<PAGE> 1
===============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
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:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted
[X] Definitive Proxy Statement by Rule 14a-6(e)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
MCK COMMUNICATIONS, INC.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
MCK COMMUNICATIONS, INC.
--------------------------------------------------------------------------------
(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)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
<PAGE> 2
MCK COMMUNICATIONS, INC.
117 KENDRICK STREET
NEEDHAM, MA 02494
September 15, 2000
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
MCK Communications, Inc. (the "Company") to be held on October 17, 2000, at
10:00 a.m. eastern time, at the offices of McDermott, Will & Emery, 28 State
Street, Boston, MA 02109 (the "Annual Meeting").
The Annual Meeting has been called for the purpose of (i) electing two
Class I Directors for a three-year term, (ii) approving the adoption of the
Company's 2000 Employee Stock Purchase Plan, (iii) approving the adoption of the
Company's 2000 Director Stock Option Plan; and (iv) considering and voting upon
such other business as may properly come before the Annual Meeting or any
adjournments or postponements thereof.
The Board of Directors has fixed the close of business on August 25, 2000
as the record date for the determination of stockholders entitled to notice of,
and to vote at, the Annual Meeting and any adjournments or postponements
thereof.
The Board of Directors of the Company recommends that you vote "FOR" the
election of the nominees of the Board of Directors as Directors of the Company,
"FOR" approval of the 2000 Employee Stock Purchase Plan and "FOR" approval of
the 2000 Director Stock Option Plan.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE ANNUAL MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE REQUESTED TO
COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED
ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF YOU ARE A
STOCKHOLDER OF RECORD AND YOU ATTEND THE ANNUAL MEETING, YOU MAY VOTE IN PERSON,
EVEN IF YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
Sincerely,
STEVEN J. BENSON
Chairman, President and Chief
Executive Officer
<PAGE> 3
MCK COMMUNICATIONS, INC.
117 KENDRICK STREET
NEEDHAM, MA 02494
(617) 454-6100
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 17, 2000
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of MCK
Communications, Inc. (the "Company") will be held on October 17, 2000, at 10:00
a.m. eastern time, at the offices of McDermott, Will & Emery, 28 State Street,
Boston, MA 02109 (the "Annual Meeting") for the purpose of considering and
voting upon:
1. The election of two Class I Directors for a three-year term;
2. Approving the adoption of the Company's 2000 Employee Stock Purchase
Plan;
3. Approving the adoption of the Company's 2000 Director Stock Option Plan;
and
4. Such other business as may properly come before the Annual Meeting and
adjournments or postponements thereof.
The Board of Directors has fixed the close of business on August 25, 2000,
as the record date for the determination of stockholders entitled to notice of,
and to vote at, the Annual Meeting and any adjournments or postponements
thereof. Only holders of Common Stock of record at the close of business on such
date will be entitled to notice of, and to vote at, the Annual Meeting and any
adjournments or postponements thereof.
In the event there are not sufficient shares to be voted in favor of any of
the foregoing proposals at the time of the Annual Meeting, the Annual Meeting
may be adjourned in order to permit further solicitation of proxies.
By Order of the Board of Directors
PAUL K. ZURLO
Secretary
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE ANNUAL MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, YOU ARE
REQUESTED TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE
ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF
YOU ARE A STOCKHOLDER OF RECORD AND YOU ATTEND THE ANNUAL MEETING, YOU MAY VOTE
IN PERSON, EVEN IF YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 4
SEPTEMBER 15, 2000
MCK COMMUNICATIONS, INC.
117 KENDRICK STREET
NEEDHAM, MA 02494
(617) 454-6100
------------------------
PROXY STATEMENT
------------------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON TUESDAY, OCTOBER 17, 2000
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of MCK Communications, Inc. ("MCK" or the
"Company") for use at the Annual Meeting of Stockholders of MCK to be held on
October 17, 2000, at 10:00 a.m. eastern time, at the offices of McDermott, Will
& Emery, 28 State Street, Boston, MA 02109, and any adjournments or
postponements thereof (the "Annual Meeting").
At the Annual Meeting, the stockholders of MCK will be asked to consider
and vote upon the following matters:
1. The election of two Class I Directors of the Company for a three-year
term, with such term to continue until the annual meeting of
stockholders to be held in the year 2003 (the "2003 Annual Meeting") and
until such Directors' successors are duly elected and qualified; and
2. Approving the adoption of the Company's 2000 Employee Stock Purchase
Plan (the "Employee Stock Purchase Plan"); and
3. Approving the adoption of the Company's 2000 Director Stock Option Plan
(the "Director Plan"); and
4. Such other business as may properly come before the meeting and any
adjournments or postponements thereof.
The Notice of Annual Meeting, Proxy Statement and Proxy Card are first
being mailed to stockholders of the Company on or about Friday, September 15,
2000 in connection with the notice of, and solicitation of proxies for, the
Annual Meeting. The Board of Directors has fixed the close of business on August
25, 2000 as the record date (the "Record Date") for the determination of
stockholders entitled to notice of, and to vote at, the Annual Meeting. Only
holders of record of the Company's common stock, par value $.001 per share (the
"Common Stock"), at the close of business on the Record Date will be entitled to
notice of, and to vote at, the Annual Meeting. As of the Record Date, there were
approximately 19,926,777 shares of Common Stock outstanding and entitled to vote
at the Annual Meeting and approximately 95 stockholders of record. Each holder
of shares of Common Stock outstanding as of the close of business on the Record
Date will be entitled to one vote for each share held of record with respect to
the matters submitted at the Annual Meeting.
The presence, in person or by proxy, of a majority of the total number of
outstanding shares of Common Stock is necessary to constitute a quorum for the
transaction of business at the Annual Meeting. A quorum being present, (i) the
affirmative vote of a plurality of the votes cast is necessary for the election
of the Class I Directors, (ii) the affirmative vote of a majority of the votes
cast is necessary for approval of the adoption of the Employee Stock Purchase
Plan and (iii) the affirmative vote of a majority of the votes cast is necessary
for approval of the adoption of the Director Plan.
Shares that reflect abstentions or "broker non-votes" (i.e., shares
represented at the meeting held by brokers or nominees as to which the
instructions have not been received from the beneficial owners or persons
<PAGE> 5
entitled to vote such shares and with respect to which the broker or nominee
does not have discretionary voting power to vote such shares) will be counted
for purposes of determining whether a quorum is present for the transaction of
business at the meeting. With respect to the election of Class I Directors,
votes may be cast in favor of or withheld from the nominee; votes that are
withheld and broker non-votes will be excluded entirely from the vote and will
have no effect. In addition, the Company's By-laws (the "By-laws") provide that
the affirmative vote of a majority of the votes cast affirmatively or negatively
at the Annual Meeting is sufficient to approve each proposal, other than the
election of directors. Under the Nasdaq Stock Market rules, each of the Employee
Stock Purchase Plan proposal and the Director Plan proposal must receive a
majority of the total votes cast on such proposal in person or by proxy. Based
on the foregoing, abstentions and broker non-votes will have no impact on the
outcome of such proposals.
STOCKHOLDERS OF MCK ARE REQUESTED TO COMPLETE, DATE, SIGN AND RETURN THE
ACCOMPANYING PROXY CARD IN THE ENCLOSED ENVELOPE. COMMON STOCK REPRESENTED BY
PROPERLY EXECUTED PROXIES RECEIVED BY THE COMPANY AND NOT REVOKED WILL BE VOTED
AT THE ANNUAL MEETING IN ACCORDANCE WITH THE INSTRUCTIONS CONTAINED THEREIN. IF
INSTRUCTIONS ARE NOT STATED THEREIN, PROPERLY EXECUTED PROXIES WILL BE VOTED
"FOR" THE ELECTION OF THE NOMINEES FOR DIRECTOR NAMED IN THIS PROXY STATEMENT,
"FOR" APPROVAL OF THE ADOPTION OF THE EMPLOYEE STOCK PURCHASE PLAN AND "FOR"
APPROVAL OF THE DIRECTOR PLAN. IT IS NOT ANTICIPATED THAT ANY MATTERS OTHER THAN
THE ELECTION OF DIRECTORS, THE APPROVAL OF THE ADOPTION OF THE EMPLOYEE STOCK
PURCHASE PLAN AND THE APPROVAL OF THE ADOPTION OF THE DIRECTOR PLAN WILL BE
PRESENTED AT THE ANNUAL MEETING. IF OTHER MATTERS ARE PRESENTED, PROXIES WILL BE
VOTED IN ACCORDANCE WITH THE DISCRETION OF THE PROXY HOLDERS.
Any properly completed proxy may be revoked by the stockholder of record
represented by such proxy at any time before it is voted on any matter (without,
however, affecting any vote taken prior to such revocation) by giving written
notice of such revocation to the Secretary of MCK, or by signing and duly
delivering a proxy bearing a later date, or by attending the Annual Meeting and
voting in person. Attendance at the Annual Meeting will not, by itself, revoke a
proxy.
The Annual Report of the Company, including financial statements for the
fiscal year ended April 30, 2000 ("Fiscal Year 2000"), is being mailed to
stockholders of MCK concurrently with this Proxy Statement. The Annual Report,
however, is not a part of the proxy solicitation materials.
2
<PAGE> 6
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors of the Company (the "Board of Directors") is divided
into three classes and is comprised of two Directors in each of Class I, Class
II and Class III. Directors serve for three-year terms with one class of
Directors being elected by the Company's stockholders at each annual meeting.
At the Annual Meeting, two Class I Directors will be elected to serve until
the 2003 Annual Meeting and until such Directors' successors are duly elected
and qualified. The Board of Directors has nominated Steven Benson and Calvin
Manz (the "Nominees") for re-election as Class I Directors. Unless otherwise
specified in the proxy, it is the intention of the persons named in the proxy to
vote the shares represented by each properly executed proxy for the re-election
of the Nominees as Directors. The Nominees have agreed to stand for election and
to serve, if elected, as Directors. However, if the Nominees fail to stand for
election or are unable to accept election, proxies will be voted for the
election of such other persons as the Board of Directors may recommend.
VOTE REQUIRED FOR APPROVAL
A quorum being present, the affirmative vote of a plurality of the votes
cast is necessary to elect the Nominees as Directors of the Company.
THE BOARD RECOMMENDS A VOTE FOR THE ELECTION OF THE NOMINEES OF THE BOARD
AS DIRECTORS OF THE COMPANY.
INFORMATION REGARDING THE BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held four (4) meetings during Fiscal Year 2000.
During Fiscal Year 2000, each of the incumbent Directors attended at least 75%
of the total number of meetings of the Board and of the committees of which he
was a member held during his term of office. The Company's Board of Directors
has established an Audit Committee and a Compensation Committee.
The Audit Committee recommends the firm to be appointed as independent
accountants to audit financial statements and to perform services related to the
audit, reviews the scope and results of the audit with the independent
accountants, reviews with management and the independent accountants the
Company's year-end operating results, considers the adequacy of the internal
accounting procedures and considers the effect of such procedures on the
accountants' independence. The Audit Committee consists of Michael Balmuth, John
Landry and Paul Severino, and held three (3) meetings during Fiscal Year 2000.
On May 16, 2000, the Board of Directors adopted a written charter for the Audit
Committee, a copy of which is attached as Exhibit A to this Proxy Statement.
The Compensation Committee reviews and recommends the compensation
arrangements for all Directors and officers, approves such arrangements for
other senior level employees and administers and takes such other action as may
be required in connection with certain compensation and incentive plans of the
Company. The Compensation Committee also determines the options or stock to be
issued to eligible persons under the Company's 1996 Stock Plan and the 1999
Stock Option and Grant Plan (together, the "Stock Plans"), construes and
interprets the Stock Plans, and prescribes the terms and conditions of such
options or stock. The Compensation Committee will also administer the Employee
Stock Purchase Plan. In addition, the Compensation Committee establishes, amends
and revokes rules and regulations for the administration of all such plans. The
Compensation Committee consists of Gregory Avis and Paul Severino.
3
<PAGE> 7
INFORMATION REGARDING DIRECTORS
Set forth below is certain information regarding the Directors of the
Company, including the Class I Directors who have been nominated for election at
the Annual Meeting, based on information furnished by them to the Company.
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE SINCE
---- --- ---------------
<S> <C> <C>
CLASS I -- TERM EXPIRES 2000
Steven J. Benson*........................................... 41 June, 1997
Calvin K. Manz*............................................. 47 June, 1989
CLASS II -- TERM EXPIRES 2001
Michael H. Balmuth.......................................... 37 September, 1997
John B. Landry.............................................. 52 September, 1997
CLASS III -- TERM EXPIRES 2002
Gregory M. Avis............................................. 41 May, 1996
Paul Severino............................................... 53 July, 1999
</TABLE>
---------------
* Nominee for re-election
The principal occupation and business experience for at least the last five
years of each Director of the Company is set forth below.
Steven J. Benson has served as the Company's President, Chief Executive
Officer and a Director of the Company since June 1997 and Chairman since August
1999. From September 1992 to April 1997, he served as Senior Vice President of
Worldwide Sales and Marketing at Shiva Corporation, a manufacturer of data
access products. From January 1988 to August 1992, Mr. Benson served as Director
of Worldwide Sales and Marketing for Lotus Development Corporation's Portable
Computing Group. Mr. Benson holds a Bachelor's degree from Bentley College.
Calvin K. Manz has served as a Director of the Company since June 1989. He
founded the company in June 1989, and served as the Company's President and
Chief Executive Officer until June 1997. He has served as the President and
Chief Executive Officer of Odyssey Financial Inc., a financial and management
advisor to technology companies, since December 1997. Mr. Manz was a Director of
Telebackup Systems, Inc., a software utilities company, from June 1997 until the
company merged in May 1999 with Veritas Software, a supplier of storage
management software. Mr. Manz also serves as a director of International
Properties Group, Ltd., a publicly-traded real estate company in Canada, and
several private companies.
Michael H. Balmuth has served as a Director of the Company since September
1997. He has served as a General Partner of Summit Accelerator Partners since
August 1999. From December 1998 to August 1999, Mr. Balmuth served as a
Principal of Summit Partners and a Vice President from March 1997 to December
1998. From August 1991 to February 1997, Mr. Balmuth served as a Principal at
Broadview Associates. He is a director of several private companies. Mr. Balmuth
holds a Bachelor's degree from Dartmouth College and an M.B.A. from Harvard
University.
John B. Landry has served as a Director of the Company since September
1997. Since 1995, he has served as Vice President of Technology Strategy for
IBM. In addition, since February 1995, Mr. Landry has served as the Chairman of
Anyday.com, an Internet calendar and personal information management company.
From March 1996 to January 1999, he served as Chairman of Narrative
Communications, an Internet-based advertising and direct marketing company. From
December 1990 to June 1995, Mr. Landry served as the Senior Vice President of
Development and Chief Technology Officer for Lotus Development Corporation. He
also serves as a director of Giga Information Group, a market research firm, and
Interliant, an applications service provider, as well as several private
companies. Mr. Landry holds a Bachelor's degree from Babson College.
4
<PAGE> 8
Gregory M. Avis has served as a Director of the Company since May 1996. Mr.
Avis has served as a Managing Partner of Summit Partners since 1990, and has
been a General Partner since 1987. Mr. Avis also serves as a director of: Ditech
Communications Corporation, a manufacturer of communications equipment; Extended
Systems, Inc., a network peripherals and wireless communications company;
Powerwave Technologies, Inc., a designer and manufacturer of power amplifiers
for wireless communications; Splash Technology Holdings, Inc., a developer of
color server systems; and several privately held companies. Mr. Avis holds a
Bachelor's degree from Williams College and an M.B.A. from Harvard University.
Paul Severino has served as a Director of the Company since July 1999. He
has served as the Chairman of NetCentric Corporation, a provider of Internet
protocol telephony applications, since August 1997. From October 1994 to
November 1996, Mr. Severino served as the Chairman of the Board of Bay Networks,
Inc., after its formation from the merger of Wellfleet and Synoptics. From
October 1986 to October 1994, he served as the President and Chief Executive
Officer of Wellfleet Communications, Inc., a company he co-founded and which
merged with Bay Networks. He is a director of Media 100, Inc., a provider of
digital video systems, Interspeed, Inc., a remote access equipment company, and
SilverStream Software, Inc., an Internet software company. Mr. Severino holds a
Bachelor's degree from Rensselaer Polytechnic Institute.
INFORMATION REGARDING EXECUTIVE OFFICERS AND KEY EMPLOYEES
Set forth below is certain information regarding each of the executive
officers and key employees of the Company as of August 18, 2000.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Steven J. Benson......................... 41 Chairman, President and Chief Executive Officer
Jeffrey P. Dickerson..................... 40 Vice President of Sales
Paul K. Zurlo............................ 34 Chief Financial Officer
Michael D. Williams...................... 42 Vice President of Business Development
Patrick J. Curley........................ 40 Vice President of Engineering
Alfred F. Brisard........................ 36 Vice President of Marketing
Michael L. Quarella...................... 45 Vice President of Operations
J. Robert Geiman......................... 27 Senior Director of Corporate Development
Sarah N. Burke........................... 42 Director of Human Resources
</TABLE>
The principal occupation and business experience for the last five years of
the Company's executive officers, other than such officers who also serve as
Directors, is set forth below.
Jeffrey P. Dickerson has served as the Company's Vice President of Sales
since September 1997. From November 1996 to August 1997, he served as Vice
President of Sales and Service at Intelligent Environments, Inc., a British
Internet software company. From February 1993 to November 1996, Mr. Dickerson
served as Vice President of Direct Sales at VMark Software, Inc., a data
warehousing software company. Mr. Dickerson holds a Bachelor's degree from North
Adams State College.
Paul K. Zurlo has served as the Company's Chief Financial Officer since
September 1997. From July 1995 to June 1997, he served as a Vice President at
Summit Partners, a venture capital firm. Summit Partners and its affiliates
manage a number of venture capital funds, including Summit Ventures IV, L.P.,
Summit Subordinated Debt Fund L.P. and Summit Investors III, L.P., which are all
stockholders of MCK. From July 1993 to July 1995, Mr. Zurlo was a consultant
with Bain & Company. Mr. Zurlo holds a Bachelor's degree from Georgetown
University and an M.B.A. from Harvard University.
Michael D. Williams has served as the Company's Vice President of Business
Development since July 1997. From December 1994 to July 1997, he served in a
series of increasingly senior management positions at Gandalf Canada Ltd., a
networking solutions provider for the remote access market, most recently as the
Vice President of Product Marketing. From December 1992 to November 1994, Mr.
Williams served as the Strategic Marketing Manager for Canada at AT&T Network
Systems (now Lucent). Mr. Williams holds a Bachelor's degree from the University
of Waterloo.
5
<PAGE> 9
Patrick J. Curley has served as the Company's Vice President of Engineering
since May 1998. From July 1994 to March 1998, he served as Director and Vice
President of Engineering at Windata, Inc., a wireless local area networking
company. From September 1991 to June 1994, Mr. Curley served as Director of
Engineering at PictureTel Corporation, a video and data conferencing company. He
holds a Bachelor's degree from Boston University.
Alfred F. Brisard has served as the Company's Vice President of Marketing
since October 1999. From November 1997 to September 1999 he served as Director
of Marketing and Business Development -- New Business Initiatives for 3Com
Corporation, a provider of information access products and network system
solutions. From April 1996 to November 1997, Mr. Brisard served as Product Line
Manager for the OEM Business Unit of Compaq/Microcom, Inc., which develops and
markets computer hardware, software and services. From March 1994 to March 1996
he served as Senior Product Manager, and from September 1992 to March 1994 as a
Staff Director, for Bell Atlantic Corp., formerly NYNEX. Mr. Brisard holds a
Bachelor's degree from Northeastern University School of Engineering and an
M.B.A. from Boston College.
Michael L. Quarella has served as Vice President of Operations since
October 1999. From January 1999 to October 1999, he served as Director of
Operations at Sensormatic Electronics Corp., a manufacturer of personal access
control and integrated security management systems. From May 1997 to December
1998, he served as Business Unit Director at ACT Manufacturing, a full service
contract manufacturing company providing printed circuit board assemblies along
with complete systems assembly and test operations. From February 1993 to May
1997, he served as Vice President of Operations at Windata, Inc., a wireless
local area networking company. From October 1990 to February 1993, he served as
Senior Director, Manufacturing at Racal-Datacom, Inc., a manufacturer of access
products and local area network system solutions. He holds a Bachelor's degree
from Fitchburg State College.
J. Robert Geiman has served as the Company's Senior Director of Corporate
Development since January 2000 and Director of Corporate Development since
January 1999. From July 1995 to December 1998, he served as an Associate at
Summit Partners. Mr. Geiman holds a Bachelor's degree from Dartmouth College.
Sarah N. Burke has served as the Company's Director of Human Resources
since October 1999. From November 1990 through October 1999, she held
increasingly senior management positions at Ardent Software, a global data
management software company, including Vice President of Human Resources. Ms.
Burke graduated from The Katherine Gibbs School and received a Certificate of
Human Resources from Bentley College.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
COMPENSATION OF DIRECTORS
MCK does not currently compensate its Directors, but they are reimbursed
for out-of-pocket expenses incurred in connection with attendance at meetings of
the Board of Directors or its committees. The Company's Directors are generally
eligible to participate in the 1996 Stock Option Plan and the 1999 Stock Option
and Grant Plan. Pursuant to the terms of the Director Plan, if approved by the
stockholders, each Director who is an eligible director on November 1, 2000 or
becomes an eligible Director after November 1, 2000, shall be granted an option
to purchase 50,000 shares of Common Stock on November 1, 2000 or the date that
such person first becomes an eligible Director, whichever is later; provided,
however, that any eligible Director who received stock options of the Company
prior to November 1, 2000, shall not be granted an Initial Grant, but rather,
shall receive an option to purchase up to the number of shares equal to 50,000
shares minus the total number of unvested shares previously granted pursuant to
stock options of the Company (collectively, the "Initial Grants"). Initial
Grants shall vest in quarterly installments, subject to the grantee's continued
service as a Director of the Company or its subsidiaries, over a period of 3
years (1/12th of the total option shares vest every 3 months). Additionally,
grantees may immediately exercise the Initial Grants, subject to the Company's
right to repurchase any unvested shares upon the termination of the Director's
continued service as a Director of the Company or its subsidiaries. Further, on
the date of each annual meeting
6
<PAGE> 10
of the stockholders of the Company, each eligible Director will automatically be
granted an additional option to purchase 10,000 shares of Common Stock, if after
such annual meeting of the stockholders the Director will continue to be an
eligible Director (the "Annual Grants"). Annual Grants shall be fully vested and
immediately exercisable on the date of grant. All options granted under the
Director Plan shall have an exercise price equal to 100% of the fair market
value of the Common Stock (generally determined as the closing sales price on
the Nasdaq National Market) on the date of grant.
COMPENSATION OF EXECUTIVE OFFICERS
The following sections of this Proxy Statement set forth and describe the
compensation paid or awarded to the Company's Chief Executive Officer and the
four other most highly compensated executive officers who earned in excess of
$100,000 during Fiscal Year 2000. These executives are referred to as the "Named
Executive Officers" elsewhere in this Proxy Statement.
Summary Compensation. The following summary compensation table sets forth
information concerning compensation for services rendered in all capacities
awarded to, earned by or paid to the Company's Chief Executive Officer and the
other Named Executive Officers during each of fiscal years ended April 30, 2000
and April 30, 1999.
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------------- -----------------------------
SECURITIES ALL OTHER
RESTRICTED STOCK UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) AWARDS(#) OPTIONS(#) ($)(1)
--------------------------- ---- --------- -------- ---------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Steven J. Benson................ 2000 $290,992 $265,000 107,100 -- $876
Chairman, President, and 1999 271,356 243,268 -- 244,629 660
Chief Executive Officer
Jeffrey P. Dickerson............ 2000 122,830 183,387 53,550 20,000 258
Vice President of Sales 1999 120,001 75,568 -- 32,217 264
Paul K. Zurlo................... 2000 156,551 32,910 53,550 -- 305
Chief Financial Officer 1999 109,584 34,258 -- 36,010 290
Michael D. Williams............. 2000 127,505 25,340 53,550 -- 314
Vice President of Business 1999 110,000 24,280 -- 32,602 264
Development
Patrick J. Curley............... 2000 121,315 13,687 53,550 -- 235
Vice President of Engineering 1999 119,155 11,125 114,750 28,359 264
</TABLE>
---------------
(1) Represents premiums paid for life insurance.
Option Grants. The following table sets forth certain information
concerning the individual grant of options to purchase Common Stock of the
Company to the Named Executive Officers who received options during Fiscal Year
2000.
7
<PAGE> 11
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------
PERCENT
OF TOTAL
OPTIONS POTENTIAL REALIZABLE
NUMBER GRANTED TO VALUE AT ASSUMED
OF EMPLOYEES ANNUAL RATES OF STOCK
SECURITIES EXERCISE EXERCISE PRICE APPRECIATE FOR
UNDERLYING RATES IN RATES OR OPTION TERM(1)
OPTIONS FISCAL BASE PRICE EXPIRATION -------------------------
NAME GRANTED YEAR(#) ($/SH) DATE 5%($) 10%($)
---- ---------- ---------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Steven J. Benson.............. -- -- -- -- -- --
Jeffrey P. Dickerson.......... 20,000 1.4% $12.75 10/04/09 $325,451.80 $410,680.05
Paul K. Zurlo................. -- -- -- -- -- --
Michael D. Williams........... -- -- -- -- -- --
Patrick J. Curley............. -- -- -- -- -- --
</TABLE>
---------------
(1) This column shows the hypothetical gain or option spreads of the options
granted based on assumed annual compound stock appreciation rates of 5% and
10% for the exercise price of such options over the full 10-year term of the
options. The 5% and 10% assumed rates of appreciation are mandated by the
rules of the Securities and Exchange Commission and do not represent the
Company's estimate or projection of future Common Stock prices.
Option Exercises and Option Values. The following table sets forth
information concerning the number of underlying shares and value of unexercised
options to purchase Common Stock held by the Named Executive Officers as of
April 30, 2000.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN THE MONEY OPTIONS
SHARES AT APRIL 30, 2000(#) AT APRIL 30, 2000($)(1)
ACQUIRED ON VALUE --------------------------- -----------------------------
NAME EXERCISE(#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ---------- ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Steven J. Benson...... 30,600 $26,680.14 76,426 137,603 $2,380,819.76 $4,286,603.26
Jeffrey P.
Dickerson........... 6,301 5,493.84 19,819 26,097 617,400.71 812,972.72
Paul K. Zurlo......... 7,091 6,182.64 5,317 15,952 165,634.98 496,936.08
Michael D. Williams... 4,326 3,771.84 8,744 19,532 272,392.75 608,460.10
Patrick J. Curley..... -- -- 12,408 15,951 386,533.53 496,904.93
</TABLE>
---------------
(1) Based on the last reported sale price on the Nasdaq National Market on April
28, 2000 less the option exercise price. As of April 28, 2000 there were no
options held by officers of MCK for which the exercise price of the option
was in excess of the market price.
EMPLOYMENT AGREEMENTS WITH EXECUTIVE OFFICERS
We entered into a severance agreement with Steven J. Benson on June 17,
1997. The severance agreement provides that, in the event Mr. Benson's
employment is terminated without cause, Mr. Benson will continue to receive
salary and benefits for six months or until Mr. Benson is reemployed, whichever
occurs first.
8
<PAGE> 12
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION
The Compensation Committee of the Board of Directors currently consists of
Gregory Avis and Paul Severino. Mr. Avis and Mr. Severino are both non-employee
directors.
COMPENSATION COMMITTEE POLICY
Compensation Policies for Executive Officers. The Compensation Committee's
executive compensation philosophy is: (i) to provide competitive levels of
compensation that integrate pay with the individual executive's performance and
the Company's annual and long-term performance goals; (ii) to motivate key
executives to achieve strategic business goals and reward them for their
achievement; (iii) to provide compensation opportunities and benefits that are
comparable to those offered by other companies in the telecommunications
equipment industry, thereby allowing MCK to compete for and retain talented
executives who are critical to the Company's long-term success; and (iv) to
align the interests of key executives with the long-term interests of
stockholders and the enhancement of stockholder value through the granting of
stock options.
The compensation of the Company's executive officers is currently comprised
of annual base salary, annual performance incentives in the form of cash
bonuses, and long-term performance incentives in the form of stock option grants
under the Stock Plans.
The Compensation Committee has determined that the base salaries of
executive officers should be set at levels that are competitive with those in
the telecommunications equipment industry. In addition, the Compensation
Committee believes that it is appropriate to reward outstanding performance
through a combination of cash bonuses and stock options to provide a competitive
compensation package that will enable the Company to attract and retain the
executives needed to achieve such performance. The Compensation Committee also
has determined that any stock option or other equity-based compensation should
involve long-term vesting to encourage tenure and enhancement of stockholder
value over the long-term.
Base Salary and Bonuses. Base salaries, bonuses and other compensation for
executive officers are targeted according to the salaries of employees holding
similar offices and having similar responsibilities within the
telecommunications equipment industry. Annual salary adjustments for executive
officers are determined by evaluating the competitive marketplace, the
performance of the Company, the performance of the executive officers and any
change in the responsibilities assumed by the executive officers. Salary
adjustments are normally determined and made on an annual basis.
Restricted Stock and Stock Option Grants. Stock options are designed to
attract and retain executives who can make significant contributions to the
Company's success; reward executives for such significant contributions; and
give executives a long-term incentive to encourage tenure; and align the
interests of the Company's executives with those of its stockholders. In
determining whether to grant restricted stock or stock options to executive
officers, the Compensation Committee evaluates each officer's performance, and
awards reflect individual performance reviews. The Compensation Committee also
may grant restricted stock or stock options for executive retention purposes,
taking into account, among other things, general industry practices. Restricted
stock and stock options typically vest over four years in order to encourage
performance over the long-term. Stock options generally have been granted with
five and ten-year terms and an exercise price equal to 100% of the fair market
value of the Common Stock on the grant date.
The total compensation for the Named Executive Officers is described in
this Proxy Statement starting on page 7 and the compensation for the Chief
Executive Officer is also discussed below.
COMPENSATION OF EXECUTIVE OFFICERS DURING FISCAL YEAR 2000
Steven Benson, the CEO of the Company, received a base salary of $290,000
for Fiscal Year 2000. This represented an increase of approximately 7.4% from
Fiscal Year 1999. The Compensation Committee has voted to keep the salary of the
CEO at the same level for Fiscal Year 2001. Mr. Benson was also awarded a cash
bonus of $290,000 in Fiscal Year 2000 based on the achievement of certain
metrics and personal
9
<PAGE> 13
objectives which included, but were not limited to, the Company's successful
completion of a public stock offering and the Company's achievement of certain
revenue and earnings goals. Mr. Benson was also awarded a restricted stock grant
of 107,100 shares which vest over four years.
COMPENSATION COMMITTEE
GREGORY AVIS
PAUL SEVERINO
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Since October 22, 1999 all executive officer compensation decisions have
been made by the Compensation Committee or the full Board of Directors. The
Compensation Committee reviews and makes recommendations regarding the
compensation for top management and key employees of the Company, including
salaries and bonuses. No member of the Compensation Committee is an officer of
the Company. The current members of the Compensation Committee are Gregory Avis
and Paul Severino. All Directors participated in deliberations of the Company's
Board of Directors concerning executive compensation during Fiscal Year 2000.
SHAREHOLDER RETURN PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total shareholder return on the Company's Common Stock, based on
the market price of the Company's Common Stock with the total return of
companies included within the Nasdaq Stock Market Index and a peer group of
companies included within the Nasdaq Telecommunications Stock Index, for the
period commencing October 22, 1999 and ending April 30, 2000. The calculation of
total cumulative return assumes a $100 investment in the Company's Common Stock,
the Nasdaq Stock Market Index and the Nasdaq Telecommunications Stock Index on
October 22, 1999, the date of the Company's initial public offering, and the
reinvestment of all dividends.
<TABLE>
<CAPTION>
NASDAQ STOCK MARKET NASDAQ
MCK COMMUNICATIONS, INC. (U.S. COMPANIES) TELECOMMUNICATIONS
------------------------ ------------------- ------------------
<S> <C> <C> <C>
10/22/1999 100 100 100
4/30/2000 195.31 136.91 117.85
</TABLE>
10
<PAGE> 14
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On July 12, 1999, MCK issued restricted stock to certain of its executive
officers. The Company accepted promissory notes as consideration for the
restricted stock. Paul Zurlo, Michael Williams, Jeffrey Dickerson and Patrick
Curley each issued a promissory note to the Company in the principal amount of
$87,500 for 53,550 shares of Common Stock, and Steven Benson issued a promissory
note to the Company in the principal amount of $175,000 for 107,100 shares of
Common Stock. These promissory notes bear interest at a compound annual rate of
5.82%. The principal amount of the promissory notes and any accrued and unpaid
interest is required to be repaid with the net, after-tax proceeds from the sale
of the restricted stock granted to the executive officer and paid for with these
promissory notes. The principal amount of the promissory notes and any accrued
and unpaid interest are due and payable on the earlier of July 12, 2004 or 60
days after the termination of the executive officer's employment with MCK. The
Company makes annual bonus payments to these executive officers in the amount of
the annual interest due on the promissory notes. The restricted stock of Messrs.
Benson, Zurlo, Williams, Dickerson and Curley vests 1/4th on the first
anniversary of the date of grant and 1/48th of the shares monthly thereafter.
On July 6, 1999, MCK issued 30,600 shares of Common Stock to one of its
Directors, Paul Severino, for an aggregate purchase price of $250,000.
On September 21, 1999, MCK issued 22,950 shares of restricted stock to one
of its executive officers, Alfred Brisard, for an aggregate purchase price of
$75,000. Mr. Brisard issued a promissory note to the Company in the principal
amount of $75,000 for the 22,950 shares of Common Stock. The promissory note
bears interest at a compound annual rate of 5.82%. The principal amount of the
note and any accrued and unpaid interest is required to be repaid with the net,
after-tax proceeds from the sale of the restricted stock granted to Mr. Brisard
and paid for with the promissory note. The principal amount of the promissory
note and the accrued and unpaid interest are due and payable on the earlier of
September 21, 2004 or 60 days after the termination of Mr. Brisard's employment
with MCK. The Company makes annual bonus payments to Mr. Brisard in an amount
equal to the annual interest due on the promissory note. The restricted stock
vests 1/4 on the first anniversary of the date of grant and 1/48th of the shares
monthly thereafter.
Upon completion of the Company's initial public offering in October 1999:
- MCK redeemed 12,910,804 shares of its Series A redeemable preferred
stock, held by Summit Partners, for an aggregate redemption price of
$16,388,020;
- MCK redeemed 23,887 shares of its Series C redeemable preferred stock,
held by Lazard Freres, for an aggregate redemption price of $2,637,573;
and
- MCK redeemed 2,000,000 shares of its Series A redeemable preferred stock
and 20,000 shares of Series E redeemable preferred stock of its
subsidiary, held by Calvin Manz, for an aggregate redemption price of
$5,173,585.
CONFLICTS OF INTEREST
Conflicts of interest may arise in the course of business transactions
between the Company, its officers, Directors and principal stockholders, and
their affiliates. The Company believes that the transactions in which it was a
party as described above were at terms no less favorable than the Company would
have obtained from unaffiliated third parties. In connection with the Company's
initial public offering, the Company adopted a policy that all future
transactions between the Company and its officers, Directors or other affiliates
(other than compensation and employment matters) be reviewed by the Board of
Directors on an on-going basis and submitted to the Audit Committee or other
comparable body for review where appropriate.
11
<PAGE> 15
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth information regarding the beneficial
ownership of Common Stock as of August 18, 2000 by:
- all persons who own beneficially 5% or more of the Company's Common
Stock;
- the Chief Executive Officer and each of the other Named Executive
Officers;
- each of the Company's Directors; and
- all Directors and executive officers as a group.
Unless otherwise indicated, each of the stockholders has sole voting and
investment power with respect to the shares of Common Stock beneficially owned,
subject to the community property laws, where these rules, beneficial ownership
includes any shares which the individual or entity has stole or shared voting or
investment power and shares of Common Stock subject to options held that are
currently exercisable or exercisable within 60 days of August 18, 2000. The
applicable percentage of "beneficial ownership" is based upon 19,926,777 shares
of Common Stock outstanding.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
------------------------
NAME OF BENEFICIAL OWNER (1) SHARES PERCENTAGE
---------------------------- ---------- ----------
<S> <C> <C>
OFFICERS AND DIRECTORS:
Summit Partners (1)......................................... 4,294,161 21.6%
Steven J. Benson (2)........................................ 1,040,265 5.2
Jeffrey P. Dickerson (3).................................... 122,129 *
Paul K. Zurlo (4)........................................... 159,579 *
Michael D. Williams (5)..................................... 117,812 *
Patrick J. Curley (6)....................................... 156,779 *
Gregory M. Avis (7)......................................... 4,294,161 21.6
Michael H. Balmuth (8)...................................... 4,294,161 21.6
John B. Landry (9).......................................... 57,639 *
Calvin K. Manz (10)......................................... 2,770,949 13.9
Paul Severino (11).......................................... 40,917 *
All executive officers and directors as a group(12
persons)(12).............................................. 8,805,693 43.7
</TABLE>
---------------
* Represents less than 1% of the outstanding shares.
(1) Represents 3,936,376 shares held by Summit Ventures IV, L.P., 178,670
shares held by Summit Subordinated Debt Fund, L.P., and 179,115 shares held
by Summit Investors III, LP. Summit Ventures IV, L.P., Summit Subordinated
Debt Fund, L.P., and Summit Investors III, L.P. are part of an affiliated
group of investment partnerships referred to, collectively, as Summit
Partners. Summit Partners, LLC through an investment committee, has voting
and dispositive authority over the shares held by Summit Ventures IV, L.P.,
Summit Debt Fund L.P. and Summit Investors III, L.P.
(2) Includes 107,004 shares underlying options granted to Mr. Benson which are
exercisable within 60 days of August 18, 2000 and 138,465 shares owned by
the Benson Family Limited Partnership, of which Mr. Benson is the general
partner and two trust for his minor children are the limited partners.
(3) Includes 26,184 shares underlying options granted to Mr. Dickerson which
are exercisable within 60 days of August 18, 2000.
(4) Includes 12,528 shares underlying options granted to Mr. Zurlo which are
exercisable within 60 days of August 18, 2000.
(5) Includes 12,740 shares underlying options granted to Mr. Williams which are
exercisable within 60 days of August 18, 2000.
12
<PAGE> 16
(6) Includes 15,952 shares underlying options granted to Mr. Curley which are
exercisable within 60 days of August 18, 2000.
(7) Represents shares described in note (1) above, beneficially owned by Summit
Partners. Summit Partners, LLC, through an investment committee, has voting
and dispositive authority over the shares held by Summit Ventures IV, L.P.,
Summit Debt Fund L.P. and Summit Investors III L.P. Mr. Avis disclaims
beneficial ownership for such shares except to the extent of his pecuniary
interest therein.
(8) Represents shares described in note (1) above, beneficially owned by Summit
Partners. Summit Partners, LLC, through an investment committee, has voting
and dispositive authority over the shares held by Summit Ventures IV, L.P.,
Summit Debt Fund L.P. and Summit Investors III L.P. Mr. Balmuth disclaims
beneficial ownership for such shares except to the extent of his pecuniary
interest therein.
(9) Includes 1,193 shares underlying options granted to Mr. Landry which are
exercisable within 60 days of August 18, 2000.
(10) Represents shares held by Manz Developments, Inc, of which Mr. Manz holds
100% of the voting stock and 48% of the total equity.
(11) Includes 15,300 shared underlying options granted to Mr. Severino which are
exercisable within 60 days of August 18, 2000.
(12) Includes 206,921 shares underlying options granted to the executive
officers which are exercisable with 60 days of August 18, 2000.
13
<PAGE> 17
PROPOSAL NO. 2
ADOPTION OF THE MCK COMMUNICATIONS, INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
On August 15, 2000, the Board of Directors adopted the MCK Communications,
Inc. 2000 Employee Stock Purchase Plan (the "Employee Stock Purchase Plan"). At
the Annual Meeting, the Company's stockholders will be asked to consider and
vote on a proposal to approve the Employee Stock Purchase Plan, a copy of which
is attached hereto as Exhibit B.
The Board of Directors believes that the ownership of the Company's Common
Stock by employees is a desirable and useful means to strengthen further the
interests of the employees and the future success of the Company.
The following summary of the principal provisions of the Employee Stock
Purchase Plan proposed for approval is qualified in its entirety by reference to
the full text of the Employee Stock Purchase Plan, which is included as Exhibit
B hereto.
GENERAL
General. The Employee Stock Purchase Plan is intended to qualify as an
"employee stock purchase plan" under Section 423 of the Internal Revenue Code of
1986, as amended (the "Code"). Each participant in the Employee Stock Purchase
Plan is granted at the beginning of each offering under the plan (an "Offering")
the non-transferable right to purchase through accumulated payroll deductions up
to a number of shares of Common Stock of the Company during the Offering (an
"Option"). The Option is automatically exercised on each purchase date at the
end of the Offering unless the participant has terminated employment, is no
longer eligible to participate, or has withdrawn from participation in the
Offering prior to such date.
Eligibility and Participation. Any employee of the Company or of any
present or future parent or subsidiary corporation of the Company designated by
the Board of Directors for inclusion in the Employee Stock Purchase Plan with
customary employment of at least 20 hours per week and 5 months per calendar
year (including officers and employee Directors but not including non-employee
Directors) is eligible to participate in the Employee Stock Purchase Plan.
However, no employee who owns or holds stock options to purchase, or as a result
of participation in the Employee Stock Purchase Plan would own or hold options
to purchase, 5% or more of the total combined voting power or value of all
classes of stock of the Company or any parent or subsidiary corporation of the
Company is entitled to participate in the Employee Stock Purchase Plan. In order
to participate in the Employee Stock Purchase Plan, an eligible employee must
execute and deliver to the Company certain authorization forms directing a
payroll deduction of a specified whole percentage of his or her base and/or
incentive compensation not to exceed ten percent (10%). Payroll deductions will
be credited to an individual account for each participating employee. No
interest will be payable with respect to any amounts credited to such accounts.
A participant may withdraw from an Offering at any time without affecting
his or her eligibility to participate in future Offerings.
Subject to certain limitations, each participant in an Offering has an
Option equal to the lesser of that number of whole shares determined by dividing
the aggregate payroll deduction by the applicable purchase price. During any
calendar year, no participant may purchase under the Employee Stock Purchase
Plan shares of Common Stock having a fair market value exceeding $25,000
(measured by the fair market value of the Common Stock on the first day of the
Offering in which the shares are purchased). In addition, the Compensation
Committee may set a maximum number of shares of Common Stock that may be
purchased by any participant on any single purchase date prior to the
commencement of any Offering.
Offerings. Generally, each Offering under the Employee Stock Purchase Plan
is for a period of 6 months. Offerings are consecutive, with a new Offering
beginning every 6 months. Offerings will generally commence on May 1st and
November 1st of each year and end on October 31st and April 30th, respectively.
The first Offering will commence on November 1, 2000 and end on April 30th,
2001. Shares will be purchased
14
<PAGE> 18
on the last day of each Offering. The Board of Directors may establish a
different term for one or more Offerings or purchase periods or different
commencement or ending dates for an Offering or purchase period.
Issuance of Stock. On each purchase date, the Company issues to each
participant in the Offering the number of shares of Common Stock determined by
dividing the amount of payroll deductions accumulated for the participant during
the Offering by the purchase price, subject to the limitations described above.
The per share purchase price for the Common Stock purchased pursuant to the
Employee Stock Purchase Plan will equal eighty-five percent of the lower of the
fair market value (generally determined as closing sales price on the Nasdaq
National Market) of a share of Common Stock on (i) the first business day of the
offering period or (ii) the last business day of the offering period. Any
payroll deductions not applied to the purchase of shares will be returned to the
participant, unless the amount remaining in a participant's individual account
is less than the amount necessary to purchase a whole share of Common Stock, in
which case, the remaining amount may be applied to the next Offering.
Sale Event. In the event of: (i) a merger or consolidation in which the
Company is not the surviving corporation, (ii) a merger in which the Company is
the surviving corporation but after which the stockholders of the Company
immediately prior to such merger cease to own their shares or other equity
interest in the Company, (iii) the sale of all or substantially all of the
assets of the Company or (iv) the acquisition, sale, or transfer of more than
50% of the outstanding shares of the Company by tender offer or similar
transaction (a "Sale Event"), the Company shall accelerate the last day of the
Offering to a date on or before the date of the Sale Event and apply the
participant's accumulated payroll deductions to purchase shares of Common Stock;
provided, however, that any successor may elect to assume the Company's rights
and obligations under the Employee Stock Purchase Plan. In the event of a
dissolution or liquidation of the Company, the Compensation Committee may
accelerate the last day of the Offering to a date on or before the consummation
of the transaction and apply the participant's accumulated payroll deductions to
purchase shares of Common Stock.
Administration. The Employee Stock Purchase Plan will be administered by
the Compensation Committee of the Board of Directors. The Compensation Committee
may adopt, amend and rescind rules and regulations not inconsistent with the
Employee Stock Purchase Plan and it will interpret and construe the Employee
Stock Purchase Plan. Each Participant will be provided with a periodic statement
showing the cash withheld and invested, purchase price per share and shares
purchased.
Termination. The Employee Stock Purchase Plan will continue until
terminated by the Board of Directors, or until all of the shares reserved for
issuance have been issued, or August 14, 2010, whichever occurs first. The Board
of Directors may amend or terminate the Employee Stock Purchase Plan at any
time. Any such termination will not impair any purchase rights granted prior to
such termination, unless it is in the best interests of the Company or its
stockholders, and any such amendment will not adversely affect the right of any
participant except to the extent that such amendment is permitted by the terms
of the Employee Stock Purchase Plan, necessary to meet the requirements of
Section 423 of the Code, or to obtain qualification or registration of the
shares of Common Stock under federal, state or foreign securities laws. Provided
further that, any amendment increasing the number of shares authorized for
issuance under the Employee Stock Purchase Plan, changing the designation of
employees which may participate in the Employee Stock Purchase Plan, or any
other action taken by the Board of Directors that, by its terms, is contingent
on stockholder approval, shall be subject to the approval of the Company's
stockholders within 12 months of the adoption of such amendment.
Stock Reserved for Issuance. A total aggregate of 250,000 shares of Common
Stock have been reserved for issuance under the Employee Stock Purchase Plan.
The share reserve will be automatically increased on May 1 of each year by: (a)
a number of shares of Common Stock equal to 0.5% of the total number of
outstanding shares of Common Stock on the immediately preceding April 30th, or
(b) a lower number of shares of Common Stock as determined by the Board of
Directors. Notwithstanding the foregoing, the aggregate number of shares of
Common Stock issued over the term of the Employee Stock Purchase Plan shall not
exceed 500,000 shares of Common Stock. This number and the terms of outstanding
Options are subject to adjustment as described in the Employee Stock Purchase
Plan. If any Option expires or terminates,
15
<PAGE> 19
the shares subject to the unexercised portion of such Option will again be
available for issuance under the Employee Stock Purchase Plan.
FEDERAL TAX CONSEQUENCES
A participant recognizes no taxable income either as a result of commencing
to participate in the Employee Stock Purchase Plan or purchasing shares of the
Common Stock under the terms of the Employee Stock Purchase Plan.
If shares of Common Stock purchased by a participant pursuant to an
exercise of purchase rights granted under the Employee Stock Purchase Plan are
disposed of at least two years after the date of the grant of such purchase
rights or one year after the transfer of shares to the participant (the "Holding
Period"), the participant will realize ordinary income in the year of
disposition in an amount equal to 15% of the fair market value of the shares at
the time the purchase rights were granted or the excess of the fair market value
of the shares on the date of disposition over the purchase price paid for the
shares, whichever is less. The amount of any ordinary income recognized will be
added to the participant's basis in the shares, and any further gain (or any
loss) after such basis adjustment would be considered gain (or loss) from the
sale of a capital asset. If the holding period requirements described above are
satisfied, neither the Company nor any participating subsidiary will be entitled
to any deduction for federal income tax purposes with respect to shares
transferred to a participant pursuant to the exercise of purchase rights.
If the participant still owns the shares at the time of death, then in the
year of death, the lesser of (i) the excess of the fair market value of the
shares on the date of death over the purchase price, or (ii) 15% of the fair
market value of the shares on the first day of the Offering in which the shares
were purchased will constitute ordinary income.
If shares acquired pursuant to the exercise of purchase rights granted
under the Employee Stock Purchase Plan are disposed of by a participant before
expiration of the Holding Period, then such participant will realize ordinary
income in the year of such disposition in an amount equal to the difference
between the purchase price of such shares and their fair market value on the
purchase date. Any amount treated as ordinary income by reason of such a
disqualifying disposition will increase the participant's income tax basis in
the shares, and any additional gain or loss on such disposition (after taking
into account such basis adjustment) will be capital gain or loss and will be
long-term if the participant's holding period for the stock is more than one
year.
If a disqualifying disposition occurs, the Company or the participating
subsidiary by which the participant is employed will be entitled to a deduction
for its taxable year in which such disposition occurs, in the same amount as the
amount of ordinary income recognized by the participant making such disposition
except to the extent such deduction is limited by applicable provisions of the
Code or the regulations thereunder.
The discussion set forth above does not purport to be a complete analysis
of the potential tax consequences relevant to the participants in the Employee
Stock Purchase Plan or the Company, or to describe tax consequences based on
particular circumstances. It is based on federal income tax law and
interpretational authorities as of the date of this Proxy Statement, which are
subject to change at any time.
VOTE REQUIRED FOR APPROVAL
A quorum being present, the affirmative vote of majority of the votes cast
is necessary to approve adoption of the Employee Stock Purchase Plan.
THE BOARD RECOMMENDS A VOTE FOR THE ADOPTION OF THE EMPLOYEE STOCK PURCHASE
PLAN.
16
<PAGE> 20
PROPOSAL NO. 3
ADOPTION OF THE MCK COMMUNICATIONS, INC.
2000 DIRECTOR STOCK OPTION PLAN
On August 15, 2000, the Board of Directors adopted the MCK Communications,
Inc. 2000 Director Stock Option Plan (the "Director Plan"). At the Annual
Meeting, the Company's stockholders will be asked to consider and vote upon a
proposal to approve the Director Plan, a copy of which is attached hereto as
Exhibit C.
The Board of Directors believes that approval of the Director Plan is in
the best interests of the Company. The purpose of the Director Plan is to
provide eligible members of the Board of Directors with a means to acquire an
equity interest in the Company and incentives based on increases in the value of
the Company's Common Stock.
SUMMARY OF THE 2000 DIRECTOR STOCK OPTION PLAN
The following summary of the principal provisions of the Director Plan
proposed for approval is qualified in its entirety by reference to the full text
of the Director Plan, which is included as Exhibit C hereto.
General. The Director Plan was adopted by the Board of Directors on August
15, 2000. The purpose of the Director Plan is to provide members of the Board of
Directors with a means to acquire an equity interest in the Company and
incentives based on increases in the value of the Company's Common Stock. As of
August 28, 2000, the Company had granted no options under the Director Plan.
Administration. The Director Plan permits either the Board of Directors or
a committee appointed by the Board of Directors and comprised of not less than
two Directors to administer the Director Plan (in either case, the
"Administrator"). The Administrator has the authority to construe and interpret
the Director Plan and all interpretations of the Administrator will be final and
binding on all persons having an interest in the Director Plan or any option.
The Board of Directors has delegated administration of the Director Plan to a
Compensation Committee composed of Gregory Avis and Paul Severino.
Eligibility. Each member of the Board of Directors is eligible to receive
stock option grants under the Director Plan except for members who are also
employees of the Company or any of its subsidiaries, Gregory Avis, Michael
Balmuth, and Calvin Manz. Any person eligible under the Director Plan may be
granted only a non-qualified stock option.
Terms of Options. Each option granted under the Director Plan is evidenced
by a written agreement between the Company and the grantee specifying the number
of shares subject to the option and the other terms and conditions of the
option, consistent with the requirements of the Director Plan. Each Director who
is an eligible Director on November 1, 2000 or becomes an eligible Director for
the first time after November 1, 2000, shall be granted an option to purchase
50,000 shares of Common Stock on November 1, 2000 or the date that such person
first becomes an eligible Director, whichever is later; provided, however, that
any eligible Director who received stock options of the Company prior to
November 1, 2000, shall receive an option to purchase up to the number of shares
equal to 50,000 shares minus the total number of unvested shares previously
granted pursuant to stock options of the Company (collectively, the "Initial
Grants"). Initial Grants shall vest in quarterly installments, subject to the
participant's continued service with the Company or its subsidiaries, over a
period of 3 years (1/12th of the total option shares vest every 3 months).
Additionally, participants may immediately exercise the Initial Grants, subject
to the Company's right to repurchase any unvested shares upon the termination of
the Director's continued service with the Company or its subsidiaries. Further,
on the date of each annual meeting of the stockholders of the Company, each
eligible Director will automatically be granted an additional option to purchase
10,000 shares of Common Stock, if after such annual meeting of the stockholders
the Director will continue to be an eligible Director (the "Annual Grants").
Annual Grants shall be fully vested and immediately exercisable on the date of
grant. All options granted under the Director Plan shall have an exercise price
equal to 100% of the fair market value of the common stock (generally determined
as the closing sales price on the Nasdaq National Market) on the date of grant
and shall be nontransferable except by will or the laws of descent and
distribution or to members of his
17
<PAGE> 21
or her immediate family, trusts for the benefit of such family members, or to
partnerships in which such family members are the only partners.
Sale Event. Upon the effectiveness of: (i) the dissolution or liquidation
or the Company, (ii) a merger, reorganization or consolidation of the Company
where the holders of the Company's outstanding voting stock immediately prior to
the transaction hold less than a majority of the outstanding voting stock of the
surviving entity immediately after the transaction, (iii) the sale of all or
substantially all of the assets of the Company, or (iv) the sale of all of the
stock of the Company (a "Sale Event"), the shares that would otherwise vest
within the twelve (12) month period immediately following the Sale Event if the
grantee continued to provide service to the Company or its subsidiaries during
that time shall immediately vest (any remaining unvested shares shall continue
to vest in accordance with the vesting schedule set forth in the option
agreement without any acceleration in the time of vesting of such shares).
Stock Reserved for Issuance. The total number of shares of Common Stock
that may be issued pursuant to the Director Plan is 500,000. This number and the
terms of outstanding options are subject to adjustment as provided in the
Director Plan. If any option expires or terminates, the shares subject to the
unexercised portion of such option will again be available for issuance under
the Director Plan.
Amendment and Termination of the Director Plan. The Board of Directors may
amend or discontinue the Director Plan at any time and may amend or cancel any
outstanding options; provided, that no amendment shall adversely affect rights
under any outstanding option without the holder's consent, unless such amendment
is necessary to obtain qualification or registration of the shares under any
applicable federal, state or foreign securities laws or is required to comply
with any applicable law, regulation or rule.
FEDERAL INCOME TAX INFORMATION
The following summary is intended only as a general guide as to the federal
income tax consequences under current law of participation in the Director Plan
and does not attempt to describe all possible federal or other tax consequences
of such participation or tax consequences based on particular circumstances.
Options granted under the Director Plan are non-qualified stock options.
The grantee of an option under the Director Plan recognizes no income for
federal income tax purposes on the date of grant. On the exercise of an option,
the grantee normally recognizes ordinary income in an amount equal to the
difference between the fair market value of the underlying shares of Common
Stock on the exercise date and the option exercise price and the amount equal to
the option exercise price paid for the shares becomes the basis for the
underlying shares which will be used in computing any capital gain or loss upon
disposition of such shares. A capital gain or loss will be long-term if the
grantee holds the shares after exercise for more than 12 months before
disposition. Subject to certain limitations, the Company may deduct for the year
of exercise an amount equal to the amount recognized by the option holder as
ordinary income upon exercise of the option, except to the extent such deduction
is limited by applicable provisions of the Code or regulations thereunder.
VOTE REQUIRED FOR APPROVAL
A quorum being present, the affirmative vote of majority of the votes cast
is necessary to approve adoption of the Director Plan.
THE BOARD RECOMMENDS A VOTE FOR THE ADOPTION OF THE DIRECTOR STOCK OPTION
PLAN.
EXPENSES OF SOLICITATION
The Company will bear the cost of soliciting proxies for the Annual
Meeting. In addition to solicitations by mail, certain Directors, officers and
regular employees of the Company (who will receive no compensation for their
services other than their regular compensation) may solicit proxies by
telephone, telegram or personal interview. Banks, brokerage houses, custodians,
nominees and other fiduciaries have been requested to forward
18
<PAGE> 22
proxy materials to the beneficial owners of shares held of record by them and
such custodians will be reimbursed for their expenses.
SUBMISSION OF STOCKHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
Stockholder proposals intended to be presented at the Company's 2001 Annual
Meeting of stockholders must be received by the Company on or before April 30,
2001 in order to be considered for inclusion in the Company's proxy statement
and form of proxy for that meeting. The Company's By-laws provide that any
stockholder of record wishing to have a stockholder proposal considered at an
annual meeting must provide written notice of such proposal and appropriate
supporting documentation, as set forth in the By-laws, to the Company at its
principal executive office not less than 90 days or more than 120 days prior to
the first anniversary of the date of the preceding year's annual meeting. In the
event, however, that the annual meeting is scheduled to be held more than 30
days before such anniversary date or more than 60 days after such anniversary
date, notice must be so delivered not later than the later of (i) the 10th day
after the date of public disclosure of the date of such meeting or (ii) the 90th
day prior to the scheduled date of such meeting. Any such proposal should be
mailed to: Secretary, MCK Communications, Inc., 117 Kendrick Street, Needham, MA
02494.
INDEPENDENT ACCOUNTANTS
The Company has selected Ernst & Young LLP as the independent public
accountants for the Company for the current fiscal year. The firm of Ernst &
Young LLP has served as the Company's independent public accountants since
September 1997. A representative of Ernst & Young LLP will be present at the
Annual Meeting and will be given the opportunity to make a statement if he or
she so desires. The representative will be available to respond to appropriate
questions.
COMPLIANCE WITH SECTION 16(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and Directors, and persons who own more than 10% of the Company's
outstanding shares of Common Stock (collectively, "Section 16 Persons"), to file
initial reports of ownership and reports of changes in ownership with the
Commission and Nasdaq. Section 16 Persons are required by Commission regulations
to furnish the Company with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain Section 16 Persons that all Section 16(a)
reports required to be filed for such persons had been filed, the Company
believes that during Fiscal Year 2000 the Section 16 Persons complied with all
Section 16(a) filing requirements applicable to them.
OTHER MATTERS
The Board of Directors does not know of any matters other than those
described in this Proxy Statement which will be presented for action at the
Annual Meeting. If other matters are duly presented, proxies will be voted in
accordance with the best judgment of the proxy holders.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, YOU ARE
REQUESTED TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE
ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
19
<PAGE> 23
LIST OF EXHIBITS
<TABLE>
<S> <C>
Exhibit A MCK Communications, Inc. Audit Committee Charter
Exhibit B MCK Communications, Inc. 2000 Employee Stock Purchase Plan
Exhibit C MCK Communications, Inc. 2000 Director Stock Option Plan
</TABLE>
<PAGE> 24
EXHIBIT A
MCK COMMUNICATIONS
AUDIT COMMITTEE CHARTER
The following shall be the principal recurring processes of the audit
committee in carrying out its oversight responsibilities. The processes are set
forth as a guide with the understanding that the committee may supplement them
as appropriate.
- The committee shall have a clear understanding with management and the
independent auditors that the independent auditors are ultimately
accountable to the board and the audit committee, as representatives of
the Company's shareholders. The committee shall have the ultimate
authority and responsibility to evaluate and, where appropriate, replace
the independent auditors. The committee shall discuss with the auditors
their independence from management and the Company and the matters
included in the written disclosures required by the Independence
Standards Board. Annually, the committee will review and recommend to the
board the selection of the Company's independent auditors, subject to
shareholders' approval.
- The committee shall discuss with the internal auditors and the
independent auditors the overall scope and plans for their respective
audits including the adequacy of staffing and compensation. Also, the
committee will discuss with management, the internal auditors, if any,
and the independent auditors the adequacy and effectiveness of the
accounting, financial controls and staffing, including the Company's
system to monitor and manage business risk, and legal and ethical
compliance programs. The committee will review the Company's written
revenue recognition policies and other Company financial policies, as
needed. Further, the committee will meet separately with the internal
auditors and the independent auditors, with and without management
present, to discuss the results of their examinations.
- The committee shall review the interim financial statements with
management and the independent auditors prior to the filing of the
Company's Quarterly Report on Form 10-Q and shall review the Company's
earnings press releases and disclosure policies prior to such releases.
Also, the committee will discuss the results of the quarterly review and
any other matters required to be communicated to the committee by the
independent auditors under generally accepted auditing standards. The
chair of the committee may represent the entire committee for the
purposes of this review.
- The committee shall review with management and the independent auditors
the financial statements to be included in the Company's Annual Report on
Form 10-K (or the annual report to shareholders if distributed prior to
the filing of Form 10-K), including their judgment about the quality, not
just acceptability, of accounting principles, the reasonableness of
significant judgments, and the clarity of the disclosures in the
financial statements. Also, the committee will discuss the results of the
annual audit and any other matters required to be communicated to the
committee by the independent auditors under generally accepted auditing
standards.
- The committee shall be comprised of three directors who meet the NASD
definitions of independent and financially literate. At least one
committee member shall have accounting and/or financial management
expertise. The committee shall have an elected chairman.
- The committee shall submit the minutes of all meetings to the board. The
committee shall investigate any matter brought to its attention within
the scope of its duties and, if necessary, in its opinion, retain counsel
and other expert advisors.
<PAGE> 25
EXHIBIT B
MCK COMMUNICATIONS, INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
1. Establishment of Plan. MCK Communications, Inc. (the "Company")
proposes to grant options to purchase shares of the Company's common stock,
$.001 par value per share (the "Common Stock"), to eligible employees of the
Company and its Participating Affiliates (as defined below) pursuant to this
Employee Stock Purchase Plan (this "Plan"). For purposes of this Plan, "Parent
Corporation" and "Subsidiary Corporation" shall have the same meanings as
"parent corporation" and "subsidiary corporation" in Sections 424(e) and 424(f),
respectively, of the Internal Revenue Code of 1986, as amended (the "Code").
"Participating Affiliates" are Parent Corporations or Subsidiaries that the
Board of Directors of the Company (the "Board") designates from time to time as
corporations that shall participate in this Plan. Affiliates may be designated
as Participating Affiliates either before or after this Plan is approved by the
Company's stockholders as provided in Section 22. The Company intends this Plan
to qualify as an "employee stock purchase plan" under Section 423 of the Code
(including, any amendments to or replacements of such Section), and this Plan
shall be so construed. Any term not expressly defined in this Plan but defined
for purposes of Section 423 of the Code shall have the same definition herein. A
total of 250,000 shares of the Company's Common Stock are reserved for issuance
under this Plan. In addition, on each May 1, the aggregate number of shares of
the Company's Common Stock reserved for issuance under this Plan shall be
increased automatically by a number of shares equal to 0.5% of the total number
of outstanding shares of the Company's Common Stock on the immediately preceding
April 30; provided, that the Board or the Committee may in its sole discretion
reduce the amount of the increase in any particular year. Notwithstanding
anything to the contrary in this Section 1, the aggregate number of shares that
may be issued over the term of this Plan shall not exceed 500,000 shares. The
share limits set forth in this Section 1 shall be subject to adjustments
effected in accordance with Section 14 of this Plan.
2. Purpose. The purpose of this Plan is to provide eligible employees of
the Company and Participating Affiliates with a convenient means of acquiring an
equity interest in the Company through payroll deductions, to enhance such
employees' sense of participation in the affairs of the Company and
Participating Affiliates, and to provide an incentive for continued employment.
3. Administration.
(a) This Plan shall be administered by the Compensation Committee of the
Board (the "Committee"). Subject to the provisions of this Plan and the
limitations of Section 423 of the Code or any successor provision in the Code,
all questions of interpretation or application of this Plan shall be determined
by the Committee in its sole discretion and its decisions shall be final and
binding upon all participants. Members of the Committee shall receive no
compensation for their services in connection with the administration of this
Plan, other than standard fees as established from time to time by the Board for
services rendered by Board members serving on Board committees. All expenses
incurred in connection with the administration of this Plan shall be paid by the
Company.
(b) The Committee may, from time to time, consistent with the Plan and the
requirements of Section 423 of the Code, establish, change or terminate such
rules, guidelines, policies, procedures, limitations, or adjustments as deemed
advisable by the Company, in its sole discretion, for the proper administration
of the Plan, including, without limitation: (a) a minimum payroll deduction
amount required for participation in an Offering Period, (b) a limitation on the
frequency or number of changes permitted in the rate of payroll deduction during
an Offering Period, (c) an exchange ratio applicable to amounts withheld in
currency other than United States dollars, (d) a payroll deduction greater or
less than the amount designated by a participant in order to adjust for the
Company's delay or mistake in processing an Enrollment Form or in otherwise
effecting a participant's election under the Plan or as advisable to comply with
the requirements of Section 423 of the Code, (e) determination of the date and
manner by which the Fair Market Value of the Common Stock is determined for
purposes of administration of the Plan, (f) delegate
<PAGE> 26
responsibility for Plan operation, management and administration, subject to the
Committee's oversight and control, on such terms as the Committee may establish,
and (g) delegate to other persons the responsibility for performing appropriate
functions as necessary, desirable or appropriate to further the purposes of this
Plan.
4. Eligibility. Any individual employed by the Company or the
Participating Affiliates is eligible to participate in an Offering Period (as
hereinafter defined) under this Plan except the following:
(a) employees who are not employed by the Company or a Participating
Subsidiary Corporation before the beginning of such Offering Period or
prior to such other time period as specified by the Committee;
(b) employees who are customarily employed for twenty (20) hours or
less per week;
(c) employees who are customarily employed for five (5) months or less
in a calendar year;
(d) employees who, together with any other person whose stock would be
attributed to such employee pursuant to Section 424(d) of the Code, own
stock or hold options to purchase stock possessing five percent (5%) or
more of the total combined voting power or value of all classes of stock of
the Company or any of its Participating Affiliates or who, as a result of
being granted an option under this Plan with respect to such Offering
Period, would own stock or hold options to purchase stock possessing five
percent (5%) or more of the total combined power or value of all classes of
stock of the Company or any of its Participating Affiliates; and
(e) individuals who provide services to the Company or any of its
Participating Affiliates as independent contractors who are reclassified as
common law employees for any reason except for federal income and
employment tax purposes.
5. Offering Dates. The offering periods of this Plan (each, an "Offering
Period") shall be of six (6) months duration commencing on May 1 and November 1
of each year and ending on October 31 and April 30, respectively, of each year,
during which payroll deductions of the participants are accumulated under this
Plan. The first Offering Period shall begin on November 1, 2000. The first
business day of each Offering Period is referred to as the "Offering Date". The
last business day of each Offering Period is referred to as the "Purchase Date".
The Committee shall have the power to change the Offering Dates, the Purchase
Dates and the duration of Offering Periods without stockholder approval;
provided, however, that no Offering Period may have a duration exceeding
twenty-seven (27) months. If the first or last day of an Offering Period is not
a day on which the national securities exchanges or Nasdaq Stock Market are open
for trading, the Company shall specify the trading day that will be deemed the
first or last day, as the case may be, of the Offering Period.
6. Participation in this Plan. Eligible employees may become participants
in an Offering Period under this Plan on the first Offering Date after
satisfying the eligibility requirements by delivering an enrollment form in
substantially the form attached hereto as Exhibit A (the "Enrollment Form") to
the Company prior to such Offering Date, or such other time period as specified
by the Committee. Notwithstanding the foregoing, the Committee may set a later
time for filing the Enrollment Form authorizing payroll deductions for all
eligible employees with respect to a given Offering Period. An eligible employee
who does not deliver an Enrollment Form to the Company by such date after
becoming eligible to participate in such Offering Period shall not participate
in that Offering Period or any subsequent Offering Period until filing an
Enrollment Form with the Company prior to such Offering Date, or such other time
period as specified by the Committee. Once an employee becomes a participant in
an Offering Period, such employee will automatically participate in the Offering
Period commencing immediately following the last day of the prior Offering
Period unless the employee withdraws or is deemed to withdraw from this Plan or
terminates further participation in the Offering Period as set forth in Section
11 below. A participant who has not otherwise withdrawn from this Plan under
Section 11 is not required to file any additional Enrollment Form in order to
continue participation in this Plan. However a participant may deliver a new
Enrollment Form for a subsequent Offering Period in accordance with the
procedures set forth in this Section 6 if the participant wishes to change any
of the elections contained in the participant's then effective Enrollment Form.
B-2
<PAGE> 27
7. Grant of Option on Enrollment. Enrollment by an eligible employee in an
Offering Period under this Plan will constitute the grant (as of the Offering
Date for such Offering Period) by the Company to such employee of an option to
purchase on the Purchase Date up to that number of shares of Common Stock of the
Company determined by dividing (a) the amount accumulated in such employee's
payroll deduction account during such Offering Period by (b) the Per Share
Purchase Price as determined pursuant to Section 8 below (but in no event less
than the par value of a share of Company's Common Stock), provided, however,
that the number of shares of the Company's Common Stock subject to any option
granted pursuant to this Plan shall not exceed the maximum number of shares
which may be purchased pursuant to Section 10 below with respect to the
applicable Purchase Date. The Fair Market Value of a share of the Company's
Common Stock shall be determined as provided in Section 8 below.
8. Purchase Price. The purchase price per share ("Per Share Purchase
Price") at which a share of Common Stock will be sold in any Offering Period
shall be eighty-five percent (85%) of the lesser of:
(a) The Fair Market Value on the Offering Date; or
(b) The Fair Market Value on the Purchase Date.
For purposes of this Plan, the term "Fair Market Value" of the Common Stock on
any given date means (i) if the Common Stock is admitted to quotation on the
National Association of Securities Dealers Automated Quotation System
("NASDAQ"), the Fair Market Value on any given date shall not be less than the
average of the highest bid and lowest asked prices of the Common Stock reported
for such date or, if no bid and asked prices were reported for such date, for
the last day preceding such date for which such prices were reported; or (ii) if
the Common Stock is admitted to trading on a national securities exchange or the
NASDAQ National Market System, then clause (i) shall not apply and the Fair
Market Value on any date shall not be less than the closing price reported for
the Common Stock on such exchange or system for such date or, if no sales were
reported for such date, for the last date preceding such date for which a sale
was reported; or (iii) if the Common Stock is not publicly traded on a
securities exchange or traded in the over-the-counter market or, if traded or
quoted, there are no transactions or quotations within the last ten trading days
or trading has been halted for extraordinary reasons, the Fair Market Value on
any given date shall be determined in good faith by the Committee with reference
to the rules and principles of valuation set forth in Section 20.2031-2 of the
Treasury Regulations.
9. Payment of Purchase Price; Changes in Payroll Deductions; Issuance of
Shares.
(a) The purchase price of the shares is accumulated by regular payroll
deductions made during each Offering Period. The deductions are made as a
percentage of the participant's compensation in one percent (1%) increments not
less than one percent (1%) (except as a result of an election pursuant to
Section 9(c) to stop payroll deductions during an Offering Period), nor greater
than ten percent (10%) or such lower limit set by the Committee. Compensation
shall mean all W-2 cash compensation, including, base salary, wages,
commissions, overtime, shift premiums and bonuses, plus draws against
commissions, provided, however, that for purposes of determining a participant's
compensation, any election by such participant to reduce his or her regular cash
remuneration under Sections 125 or 401(k) of the Code shall be treated as if the
participant did not make such election. Notwithstanding the foregoing,
Compensation shall not include reimbursements of expenses, allowances, long-term
disability, workers' compensation or any amount deemed received without the
actual transfer of cash or any amounts directly or indirectly paid pursuant to
the Plan or any other stock purchase or stock option plan, or any other
compensation not included above. Payroll deductions shall commence on the first
payday of the Offering Period and shall continue to the end of the Offering
Period unless sooner altered or terminated as provided in this Plan.
(b) A participant may increase or decrease the rate of payroll deductions
for any subsequent Offering Period by filing with the Company a new Enrollment
Form prior to the beginning of such Offering Period, or prior to such other time
period as specified by the Committee.
(c) A participant may reduce his or her payroll deduction percentage to
zero during an Offering Period by filing with the Company a revised Enrollment
Form. Such reduction shall be effective beginning with the next payroll period
after the Company's receipt of the request and no further payroll deductions
will be made
B-3
<PAGE> 28
for the duration of the Offering Period. Payroll deductions credited to the
participant's account prior to the effective date of the request shall be used
to purchase shares of Common Stock in accordance with Section (e) below. A
participant may not resume making payroll deductions during the Offering Period
in which he or she reduced his or her payroll deductions to zero.
(d) All payroll deductions made for a participant are credited to his or
her account under this Plan and are deposited with the general funds of the
Company. No interest accrues on the payroll deductions. All payroll deductions
received or held by the Company may be used by the Company for any corporate
purpose, and the Company shall not be obligated to segregate such payroll
deductions.
(e) On each Purchase Date, so long as this Plan remains in effect and
provided that the participant has not submitted a revised Enrollment Form
withdrawing from the Plan before such Purchase Date in accordance with Section
11, the Company shall apply the funds then in the participant's account to the
purchase of whole shares of Common Stock reserved under the option granted to
such participant with respect to the Offering Period to the extent that such
option is exercisable on the Purchase Date. The Per Share Purchase Price shall
be as specified in Section 8. Any cash remaining in such participant's account
on a Purchase Date which is less than the amount necessary to purchase a full
share of Common Stock of the Company shall be carried forward, without interest,
into the next Offering Period. If this Plan has been oversubscribed, all funds
not used to purchase shares on the Purchase Date shall be returned to the
participant, without interest. No Common Stock shall be purchased on a Purchase
Date on behalf of any employee whose participation in this Plan has terminated
prior to such Purchase Date.
(f) As promptly as practicable after the Purchase Date, the Company shall
issue shares for the participant's benefit representing the shares purchased
upon exercise of his or her option, subject to compliance with Section 24 below.
(g) During a participant's lifetime, his or her option to purchase shares
hereunder is exercisable only by him or her. The participant will have no
interest or voting right in shares covered by his or her option until such
option has been exercised.
10. Limitations on Shares to be Purchased.
(a) No participant shall be entitled to purchase Common Stock under this
Plan at a rate which, when aggregated with his or her rights to purchase stock
under all other employee stock purchase plans of the Company or any Subsidiary
Corporation, exceeds $25,000 in Fair Market Value, determined as of the Offering
Date (or such other limit as may be imposed by the Code) for each calendar year
in which the employee participates in this Plan. The Company shall automatically
suspend the payroll deductions of any participant as necessary to enforce such
limit; provided that when the Company automatically resumes such payroll
deductions, the Company must apply the rate in effect immediately prior to such
suspension.
(b) No participant shall be entitled to purchase more than the Maximum
Share Amount (as defined below) on any single Purchase Date. Prior to the
commencement of any Offering Period or before such time period as specified by
the Committee, the Committee may, in its sole discretion, set a maximum number
of shares which may be purchased by any employee at any single Purchase Date
(the "Maximum Share Amount"). Until otherwise determined by the Committee, there
shall be no Maximum Share Amount. If a new Maximum Share Amount is set, then all
participants must be notified of such Maximum Share Amount before commencing the
next Offering Period. The Maximum Share Amount shall continue to apply with
respect to all succeeding Purchase Dates and Offering Periods unless revised by
the Committee as set forth above.
(c) If the number of shares to be purchased on a Purchase Date by all
employees participating in this Plan exceeds the number of shares then available
for issuance under this Plan, then the Company will make a pro rata allocation
of the remaining shares in as uniform a manner as shall be reasonably
practicable and as the Committee shall determine to be equitable.
(d) Any payroll deductions accumulated in a participant's account which are
not used to purchase stock due to the limitations in this Section 10 shall be
returned to the participant as soon as practicable after the end
B-4
<PAGE> 29
of the applicable Offering Period, without interest, provided that, any amount
remaining in such participant's account which is less than the amount necessary
to purchase a full share of Common Stock of the Company shall be carried
forward, without interest, into the next Offering Period.
11. Withdrawal.
(a) Each participant may withdraw from an Offering Period under this Plan
by signing and delivering to the Company a revised Enrollment Form indicating
such participant's intention to withdraw. Such withdrawal may be elected at any
time prior to the end of an Offering Period, or such other time period as
specified by the Committee.
(b) Upon withdrawal from this Plan, the accumulated payroll deductions
shall be returned to the withdrawn participant, without interest, and his or her
interest in this Plan shall terminate. If a participant voluntarily elects to
withdraw from this Plan, he or she may not resume his or her participation in
this Plan during the same Offering Period, but he or she may participate in any
Offering Period under this Plan commencing after such withdrawal by filing a new
authorization for payroll deductions in the same manner as set forth in Section
6 above for initial participation in this Plan.
12. Termination of Employment. Termination of a participant's employment
for any reason, including retirement, death or the failure of a participant to
remain an eligible employee of the Company or of a Participating Subsidiary
Corporation, immediately terminates his or her participation in this Plan. In
such event, the payroll deductions credited to the participant's account will be
returned to him or her or, in the case of his or her death, to his or her legal
representative, without interest. For purposes of this Section 12, an employee
will not be deemed to have terminated employment or failed to remain in the
continuous employ of the Company or of a Participating Subsidiary Corporation in
the case of sick leave, military leave, or any other leave of absence approved
by the Board; provided that such leave is for a period of not more than ninety
(90) days or reemployment upon the expiration of such leave is guaranteed by
contract or statute.
13. Return of Payroll Deductions. If a participant's interest in this Plan
is terminated by withdrawal, termination of employment or otherwise, or if this
Plan is terminated by the Board, the Company shall deliver to the participant
all payroll deductions credited to such participant's account. No interest shall
accrue on the payroll deductions of a participant in this Plan.
14. Capital Changes. Subject to any required action by the stockholders of
the Company, the number of shares of Common Stock covered by each option under
this Plan which has not yet been exercised and the number of shares of Common
Stock which have been authorized for issuance under this Plan but have not yet
been placed under option (collectively, the "Reserves"), as well as the price
per share of Common Stock covered by each option under this Plan which has not
yet been exercised, shall be proportionately adjusted for any increase or
decrease in the number of issued and outstanding shares of Common Stock
resulting from a stock split or the payment of a stock dividend (but only on the
Common Stock) or any other increase or decrease in the number of issued and
outstanding shares of Common Stock effected without receipt of any consideration
by the Company; provided, however, that conversion of any convertible securities
of the Company shall not be deemed to have been "effected without receipt of
consideration". Notwithstanding the foregoing, any fractional shares resulting
from an adjustment pursuant to this Section 14 shall be rounded down to the
nearest whole number, and in no event may the Per Share Purchase Price be
decreased to an amount less than the par value, if any, of the Common Stock.
Such adjustment shall be made by the Committee, whose determination shall be
final, binding and conclusive. Except as expressly provided herein, no issue by
the Company of shares of stock of any class, or securities convertible into
shares of stock of any class, shall affect, and no adjustment by reason thereof
shall be made with respect to, the number or price of shares of Common Stock
subject to an option.
In the event of the proposed dissolution or liquidation of the Company, the
Offering Period will terminate immediately prior to the consummation of such
proposed action, unless otherwise provided by the Committee. The Committee may,
in its sole discretion in such instances, declare that this Plan shall terminate
as of a date fixed by the Committee and give each participant the right to
purchase shares under this Plan prior to such termination. In the event of (i) a
merger or consolidation in which the Company is not the surviving
B-5
<PAGE> 30
corporation (other than (A) a merger or consolidation with a wholly-owned
subsidiary, a reincorporation of the Company in a different jurisdiction, or
other transaction in which there is no substantial change in the stockholders of
the Company or their relative stock holdings, and (B) the options under this
Plan are assumed, converted or replaced by the successor corporation, which
assumption will be binding on all participants), (ii) a merger in which the
Company is the surviving corporation but after which the stockholders of the
Company immediately prior to such merger (other than any stockholder that
merges, or which owns or controls another corporation that merges, with the
Company in such merger) cease to own their shares or other equity interest in
the Company, (iii) the sale of all or substantially all of the assets of the
Company or (iv) the acquisition, sale, or transfer of more than 50% of the
outstanding shares of the Company by tender offer or similar transaction, (each
a "Sale Event") the Company shall apply the funds contributed under the Plan to
the purchase of shares of Common Stock pursuant to the provisions of Section 9
immediately prior to the effective date of such Sale Event. Notwithstanding the
foregoing, the surviving, continuing, successor or purchasing corporation or
parent corporation thereof (the "Acquiring Corporation"), may elect to assume
the Company's rights and obligations under the Plan. All purchase rights which
are neither exercised nor assumed as of the date of the Sale Event shall
terminate and cease to be outstanding effective as of the effective date of the
Sale Event.
The Committee may, if it so determines in its sole discretion, also make
provision for adjusting the Reserves, as well as the price per share of Common
Stock covered by each outstanding option, in the event that the Company effects
one or more reorganizations, recapitalizations, rights offerings or other
increases or reductions of shares of its outstanding Common Stock, or in the
event of the Company being consolidated with or merged into any other
corporation.
15. Withholding. The participant shall make adequate provision for the
foreign, federal, state and local tax withholding obligations of the Company or
any of its Subsidiaries, if any, which arise in connection with participation in
the Plan. The Company and its Subsidiaries shall, to the extent permitted by
law, have the right to deduct any such taxes from any payment of any kind
otherwise due to the participant.
16. Nonassignability. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under this Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 23 below) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be void and
without effect.
17. Reports. Individual accounts will be maintained for each participant
in this Plan. Each participant shall receive as soon as practicable after the
end of each Offering Period a report of his or her account setting forth the
total payroll deductions accumulated, the number of shares purchased, the per
share price thereof and the remaining cash balance, if any, carried forward to
the next Offering Period.
18. Notice of Disqualifying Disposition. Each participant shall notify the
Company in writing if the participant disposes of any of the shares purchased in
any Offering Period pursuant to this Plan if such disposition occurs within two
(2) years from the Offering Date or within one (1) year from the Purchase Date
on which such shares were purchased (the "Notice Period"). The Company may, at
any time during the Notice Period, place a legend or legends on any certificate
representing shares acquired pursuant to this Plan requesting the Company's
transfer agent to notify the Company of any transfer of the shares. The
obligation of the participant to provide such notice shall continue
notwithstanding the placement of any such legend on the certificates.
19. No Rights as Shareholder or to Continued Employment. A participant
shall have no rights as a shareholder by virtue of participation in the Plan
until the date of the issuance of a certificate for the shares purchased
pursuant to the exercise of the participant's purchase right (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company). No adjustment shall be made for dividends,
distributions or other rights for which the record date is prior to the date
such certificate is issued, except as provided in Section 14. Neither this Plan
nor the grant of any option hereunder shall confer any right on any employee to
remain in the employ of the Company or any Participating Subsidiary
B-6
<PAGE> 31
Corporation, or restrict the right of the Company or any Participating
Subsidiary Corporation to terminate such employee's employment at any time.
20. Equal Rights and Privileges. All eligible employees shall have equal
rights and privileges with respect to this Plan so that this Plan qualifies as
an "employee stock purchase plan" within the meaning of Section 423 or any
successor provision of the Code and the related regulations. Any provision of
this Plan which is inconsistent with Section 423 or any successor provision of
the Code shall, without further act or amendment by the Company, the Committee
or the Board, be reformed to comply with the requirements of Section 423. This
Section 20 shall take precedence over all other provisions in this Plan.
21. Notices. All notices or other communications by a participant to the
Company under or in connection with this Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
22. Term; Stockholder Approval. This Plan will become effective on
November 1, 2000, subject to approval by the stockholders of the Company, in any
manner permitted by applicable corporate law, within twelve (12) months before
or after August 15, 2000, the date on which the Board adopted this Plan. No
purchase of shares pursuant to this Plan shall occur prior to such stockholder
approval. This Plan shall continue until the earlier to occur of (a) termination
of this Plan by the Board (which termination may be effected by the Board at any
time), (b) issuance of all of the shares of Common Stock reserved for issuance
under this Plan, or (c) ten (10) years from the adoption of this Plan by the
Board.
23. Designation of Beneficiary.
(a) A participant may file a written designation of a beneficiary who is to
receive any shares and cash, if any, from the participant's account under this
Plan in the event of such participant's death subsequent to the end of any
Offering Period but prior to delivery to him of such shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under this Plan in the event
of such participant's death prior to a Purchase Date.
(b) Such designation of beneficiary may be changed by the participant at
any time by written notice. In the event of the death of a participant and in
the absence of a beneficiary validly designated under this Plan who is living at
the time of such participant's death, the Company shall deliver such shares or
cash to the executor or administrator of the estate of the participant, or if no
such executor or administrator has been appointed (to the knowledge of the
Company), the Company, in its discretion, may deliver such shares or cash to the
spouse or to any one or more dependents or relatives of the participant, or if
no spouse, dependent or relative is known to the Company, then to such other
person as the Company may designate.
24. Conditions Upon Issuance of Shares; Limitation on Sale of
Shares. Shares shall not be issued with respect to an option unless the
exercise of such option and the issuance and delivery of such shares pursuant
thereto shall comply with all applicable provisions of law, domestic or foreign,
including, without limitation, the Securities Act of 1933, as amended, the
Securities Exchange Act of 1934, as amended, the rules and regulations
promulgated thereunder, and the requirements of any stock exchange or automated
quotation system upon which the shares may then be listed, and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.
25. Applicable Law. The Plan shall be governed by the substantive laws
(excluding the conflict of laws rules) of the Commonwealth of Massachusetts.
26. Amendment or Termination of this Plan. The Board may at any time
amend, terminate or extend the term of this Plan, except that (i) any such
termination cannot affect options previously granted under this Plan unless the
Board determines that the termination of the Plan immediately following any
Purchase Date is in the best interests of the Company and its shareholders, (ii)
any amendment may not adversely affect the previously granted purchase right of
any participant unless permitted by the Plan or as may be necessary to qualify
the Plan as an employee stock purchase plan pursuant to Section 423 of the Code
or to obtain qualification or registration of the Common Stock under applicable
federal, state or foreign securities laws, and (iii) any amendment must be
approved by the stockholders of the Company in accordance with Section 22
B-7
<PAGE> 32
above within twelve (12) months of the adoption of such amendment (or earlier if
required by Section 22) if such amendment would:
(a) increase the number of shares that may be issued under this Plan;
(b) change the designation of the employees (or class of employees)
eligible for participation in this Plan; or
(c) any other action taken by the Board that, by its terms, is
contingent on stockholder approval.
Notwithstanding the foregoing, the Board may make such amendments to the Plan as
the Board determines to be advisable, if the continuation of the Plan or any
Offering Period would result in financial accounting treatment for the Plan that
is different from the financial accounting treatment in effect on August 15,
2000.
B-8
<PAGE> 33
EXHIBIT C
MCK COMMUNICATIONS, INC.
2000 DIRECTOR STOCK OPTION PLAN
SECTION 1. GENERAL PURPOSE OF THE PLAN, DEFINITIONS
The name of the plan is the 2000 Director Stock Option Plan (the "Plan").
The purpose of the Plan is to enable MCK Communications, Inc. (the "Company") to
attract and retain outside directors and further align their interests with
those of the shareholders by providing for or increasing their equity interests
in the Company. It is anticipated that providing such persons with a direct
stake in the Company's welfare will assure a closer identification of their
interests with those of the Company, thereby stimulating their efforts on the
Company's behalf and strengthening their desire to remain with the Company.
The following terms shall be defined as set forth below:
"Act" means the Securities Act of 1933, as amended.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended, and
related rules, regulations and interpretations.
"Consultant" means a person engaged to provide consulting or advisory
services (other than as an employer or director) to the Company or its
Subsidiary, provided that the identity of such person, the nature of such
services or the entity to which such services are provided would not
preclude the Company from offering or selling securities to such person
pursuant to the Plan in reliance on the registration of securities on a
Form S-8 Registration Statement under the Act.
"Fair Market Value" of the Stock on any given date means (i) if the
Stock is admitted to quotation on the National Association of Securities
Dealers Automated Quotation System ("NASDAQ"), the Fair Market Value on any
given date shall not be less than the average of the highest bid and lowest
asked prices of the Stock reported for such date or, if no bid and asked
prices were reported for such date, for the last day preceding such date
for which such prices were reported; or (ii) if the Stock is admitted to
trading on a national securities exchange or the NASDAQ National Market
System, then clause (i) shall not apply and the Fair Market Value on any
date shall not be less than the closing price reported for the Stock on
such exchange or system for such date or, if no sales were reported for
such date, for the last date preceding such date for which a sale was
reported; or (iii) if the Stock is not publicly traded on a securities
exchange or traded in the over-the-counter market or, if traded or quoted,
there are no transactions or quotations within the last ten trading days or
trading has been halted for extraordinary reasons, the Fair Market Value on
any given date shall be determined in good faith by the Committee.
"Non-Qualified Stock Option" means any Stock Option that is not
designated and qualified as an "incentive stock option" as defined in
Section 422 of the Code.
"Option" or "Stock Option" means any option to purchase shares of
Stock granted pursuant to Section 5.
"Service Relationship" means a participant's employment or service
with the Company or its Subsidiary, whether in the capacity of an employee,
a director or a Consultant. Unless otherwise determined by the Board, a
participant's Service Relationship shall not be deemed to have terminated
merely because of a change in the capacity in which the participant renders
service to the Company or a transfer between locations of the Company or
its Subsidiaries or a transfer between the Company and any Subsidiary,
provided that there is no interruption or other termination of the Service
Relationship. Furthermore, a participant's Service Relationship shall not
be deemed to have terminated if the participant takes any military leave,
sick leave, or other bona fide leave of absence approved by the Company;
provided, however, that if any such leave exceeds ninety (90) days, on the
ninety-first (91st)
<PAGE> 34
day of such leave, the Service Relationship shall be deemed to have
terminated unless the participant's right to return to service with the
Company or its Subsidiary is guaranteed by statute or contract.
Notwithstanding the foregoing, unless otherwise designated by the Company
or required by law, a leave of absence shall not be treated as service for
purposes of determining vesting under the participant's Option agreement.
Subject to the foregoing, the Company, in its discretion, shall determine
whether the participant's Service Relationship has terminated and the
effective date of such termination.
"Stock" means the Common Stock, par value $.001 per share, of the
Company, subject to adjustments pursuant to Section 3.
"Subsidiary" means any corporation or other entity (other than the
Company) in any unbroken chain of corporations or other entities beginning
with the Company if each of the corporations or entities (other than the
last corporation or entity in the unbroken chain) owns stock or other
interests possessing 50 percent or more of the economic interest or the
total combined voting power of all classes of stock or other interests in
one of the other corporations or entities in the chain.
SECTION 2. ADMINISTRATION OF PLAN; COMMITTEE
(a) Administration of Plan. The Plan shall be administered by the Board,
or at the discretion of the Board, by a committee or committees of the Board,
comprised of not less than two directors. All references herein to the Committee
shall be deemed to refer to the group then responsible for administration of the
Plan at the relevant time (i.e., either the Board or a committee or committees
of the Board, as applicable).
(b) Powers of Committee. The Committee shall have the power and authority
to grant Options consistent with the terms of the Plan, including the power and
authority:
(i) to determine and modify from time to time the terms and
conditions, including restrictions, not inconsistent with the terms of the
Plan, of any Option, and to approve the form of written instruments
evidencing the Options;
(ii) to impose any limitations on Options granted under the Plan,
including limitations on transfers, repurchase provisions and the like and
to exercise repurchase rights or obligations;
(iii) to amend the Plan or any Option pursuant Section 8; and
(iv) at any time to adopt, alter and repeal such rules, guidelines and
practices for administration of the Plan and for its own acts and
proceedings as it shall deem advisable; to interpret the terms and
provisions of the Plan and any Option (including related written
instruments); to make all determinations it deems advisable for the
administration of the Plan; to decide all disputes arising in connection
with the Plan; and to otherwise supervise the administration of the Plan.
All decisions and interpretations of the Board shall be binding on all persons,
including the Company and Plan participants.
SECTION 3. STOCK ISSUABLE UNDER THE PLAN: MERGERS: SUBSTITUTION
(a) Stock Issuable. The maximum number of shares of Stock reserved and
available for issuance under the Plan shall be 500,000 shares of Common Stock
subject to adjustment as provided in Section 3(b). For purposes of this
limitation, the shares of Stock underlying any Options which are forfeited,
canceled, reacquired by the Company, satisfied without the issuance of Stock or
otherwise terminated (other than by exercise) shall be added back to the shares
of Stock available for issuance under the Plan. The shares available for
issuance under the Plan may be authorized but unissued shares of Stock or shares
of Stock reacquired by the Company and held in its treasury.
(b) Changes in Stock. Subject to Section 3(c) hereof, if, as a result of
any reorganization, recapitalization, reclassification, stock dividend, stock
split, reverse stock split or other similar change in the Company's capital
stock, the outstanding shares of Stock are increased or decreased or are
exchanged for a different number or kind of shares or other securities of the
Company, or additional shares or new or different shares or
C-2
<PAGE> 35
other securities of the Company or other non-cash assets are distributed with
respect to such shares of Stock or other securities, the Board shall make an
appropriate or proportionate adjustment in (i) the maximum number of shares
reserved for issuance under the Plan, (ii) the number of Stock Options that will
be granted to individual participants, (iii) the number and kind of shares or
other securities subject to any then outstanding Options under the Plan, and
(iv) the exercise price and/or exchange price for each share subject to any then
outstanding Stock Options under the Plan, without changing the aggregate
exercise price (i.e., the exercise price multiplied by the number of Stock
Options) as to which such Stock Options remain exercisable. The adjustment by
the Board shall be final, binding and conclusive. No fractional shares of Stock
shall be issued under the Plan resulting from any such adjustment, but the Board
in its discretion may make a cash payment in lieu of fractional shares.
The Board may also adjust the number of shares subject to outstanding
Options and the exercise price and the terms of outstanding Options to take into
consideration material changes in accounting practices or principles,
extraordinary dividends, acquisitions or dispositions of stock or property or
any other event if it is determined by the Board that such adjustment is
appropriate to avoid distortion in the operation of the Plan.
(c) Mergers and Other Sale Events. In the case of (i) the dissolution or
liquidation of the Company, (ii) a merger, reorganization or consolidation
between the Company and another person or entity (other than a holding company
or Subsidiary of the Company) as a result of which the holders of the Company's
outstanding voting stock immediately prior to the transaction hold less than a
majority of the outstanding voting stock of the surviving entity immediately
after the transaction, (iii) the sale of all or substantially all of the assets
of the Company to an unrelated person or entity, or (iv) the sale of all of the
Stock of the Company to an unrelated person or entity (in each case, a
"Transaction"), the shares that would otherwise vest within the twelve (12)
month period immediately following the Transaction if the participant's Service
Relationship continued during that time shall immediately vest (any remaining
unvested shares shall continue to vest in accordance with the vesting schedule
set forth in the option agreement without any acceleration in the time of
vesting of such shares). Upon the effectiveness of the Transaction, the Plan and
all Options granted hereunder shall, unless assumed by the successor entity,
terminate. In the event of such termination, each participant shall be permitted
to exercise for a period of at least 15 days prior to the date of such
termination all outstanding Options held by such participant which are then
exercisable.
SECTION 4. ELIGIBILITY
Each member of the Board other than: (i) those members who are also
employees of the Company or any of its Subsidiaries, and (ii) Gregory Avis,
Michael Balmuth and Calvin Manz, shall be eligible for the grant of Options
under this Plan (each an "Eligible Director").
SECTION 5. STOCK OPTIONS
Any Stock Option granted under the Plan shall be pursuant to a Stock Option
agreement. All Stock Options granted under the Plan shall be Non-Qualified Stock
Options. All grants of Options to Eligible Directors under this Plan shall be
automatic and non-discretionary and shall be made strictly in accordance with
this Section 5. No person shall have any discretion to select which Eligible
Directors shall be granted Options or to determine the number of shares to be
covered by such Options.
(a) Terms of Stock Options. Stock Options granted under the Plan shall be
subject to the following terms and conditions and shall contain such additional
terms and conditions, not inconsistent with the terms of the Plan.
(i) Initial Grants. Each person who is an Eligible Director on
November 1, 2000, or becomes, for the first time, an Eligible Director
after November 1, 2000, shall, without further action by the Board,
automatically be granted an Option to purchase 50,000 shares of Stock,
subject to adjustment as provided in Section 3(b) hereof, on November 1,
2000 or, if later, the date that such person first becomes and Eligible
Director; provided, however, that any Eligible Director who previously
received stock options under any other stock option plan of the Company or
its Subsidiaries prior to November 1, 2000 or, if later, first becoming an
Eligible Director, shall, without further action by the Board,
automatically be
C-3
<PAGE> 36
granted an Option to purchase the number of shares of Stock equal to 50,000
shares of Stock minus the number of shares of Stock that have not vested
pursuant to such other stock options as of November 1, 2000 or, if later,
the date such participant first becomes an Eligible Director (collectively,
the "Initial Grants").
(ii) Annual Grants. On the date of each annual meeting of the
Company's stockholders held after November 1, 2000 (provided that in no
event shall such date be more than 180 days after the fiscal year end), or,
if such date shall not be a business day, the business day immediately
preceding such date, and so long as shares remain available for issuance
under the Plan, each Eligible Director who will continue to be an Eligible
Director after such annual meeting shall without further action by the
Board automatically be granted an Option to purchase 10,000 shares of
Stock, subject to adjustment as provided in Section 3(b) hereof.
(iii) Term. No Option shall be exercisable after the expiration of
ten (10) years from the date it was granted.
(iv) Exercise Price. The exercise price for each Option shall be one
hundred percent (100%) of the Fair Market Value of the Stock on the date
the Option is granted.
(v) Vesting and Exercisability. Initial Grants shall be exercisable
at any time on or after the date of grant and shall vest with respect to
1/12 of the shares of Stock subject to such Initial Grants on the last day
of each full calendar quarter after the date of grant. Annual Grants shall
be immediately exercisable and fully vested on the date of grant.
(vi) Insufficient Shares. Notwithstanding the foregoing, if, on any
date upon which Options are to be granted under Section 5(a)(i) or 5(a)(ii)
hereof, the shares of Stock remaining available for issuance under this
Plan are insufficient for the grant of Options to purchase the total number
of shares of Stock specified in such section, then each Eligible Director
entitled to receive an Option on such date shall be granted an Option to
purchase a proportionate amount of the available number of shares of Stock
(rounded down to the greatest number of whole shares). Except for the
specified Options referred to in Section 5(a)(i) or 5(a)(ii) above, no
other Options shall be granted under this Plan
(vii) Rights of a Stockholder. A participant shall have no rights as
a stockholder with respect to any shares covered by an Option until the
date of the issuance of a certificate for the shares for which the Option
has been exercised (as evidenced by an appropriate entry on the books of
the Company or of a duly authorized transfer agent of the Company). No
adjustment shall be made for dividends, distributions or other rights for
which the record date is prior to the date such certificate is issued,
except as provided in Section 3(b).
(viii) Method of Exercise. Stock Options may be exercised in whole or
in part, by giving written notice of exercise to the Company, specifying
the number of shares to be purchased. Payment of the purchase price may be
made by one or more of the following methods to the extent provided in the
Stock Option Agreement:
(A) In cash, by certified or bank check, or other instrument
acceptable to the Committee in U.S. funds payable to the order of the
Company in an amount equal to the purchase price of such shares;
(B) If permitted by the Board, through the delivery (or attestation
to the ownership) of shares of Stock that have been purchased by the
participant on the open market or have been beneficially owned by the
participant for at least six months and are not then subject to
restrictions under any Company plan. Such surrendered shares shall be
valued at Fair Market Value on the exercise date; or
(C) If permitted by the Board, by the participant delivering to the
Company a properly executed exercise notice together with irrevocable
instructions to a broker to promptly deliver to the Company cash or a
check payable and acceptable to the Company to pay the purchase price;
provided that in the event the participant chooses to pay the purchase
price as so provided, the
C-4
<PAGE> 37
participant and the broker shall comply with such procedures and enter
into such agreements of indemnity and other agreements as the Board
shall prescribe as a condition of such payment procedure.
Payment instruments will be received subject to collection. No certificates
for shares so purchased will be issued to a participant until the Company has
completed all steps required by law to be taken in connection with the issuance
and sale of the shares, including without limitation (i) receipt of a
representation from the participant at the time of exercise of the Option that
the participant is purchasing the shares for the participant's own account and
not with a view to any sale or distribution thereof, (ii) the legending of any
certificate representing the shares to evidence the foregoing representations
and restrictions, and (iii) obtaining from the participant payment or provision
for all withholding taxes due as a result of the exercise of the Option. The
delivery of certificates representing the shares of Stock to be purchased
pursuant to the exercise of a Stock Option will be contingent upon receipt from
the participant (or a purchaser acting in his or her stead in accordance with
the provisions of the Stock Option) by the Company of the full purchase price
for such shares and the fulfillment of any other requirements contained in the
Stock Option or applicable provisions of laws.
(b) Non-transferability of Options. No Stock Option shall be transferable
by the participant otherwise than by will or by the laws of descent and
distribution and all Stock Options shall be exercisable, during the
participant's lifetime, only by the participant, or by the participant's legal
representative or guardian in the event of the participant's incapacity.
Notwithstanding the foregoing the participant may transfer, without
consideration for the transfer, his or her Stock Options to members of his or
her immediate family, to trusts for the benefit of such family members, or to
partnerships in which such family members are the only partners, provided that
the transferee agrees in writing with the Company to be bound by all of the
terms and conditions of this Plan and the applicable Stock Option Agreement.
(c) Termination. Unless otherwise provided in the option agreement or
determined by the Board, upon the termination of the participant's Service
Relationship with the Company or its Subsidiaries, the participant's rights in
his or her Stock Options shall automatically terminate upon the effective date
of such termination.
SECTION 6. TAX WITHHOLDING
(a) Payment by Participant. Each participant shall, no later than the date
as of which the value of an Option or of any Stock or other amounts received
thereunder first becomes includable in the gross income of the participant for
federal income tax purposes, pay to the Company, or make arrangements
satisfactory to the Board regarding payment of, any federal, state, or local
taxes of any kind required by law to be withheld with respect to such income.
The Company and its Subsidiaries shall, to the extent permitted by law, have the
right to deduct any such taxes from any payment of any kind otherwise due to the
participant.
(b) Payment in Stock. Subject to approval by the Board, a participant may
elect to have the minimum required tax withholding obligation satisfied, in
whole or in part, by (i) authorizing the Company to withhold from shares of
Stock to be issued pursuant to any Option a number of shares with an aggregate
Fair Market Value (as of the date the withholding is effected) that would
satisfy the withholding amount due, or (ii) transferring to the Company shares
of Stock owned by the participant with an aggregate Fair Market Value (as of the
date the withholding is effected) that would satisfy the withholding amount due.
The Fair Market Value of any shares of Stock withheld or tendered to satisfy any
such tax withholding obligation shall not exceed the amount determined by the
applicable minimum statutory withholding rates.
SECTION 7. REPURCHASE RIGHTS
Shares of Stock issued under the Plan may be subject to one or more
repurchase options, or other conditions and restrictions as determined by the
Board in its discretion at the time the Option is granted. The Company shall
have the right to assign at any time any repurchase right it may have, whether
or not such right is then exercisable, to one or more persons as may be selected
by the Company. Upon request by the Company, each participant shall execute any
agreement evidencing such transfer restrictions prior to the
C-5
<PAGE> 38
receipt of shares of Stock hereunder and shall promptly present to the Company
any and all certificates representing shares of Stock acquired hereunder for the
placement on such certificates of appropriate legends evidencing any such
transfer restrictions.
SECTION 8. AMENDMENTS AND TERMINATION
The Board may, at any time, amend or discontinue the Plan and the Board
may, at any time, amend or cancel any outstanding Option, but no such action
shall adversely affect rights under any outstanding Option without the holder's
consent unless such action is necessary to obtain qualification or registration
of the Stock under any applicable federal, state or foreign securities laws or
is necessary to comply with any applicable law, regulation or rule. This Plan
shall continue until the earlier to occur of: (a) termination of this Plan by
the Board pursuant to this Section 8, (b) issuance of all of the shares of Stock
reserved for issuance under this Plan, or (c) ten (10) years from the adoption
of this Plan by the Board.
SECTION 9. STATUS OF PLAN
With respect to the portion of any Option that has not been exercised and
any payments in cash, Stock or other consideration not received by a
participant, a participant shall have no rights greater than those of a general
creditor of the Company unless the Board shall otherwise expressly determine in
connection with any Option or Options. In its sole discretion, the Board may
authorize the creation of trusts or other arrangements to meet the Company's
obligations to deliver Stock or make payments with respect to Options hereunder,
provided that the existence of such trusts or other arrangements is consistent
with the foregoing sentence.
SECTION 10. GENERAL PROVISIONS
(a) No Distribution; Compliance with Legal Requirements. The Board may
require each person acquiring Stock pursuant to an Option to represent to and
agree with the Company in writing that such person is acquiring the shares
without a view to distribution thereof. No shares of Stock shall be issued
pursuant to an Option until all applicable securities law and other legal and
stock exchange or similar requirements have been satisfied. The Board may
require the placing of such stop-orders and restrictive legends on certificates
for Stock and Options as it deems appropriate.
(b) Delivery of Stock Certificates. Stock certificates to participants
under this Plan shall be deemed delivered for all purposes when the Company or a
stock transfer agent of the Company shall have mailed such certificates in the
United States mail, addressed to the participant, at the participant's last
known address on file with the Company.
(c) Other Compensation Arrangements; No Employment Rights. Nothing
contained in this Plan shall prevent the Board from adopting other or additional
compensation arrangements, including trusts, and such arrangements may be either
generally applicable or applicable only in specific cases. Nothing in this Plan
or any Option granted pursuant hereto shall confer upon any participant any
right to continue to serve the Company as member of the Board, nor does it
confer any right to continued service with the Company or any Subsidiary or
interfere in any way with any right of the Company or its Subsidiaries to
terminate the participant's Service Relationship, at any time.
(d) Trading Policy Restrictions. Option exercises under the Plan shall be
subject to such Company's insider-trading-policy-related restrictions, terms and
conditions as may be established by the Board, or in accordance with policies
set by the Board, from time to time.
SECTION 11. EFFECTIVE DATE OF PLAN
This Plan shall become effective on August 15, 2000, the date the Plan is
adopted by the Board, but no Option shall be exercised unless and until the Plan
has been approved by the holders of a majority of the votes
C-6
<PAGE> 39
cast at a meeting of stockholders at which a quorum is present or by written
consent in accordance with applicable law within twelve (12) months before or
after August 15, 2000.
SECTION 12. GOVERNING LAW
This Plan and all Options and actions taken thereunder shall be governed by
the laws of the State of Delaware, applied without regard to conflict of law
principles thereof.
C-7
<PAGE> 40
MCK COMMUNICATIONS, INC.
PROXY FOR
2000 ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of MCK COMMUNICATIONS, INC., a Delaware
corporation, hereby acknowledges receipt of the Notice of 2000 Annual Meeting
of Stockholders and Proxy Statement, each dated September 15, 2000, and hereby
appoints Steven Benson and Paul Zurlo, and each of them, proxies and
attorneys-in-fact, with full power of substitution, on behalf and in the name
of the undersigned, to represent the undersigned at the 2000 Annual Meeting of
stockholders to be held at the offices of McDermott, Will & Emery, 28 State
Street, Boston, Massachusetts, 02109, on October 17, 2000 at 10:00 a.m. local
time, and any adjournment(s) or postponement(s) thereof, and to vote all shares
of common stock which the undersigned would be entitled to vote thereat if then
and there personally present, on the matters in the manner set forth below:
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
SEE REVERSE
SIDE
<PAGE> 41
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF STOCKHOLDERS
MCK COMMUNICATIONS, INC.
OCTOBER 17, 2000
Please Detach and Mail in the Envelope Provided
<TABLE>
<S> <C>
[X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
FOR WITHHOLD
all nominees listed AUTHORITY
at right (except to vote for all nominees
as indicated) listed at right
Proposal to [ ] [ ]
Elect the Two NOMINEES: Steven Benson 2. Proposal to Approve the FOR AGAINST ABSTAIN
Nominees listed Calvin Manz Adoption of the 2000 Employee [ ] [ ] [ ]
at right as Members of Our Board of Directors Stock Purchase Plan.
INSTRUCTIONS: IF YOU WISH TO WITHHOLD 3. Proposal to Approve the Adoption [ ] [ ] [ ]
AUTHORITY TO VOTE FOR ANY INDIVIDUAL of the 200 Director Stock Option
NOMINEE, STRIKE A LINE THROUGH SUCH Plan.
NOMINEE'S NAME ON THE LIST AT RIGHT.
In their discretion, the proxies are authorized to vote
upon such other matter(s) which may properly come before
the annual meeting, or at any adjournment(s) or
postponement(s) thereof.
THIS PROXY WILL BE VOTED AS DIRECTED AND, IF NO DIRECTION
IS INDICATED, THIS PROXY WILL BE VOTED FOR THE TWO LISTED
NOMINEES FOR ELECTION AS DIRECTORS, TO APPROVE THE
ADOPTION OF THE 2000 EMPLOYEE STOCK PURCHASE PLAN AND TO
APPROVE THE ADOPTION OF THE 2000 DIRECTOR STOCK OPTION
PLAN.
Both of the foregoing attorneys-in-fact or their
substitutes or, if only one shall be present and acting
at the annual meeting or any adjournment(s) or
postponement(s) thereof, the attorney-in-fact so present,
shall have and may exercise all of the powers of said
attorney-in-fact hereunder.
Signature _________________________________________________ Signature _____________________________________ Dated: _________, 2000
NOTE: THIS PROXY SHOULD BE MARKED, DATED AND SIGNED BY THE STOCKHOLDER EXACTLY AS HIS, HER OR ITS NAME APPEARS HEREON. PERSONS
SIGNING IN A FIDUCIARY CAPACITY SHOULD SO INDICATE AND IF SHARES ARE HELD BY JOINT TENANTS OR AS COMMUNITY PROPERTY, BOTH
SHOULD SIGN.
</TABLE>
