, each stockholder
identified in the table possesses sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by such
stockholder.
(2) Includes 5,261,322 shares held by Institutional Venture Partners VI,
L.P., 108,114 shares held by Institutional Venture Management VI, L.P.
and 36,226 shares held by IVP Founders Fund I, L.P. Also includes 3,000
shares held by Mr. Geoffrey Y. Yang. Mr. Yang, a director of the Company,
is a General Partner of Institutional Venture Management VI, L.P., which
is the General Partner of each of such limited partnerships.
3
<PAGE>
(3) Includes 4,675,896 shares held by U.S. Venture Partners IV, L.P., 567,594
shares held by Second Ventures Limited Partnership II and 162,172 shares
held by U.S.V.P. Entrepreneur Partners II, L.P. Also includes 1,300
shares held by Mr. Irwin Federman. Mr. Federman, a director of the
Company, is a General Partner of Presidio Management Group IV, L.P.,
which is the General Partner of each of such limited partnerships.
(4) Represents shares held by Amos Wilnai and Ruth Wilnai, Trustees of the
Wilnai Family Trust U/D/T dated June 10, 1997. Does not include 1,313,206
shares held by Nitzan Wilnai, 1,313,206 shares held by Sigal Wilnai and
1,313,206 shares held by Yael Wilnai, each of whom is an adult child of
Mr. Wilnai. Also does not include 113,205 shares held by Miriam Wilnai,
Mr. Wilnai's mother. Mr. Wilnai disclaims beneficial ownership of all
such shares.
(5) Includes 502,590 shares held by Dr. Ranjana Sharma, as custodian for Mr.
Dubey's minor children. Mr. Dubey disclaims beneficial ownership of all
such shares.
(6) Includes 190,625 shares issuable pursuant to options currently
exercisable or exercisable within 60 days of the Record Date. Also
includes 9,000 shares held by Mr. Joffe's minor children, as to which
Mr. Joffe disclaims beneficial ownership.
(7) Includes options to purchase 100,000 shares exercisable within 60 days of
the Record Date.
(8) Includes options to purchase 90,000 shares exercisable within 60 days of
the Record Date.
(9) Does not include 4,675,896 shares held by U.S. Venture Partners IV, L.P.,
567,594 shares held by Second Ventures Limited Partnership II and 162,172
shares held by U.S.V.P. Entrepreneur Partners II, L.P. As the General
Partner of Presidio Management Group IV, L.P., which is the General
Partner of each of such limited partnerships, Mr. Federman may be deemed
to share voting and investment power with respect to such shares.
However, Mr. Federman disclaims beneficial ownership of all such shares
except to the extent of his pecuniary interest therein.
(10) Does not include 5,261,322 shares beneficially owned by Institutional
Venture Partners VI, L.P., 108,114 shares held by Institutional Venture
Management VI, L.P., and 36,226 shares held by IVP Founders Fund I, L.P.
As a General Partner of Institutional Venture Management VI, L.P., which
is the General Partner each of such limited partnerships, Mr. Yang may be
deemed to share voting and investment power with respect to such shares.
However, Mr. Yang disclaims beneficial ownership of all such shares
except to the extent of his pecuniary interest therein.
(11) Mr. Walker resigned from his position as Chief Financial Officer of the
Company on August 29, 1997.
(12) Includes (i) shares held by Institutional Venture Partners VI, L.P.,
Institutional Venture Management VI, L.P., IVP Founders Fund I, L.P.,
U.S. Venture Partners IV, L.P., Second Ventures Limited Partnership II
and U.S.V.P. Entrepreneur Partners II, L.P. and (ii) an aggregate of
498,750 shares exercisable within 60 days of the Record Date.
As of the Record Date, the per share market value of the Company's Common
Stock was $19.625, based on the closing price on that date on The Nasdaq
National Market.
4
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
DIRECTORS AND NOMINEES FOR DIRECTOR
The Company's Board of Directors currently consists of six persons, divided
into three classes, serving staggered terms of office. There are currently two
directors in each of Class I, Class II and Class III. Two Class I directors
are to be elected at the Annual Meeting. The Class I directors elected at the
Annual Meeting will serve for three-year terms, or until their successors have
been duly elected and qualified.
Unless otherwise instructed, the proxy holders will vote the proxies
received by them for the Company's nominees: Prabhat K. Dubey and Geoffrey Y.
Yang as Class I directors.
The nominees, and certain information about them as of the Record Date, are
set forth below:
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE POSITIONS SINCE
--------------- --- --------- --------
<S> <C> <C> <C>
Prabhat K. Dubey.......... 47 President and Chief Executive Officer 1994
Geoffrey Y. Yang.......... 39 Director 1994
</TABLE>
Prabhat K. Dubey has served as the Company's President and Chief Executive
officer, and as a director, since he joined the Company in October 1994. From
March 1994 to August 1994, Dr. Dubey was the Chief Operating Officer of
Wireless Access, Inc., a supplier of communications devices and chip sets.
From August 1989 to March 1994, he served as Vice President and General
Manager of the Wireless & Messaging DSP IC Group at Lucent Technologies, a
communications products company and former subsidiary of AT&T Corporation. Dr.
Dubey holds a Ph.D in Physics from the Indian Institute of Technology and an
M.B.A. from the University of Western Ontario.
Geoffrey Y. Yang has served as a director of the Company since July 1994.
Mr. Yang has been a general partner of Institutional Venture Partners, a
venture capital firm, since June 1989. He also serves on the Board of
Directors of Excite, Inc., an Internet navigation service, and numerous
private companies. Mr. Yang holds a B.A. in Economics from Princeton
University, a B.S.E. in Engineering and Management Systems from Princeton
University, as well as an M.B.A. from Stanford University.
The remaining directors of the Company, and certain information about them
as of the Record Date, are set forth below:
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE CLASS AGE POSITIONS SINCE
--------------- ----- --- --------- --------
<S> <C> <C> <C> <C>
John G. Adler........... III 61 Director 1997
Irwin Federman.......... III 62 Director 1994
Andrew S. Rappaport..... II 40 Director 1994
Amos Wilnai............. II 58 Chairman of the Board, Executive 1992
Vice President, Business Development
</TABLE>
John G. Adler has served as a director of the Company since March 1997. Mr.
Adler served as the Chairman of the Board of Directors of Adaptec, Inc., an
electronic equipment manufacturing company, from May 1990 through August 1997.
Mr. Adler also served as the President of Adaptec, Inc. from May 1985 to
August 1992 and as its Chief Executive Officer from December 1986 to July
1995. Mr. Adler holds a B.S.E.E. degree from the University of Mississippi and
was a Sloan Executive Fellow at Stanford University in 1971.
Irwin Federman has served as a director of the Company since July 1994. Mr.
Federman has been a general partner of U.S. Venture Partners, a venture
capital firm, since April 1990. From 1988 to 1990 he was a Managing Director
of Dillon Read & Co., an investment banking firm, and a general partner in its
venture capital affiliate, Concord Partners. Mr. Federman also serves on the
boards of directors of SanDisk Corporation, a memory
5
<PAGE>
systems company, Western Digital Corporation, a disk drive manufacturer, Komag
Incorporated, a thin film media manufacturer, NeoMagic Corporation, a
developer of multimedia accelerators, Checkpoint Software Technology, Ltd., a
network security software company and several privately-held companies.
Mr. Federman received a B.S. degree in Economics from Brooklyn College and was
awarded an honorary Doctorate of Engineering Science from Santa Clara
University.
Andrew S. Rappaport has served as a director of the Company since July 1994.
Mr. Rappaport has been a partner of August Capital, LLC, a venture capital
firm, since July 1996. Prior to that time, Mr. Rappaport was the President of
The Technology Research Group, Inc. a Boston-based strategic management
consulting firm which he founded in August 1984. Mr. Rappaport attended
Princeton University.
Amos Wilnai has served as the Chairman of the Board of Directors since he
founded the Company in September 1992. Since September 1994, Mr. Wilnai has
also served as the Company's Executive Vice President of Business Development.
From September 1992 to October 1994, he was the President of the Company.
Mr. Wilnai has a B.S.E.E. degree from the Technion Institute of Technology in
Israel and an M.S.E.E. degree from the Polytechnic Institute in Brooklyn.
Unless otherwise instructed, the proxy holders will vote the proxies
received by them for the Company's nominees named above. In the event that
either nominee is unable or declines to serve as a director at the time of the
Annual Meeting, the proxy holders will vote the proxies in their discretion
for any nominee who is designated by the current Board of Directors to fill
the vacancy. It is not expected that either nominee will be unable or will
decline to serve as a director. In the event that additional persons are
nominated for election as directors, the proxy holders intend to vote all
proxies received by them in such a manner as will assure the election of as
many of the nominees listed above as possible, and in such event the specific
nominees to be voted for will be determined by the proxy holders.
BOARD MEETINGS AND COMMITTEES
During fiscal 1997, the Board of Directors held fifteen meetings. The
standard committees of the Board of Directors include an Audit Committee and a
Compensation Committee. There is no nominating committee.
The Audit Committee held three meetings in fiscal 1997. Messrs. Irwin
Federman and Andrew S. Rappaport currently serve on the Audit Committee. The
functions of the Audit Committee include recommending appointment of the
Company's independent accountants to the Board of Directors and reviewing (i)
the scope of the independent accountants' annual audit and their compensation,
(ii) the general policies and procedures of the Company with respect to
internal auditing, accounting and financial controls and (iii) any change in
accounting principles, significant audit adjustments proposed by the
accountants and any recommendations that the accountants may have with respect
to policies and procedures.
The Compensation Committee held three meetings in fiscal 1997. The
Compensation Committee consisted of Messrs. John G. Adler and Geoffrey Y.
Yang. The Compensation Committee monitors the nature and levels of
compensation paid by the Company to its executive personnel, including among
other things, annual salaries and bonuses, and stock option and other
incentive compensation arrangements. In addition, the Compensation Committee
reviews bonus and stock compensation arrangements for all other employees of
the Company. As part of the foregoing, the Compensation Committee also
administers the Company's 1997 Stock Plan and 1997 Employee Stock Purchase
Plan.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on its review of the copies of Forms 3, 4 and 5 received by the
Company, or written representations from certain reporting persons that no
Form 5's were required for such persons, the Company believes that, during the
fiscal year ended December 31, 1997, all filing requirements under Section
16(a) of the Securities Exchange Act applicable to its officers, directors and
10% stockholders were complied with.
6
<PAGE>
DIRECTORS' COMPENSATION
The Company's directors do not receive cash compensation for their services
as members of the Board of Directors. Under the Company's 1997 Director Option
Plan, however, each of the Company's directors who is not also an employee of
the Company is automatically granted an option to purchase (i) 40,000 shares
of the Company's Common Stock at a purchase price equal to the fair market
value of such shares on the date of grant upon becoming a director and (ii) an
additional 10,000 shares of the Company's Common Stock at a purchase price
equal to the fair market value of such shares on the date of grant, following
the announcement of the Company's earnings for the prior fiscal year, provided
that such director has served on the Board of Directors for the preceding six
months. Such directors do not receive any other compensation for their
services as members of the Board of Directors. Directors who were members of
the Board in 1997 at the time that the Board adopted the Director Option Plan
were excluded from receiving an initial automatic grant of 40,000 shares under
the Plan but are eligible to receive subsequent annual automatic grants if
they meet the other requirements of the Plan at that time. See "Additional
Information Relating to Directors and Officers of the Company--Benefit Plans--
1997 Director Option Plan."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the Company's fiscal year ended December 31, 1997, the members of the
Compensation Committee were John G. Adler and Geoffrey Y. Yang. No
interlocking relationship exists between any member of the Company's Board of
Directors or the Compensation Committee and any member of the board of
directors or compensation committee of any other company, nor has any such
interlocking relationship existed in the past.
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE COMPANY'S
NOMINEES FOR DIRECTOR.
VOTE REQUIRED
The two nominees for Class I director receiving the highest number of
affirmative votes of the shares entitled to be voted for them shall be elected
as directors. Votes withheld from any nominee are counted for purposes of
determining the presence or absence of a quorum, but have no other legal
effect under Delaware law.
7
<PAGE>
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected Price Waterhouse LLP, independent
accountants, to audit the financial statements of the Company for the fiscal
year ending December 31, 1998. If the stockholders do not ratify the
appointment of Price Waterhouse LLP, the selection of independent accountants
will be reconsidered by the Board of Directors. Representatives of Price
Waterhouse LLP are expected to be present at the meeting, will have the
opportunity to make a statement if they desire to do so, and are expected to
be available to respond to appropriate questions.
RECOMMENDATION
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE APPOINTMENT OF PRICE
WATERHOUSE LLP AS THE COMPANY'S INDEPENDENT ACCOUNTANTS FOR FISCAL 1998 AND
RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THIS PROPOSAL.
ADDITIONAL INFORMATION RELATING TO
DIRECTORS AND OFFICERS OF THE COMPANY
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the compensation
received for services rendered to the Company during the fiscal year ended
December 31, 1997 (the "Last Fiscal Year") by (i) the Chief Executive Officer
of the Company, (ii) the four most highly compensated executive officers of
the Company whose compensation exceeded $100,000 during the Last Fiscal Year
and (iii) each person who would have been listed under (ii) had he been
serving as an executive officer of the Company on December 31, 1997 (the
"Named Executive Officers"):
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
--------------------- OTHER ANNUAL
NAME AND PRINCIPAL POSITIONS YEAR SALARY BONUS COMPENSATION
---------------------------- ---- -------- ------- ------------
<S> <C> <C> <C> <C>
Prabhat K. Dubey............................ 1997 $180,000 -- $33,729(1)
President and Chief Executive Officer 1996 $165,000 -- --
Amos Wilnai................................. 1997 $160,000 -- --
Executive Vice President, 1996 $150,000 -- --
Business Development
Alexander Joffe............................. 1997 $140,000 -- --
Vice President, Engineering 1996 $140,000 $50,000 --
Sena C. Reddy............................... 1997 $134,854 -- --
Executive Vice President, Operations 1996 -- --
John A. Teegen.............................. 1997 $132,553 $66,237 $74,693(1)
Vice President, Sales 1996 -- --
William R. Walker(2)........................ 1997 $135,558 -- --
1996 $ 77,538 -- --
</TABLE>
- --------
(1) Consists of relocation expenses reimbursed by the Company.
(2) Mr. Walker resigned as Chief Financial Officer and Secretary on August 29,
1997.
8
<PAGE>
OPTION GRANTS IN FISCAL 1997
The following table sets forth information with respect to stock options
granted to the Named Executive Officers in the Last Fiscal Year:
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE AT
ASSUMED ANNUAL
NUMBER OF RATES OF STOCK
SECURITIES % OF TOTAL EXERCISE APPRECIATION FOR
UNDERLYING OPTIONS GRANTED PRICE OPTION TERMS(5)
OPTIONS TO EMPLOYEES IN PER EXPIRATION -------------------
NAME GRANTED(1) FISCAL YEAR(2) SHARE(3) DATE(4) 5% 10%
---- ---------- --------------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Prabhat K. Dubey........ 225,000 7.31% $3.33 04/25/2007 $471,199 $1,194,112
Alexander Joffe......... 150,000 4.87% 3.33 04/25/2007 314,133 796,074
Sena C. Reddy........... 300,000 9.75% 2.00 01/27/2007 377,337 956,245
John A. Teegen.......... 270,000 8.77% 2.00 01/27/2007 339,603 860,621
</TABLE>
- --------
(1) All options were granted under the 1993 Stock Plan and provide for vesting
as to 25% of the underlying Common Stock one year after the date of grant,
then ratably over 36 months thereafter, except for options granted to Dr.
Dubey, which begin vesting six months after the date of grant, then vest
as to 25% of the underlying Common Stock 18 months after the date of
grant, then ratably over 36 months thereafter.
(2) Options to purchase an aggregate of 3,078,500 shares of Common Stock of
the Company were granted to employees during the fiscal year ended
December 31, 1997.
(3) The exercise price equaled the fair market value of the Company's Common
Stock on the date of grant, as determined by the Board of Directors.
(4) Options may terminate before their expiration dates if the optionee's
status as an employee or consultant is terminated, upon the optionee's
death or disability or upon an acquisition of the Company.
(5) Potential realizable value is based on an assumption that the stock price
of the Common Stock appreciates at the annual rate shown (compounded
annually) from the date of grant until the end of the term of the option.
The potential realizable value is calculated as (a) the potential stock
price at the end of the term based on the 5 percent and 10 percent assumed
rates of annual stock price appreciation less the exercise price times (b)
the number of shares subject to the option. The assumed rates of
appreciation are mandated by the rules of the Securities and Exchange
Commission and do not represent the Company's estimate or projection of
future Common Stock prices.
AGGREGATE STOCK OPTION EXERCISES IN FISCAL 1997 AND FISCAL YEAR-END VALUES
The following table sets forth information regarding the value of options to
purchase shares of the Company's Common Stock that were exercised or held by
the Named Executive Officers during the Last Fiscal Year.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
SHARES AT DECEMBER 31, 1997 DECEMBER 31, 1997(2)
ACQUIRED ON VALUE ---------------------------------- -------------------------
NAME EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ---------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Prabhat K. Dubey........ -- -- -- 225,000 -- $3,075,008
Alexander Joffe......... -- -- 118,750 331,250 $1,939,579 5,010,416
Sena C. Reddy........... -- -- -- 300,000 -- 4,500,000
John A. Teegen.......... -- -- -- 270,000 -- 4,050,000
William R. Walker....... 105,000 $139,997 -- -- -- --
</TABLE>
- --------
(1) Market value of underlying securities on date of exercise minus the
exercise price.
(2) Represents the difference between the fair market value of the shares
underlying such options at fiscal year-end of $17.00 and the exercise
price of such options.
9
<PAGE>
BENEFIT PLANS
1997 Stock Plan. The Company's 1997 Stock Plan (the "1997 Plan") was
approved by the Board of Directors in August 1997 and was approved by the
stockholders in September 1997. The 1997 Plan provides for the grant of
incentive stock options to employees (including officers and employee
directors) and for the grant of nonstatutory stock options and Stock Purchase
Rights ("SPRs") to employees, directors and consultants. The following shares
have been reserved for issuance under the 1997 Plan: (a) 1,500,000 shares of
Common Stock, which includes shares which have been reserved but unissued
under the 1993 Stock Plan (the "1993 Plan" which terminated after the
completion of the initial public offering); (b) any shares returned to the
1993 Plan as a result of termination of options under the 1993 Plan; and (c)
shares added to the 1997 Plan pursuant to automatic annual increases equal to
the lesser of (i) 1,000,000 shares, (ii) 5% of all then outstanding shares of
Common Stock of the Company, or (iii) a lesser amount determined by the Board
of Directors. Unless terminated sooner, the 1997 Plan will terminate
automatically in August 2007.
The 1997 Plan is administered by the Board of Directors or a committee
thereof (as applicable, the "Administrator"). The Administrator has the power
to determine the terms of the options or SPRs granted, including the exercise
price of the option or SPR, the number of shares subject to each option or
SPR, the exercisability thereof and the form of consideration payable upon
such exercise. In addition, the Administrator has the authority to amend,
suspend or terminate the 1997 Plan, provided that no such action may affect
any share of Common Stock previously issued and sold or any option previously
granted under the 1997 Plan.
Options and SPRs granted under the 1997 Plan are not generally transferable
by the optionee, and each option and SPR is exercisable during the lifetime of
the optionee only by such optionee. Options granted under the 1997 Plan must
generally be exercised within three months after the end of an optionee's
status as an employee, director or consultant of the Company, or within 12
months after such optionee's termination by death or disability, but in no
event later than the expiration of the option's 10 year term. Unless the
Administrator determines otherwise, the agreements governing the terms of the
SPRs (an "SPR Agreement") will grant the Company a repurchase option
exercisable upon the voluntary or involuntary termination of the purchaser's
employment with the Company for any reason (including death or disability).
The purchase price for the shares of Common Stock repurchased pursuant to an
SPR Agreement will be the original price paid by the purchaser and may be paid
by cancellation of any indebtedness of the purchaser to the Company. The
repurchase option will lapse at a rate determined by the Administrator. The
exercise price of all incentive stock options granted under the 1997 Plan must
be at least equal to the fair market value of the Common Stock on the date of
grant. The exercise price of nonstatutory stock options intended to qualify as
"performance-based compensation" within the meaning of Section 162(m) of the
Code must at least be equal to the fair market value of the Common Stock on
the date of grant. With respect to any participant who owns stock possessing
more than 10% of the voting power of all classes of the Company's outstanding
capital stock, the exercise price of any incentive stock option granted must
equal at least 110% of the fair market value on the date of grant and the term
of such incentive stock option must not exceed five years. The term of all
other options granted under the 1997 Plan may not exceed ten years.
The 1997 Plan provides that in the event of a merger of the Company with or
into another corporation, or a sale of substantially all of the Company's
assets, each option is to be assumed or an equivalent option substituted for
by the successor corporation. If the outstanding options are not assumed or
substituted for by the successor corporation, the Administrator will provide
for the optionee to have the right to exercise such options or SPRs as to all
of the optioned stock, including shares as to which such options or SPRs would
not otherwise be exercisable. If the Administrator makes an option or SPR
exercisable in full in the event of a merger or sale of assets, the
Administrator will notify the optionee that the option or SPR will be fully
exercisable for a period of 15 days from the date of such notice, and the
option or SPR will terminate upon the expiration of such period.
1997 Employee Stock Purchase Plan. The Company's 1997 Employee Stock
Purchase Plan (the "1997 Purchase Plan") was adopted by the Board of Directors
in August 1997 and was approved by the stockholders in September 1997. A total
of 300,000 shares of Common Stock has been reserved for issuance under the
1997
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Purchase Plan, plus shares added to the plan pursuant to automatic annual
increases equal to the lesser of (i) 400,000 shares, (ii) .8% of all then
outstanding shares of Common Stock of the Company, or (iii) a lesser amount
determined by the Board of Directors.
The 1997 Purchase Plan, which is intended to qualify under Section 423 of
the Code, contains consecutive, overlapping, 24-month offering periods. Each
offering period includes four six-month purchase periods. The offering periods
generally start on the first trading day on or after May 1 and November 1 of
each year, except for the first such offering period which commenced on the
first trading day after the initial prospectus and ends on the last trading
day on or before October 31, 1999.
Employees are eligible to participate in the 1997 Purchase Plan if they are
customarily employed by the Company or any participating subsidiary for at
least 20 hours per week and more than five months in any calendar year.
However, any employee who (i) immediately after grant owns stock possessing 5%
or more of the total combined voting power or value of all classes of the
capital stock of the Company, or (ii) whose rights to purchase stock under all
employee stock purchase plans of the Company accrues at a rate which exceeds
$25,000 worth of stock for each calendar year may not purchase stock under the
1997 Purchase Plan. The 1997 Purchase Plan permits participants to purchase
Common Stock through payroll deductions of up to 10% of the participant's
"compensation." Compensation is defined as the participant's base gross
earnings and commissions excluding payments for overtime, shift premiums,
incentive compensation, incentive payments, bonuses and other compensation.
The maximum number of shares a participant may purchase during a single
purchase period is 5,000 shares.
Amounts deducted and accumulated by the participant are used to purchase
shares of Common Stock at the end of each six-month purchase period. The price
of stock purchased under the 1997 Purchase Plan is 85% of the lower of the
fair market value of the Common Stock at the beginning of the 24-month
offering period or at the end of the six-month purchase period. In the event
the fair market value at the end of a purchase period is less than the fair
market value at the beginning of the offering period, the participants will be
withdrawn from the current offering period following exercise and
automatically re-enrolled in a new 24-month offering period. The new 24-month
offering period will use the lower fair market value as of the first date of
the new offering period to determine the purchase price for future purchase
periods. Participants may end their participation at any time during an
offering period, and they will be paid their payroll deductions to date.
Participation ends automatically upon termination of employment with the
Company.
Rights granted under the 1997 Purchase Plan are not transferable by a
participant other than by will, the laws of descent and distribution, or as
otherwise provided under the 1997 Purchase Plan. The 1997 Purchase Plan
provides that, in the event of a merger of the Company with or into another
corporation or a sale of substantially all of the Company's assets, each
outstanding option granted thereunder may be assumed or substituted for by the
successor corporation. If the successor corporation refuses to assume or
substitute such outstanding options, the offering period then in progress will
be shortened and a new exercise date will be set. The 1997 Purchase Plan will
terminate in August 2007. The Board of Directors has the authority to amend or
terminate the 1997 Purchase Plan, except that no such action may adversely
affect any outstanding rights to purchase stock granted under the 1997
Purchase Plan.
1997 Director Option Plan. The 1997 Director Option Plan (the "Director
Plan") was adopted by the Board of Directors in August 1997 and was approved
by the stockholders in September 1997. The Director Plan provides for the
grant of nonstatutory stock options to non-employee directors. The Director
Plan has a term of ten years, unless terminated sooner by the Board of
Directors. A total of 150,000 shares of Common Stock have been reserved for
issuance under the Director Plan, plus annual increases equal to (i) the
number of shares of stock underlying options granted under the Director Plan
in the immediately preceding year, or (ii) a lesser amount determined by the
Board of Directors.
The Director Plan provides that each non-employee director will
automatically be granted an option to purchase 40,000 shares of Common Stock
(the "First Option") on the date which such person first becomes a
11
<PAGE>
non-employee director, unless immediately prior to becoming a non-employee
director, such person was an employee director of the Company. In addition to
the First Option, each non-employee director will automatically be granted an
option to purchase 10,000 shares (a "Subsequent Option") on the date two days
after the announcement of the Company's fiscal year-end earnings of each year,
if on such date he or she will have served on the Board of Directors for at
least the preceding six months. Each First Option and each Subsequent Option
will have a term of ten years. Each First Option will vest as to 25% of the
optioned stock one year from the date of grant, and as to an additional 1/48
of the optioned stock each full month thereafter, provided the person
continues to serve as a Director on such dates. Each Subsequent Option will
vest as to 1/12 of the optioned stock each full month after the date of grant.
The exercise price of each First Option and each Subsequent Option is 100% of
the fair market value per share of the Common Stock, generally determined with
reference to the closing price of the Common Stock as reported on the Nasdaq
National Market on the last trading day prior to the date of grant.
In the event of a merger of the Company or the sale of substantially all of
the assets of the Company, each outstanding option may be assumed or an
equivalent option substituted for by the successor corporation. If an option
is assumed or substituted for by the successor corporation, it will continue
to vest as provided in the Director Plan. However, if a non-employee
director's status as a director of the Company or the successor corporation,
as applicable, is terminated other than upon a voluntary resignation by the
non-employee director, each option granted to such non-employee director will
become fully vested and exercisable. If the successor corporation does not
agree to assume or substitute for such options, they will become fully vested
and exercisable for a period for 15 days from the date the Board of Directors
notifies the optionee of the option's full exercisability, after which period
such options will terminate. Options granted under the Director Plan must be
exercised within three months of the end of the optionee's tenure as a
director of the Company, or within 12 months after such director's termination
by death or disability, but in no event later than the expiration of the
option's 10 year term. No option granted under the Director Plan is
transferable by the optionee other than by will or the laws of descent and
distribution, and each option is exercisable, during the lifetime of the
optionee, only by such optionee.
CHANGE OF CONTROL PROVISIONS
The stock options held by certain executive officers and directors of the
Company provide for partial acceleration of vesting upon the occurrence of
certain events following a change of control of the Company. Specifically,
following a change of control of the Company and the subsequent termination of
employment or directorship of such persons for any reason, options held by
such persons shall become exercisable for an amount that would have vested had
such persons remained employees or directors of the Company for twelve months
beyond the date of termination, in addition to all options vested at the time
of the termination. Options granted to John G. Adler, Uday Bellary, Brent R.
Bilger, Prabhat K. Dubey, Alexander Joffe, Sena C. Reddy and John A. Teegen in
the amounts of 90,000, 150,000, 405,000, 225,000, 450,000, 300,000 and
270,000, respectively, include this provision. Such acceleration would occur
regardless of whether or not the options were assumed by the successor entity
in the change of control transaction. However, such acceleration of vesting
shall be subject to the favorable opinion of the independent accountants to
the Company that such acceleration will not adversely affect the likelihood of
receiving "pooling of interests" accounting treatment in the event that
obtaining such accounting treatment is a condition to the change of control
transaction.
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<PAGE>
CERTAIN TRANSACTIONS
Since January 1, 1997, there has not been any transaction or series of
similar transactions to which the Company was or is a party in which the
amount involved exceeded or exceeds $60,000 and in which any director,
executive officer, holder of more than 5% of any class of the Company's voting
securities, or any member of the immediate family of any of the foregoing
persons had or will have a direct or indirect material interest, other than
the transactions described below.
Shareholder Rights Agreement. On July 12, 1994, the Company issued and sold
an aggregate of 9,255,000 shares of Series A Preferred Stock for an aggregate
purchase price of $3,085,000, or approximately $.33 per share. The investors
in such shares included, among others, venture capital funds affiliated with
Institutional Venture Partners ("IVP") and U.S. Venture Partners ("USVP"),
each of which holds more than 5% of the Company's voting securities as of the
Record Date. On November 16, 1995, the Company issued and sold an aggregate of
4,086,780 shares of Series B Preferred Stock for an aggregate purchase price
of $7,219,967, or approximately $1.77 per share. The investors in such shares
included, among others, venture capital funds affiliated with Kleiner Perkins
Caufield & Byers ("KPCB"), IVP and USVP. IVP and USVP each hold more than 5%
of the Company's voting securities as of the Record Date. Upon the closing of
the Company's initial public offering, each share of Series A Preferred Stock
and Series B Preferred Stock automatically converted into one share of Common
Stock of the Company. In connection with the Series A Preferred Stock
financing, the Company entered into a shareholder rights agreement with, among
others, Amos Wilnai, Alexander Joffe and holders of the Company's Series A
Preferred Stock, pursuant to which the Company granted, among other things,
certain stock registration rights to such parties. In connection with the
Series B Preferred Stock financing, the Company amended such agreement to,
among other things, add the holders of Series B Preferred Stock as parties
thereto. Under the agreement, as amended, Mr. Wilnai and Mr. Joffe have
certain registration rights with respect to an aggregate of 3,700,851 shares
of Common Stock held by them or issuable upon the exercise of stock options
granted to them. In addition, the holders of Common Stock of the Company
issued upon the conversion of the Company's Series A Preferred Stock and
Series B Preferred Stock have certain registration rights with respect to such
shares.
Indemnification Agreements. The Company has entered into indemnification
agreements with each of its directors and executive officers.
Loans to Officers. From time to time the Company has made interest free
loans to certain executive officers of the Company to fund the exercise price
of stock options held by such officers. These loans are evidenced by full
recourse promissory notes which mature on the earlier to occur of (i) the
fifth anniversary of the issuance date, (ii) a date which is 30 days after the
termination of the respective officer's employment with the Company for any
reason other than death or disability and (iii) a date which is one year after
the date of termination of the respective officer's employment with the
Company due to death or disability. Such promissory notes are also secured by
the shares of Common Stock purchased with the proceeds of such loans. The
following table sets forth the name and position of such officers, certain
information with respect to the promissory notes issued to evidence such loans
and the number of shares of the Company's Common Stock purchased with the
proceeds of such loans.
<TABLE>
<CAPTION>
PRINCIPAL ISSUANCE MATURITY
NAME AND POSITION AMOUNT PURCHASED DATE DATE
----------------- --------- --------- -------- --------
<S> <C> <C> <C> <C>
Prabhat K. Dubey........ $60,000 1,800,000 10/31/95 10/31/00
President and Chief
Executive Officer
Alexander Joffe......... 47,400 1,800,000 11/03/95 11/03/00
Vice President,
Engineering
</TABLE>
The entire principal amount on each of the loans described in the table set
forth above was outstanding on December 31, 1997.
13
<PAGE>
On March 7, 1997, the Company made a loan to Dr. Dubey in the aggregate
principal amount of $100,000 and bearing interest at the rate of 6.07% per
annum. The loan is evidenced by a full recourse promissory note, dated October
31, 1996, which matures on the earlier to occur of (i) October 31, 1999, or
(ii) a date which is six months after the date of any termination of Dr.
Dubey's employment with the Company. The promissory note is secured by a
pledge of 500,590 shares of Common Stock owned by Dr. Dubey and currently held
in escrow. The entire principal amount and accrued interest on the loan to Dr.
Dubey was outstanding as of the Record Date.
See also "Additional Information Relating to Directors and Officers of the
Company--Change of Control Provisions."
14
<PAGE>
STOCK PRICE PERFORMANCE GRAPH
The following graph shows a comparison of cumulative total stockholder
returns for the Company, the Nasdaq Stock Market--U.S. Index, and the
Hambrecht & Quist Technology Index. The Hambrecht & Quist Technology Index is
comprised of the publicly traded stocks of approximately 275 companies in the
computer hardware, computer software, communications, semiconductor and
information services industries. Both indices weight returns based on market
capitalization of the companies in the indices. Historic stock price
performance is not necessarily indicative of future stock price performance.
COMPARISON OF CUMULATIVE TOTAL RETURN*
[PERFORMANCE GRAPH APPEARS HERE]
- --------
* ASSUMES $100 INVESTED ON OCTOBER 28, 1997, THE EFFECTIVE DATE OF THE
COMPANY'S INITIAL PUBLIC OFFERING. TOTAL RETURN ASSUMES REINVESTMENT OF
DIVIDENDS.
<TABLE>
<CAPTION>
OCTOBER 28, DECEMBER 31,
1997 1997
----------- ------------
<S> <C> <C>
MMC Networks, Inc...................................... $100 $155
Nasdaq Stock Market--U.S. Index........................ 100 98
Hambrecht & Quist Technology Index..................... 100 94
</TABLE>
The Stock Price Performance Graph shall not be deemed incorporated by
reference by any general statement incorporating by reference this proxy
statement (or any portion hereof) into any filing under the Securities Act of
1933 or the Securities Exchange Act of 1934, except to the extent that the
Company specifically incorporated this performance graph by reference, and
shall not otherwise be deemed filed under such Acts.
15
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION
COMPENSATION PRINCIPLES
The Compensation Committee firmly believes that the compensation of the
Company's employees, including executive officers, should be designed to:
. Attract, retain and motivate well-qualified employees who contribute to
the long-term success of the Company.
. Strongly encourage the development and achievement of strategic
objectives that enhance long-term stockholder value.
. Relate compensation levels to the overall success of the Company, which
includes sound financial results for its stockholders, providing quality
products and services useful to its customers and fostering a favorable
workplace environment.
Regarding Section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code") (which limits the deductibility by corporations of certain
executive compensation in excess of $1 million for any covered individual),
the Compensation Committee has elected to qualify compensation under the
Company's 1997 Stock Plan for an exemption from the deductibility limitations
of Section 162(m). The non-equity-based compensation paid to the Named
Officers in fiscal 1997 did not exceed $1 million. The Compensation Committee
will continue to consider the effects of Section 162(m) but does not currently
intend to take any action to preserve the deductibility of cash compensation.
EXECUTIVE COMPENSATION PRACTICES
The Company's executive compensation program consists primarily of cash and
equity-based components. Salary and bonus comprise cash components. Grants of
options under the Company's stock option plan and participation in the
Company's employee stock purchase plan comprise the equity-based components.
The Company also provides health and welfare benefits to the Named Executive
Officers through programs that are available to all employees in general.
CASH COMPONENTS
Salary levels are reviewed periodically for executive officers by the
Compensation Committee after a review of compensation surveys for data
networking and semiconductor companies. It is the Company's intent to maintain
a total compensation program that can attract, motivate and retain high-
performance executives who are critical to the long-term success of the
Company.
The Company plans to establish an incentive compensation plan that will pay
bonuses to officers and employees based on achievement of pre-defined goals
and financial targets.
The Company does not currently intend to pay any amount into the 401(k) Plan
to match employee contributions.
EQUITY-BASED COMPONENTS
The Company utilizes equity-based compensation in the form of stock options
and discount stock purchases under the employee stock purchase plan for its
employees (including the Named Executive Officers). Options and the stock
purchase plan provide a close tie between management and employees and the
stockholders by focusing management and employees on creating and enhancing
long-term stockholder value. The actual value of such equity-based
compensation correlates directly to the Company's stock price performance.
Stock options are an essential element of the Company's compensation
package. This component is intended to retain all employees receiving options,
including the Named Executive officers, and to motivate them to improve long-
term stock performance. All full-time employees hold options under the various
stock option plans. Stock options are currently outstanding under the 1997
Plan and the 1993 Plan, which has expired as to future grants.
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<PAGE>
In determining the number of shares subject to options to be granted to
executive officers, the Compensation Committee considers survey data on
options granted to executives with comparable positions at other companies,
the number of shares subject to options previously granted to the executive,
the number of unvested shares subject to outstanding options held by the
executive (which is an indicator of the retention value of the outstanding
options) and an evaluation of the executive's prior year individual
performance. In 1997, the Compensation Committee continued to focus on
retention and individual performance as the critical factors in determining
the number of options to grant to executives.
The options granted in 1997 under the 1997 Plan and the 1993 Plan had
exercise prices equal to the fair market value of the Common Stock on the date
of grant and will only have value if the stock price increases subsequent to
such date. The fair market value of options granted before the date of the
Company's initial public offering of its Common Stock was equal to the fair
market value on the date of grant as determined by the Board of Directors. The
fair market value of options granted after the date of the Company's initial
public offering was equal to the closing price of its Common Stock on the
Nasdaq National Market on the date of grant. These options generally become
exercisable cumulatively at an annual rate of not more than 25 percent of the
total shares granted commencing one year from the date of grant.
EMPLOYMENT AGREEMENTS AND CHANGE-IN-CONTROL PROVISIONS
The Company currently does not have Employment Agreements with any of its
officers, directors or employees. In the event of a change in control of the
Company, the 1997 Stock Plan provides for full vesting of options unless each
option is to be assumed or an equivalent option substituted for by the
successor corporation. In addition, the stock options held by certain
executive officers and directors of the Company provide for partial
acceleration of vesting upon the termination of employment or directorship of
such persons for any reason following a change of control of the Company. See
"Additional Information Relating to Directors and Officers of the Company--
Change of Control Provisions." The Compensation Committee believes that such
provisions are appropriate in light of the prior and continuing contributions
of such officers and directors to the Company.
1997 CHIEF EXECUTIVE OFFICER COMPENSATION
Dr. Dubey, in his capacity as the Chief Executive Officer, participates in
the same compensation programs as the other Named Executive Officers. The
Compensation Committee has targeted Dr. Dubey's total compensation, including
compensation derived from the stock option plan, at a level it believes is
competitive with the average amount paid by other data networking and
semiconductor companies with similar revenues and growth rates.
Dr. Dubey's annual base salary was increased from $165,000 to $180,000 in
1997 primarily based on personal accomplishments and Company performance in
1996 and 1997. In particular, the Compensation Committee based its decision on
the Company's revenue growth, timely introduction of new products and
continued increase in design wins. The Committee believes the 1997 stock
option grant to Dr. Dubey is competitive in the industry. Dr. Dubey also
received life insurance premiums (generally available to all employees) and
reimbursement of relocation expenses.
This report of the Compensation Committee shall not be deemed incorporated
by reference by any general statement incorporating by reference this proxy
statement (or any portion hereof) into any filing under the Securities Act of
1933 or under the Exchange Act, except to the extent that the Company
specifically incorporates this report by reference, and shall not otherwise be
deemed filed under such Acts.
SUBMITTED BY THE COMPENSATION
COMMITTEE
Geoffrey Y. Yang
John G. Adler
17
<PAGE>
OTHER MATTERS
The Company knows of no other matters to be submitted to the meeting. If any
other matters properly come before the meeting, it is the intention of the
persons named in the enclosed proxy card to vote the shares they represent as
the Board of Directors may recommend.
THE BOARD OF DIRECTORS
Dated: April 17, 1998
#1679-PS-98
18
<PAGE>
THE PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
--------------------------------------------------
MMC NETWORKS, INC.
PROXY FOR 1998 ANNUAL MEETING OF STOCKHOLDERS
MAY 28, 1998
The undersigned shareholder of MMC Networks, Inc. (the "Company") hereby
acknowledges receipt of the Notice of Annual Meeting of Stockholders and Proxy
Statement for the 1998 Annual Meeting of Stockholders of the Company to be held
on May 28, 1998 at 1:00 p.m., local time, at the Company's principal place of
business, 1134 East Arques Avenue, Sunnyvale, California 94086 (telephone (408)
731-1600), and hereby revokes all previous proxies and appoints Prabhat K. Dubey
and Amos Wilnai, or either of them, with full power of substitution, Proxies and
Attorneys-in-Fact, on behalf and in the name of the undersigned, to vote and
otherwise represent all of the shares registered in the name of the undersigned
at said Annual Meeting, or any adjournment thereof, with the same effect as if
the undersigned were present and voting such shares, on the matters and in the
manner specified on the reverse side:
(Continued and to be signed on reverse side)
<PAGE>
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE
SPECIFICATIONS MADE. IF NO SPECIFICATION IS MADE, THE SHARES REPRESENTED BY
THIS PROXY WILL BE VOTED FOR EACH OF THE FOLLOWING PERSONS AND PROPOSALS, AND
FOR SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING AS THE
PROXYHOLDERS DEEM ADVISABLE.
1. Election of Directors
Nominees: PRABHAT K. DUBEY and GEOFFREY Y. YANG.
[_] FOR BOTH NOMINEES [_] AUTHORITY TO VOTE WITHHELD
[_] For both nominees except the one whose name is crossed out above.
2. Proposal to ratify the appointment of Price Waterhouse, LLP as the
independent auditors of the Company for the fiscal year ending December 31,
1998.
[_] FOR [_] AGAINST [_]ABSTAIN
In their discretion, the Proxies are entitled to vote upon such other matters as
may properly come before the meeting or any adjournments thereof.
Dated , 1998
--------------
Signature:
--------------------
Signature:
--------------------
I Plan to attend the meeting: [_]
(This proxy should be marked, dated and signed by each stockholder exactly as
such stockholder's name appears hereon, and returned promptly in the enclosed
envelope. Persons signing in a fiduciary capacity should so indicate. A
corporation is requested to sign its name by its President or other authorized
officer, with the office held designated. If shares are held by joint tenants
or as community property, both holders should sign.)
TO ENSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, PLEASE MARK, SIGN AND DATE
THIS PROXY AND RETURN IT AS PROMPTLY AS POSSIBLE.
