<PAGE> 1
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c)
of the Securities Exchange Act of 1934
Check the appropriate box:
[ ] Preliminary Information Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14c-5(d)(2))
[X] Definitive Information Statement
AVISTAR COMMUNICATIONS CORPORATION
--------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies:
N/A
----------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies: N/A
----
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: N/A
-----------------------------
(4) Proposed maximum aggregate value of transaction: N/A
----------------
(5) Total fee paid: N/A
-------------------------------------------------
[ ] 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: N/A
-----------------------------------------
(2) Form, Schedule, or Registration Statement No.: N/A
------------------
(3) Filing Party: N/A
---------------------------------------------------
(4) Date Filed: N/A
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<PAGE> 2
AVISTAR COMMUNICATIONS CORPORATION
To Our Stockholders:
This information statement is being provided to the stockholders of Avistar
Communications Corporation (the "Company"). The Company and its majority
stockholders have approved an amendment to its Bylaws which increases the number
and range of persons serving on its Board of Directors and appoints Robert P.
Latta as a member of the Company's Board of Directors. As a matter of regulatory
compliance, we are sending you this information statement, which describes the
purpose and effect of the aforementioned amendment.
Please feel free to call us at (650) 610-2900 should you have any questions
on the enclosed information statement. We thank you for your continued interest
in the Company.
For the Board of Directors of
AVISTAR COMMUNICATIONS
CORPORATION
Gerald J. Burnett
President
Redwood Shores, California
January 5, 2001
<PAGE> 3
AVISTAR COMMUNICATIONS CORPORATION
555 TWIN DOLPHIN DRIVE, SUITE 360
REDWOOD SHORES, CA 94065
(650) 610-2900
------------------------
INFORMATION STATEMENT
GENERAL INFORMATION FOR STOCKHOLDERS
This information statement is furnished to the holders of Common Stock of
Avistar Communications Corporation, a Delaware corporation (the "Company"), in
order to comply with the requirements of Section 14(c) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and Regulation 14C under
the Exchange Act. The purpose of this Information Statement is to inform all
stockholders of the approval of an amendment (the "Amendment") to the Company's
Bylaws to increase the authorized number of members of the Company's Board of
Directors from a range of four to six directors to a range of five to nine
directors and the election of Robert P. Latta to the Board of Directors
immediately thereafter. This information statement is being first sent to
stockholders on or about January 5, 2001.
The Company has obtained the affirmative vote of the holders of a majority
of the Company's Common Stock (the "Voting Capital Stock") to the foregoing
amendment and the election of Mr. Latta. WE ARE NOT ASKING YOU FOR A PROXY OR
CONSENT AND YOU ARE REQUESTED NOT TO SEND US A PROXY OR CONSENT.
VOTE REQUIRED
The affirmative vote of a majority of the outstanding Voting Capital Stock
is required to amend Article III, Section 3.2 of the Company's bylaws. Each
share of Voting Capital Stock is entitled to one vote per share on the
Amendment. The affirmative vote of a majority of Voting Capital attending a
meeting or acting by written consent is required to elect a director. The record
date established by the Company for purposes of determining the number of
outstanding shares of Common Stock of the Company is December 29, 2000 (the
"Record Date"); the number of shares that voted to approve the aforementioned
actions was 17,278,452, representing approximately 69% of the Voting Capital
Stock.
SECTION 228 OF THE DELAWARE GENERAL CORPORATION LAW
Section 228 of the Delaware General Corporation Law (the "Delaware Law")
provides that the written consent of the holders of outstanding shares of Voting
Capital Stock, having not less than the minimum number of votes which would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted, may be substituted for such a
special meeting. Pursuant to Article III, Section 3.2 of the Company's Bylaws
and in accordance with Section 109 of the Delaware Law, a majority of the
outstanding shares of Voting Capital Stock entitled to vote thereon is required
in order to amend the Bylaws. In order to eliminate the costs and management
time involved in holding a special meeting and in order to effect the increase
in the range of authorized directors as early as possible in order to accomplish
the purposes of the Company as hereafter described, the Board of Directors of
the Company voted to utilize the written consent of the holders of a majority in
interest of the Voting Capital Stock of the Company.
Pursuant to Section 228 of the Delaware Law, the Company is required to
provide prompt notice of the taking of the corporate action without a meeting to
the stockholders of record who have not consented in writing to such action. No
additional action will be undertaken pursuant to such written consents, and no
dissenters' rights under the Delaware Law are afforded to the Company's
stockholders as a result of the approval of the Amendment.
<PAGE> 4
STOCKHOLDER PROPOSALS TO BE PRESENTED AT NEXT ANNUAL MEETING
Proposals of stockholders which are intended to be presented by such
stockholders at the Company's 2001 Annual Meeting must be received by the
Secretary of the Company at the Company's principal executive offices no later
than February 5, 2001 in order that they may be included in the proxy statement
and form of proxy relating to that meeting. The proxy card attached to the
materials for the 2001 Annual Meeting of Stockholders will grant the proxy
holders discretionary authority to vote on any matter raised at the Annual
Meeting. If a stockholder intends to submit a proposal at the Company's Annual
Meeting in 2001 but does not request inclusion in the materials prepared by the
Company, or intends to bring before the stockholders at the 2001 Annual Meeting
a proposal that is not eligible for inclusion in the proxy statement relating to
that meeting, the stockholder must give notice to the Company in accordance with
the requirements set forth in the Securities Exchange Act of 1934, as amended,
no later than February 5, 2001. The stockholder may not bring the proposal
before the stockholders at the 2001 Annual Meeting of Stockholders, regardless
of whether the proposal is included in the materials sent to the stockholders,
unless the stockholder has complied with the foregoing notice provisions. The
proxy holders will be allowed to use their discretionary voting authority when
and if the proposal is raised at the Company's 2001 Annual Meeting in 2001.
2
<PAGE> 5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of December 29, 2000 certain information
regarding beneficial ownership of the Common Stock by (i) each stockholder known
to the Company to be the beneficial owner of more than 5% of the Common Stock,
(ii) each director, named executive officer and nominee for director of the
Company and (iii) all executive officers, directors and nominees for director as
a group. Unless otherwise indicated, each of the stockholders has sole voting
investment power with respect to the shares beneficially owned.
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF PERCENT OF
COMMON COMMON
STOCK STOCK
BENEFICIALLY BENEFICIALLY
NAME OF BENEFICIAL OWNER OWNED OWNED(1)
------------------------ ------------ ------------
<S> <C> <C>
UBS (USA) Inc.(2)........................................... 1,053,369 4.2%
Stamford Branch
677 Washington Boulevard
Stamford, Connecticut 06901
Gerald J. Burnett(3)........................................ 11,277,835 44.9
R. Stephens Heinrichs(4).................................... 5,052,354 20.1
William L. Campbell......................................... 948,263 3.8
Michael G. Barsotti......................................... 287,500 1.1
James P. Hughes(5).......................................... 425,000 1.7
R. Jan Afridi(6)............................................ 26,500 *
William R. Brody............................................ 24,000 *
David M. Solo............................................... -- *
Robert M. Metcalfe.......................................... -- *
Robert P. Latta............................................. -- *
Executive officers and directors as a group (15 persons).... 18,737,077 74.5
</TABLE>
---------------
(1) Based on 25,123,365 shares of Common Stock outstanding on December 29, 2000
together with applicable options for such stockholder. Beneficial ownership
is determined in accordance with the rules of the Securities and Exchange
Commission (the "Commission"), and includes voting and investment power with
respect to shares. Shares of Common Stock subject to options currently
exercisable or exercisable within 60 days after December 29, 2000 are deemed
outstanding for computing the percentage ownership of the person holding
such options but are not deemed outstanding for computing the percentage of
any other person. Except as otherwise noted, the stockholders named in the
table have sole voting and investment power with respect to all shares of
Common Stock shown as beneficially owned by them, subject to applicable
community property laws.
(2) UBS (USA) is a wholly owned subsidiary of UBS AG.
(3) Shares are held by Dr. Burnett as a co-trustee of a marital trust, as to
which he has sole voting and investment power.
(4) Shares are held by Mr. Heinrichs as a co-trustee of a marital trust, as to
which he has sole voting and investment power.
(5) Mr. Hughes is an executive officer of Avistar Systems Corporation, a wholly
owned subsidiary of the Company ("ASC").
(6) Mr. Afridi is an executive officer of ASC.
Except as otherwise noted above, the address of each person listed on the
table is 555 Twin Dolphin Drive, Suite 360, Redwood Shores, California 94065.
3
<PAGE> 6
AMENDMENT TO BYLAWS
The Company's Bylaws currently provides for four (4) to six (6) persons to
serve as members of its Board of Directors, with the exact number set at six
(6). On November 28, 2000, the Board of Directors adopted resolutions setting
forth the proposed amendment to Article III, Section 3.2 of the Company's Bylaws
(the "Amendment"), the advisability of the Amendment, and a call for submission
of the Amendment for approval by written consent of the Company's stockholders.
The text of Article III, Section 3.2 of the Bylaws of the Company, as
proposed to be amended will read:
"The number of directors of the corporation shall be not less than
five (5) nor more than nine (9). The current number of authorized directors
is seven (7). The indefinite number of directors may be changed, or a
definite number may be fixed without provision for an indefinite number, by
a duly adopted amendment to the certificate of incorporation or by an
amendment to this bylaw duly adopted by the vote or written consent of
holders of a majority of the outstanding shares entitled to vote. Directors
need not be stockholders. No reduction of the authorized number of
directors shall have the effect of removing any director before that
director's term of office expires."
On January 2, 2001, Gerald J. Burnett, R. Stephen Heinrichs and William
Campbell, each of whom is a member of the Company's Board of Directors (the
"Majority Stockholders"), approved the Amendment pursuant to an Action by
Written Consent of the Stockholders. The Amendment will be effective on February
2, 2001.
PURPOSE AND EFFECT OF THE AMENDMENT
The Board of Directors believes that it is in the Company's best interest
to increase the size of the Board of Directors in order to allow the Company to
appoint additional qualified directors. The Board of Directors also believes
that the availability of additional directorships will provide it with the
flexibility to identify and recruit key individuals whose industry knowledge and
expertise will benefit the direction and vision of the Company by contributing
to discussions as to whether the Company should make acquisitions, establish
strategic relationships with other companies or enter into any other proper
corporate action. Furthermore, the proposed range of authorized persons serving
as directors offers the Board of Directors greater flexibility in determining
the size of the Board without further stockholder approval, within the range set
by the stockholders. Upon the effectiveness of the Amendment, the Board of
Directors intends to appoint Robert P. Latta, who is a partner of the law firm
of Wilson Sonsini Goodrich & Rosati, Professional Corporation, the Company
outside counsel, as an independent director. The Board of Directors also intends
to add an eighth director when and if a qualified candidate is identified and
available.
The Board of Directors believes that the proposed increase in the number of
directors will effectively increase the number of outside independent directors,
which may serve to further legitimize the actions of the Board of Directors and
ensure that proposed corporate transactions are at arms-length. However, the
proposed amendment to increase the size of the Board of Directors could, under
certain circumstances, have an anti-takeover effect, although this is not the
intention of this proposal. For example, in the event of a hostile attempt to
take over control of the Company, in addition to the fact that a further change
to the size of the Board of Directors requires the approval of the holders of a
majority of the voting capital stock, it may be easier for the Company to impede
the attempt with a larger Board since it would require more directors to vote in
favor of the take-over attempt. The Amendment therefore may have the effect of
discouraging unsolicited takeover attempts. By potentially discouraging
initiation of any such unsolicited takeover attempt, the proposed Amendment may
limit the opportunity for the Company's stockholders to dispose of their shares
at the higher price generally available in takeover attempts or that may be
available under a merger proposal. The proposed amendment may have the effect of
permitting the Company's current management, including the current Board of
Directors, to retain its position, and place it in a better position to resist
changes that stockholders may wish to make if they are dissatisfied with the
conduct of the Company's business. However, the Board of Directors is not aware
of any attempt to take control of the Company and the Board of Directors has not
presented this proposal with the intent that it be utilized as a type of
anti-takeover device.
4
<PAGE> 7
Cumulative Voting. Under Delaware law, cumulative voting is not mandatory,
and cumulative voting rights must be provided in a corporation's certificate of
incorporation if stockholders are to be entitled to cumulative voting rights.
The Company's certificate of incorporation provides for such cumulative voting.
Cumulative voting entitles each stockholder to cast a number of votes that
is equal to the number of voting shares held by such stockholder multiplied by
the total number of directors to be elected, and to cast all such votes for one
nominee or distribute the votes among up to as many candidates as there are
positions to be filled. Without cumulative voting, a stockholder or group of
stockholders must hold a majority of the voting shares to cause the election of
one or more nominees. Cumulative voting enables a minority stockholder or group
of stockholders holding a relatively small number of shares to elect a
representative or representatives to the Board of Directors.
The Amendment would increase the number of authorized directors and, as a
result, a minority stockholder would face less difficulty in electing a
representative to the Board of Directors because the number of votes available
to each stockholder would increase and fewer votes would be required to elect
any single director. The Amendment could have the impact of facilitating the
re-election of existing members of the Board as fewer of the available votes
would be necessary to elect each director.
REMOVAL OF DIRECTORS
In the case of a Delaware corporation having cumulative voting, if less
than the entire board is to be removed, a director may not be removed without
cause if the number of votes cast against such removal would be sufficient to
elect the director. As noted above, the Company's certificate of incorporation
provides for cumulative voting. Although the Company's bylaws specify that the
Board of Directors, or any individual director, may be removed from office with
or without cause at any time, no individual director may be removed if the
number of votes cast against removal would be sufficient to elect that director.
An increase in the number of authorized directors would reduce the number
of shares voting against removal that would be sufficient to impede a director's
removal without cause. Thus, increasing the size of the board of directors may
have the impact of making it more difficult to remove sitting directors.
CLASSIFIED BOARD OF DIRECTORS
A classified board is one on which a certain number, but not all, of the
directors are elected on a rotating basis each year. This method of electing
directors makes changes in the composition of the board of directors more
difficult, and thus a potential change in control of a corporation a lengthier
and more difficult process. Delaware law permits, but does not require, a
classified board of directors, pursuant to which the directors can be divided
into as many as three classes with staggered terms of office, with only one
class of directors standing for election each year. The Company's certificate of
incorporation and bylaws do not provide for a classified board and the Company
presently does not intend to propose establishment of a classified board.
INTEREST OF CERTAIN PERSONS IN THE AMENDMENT
The directors of the Company may be deemed to have a substantial interest
in the Amendment because the Amendment may have the effect of preserving the
current directors on the Company's Board of Directors and committees thereof due
to cumulative voting, as fewer votes would be necessary to elect each director
and more votes would be necessary to remove a director without cause.
5
<PAGE> 8
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
Our directors, executive officers and key employees, and their ages as of
December 26, 2000, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Gerald J. Burnett......................... 57 Chairman of the Board, President and Chief
Executive Officer
R. Stephen Heinrichs...................... 53 Vice Chairman of the Board, Chief Financial
Officer and Secretary
William L. Campbell....................... 52 Executive Vice President and Director
Craig F. Heimark.......................... 45 Vice President of Strategic Markets
James P. Hughes........................... 40 President of Avistar Systems Corporation
R. Jan Afridi............................. 41 Vice President of Financial Industry Sales of
Avistar Systems Corporation
Stephen F. Arisco......................... 42 Vice President of Operations and Customer
Support of Avistar Systems Corporation
Michael G. Barsotti*...................... 51 Vice President of Finance; Chief Financial
Officer of Avistar Systems Corporation
Lauren F. Calaby.......................... 38 Vice President of Product Marketing and Business
Development of Avistar Systems Corporation
J. Chris Lauwers.......................... 40 Vice President of Engineering of Avistar Systems
Corporation
Lester F. Ludwig.......................... 44 Vice President of Collaboration Properties, Inc.
William R. Brody.......................... 56 Director
David M. Solo............................. 35 Director
Robert M. Metcalfe........................ 54 Director
Robert P. Latta........................... 46 Nominee for Director
</TABLE>
------------
*Mr. Barsotti resigned from the Company effective January 15, 2001.
Gerald J. Burnett is one of our founders and has been Chairman, President
and Chief Executive Officer since March 2000. He has been Chief Executive
Officer of Avistar Systems Corporation and a director of Collaboration
Properties, Inc. since 1998. From 1993 to 1997, he was a director of Avistar
Systems Corporation or a principal of its predecessor limited partnership, and
also served as an advisor to Vicor, Inc., a systems engineering company. From
1976 through 1989, he was President of Teknekron, a group of technology
companies. He is also one of the founders and has been a director of Vicor, Inc.
since its inception in 1989. Since 1990, he has also been a director of Western
Data Systems of Nevada, Inc., a supplier of software to the aerospace and
defense industries. He is also a member of the Corporation (Board of Trustees)
of the Massachusetts Institute of Technology. Dr. Burnett holds a B.S. and an
M.S. from the Massachusetts Institute of Technology in electrical engineering
and computer science and a Ph.D. from Princeton University in computer science
and communications.
R. Stephen Heinrichs is one of our founders and has been Vice Chairman,
Chief Financial Officer and Secretary since March 2000. He has been Chairman of
Avistar Systems Corporation since 1993 and also served as Chief Executive
Officer from 1993 to 1997 and Chief Financial Officer from 1993 to 1995. From
1976 through 1989 he was Chief Financial Officer of Teknekron and Chairman and
Chief Executive Officer of several Teknekron companies. He is also one of the
founders and has been a director of Vicor, Inc. since its inception in 1989. He
has been Chairman of Western Data Systems of Nevada, Inc. since 1990. From 1969
through 1974 he was an accountant with Arthur Andersen LLP. Mr. Heinrichs holds
a B.S. from California State University in Fresno in Accounting. He is a
certified public accountant.
6
<PAGE> 9
William L. Campbell is one of our founders and has been a director and
Executive Vice President since March 2000. He has been Chairman, President and
Chief Executive Officer of Collaboration Properties, Inc. since 1998. He is one
of the founders of Vicor, Inc. and has been Chairman since 1994 and a director
since 1989. Mr. Campbell holds a B.S. in general engineering from the U.S.
Military Academy and an M.S. in management from the Sloan School of the
Massachusetts Institute of Technology.
Craig F. Heimark has been Vice President of Strategic Markets since March
2000. From 1997 to 2000, he was Managing Partner of the Hawthorne Group, a
strategic advisory firm specializing in consulting to high growth information
technology companies. Prior to founding the Hawthorne Group, he served in
various roles at SBC Warburg, including Member of the Executive Board, Head of
Strategic Planning and Chief Information Officer from 1990 to 1997. He holds a
B.A. in Economics and B.S. in Biology from Brown University.
James P. Hughes has been President of Avistar Systems Corporation since
January 2000. Previously, he had been Vice President of Sales of Avistar Systems
Corporation since 1994. From 1991 through 1993, he was Director of Business
Development at Aurum Software, Inc. Mr. Hughes holds a B.S. and an M.B.A. in
Marketing from the University of Santa Clara.
R. Jan Afridi has been Vice President of Financial Industry Sales of
Avistar Systems Corporation since April 2000. Previously, he served as Director
of Domestic Financial Services Sales from 1998 to March 2000 of Avistar Systems
Corporation and as Director of Support Services from 1997 to 1998 of Avistar
Systems Corporation. Prior to joining Avistar he was Director of Sales at
Cornerstone, a document imaging company, from 1994 to 1997. Mr. Afridi holds a
B.S. in engineering from U.S. Military Academy University and an M.B.A. from
Golden Gate University.
Stephen F. Arisco has been Vice President of Operations and Customer
Service of Avistar Systems Corporation since February 2000. He previously served
as Director of Operations and Customer Service from December 1997 to January
2000 of Avistar Systems Corporation. From 1987 through 1997, he was Director of
Customer Service and Operations at TRW Financial Systems, a systems integration
company. He holds a certificate of study from H.C. Wilcox Vocational Technical
School and an associate degree from Diablo Valley College.
Michael G. Barsotti has been Vice President of Finance since August 2000.
He has been Chief Financial Officer of Avistar Systems Corporation since 1995.
During 1994 he was Chief Financial Officer of Redwood Microsystems. Prior to
that, he was Corporate Controller at ASK Computer Systems. Mr. Barsotti has a
B.S. in mechanical engineering and an M.B.A. in finance from the University of
California at Berkeley. He is a certified public accountant.
Lauren F. Calaby has been Vice President of Product Marketing and Business
Development of Avistar Systems Corporation since February 2000. She previously
served as Director of Product Marketing and Business Development and in other
business development positions of Avistar Systems Corporation from October 1997
to January 2000. From 1996 through 1997, she was Director of Product and
Strategy at Pacific Bell. From 1993 through 1996, she was at AirTouch Teletrac,
last serving as Director of Corporate Development. Ms. Calaby holds a B.S. in
metallurgical engineering and material science from Carnegie Mellon University
and an M.B.A. from the University of California at Los Angeles.
J. Chris Lauwers has been Vice President of Engineering of Avistar Systems
Corporation since 1994. He was Principal Software Architect at Vicor, Inc. from
1990 through 1993. From 1987 to 1990 he was a Research Associate of Olivetti
Research Center. Dr. Lauwers holds a B.S. in electrical engineering from the
Katholieke Universiteit Leuven of Belgium. He also holds an M.S. and a Ph.D. in
electrical engineering and computer science from Stanford University.
Lester F. Ludwig has been Vice President of Collaboration Properties, Inc.
since 1998. Previously, he had been Principal Scientist at Vicor, Inc. since
1990. He was Director of Technology of Avistar Systems Corporation from 1995 to
1998. From 1986 to 1990 Dr. Ludwig conducted foundational multimedia
communications research at Bellcore. Dr. Ludwig holds a B.S. and an M.S. in
electrical engineering from
7
<PAGE> 10
Cornell University and a Ph.D. in electrical engineering and computer science
from the University of California at Berkeley.
William R. Brody has been a director since April 2000. Dr. Brody has been
President of The Johns Hopkins University since September 1996. Prior to
assuming that position, he served as Provost of the University of Minnesota
Academic Health Center from 1994 to 1996. From 1987 to 1994, Dr. Brody was the
Martin Donner Professor and Director of the Department of Radiology, professor
of electrical and computer engineering and professor of biomedical engineering
at Johns Hopkins University and radiologist-in-chief of The Johns Hopkins
Hospital. He has been a co-founder of three medical device companies, and served
as the President and Chief Executive Officer of Resonex Inc., a medical device
company, from 1984 to 1987. He currently serves on the board of directors of
Alza Corporation, Medtronic Inc. and Mercantile Bankshares Corporation. Dr.
Brody holds a B.S. and an M.S. in electrical engineering from the Massachusetts
Institute of Technology and an M.D. and a Ph.D. in electrical engineering from
Stanford University.
David M. Solo has been a director since April 2000. He is currently a
strategic advisor to several companies, including UBS AG on e-commerce and
technology issues. From 1998 to 1999 he was a member of the UBS AG Executive
committee and prior to that served as SBC Warburg Deputy Chief Executive Officer
and Chief Operating Officer with responsibilities including Logistics and
Technology from 1996 to 1998. From 1992 to 1996 he was the Head of Fixed Income
& Rate Derivatives Division of SBC Warburg and its predecessor SBC. Mr. Solo
holds a B.S. and an M.S. in electrical engineering and computer science from the
Massachusetts Institute of Technology.
Robert M. Metcalfe has served as a director of the Company since November
2000. Since 1993, Mr. Metcalfe has served as Vice President of Technology for
International Data Group ('IDG'), a publisher of technology, consumer and
general how-to books, and has served as a member of the board of directors of
IDG since 1992. From 1992 to 1993, Mr. Metcalfe wrote articles for magazines
such as Computerworld, Communications Week, Digital Media and Network Computing.
From 1991 to 1992, Mr. Metcalfe was a visiting fellow at Wolfson College, Oxford
University. From 1979 to 1990, Mr. Metcalfe was a founder of 3Com Corporation, a
provider of networking products and solutions, and served in various capacities
including Chief Executive Officer, President, Chairman of the Board and Division
General Manager. In 1973, while he was working at the Xerox Palo Alto Research
Center, Mr. Metcalfe co-invented Ethernet, the local area networking (LAN)
technology that connects personal computers to the Internet. Mr. Metcalfe also
currently sits on the Board of Trustees of Massachusetts Institute of
Technology. Mr. Metcalfe holds Bachelor degrees in Electrical Engineering and
Business Management from Massachusetts Institute of Technology, a Masters degree
in Applied Mathematics from Harvard University and a Doctorate degree in
Computer Science from Harvard University.
Robert P. Latta will be elected as a director of the Company upon the
effectiveness of the Amendment. Mr. Latta is a partner of the law firm Wilson
Sonsini Goodrich & Rosati, a professional corporation ('WSGR'). Mr. Latta joined
WSGR in 1979 and has been a partner since 1984. Mr. Latta specializes in
venture-backed start-ups, public offerings and mergers and acquisitions. Mr.
Latta and WSGR have represented the Company and its predecessors since 1997 as
corporate counsel. Mr. Latta holds Bachelor of Arts degrees in economics and
psychology and a Juris Doctorate degree from Stanford University.
BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
Our amended bylaws upon effectiveness of the Amendment shall provide that
the number of members of our board of directors will be not less than five and
not more than nine. The number of directors is currently six. Upon the
effectiveness of the Amendment, the number of directors within the range will be
increased to seven.
The audit committee consists of Dr. Brody, Mr. Solo and Dr. Metcalfe. The
audit committee will review our records and affairs to determine our financial
condition, oversee the adequacy of our system of internal accounting controls
and review our accounting methods.
8
<PAGE> 11
The compensation committee consists of Dr. Brody, Mr. Solo and Dr.
Metcalfe. The compensation committee will determine compensation for our
officers, administers our stock option plans and make recommendations to the
board of directors concerning awards granted under the plan to directors and
employees who are subject to Section 16 of the Securities Exchange Act of 1934.
No officer serving on the board of directors will participate in decisions
awarding compensation or granting stock options to himself.
DIRECTOR COMPENSATION
Our employees and representatives of our institutional investors do not
receive any compensation for serving on the board of directors. Non-employee
directors receive an annual fee of $10,000. In April 2000, we awarded options to
purchase 12,000 shares, exercisable at $17.25 per share, to each of Dr. Brody
and Mr. Solo under our 1997 stock option plan.
All of our directors may be reimbursed for reasonable travel expenses
incurred in attending board meetings. In addition, all of our non-employee
directors are eligible to receive initial and automatic grants of stock options
or other rewards pursuant to our director stock option plan of 12,000 shares
when joining our board, and 3,000 shares per year thereafter. Upon joining our
Board, Mr. Latta will receive an option to purchase 12,000 shares at the
then-current fair market value on the date his election becomes effective.
EXECUTIVE COMPENSATION
The following table provides information concerning the compensation paid
to our Chief Executive Officer and each of our most highly compensated executive
officers whose total salary and bonus exceeded $100,000 during the year ended
December 31, 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
ANNUAL COMPENSATION -------------------
-------------------- SECURITIES
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS UNDERLYING OPTIONS
--------------------------- ---- ------ ----- -------------------
<S> <C> <C> <C> <C>
Gerald J. Burnett.......................... 1999 $199,866 -- --
Chief Executive Officer
R. Stephen Heinrichs....................... 1999 $204,527 -- --
Chief Financial Officer
William L. Campbell........................ 1999 $204,846 -- --
Chief Executive Officer of Collaboration
Properties, Inc.(1)
James P. Hughes............................ 1999 $142,938 $ 59,610(2) 215,942
President of Avistar Systems Corporation
R. Jan Afridi.............................. 1999 $ 99,389 $153,536(2) 50,000
Vice President of Financial Industry
Sales of Avistar Systems Corporation(3)
</TABLE>
------------------------
(1) Served as President and Chief Executive Officer of Collaboration Properties,
Inc. during 1999. Our founders contributed the stock of Collaboration
Properties to us, and Mr. Campbell became our Executive Vice President in
March 2000.
(2) Represents commissions earned during 1999.
(3) Served as Director of Domestic Financial Industry Sales of Avistar Systems
Corporation during 1999.
9
<PAGE> 12
The following table provides information regarding stock options granted to
the named executive officers during the year ended December 31, 1999.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZATION
--------------------------------------------------------- VALUE AT ASSUMED ANNUAL
NUMBER OF PERCENT OF RATES OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION FOR OPTION
UNDERLYING GRANTED TO TERM(1)
OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION -----------------------
NAME GRANTED FISCAL YEAR PER SHARE(2) DATE 5% 10%
---- ---------- ------------- -------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Gerald J. Burnett............ -- -- -- -- -- --
R. Stephen Heinrichs......... -- -- -- -- -- --
William L. Campbell.......... -- -- -- -- -- --
James P. Hughes.............. 100,000(3) 13.6% $ .95 6/21/09 $1,860,000 $3,017,000
115,942(3) 15.8% $3.45 12/20/09 $1,866,000 $3,209,000
R. Jan Afridi................ 50,000(3) 6.8% $ .95 6/21/09 $ 930,000 $1,509,000
</TABLE>
------------------------
(1) Assumed a per share fair market value equal to the initial public offering
price of $12.00. The dollar amounts under these columns represent the
potential realizable value of each grant assuming that the market value of
our stock appreciates from the date of grant to the expiration of the option
at annualized rates of 5% and 10%. These assumed rates of appreciation have
been specified by the SEC for illustrative purposes only and are not
intended to forecast future financial performance or possible future
appreciation in the price of our stock. The actual amount the executive
officer may realize will depend on the extent to which the stock price
exceeds the exercise price of the options on the date the option is
exercised.
(2) The exercise price on the date of grant was equal to 100% of the fair market
value on the date of grant, as determined by the board of directors at the
time of the grant. To determine compensation charges for accounting purposes
we have subsequently determined the fair market value of our common stock on
June 21, 1999 to be $5.00 per share and on December 20, 1999 to be $6.00 per
share.
(3) 25% of this option grant vests twelve months after the grant date with 6.25%
of the remaining options vesting on a quarterly basis for three years,
thereafter.
1999 OPTION VALUES
The following table provides information with respect to options exercised
by named executive officers during the year ended December 31, 1999 and the
value of unexercised options held by named executive officers as of December 31,
1999. None of the named executive officers exercised any stock options during
1999.
OPTION/SAR VALUES AT DECEMBER 31, 1999
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT YEAR-END OPTIONS AT YEAR-END(1)
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Gerald J. Burnett.................................... -- -- -- --
R. Stephen Heinrichs................................. -- -- -- --
William L. Campbell.................................. -- -- -- --
James P. Hughes...................................... 62,500 253,442 $734,375 $2,536,929
R. Jan Afridi........................................ -- 50,000 -- $ 552,500
</TABLE>
------------------------
(1) Assumed a per share fair market value equal to the initial public offering
price of $12.00.
For the Board of Directors of
AVISTAR COMMUNICATIONS
CORPORATION
Gerald J. Burnett
Chief Executive Officer
Dated: January 5, 2001
10
