<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT /x/ FILED BY A PARTY OTHER THAN THE REGISTRANT / /
- --------------------------------------------------------------------------------
Check the appropriate box:
/ / Preliminary Proxy Statement
/x/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
PictureTel Corporation
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
/x/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / 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
PICTURETEL CORPORATION
222 ROSEWOOD DRIVE
DANVERS, MASSACHUSETTS 01923
May 5, 1995
Dear Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders of
PictureTel Corporation which will be held on Thursday, June 29, 1995 at 10:00
a.m. at the Westin Hotel, 10 Huntington Avenue, Boston, Massachusetts.
We ask for your support in approving the election of directors (Item 1),
for approval of an amendment to the PictureTel Equity Incentive Plan to increase
the number of shares of Common Stock available for delivery under the Plan from
3,300,000 to 4,500,000, and to limit the number of options that may be granted
to any participant in any fiscal year to 250,000 shares (Item 2), and for the
ratification of the appointment of Coopers & Lybrand L.L.P. as the Company's
independent auditors (Item 3).
A copy of the Company's Annual Report to Stockholders for 1994 is included
with the proxy materials.
Sincerely,
DR. NORMAN E. GAUT
Chairman of the Board
<PAGE> 3
PICTURETEL CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JUNE 29, 1995
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
PictureTel Corporation (the "Company") will be held at the Westin Hotel, 10
Huntington Avenue, Boston, Massachusetts, on the 29th day of June, 1995 at 10:00
a.m. for the following purposes:
1. To fix the number of directors at five and to elect five directors,
each to serve until the next annual meeting and until his successor is
elected and qualified.
2. To consider and act upon a proposal to amend the PictureTel Equity
Incentive Plan to increase the aggregate number of shares of Common
Stock which may be delivered under the plan from 3,300,000 to 4,500,000
and to limit the number of options that may be granted to any
participant in any fiscal year to 250,000 shares.
3. To consider and act upon a proposal to ratify the selection of Coopers
& Lybrand L.L.P. as independent auditors for the 1995 fiscal year.
4. To transact any other business which may properly be brought before the
meeting or any adjournment thereof.
Stockholders of record at the close of business on May 1, 1995 are entitled
to notice of and to vote at the meeting or any adjournment thereof.
BY ORDER OF THE BOARD OF DIRECTORS
LES B. STRAUSS
Secretary
Danvers, Massachusetts
May 12, 1995
A PROXY CARD IS ENCLOSED FOR YOUR USE. WHETHER OR NOT YOU EXPECT TO BE
PRESENT AT THE ANNUAL MEETING, PLEASE MARK, SIGN, AND DATE THE ENCLOSED PROXY
AND RETURN IT IN THE ENCLOSED STAMPED AND ADDRESSED ENVELOPE.
<PAGE> 4
PICTURETEL CORPORATION
222 ROSEWOOD DRIVE
DANVERS, MASSACHUSETTS 01923
ANNUAL MEETING OF STOCKHOLDERS
JUNE 29, 1995
PROXY STATEMENT
The enclosed form of proxy is solicited on behalf of the Board of Directors
of PictureTel Corporation (the "Company") for use at the Annual Meeting of
Stockholders (the "Annual Meeting") to be held at the Westin Hotel, 10
Huntington Avenue, Boston, Massachusetts, on June 29, 1995 at 10:00 a.m. and at
any and all adjourned sessions thereof. The proxy may be revoked prior to its
exercise (i) by written notice received by the Secretary of the Company at its
address set forth above, (ii) by execution of a later-dated proxy, or (iii) by
attending the Annual Meeting or any session thereof and voting the shares
covered by the proxy in person. Shares represented by duly executed proxies will
be voted FOR the election of directors and the proposals set forth in Items 2
and 3 unless authority to vote for the election of directors or such proposal is
withheld or different instructions are given. The proxy, when executed and not
so revoked, will be voted at the meeting, including any adjournments thereof,
and if it contains any specifications, it will be voted in accordance therewith.
Stockholders of record at the close of business on May 1, 1995 are entitled
to receive notice of and to vote at the Annual Meeting and any adjournments
thereof. Each share of Common Stock outstanding on the record date is entitled
to one vote. As of the close of business on May 1, 1995, there were outstanding
and entitled to vote 15,720,838 shares of Common Stock.
It is expected that the form of proxy and proxy statement will first be
mailed to stockholders on or about May 12, 1995.
ITEM 1 -- ELECTION OF DIRECTORS
The directors propose that the stockholders fix the number of directors at
five. All of the nominees are currently directors, and, all directors were
elected at the 1994 Annual Meeting of Stockholders on June 9, 1994. Five
directors are to be elected to serve as Directors until the next annual meeting
and until their successors are elected and qualified.
NOMINEES FOR ELECTION
The age, positions with the Company, principal occupations during the past
five years, and directorships of other public companies now held by each person
who is a nominee for election as a Director at the Annual Meeting are as
follows:
Dr. Norman E. Gaut, 57, became President and Chief Executive Officer of the
Company in January, 1986. Dr. Gaut was elected Chairman of the Board on April 9,
1987. Dr. Gaut has been a Director of the Company since September, 1984.
Robert T. Knight, 57, was elected a Director in December, 1992 and is a
member of the Compensation Committee. Mr. Knight was elected Chairman of Digital
Sound Corporation, a voice processing company, in December, 1994. Previously,
Mr. Knight was President and Chief Executive Officer of Digital Sound
Corporation. Prior to 1991, Mr. Knight was a corporate vice president of Xerox
Corporation. Mr. Knight is also a Director of Blue Cross of California, a
medical insurance company.
Vinod Khosla, 40, was elected a Director in January, 1990, and is a member
of the Audit Committee. Mr. Khosla has been a general partner of Kleiner,
Perkins, Caufield & Byers, a venture capital partnership, since March, 1986. Mr.
Khosla was the Chief Executive of Sun Microsystems Inc. from 1982 to 1984. Mr.
Khosla
<PAGE> 5
is also a Director of Spectrum HoloByte, Inc., a home entertainment company
specializing in virtual reality and simulation, The 3DO Company, which develops
and licenses technology for the home interactive multimedia platform, and NexGen
Microsystems, which makes highly integrated, high performance Intel compatible
microprocessors. Mr. Khosla is also a Director of several other private
companies.
David B. Levi, 62, has been a Director of the Company since September, 1986
and is a member of the Audit Committee. Since July, 1991, Mr. Levi has been
President of Natural Microsystems Corporation, a manufacturer of voice
processing systems. Mr. Levi is also a Director of Natural Microsystems
Corporation.
James R. Swartz, 52, was elected a Director in December, 1988 and is a
member of the Compensation Committee. Mr. Swartz is a founder and has been a
general partner of Accel Partners, a venture capital limited partnership, since
1983. Mr. Swartz is also a Director of Remedy Corporation, a client server
application software company.
None of the nominees are related to any other nominee or to any executive
officer of the Company by marriage, adoption, or blood (except relationships, if
any, more remote than first cousins).
BOARD MEETINGS AND COMMITTEES:
The Board of Directors of the Company held eight meetings during the fiscal
year ended December 31, 1994. The Board has two committees: an Audit Committee
and a Compensation Committee.
The Compensation Committee currently consists of two non-employee
directors, Robert T. Knight and James R. Swartz. It has the authority to
determine the compensation of officers and key employees of the Company, to
determine compensation under the employee benefit plans and to administer the
Amended and Restated 1984 Stock Option Plan, the Equity Incentive Plan of the
Company and, the Employee Stock Purchase Plan. During the fiscal year ended
December 31, 1994, the Compensation Committee held four meetings and took action
by written consent ten times.
The Audit Committee currently consists of two non-employee directors, Vinod
Khosla and David B. Levi. It provides review and control functions with respect
to the Company's operations. Further, the Committee recommends the appointment
of the Company's independent auditors and meets annually with the auditors to
review the scope and results of the year-end audit and discuss any concerns
related to corporate accounting practices or controls. The Audit Committee held
two meetings during the fiscal year ended December 31, 1994.
Each director attended at least 75% of the total number of meetings of the
Board of Directors and all committees of the Board on which he or she served.
DIRECTORS COMPENSATION
During fiscal 1994, each director who is not an officer, employee of the
Company, or consultant to the Company or any subsidiary (an "Outside Director")
received an annual retainer of $5,000 and $1,000 for each meeting of the Board
of Directors that such Outside Director attends. Outside Directors also receive
expense reimbursements for attending Board and Committee meetings. Directors who
are officers or employees of the Company do not receive any additional
compensation for their services as director.
Outside Directors are also entitled to participate in the 1992 NonEmployee
Directors' Stock Option Plan. The plan provides that each Outside Director and
who has been a Director for more than two years on October 23, 1992 and each
other Outside Director first elected a Director after October 23, 1992
("Eligible Directors") shall automatically be granted an option to purchase
20,000 shares of Stock at an exercise price equal to the fair market value of
the Stock on the respective effective date of the grant. James R. Swartz, Vinod
Khosla, and David B. Levi were each granted an option for 20,000 shares on
October 23, 1992 at an exercise price of $19.25. Robert T. Knight, upon his
election to the board on December 16, 1992, was granted an option for 20,000
shares on December 16, 1992 at an exercise price of $22.50. Each option is
exercisable in installments, 25% one year after the effective date of the grant
and 6.25% after the end of each quarter thereafter so that the options are 100%
exercisable four years after the effective date of grant. These options remain
exercisable for a term of 10 years unless an Eligible Director ceases to be a
director for any reason
2
<PAGE> 6
other than death or total and permanent disability, all options held by the
Director that are not then exercisable shall then terminate. Options that are
exercisable on the date of such termination, shall continue to be exercisable
until the earlier of (1) three months thereafter or (2) the date on which the
option would have terminated had the director remained an Eligible Director.
DELINQUENT FILINGS
Under the securities laws of the United States, the Company's directors,
certain of its officers, and any persons holding more than ten percent of the
Company's Common Stock are required to report their ownership of the Company's
Common Stock and any changes in that ownership to the Securities and Exchange
Commission. Specific due dates for these reports have been established and the
Company is required to report in this proxy statement any failure to file by
these dates during 1994. All of these filing requirements were satisfied by its
directors and officers and, to the knowledge of the Company, ten percent
holders.
Unless authority to do so has been withheld or limited in proxies, proxies
will be voted to fix the number of directors at five and to elect the nominees
specified above. However, should any of the nominees refuse or be unable to
serve, it is the intention of the persons named as proxies to act in respect to
the filling of that office by voting the shares to which the proxy relates,
unless authority to do so has been withheld or limited in the proxy, for the
election of such other persons as may be designated by the Board of Directors
or, in the absence of such designation, in such other manner as they may, in
their discretion, determine.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE TO FIX THE
NUMBER OF DIRECTORS AT FIVE AND FOR EACH OF THE FIVE NOMINEES.
3
<PAGE> 7
<TABLE>
SECURITY OWNERSHIP
The following table sets forth certain information as of May 1, 1995 as to
the security ownership of those persons owning of record or known to the Company
to be the beneficial owners of more than five percent of the outstanding Common
Stock of the Company, each of the Company's directors and named executive
officers and the Company's executive officers and directors as a group.
<CAPTION>
SHARES OF
COMMON STOCK
BENEFICIALLY OWNED
----------------------
NAME AND ADDRESS OF HOLDER NUMBER PERCENT
- ----------------------------------------------------------------------------- --------- --------
<S> <C> <C>
Norman E. Gaut(1)............................................................. 330,682 2.1%
David B. Levi(2).............................................................. 23,150 *
Robert T. Knight(3)........................................................... 14,000 *
Vinod Khosla(4)............................................................... 42,985 *
James R. Swartz(5)............................................................ 52,861 *
Les B. Strauss(6)............................................................. 86,913 *
Lawrence M. Bornstein(7)...................................................... 12,500 *
Dominic J. LaCava(8).......................................................... 18,750 *
Khoa D. Nguyen(9)............................................................. 61,875 *
Kopp Investment Advisors, Inc.(11)............................................ 2,514,600 16.0%
6600 France Avenue South
Suite 672 Edina, MN 55435
The Capital Group, Inc. and Capital Guardian Trust Company(12)................ 1,443,000 9.2%
333 South Hope Street
Los Angeles, CA 90071
Twentieth Century Companies, Inc.(13)......................................... 900,000 5.7%
4500 Main Street
P.O. Box 418210
Kansas City, MO 64141-9210
All Current Directors and Officers as a Group (consisting of 13 persons)(10).. 687,391 4.2%
- ---------------
<FN>
* Less than one percent.
(1) Includes 297,249 options exercisable within 60 days owned by Dr. Gaut and
14,000 shares of Common Stock owned by a trust which Dr. Gaut may be deemed
to beneficially own.
(2) Includes 13,000 options exercisable within 60 days owned by Mr. Levi.
(3) Includes 12,500 options exercisable within 60 days owned by Mr. Knight.
(4) Includes 12,500 options exercisable within 60 days owned by Mr. Khosla.
(5) Includes 12,500 options exercisable within 60 days owned by Mr. Swartz; and
3,660 shares held by the Swartz Family Partnership L.P. with respect to
which Mr. Swartz is a general partner and 189 shares held by Hamilton
Assets Limited of which Mr. Swartz controls 50%.
(6) Includes 86,208 options exercisable within 60 days owned by Mr. Strauss.
(7) Represents 12,500 options exercisable within 60 days owned by Mr.
Bornstein.
(8) Represents 18,750 options exercisable within 60 days owned by Mr. LaCava.
(9) Represents 61,875 options exercisable within 60 days owned by Mr. Nguyen.
(10) Also included in the determination of beneficial ownership are any shares
which may be acquired by a director or officer of the Company within sixty
days through the exercise of any option. As of May 1, 1995, 566,807 shares
of Common Stock may be acquired on exercise of options which are
exercisable within sixty days.
</TABLE>
4
<PAGE> 8
(11) Kopp Investment Advisors holds 2,502,000 of these shares as investment
advisor for its investment management clients; 2,500 are held indirectly as
sole trustee of Kopp Investment Advisors, Inc. Profit Sharing Plan on
behalf of their employees; and 10,000 shares are owned directly by LeRoy C.
Kopp. This information is based, in part, on a Schedule 13G filed with the
Commission on February 10, 1995.
(12) Certain operating subsidiaries of The Capital Group Companies, Inc.
exercised investment discretion over various institutional accounts.
Capital Guardian Trust Company, a bank, and one of such operating
companies, exercised investment discretion over 983,000 of said shares.
Capital Research and Management Company, a registered investment advisor,
and Capital International Limited, another operating subsidiary, had
investment discretion with respect to 450,000 and 10,000 shares,
respectively, of the above shares. This information is based, in part, on a
Schedule 13G filed with the Commission on February 8, 1995.
(13) Twentieth Century Companies, Inc., the parent holding company of Investors
Research Corporation, a wholly-owned subsidiary, beneficially owns the
900,000 shares. Investors Research Corporation, manages pursuant to
management agreements, the investments of five registered investment
companies, Twentieth Century Investors, Inc., Twentieth Century World
Investors, Inc., Twentieth Century Capital Portfolios, Inc., Twentieth
Century Premium Reserves, Inc. and TCI Portfolios, Inc. Investors Research
Corporation also manages the assets of institutional investor accounts. The
900,000 shares are owned by and held for such investment companies and
separate institutional investor accounts. This information is based, in
part, on a Schedule 13G filed with the Commission on February 10, 1995.
EXECUTIVE OFFICERS
NORMAN E. GAUT. See "Nominees for Election" above.
Les B. Strauss, 51, joined the Company in March, 1990 as Vice President,
Chief Financial Officer and Secretary. In March, 1994, Mr. Strauss was also
elected Treasurer of the Corporation. Mr. Strauss held similar positions at
Camex Inc., a desk top publishing company, from 1987 to 1990.
Ian S. Bell, 61, joined the Company in June, 1994 as Vice President of
Operations. Prior to joining PictureTel, Mr. Bell held the position of Vice
President of Operations for Sun MicroSystems for a period of eight years. Mr.
Bell was responsible for the global expansion of Sun Microsystems Manufacturing
and Distribution Operations, starting with the development of their East Coast
operations in Boston, then onto Europe and finishing in the Far East. Mr. Bell
previously held similar positions for ten years with Digital Equipment
Corporation.
Lawrence M. Bornstein, 52, joined the Company in January, 1994 as Vice
President of Human Resources. Prior to joining PictureTel, Mr. Bornstein served
as an executive recruiter for Heidrick and Struggles, an executive search firm
from June, 1993 to January, 1994. Mr. Bornstein also served as a Human Resources
Officer for Computervision from October, 1985 to April, 1993, and previously
held like positions with Fidelity and Digital Equipment Corporation.
Stephen J. Crummey, 50, joined the Company in November, 1994 as Vice
President of Worldwide Sales. Prior to joining PictureTel, Mr. Crummey was
President & CEO of International Interactive Media from March, 1994 to October,
1994. Mr. Crummey provided consulting services during the period September, 1993
to March, 1994. From March, 1992 to August, 1993, Mr. Crummey held a position of
Vice President of Worldwide Sales at Avid Technology. Previously, Mr. Crummey
held several key sales positions at Lotus Development Corporation, including
Senior Vice President of Worldwide Sales and Service and International Business
Group.
David W. Grainger, 53, joined the Company in September, 1994 as Vice
President, Worldwide Customer Services. Prior to joining PictureTel, Mr.
Grainger held the position of Senior Vice President and Officer, Worldwide
Customer Services for Xerox Corporation from September, 1991 to September, 1994.
Mr. Grainger previously held a number of positions of increasing responsibility
in domestic and international operations for Digital Equipment Corporation from
1969 to September, 1991.
5
<PAGE> 9
Domenic J. LaCava, 54, joined the Company in December, 1993 as Vice
President, Personal Systems Division. Prior to joining PictureTel, Mr. LaCava
held the position of President of the PowerOpen Association, an organization
delivering a standards-based environment built on the PowerPC architecture, from
January, 1993 to October, 1993. From May, 1977 to July, 1992, Mr. LaCava was
with Digital Corporation, where his last assignment was as Vice President of
Digital's Unix-based Software and Systems. During Mr. LaCava's 15 year career at
Digital, he also held the position of Vice President of the low-end business
which focused on the desktop and deskside systems.
Joan M. Nevins, 42, joined the Company in October, 1986 as Vice
President-Finance and Administration. In March, 1994, Ms. Nevins accepted a new
position as Vice President of Marketing.
Khoa D. Nguyen, 41, joined the Company in January, 1993 as Vice President
of Engineering. He was named Chief Technical Officer in January, 1994 and, in
addition, became the General Manager heading up the Group Systems Division in
March, 1994. Prior to joining PictureTel, Mr. Nguyen was Vice President,
Engineering of VideoTelecom, a manufacturer of multi-media conferencing systems,
from August, 1991 through December, 1992. From January, 1975 until July, 1991,
Mr. Nguyen was with IBM, where, from January, 1990 until July, 1991, he had
responsibility for management of IBM's future systems technology architecture
group for RISC-based workstations. From May, 1987 to December, 1989 he served as
an Area Manager of all graphics development with the Advanced Workstation
Division.
All of the Company's executive officers are full-time employees of the
Company. Executive officers of the Company hold office for an indefinite term,
subject to the discretion of the Board of Directors.
None of the persons listed above is related to any other such person by
marriage, adoption or blood (except relationships, if any, more remote than
first cousins).
6
<PAGE> 10
MANAGEMENT COMPENSATION
Summary Compensation Table
The following table sets forth the cash compensation paid by the Company in
respect of the fiscal years 1992-1994, as well as certain other compensation
paid, awarded or accrued for those years, to the Company's Chief Executive
Officer and to the four other most highly compensated Executive Officers in 1994
(collectively the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
OTHER ----------------------
ANNUAL COMPENSATION ANNUAL RESTRICTED ALL OTHER
---------------------------------- COMPEN- STOCK COMPEN-
SALARY BONUS SATION AWARD(S) OPTIONS SATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) ($) (SHARES) ($)
- -------------------------------- ------- -------- ----------- --------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Dr. Norman E. Gaut 1994 $235,000 $ 100,000 -0- 100,000 $ 1,499(1)
Chairman, President 1993 235,000 -0- -0- -0- 275(1)
and CEO 1992 210,000 60,000 -0- 100,000 275(1)
Les B. Strauss 1994 $180,000 $ 80,000 -0- 75,000 $ 1,499(1)
Vice President and Chief 1993 170,000 -0- -0- -0- 275(1)
Financial Officer, Treasurer 1992 160,000 40,000 -0- 25,000 275(1)
Dominic J. LaCava 1994 $170,000 $ 85,000(2) -0- 50,000 $ 1,499(1)
Vice President 1993(3) 7,083 -0- -0- 50,000
Personal Systems Division 1992(3)
Khoa D. Nguyen 1994 $180,000 $ 70,000 -0- 40,000 $26,499(4)
Vice President and 1993 170,000 50,000(6) $ 9,930(5) 110,000 275(1)
Chief Technical Officer 1992(7)
Lawrence M. Bornstein 1994 $145,000 $ 75,000(8) -0- 65,000 $ 1,499(1)
Vice President 1993(9)
Human Resources 1992(9)
- ---------------
<FN>
(1) Company contributions to 401(k) plan.
(2) Represents a sign-on bonus of $10,000 and $75,000 annual management
incentive bonus award.
(3) Mr. LaCava joined the Company in December, 1993.
(4) Comprised of $25,000 of forgiven loan principal and Company
401(k)contributions of $1,499.
(5) Represents reimbursement of certain moving expenses paid by the Company.
(6) Represents a sign-on bonus of $50,000.
(7) Mr. Nguyen joined the Company in January, 1993.
(8) Represents a sign-on bonus of $5,000 and $70,000 annual management incentive
bonus award.
(9) Mr. Bornstein joined the Company in January, 1994.
</TABLE>
7
<PAGE> 11
OPTIONS/SAR GRANTS IN 1994
The following table shows all grants of options to the Named Executive
Officers of PictureTel in 1994. Pursuant to the Securities and Exchange
Commission (the "SEC") rules, the table also shows the potential realized value
of the options assuming PictureTel's stock price appreciates annually by 5% and
10% respectively from the date of grant until the end of the option term (10
years). These rates are mandated by the SEC rules and do not represent the
Company's estimate or projection of the future Common Stock price. The Company
does not agree that the value of an option can properly be determined by this
method.
<TABLE>
<CAPTION>
PERCENTAGE POTENTIAL REALIZABLE
OF TOTAL VALUE AT
OPTIONS/ ASSUMED ANNUAL RATES OF
SARS STOCK PRICE APPRECIATION
OPTIONS/ GRANTED TO EXERCISE OR FOR OPTION TERM
SARS EMPLOYEES BASE PRICE EXPIRATION -------------------------
NAME GRANTED(A) IN 1994 (PER SHARE) DATE 5% ($) 10% ($)
----- ----------- ---------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Norman E. Gaut........... 100,000(1) 9.5% $ 17.75 10/25/04 $1,116,300 $2,828,900
Les B. Strauss........... 75,000(1) 7.1% $ 17.75 10/25/04 $ 837,225 $2,121,675
Dominic J. LaCava........ 50,000(1) 4.8% $ 17.75 10/25/04 $ 558,150 $1,414,450
Khoa D. Nguyen........... 40,000(1) 3.8% $ 17.75 10/25/04 $ 446,520 $1,131,560
Lawrence M. Bornstein.... 25,000(1) 2.4% $ 17.75 10/25/04 $ 279,075 $ 707,225
40,000(2) 3.8% $ 17.00 01/13/04 $ 427,640 $1,083,760
- ---------------
<FN>
(1) Option granted on October 26, 1994, has a ten year term, and is exercisable
commencing 12 months after the grant date, with 25% of the option shares
covered thereby becoming exercisable at that time and with an additional
6.25% of the option shares becoming exercisable quarterly thereafter, with
all options being fully exercisable on the fourth anniversary of the grant
date.
(2) Option granted on January 14, 1994, has a ten year term, and is exercisable
commencing 12 months after the grant date, with 25% of the option shares
covered thereby becoming exercisable at that time and with an additional
6.25% of the option shares becoming exercisable quarterly thereafter, with
all options being fully exercisable on the fourth anniversary of the grant
date.
</TABLE>
AGGREGATED OPTION/SAR EXERCISES IN 1994
AND 1994 YEAR-END OPTION/SAR VALUES
The following table provides information as to options exercised by each of
the Named Executive Officers of PictureTel during 1994 and the value of options
held by such officers at year end 1994 measured in terms of the closing price of
PictureTel's Common Stock on NASDAQ on December 31, 1994 ($24.00). (No stock
appreciation rights were granted by PictureTel in 1994 and none were outstanding
at December 31, 1994.)
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED IN-
NUMBER OF UNEXERCISED THE-MONEY OPTIONS/SARS
SHARES OPTIONS/SARS AT 12/31/94 AT 12/31/94($)(E)
ACQUIRED ON VALUE ---------------------------- ---------------------------
NAME EXERCISE(#) REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------ ------------ -------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Norman E.Gaut............ 750 $ 16,313 278,499 156,250 $4,312,664 $884,375
Les B. Strauss........... -0- -0- 78,908 99,175 994,048 573,344
Domenic J. LaCava........ -0- -0- 12,500 87,500 75,000 537,500
Khoa D. Nguyen........... -0- -0- 48,125 101,875 156,406 451,094
Lawrence W. Bornstein.... -0- -0- -0- 65,000 -0- 436,250
- ---------------
<FN>
(1) Amounts in this column reflect the market value of the shares at exercise
date less the exercise price and may not represent amounts actually realized
by the named individuals.
(2) Amounts in this column reflect the market value of the shares at December
31, 1994 less the exercise price. The actual value of unexercised options
fluctuates with stock market activity.
</TABLE>
8
<PAGE> 12
EMPLOYMENT, SEVERANCE AND OTHER AGREEMENTS
In early 1995, the Company amended the severance pay provisions contained
in the executive officers' letters of employment or agreements to provide the
following:
In the event that Dr. Norman E. Gaut's employment is involuntarily
terminated for any reason other than for cause, Dr. Gaut shall receive his then
current base salary for a period of twenty-four (24) consecutive months
following the date of such termination.
In the event that Messrs. Strauss, LaCava, Nguyen or Bornstein's employment
is involuntarily terminated for any reason other than for cause, they shall
receive their then current base salary for a period of twelve (12) consecutive
months following the date of such termination.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors of PictureTel (the
"Committee") has the authority to establish the level of base salary payable to
the Chief Executive Officer and other executive officers of the Company and to
administer the Company's 1984 Amended and Restated Stock Option Plan and the
Equity Incentive Plan, under which grants may be made to such officers and key
employees at all levels in the Company. In addition, the Committee has the
responsibility for approving the Management Bonus Program(s) to be in effect for
the Chief Executive Officer and other executive officers and key employees each
fiscal year and to review programs and policies concerning matters of executive
compensation. The Committee is currently composed of two independent,
non-employee directors who have no interlocking relationships as defined by the
Securities and Exchange Commission. The Committee also administers the Company's
Employee Stock Purchase Plan.
General Compensation Philosophy. The Company operates in the competitive
and rapidly changing environment of the electronics and high technology
industry. The Committee strives to maintain compensation programs that allow the
company to respond to the competitive pressures within this industry. The
Company's compensation philosophy is to offer compensation opportunities linked
to the Company's business objectives and performance, individual performance and
contributions to the Company's success and enhanced shareholder value. These
compensation opportunities are intended to be competitive within the electronics
and high technology industry and enable the Company to attract, retain and
motivate the management talent necessary to ensure the Company's long-term
growth.
Compensation Components. It is the Committee's objective to have a
substantial portion of each executive officer's compensation contingent ("at
risk") upon the Company's successful performance, as well as his or her
contribution to the Company's success in meeting its objectives and to design a
total compensation and incentive structure to motivate and reward success,
balancing short and long-term goals. The Company's executive compensation
program consists of three main components: (1) a base salary; (2) an annual
management bonus; and, (3) long-term incentives. The second and third elements
constitute the "at risk" portion of the Company's overall compensation program.
Base Salary. The Committee annually reviews each executive officer's base
salary. In determining salary adjustments, the Committee considers the
executive's individual performance, the Company's success in achieving the
annual business objectives, and the executive's current base salary in relation
to the expected salary level for the position. The expected salary level is
established at approximately the 50th percentile of comparable positions of the
companies included in the executive compensation surveys in which the Company
participates as well as other commercially-available surveys. These surveys
include electronic and high technology companies with whom the Company competes
for senior-level executives. (Some of the companies included in the surveys are
included in the NASDAQ Electronic Components Stock Index used in the
"Performance Graph".) Further, the base salary plus bonus is also targeted at
approximately the 50th percentile for total cash compensation with an
opportunity for the amount of base salary plus bonus to be above the mid-range
of the survey groups in the event Company profitability exceeds business plan
targets. The Committee exercises its judgment based upon the above criteria and
does not apply a specific formula or assign a weight to each factor considered.
After giving consideration to various relevant factors, including competitive
salary levels and performance, the Committee determined that 1994 base salary
adjustments were
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<PAGE> 13
to be made for two Named Executive Officers in the three tables preceding this
Report. The Committee believes that the salaries paid to all Named Executive
Officers (other than Dr. Gaut; see below) approximate the expected 50th
percentile of the compensation data reviewed.
Annual Management Bonus. The annual management bonus is the first "at
risk" executive compensation element in the Company's executive compensation
program. At the beginning of each year, the Committee establishes objectives for
the management bonus program, including plan revenue and profitability targets
drawn from the fiscal year business plan approved by the Board of Directors.
Additionally, at the beginning of each year, the Committee establishes bonus
award targets for the executive officers and for 1994 these bonus targets ranged
from 25% to 40% of base salaries. The bonus plan has a threshold level of
Company performance based on both revenue and profit before interest and taxes
(a prescribed percentage of business plan objectives) that must be achieved
before any bonuses are awarded. The bonuses that may be paid under the program
may not exceed 100% of the bonus target on full achievement of the Company's
business plan targets and may not exceed 200% of the bonus target on achievement
of exceptional performance in excess of 100% of the Company's business plan
targets. The bonus amounts payable to each executive officer are then determined
by considering both Company performance and individual performance. After giving
consideration to the criteria deemed relevant by the Committee, including the
fact that the Company met and exceeded the business plan targets established for
1994, the individual performance of the Named Executive Officers, and the
recommendations of the Company's management, the Committee made the bonus awards
to the Named Executive Officers set forth in the Summary Compensation Table.
Long-Term Incentive Program. The second "at risk" element of the Company's
compensation program in which all executive officers and all other level
employees participate. This program has consisted solely of stock options, not
cash (although cash and other stock based awards are permitted under the Equity
Incentive Plan). The Committee views the granting of stock options as a
significant method of aligning management's long-term interests with those of
the shareholders, bring into balance short and long-term compensation with the
Company's goals, foster the retention of key executive and management personnel,
and incent the achievement of superior performance over time. Awards to
executives are based upon criteria which include an individual's current
position with the Company, total compensation, the executive's performance in
the recent period, expected contributions to the achievement of the Company's
long-term performance goals, and current competitive practice. The relative
weight given to each of these factors will vary from executive to executive at
the Committee's discretion. After giving consideration to the criteria deemed
relevant by the Committee, including the lack of any "subsequent round" option
grants to Company executives since October 23, 1992, a competitive analysis of
the Company's option program against the programs of companies of similar size
and industry, the Company's overall compensation program competitiveness, and
the recommendations of the Company's management, the Committee approved the
stock option grants to the Named Executive Officers set forth in the Option/SAR
Grant Table. These stock options granted under the Equity Incentive Plan become
exercisable over four years and have a term of ten years.
Compensation of the Chief Executive Officer. Dr. Norman E. Gaut is Chief
Executive Officer, President and Chairman of the Board of Directors of the
Company. Dr. Gaut's salary, bonus, and stock option grants for fiscal 1994
reflect the Committee's evaluation of his overall leadership of the Company. The
Committee considered, among other factors, the Company's revenue and
profitability for prior and current fiscal years, the Company's market share in
key segments, the creation of new ventures to penetrate developing markets, and
the building of a senior management team as the foundation for product
innovation and the long-term strategic growth of the Company.
In 1994, the Committee reviewed Dr. Gaut's base salary, and after
considering factors deemed relevant by the Committee, including those considered
for the other Named Executive Officers, as set forth under "Base Salary" above,
the Committee determined not to adjust Dr. Gaut's base salary. Dr. Gaut's salary
has not attained the expected 50th percentile of the executive compensation
surveys reviewed, but this is not the sole determinate criterion for
establishing his pay.
At the beginning of fiscal 1994, the Committee established a target bonus
for Dr. Gaut under the Company's management bonus program described above. After
giving consideration to the criteria deemed
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<PAGE> 14
relevant by the Committee, including the fact that the Company met and exceeded
the performance objectives established for 1994, Dr. Gaut's performance in the
leadership of the Company, the Committee approved the bonus award to Dr. Gaut
set forth in the Summary Compensation Table. The bonus award is slightly above
the 40% target established for Dr. Gaut.
In October 1994, Dr. Gaut was granted an option to purchase 100,000 shares
of the Company's Common Stock at the market price on that date, vesting over a
four year period with a ten year term. In keeping with the Company's overall
philosophy regarding the grant of stock options as a long-term incentive, the
Committee based its grant on an evaluation of Dr. Gaut's overall leadership of
the Company, the number of unvested options held by Dr. Gaut, and competitive
compensation data available to the Committee for comparable positions within the
electronics and high technology industry.
Tax Limitations. As a result of federal tax legislation enacted in 1993,
under Section 162(m) of the Internal Revenue Code of 1986, as amended, a
publicly-held company such as the Company will not be allowed a federal income
tax deduction for compensation paid to certain executive officers, to the extent
that compensation exceeds $1 million per officer in any year. At present, since
both the 1984 Amended and Restated Stock Option Plan and the Equity Incentive
Plan were approved by the shareholders prior to December 20, 1993, as well as
any amendments requiring such approval, the stock option grants that have been
made to date have been exempt from the $1 million limitation under "transitional
rules" contained in the proposed tax regulations. The shareholders are being
asked at the 1995 Annual Meeting to approve an amendment to the Company's Equity
Incentive Plan which will impose a limit on the maximum number of shares of
Common Stock for which any one participant may be granted stock options in any
one fiscal year. If such amendment is approved, any compensation deemed paid to
an executive officer when he exercises an outstanding option under the Equity
Incentive Plan with an exercise price equal to the fair market value of the
option shares on the grant date will qualify as performance-based compensation
which will not be subject to the $1 million limitation.
Compensation Committee
Robert T. Knight
James R. Swartz
April 5, 1995
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<PAGE> 15
STOCK PERFORMANCE GRAPH
The following graph sets forth information comparing the cumulative total
return to holders of the Company's Common Stock over the last five fiscal years,
commencing with the last trading day before the beginning of the Company's fifth
preceding fiscal year (the "Measuring Period") with (1) the cumulative total
return of the NASDAQ Stock Market Index (U.S.) and (2) the cumulative total
return of the NASDAQ Electronics Components Stock Index, assuming in each case
the investment of $100 on December 31, 1989. The yearly change in cumulative
total return is measured by dividing (i) the sum of (a) the cumulative amount of
dividends for each fiscal year, assuming dividend reinvestment, and (b) the
change in share price between the beginning and end of the Measuring Period, by
(ii) the share price at the beginning of the Measuring Period. PictureTel has
not paid any cash dividends.
<TABLE>
<CAPTION>
NASDAQ
Electronics
Measurement Period NASDAQ Stock Components
(Fiscal Year Covered) PictureTel Market Index Stock Ind ex
<S> <C> <C> <C>
1989 100.00 100.00 100.00
1990 170.18 84.92 97.04
1991 664.91 136.27 138.19
1992 354.39 158.57 215.90
1993 263.16 182.03 296.49
1994 336.84 177.99 328.33
</TABLE>
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<PAGE> 16
ITEM 2 -- PROPOSED AMENDMENT TO THE PICTURETEL CORPORATION EQUITY INCENTIVE PLAN
TO INCREASE THE NUMBER OF SHARES OF CAPITAL STOCK WHICH MAY BE
DELIVERED PURSUANT TO THE PLAN FROM 3,300,000 TO 4,500,000; AND TO
LIMIT THE NUMBER OF OPTIONS THAT MAY BE GRANTED TO ANY PARTICIPANT IN
ANY FISCAL YEAR TO OPTIONS FOR 250,000 SHARES.
GENERAL:
The Company has historically utilized stock options as a key part of its
overall compensation program for executive officers and other employees
Company-wide. Pursuant to the terms of the Company's 1984 Amended and Restated
Stock Option Plan, no further awards may be granted under that plan. As of May
1, 1995, there were 223,315 shares available for awards under the Company's
Equity Incentive Plan. As of that date, 3,076,685 shares had been issued under
that Plan and options for 2,320,122 shares were outstanding, leaving a balance
of 223,315 additional shares that may be subject of future option grants or
other awards under that Plan. The Board of Directors believes it is in the best
interests of the Company to have stock and stock-based awards available in order
to retain, attract and motivate high quality personnel for the Company. See
"Compensation Committee Report" herein. On April 4, 1995, the Board of Directors
unanimously approved, subject to stockholder approval, an amendment to the
Company's Equity Incentive Plan to increase the number of shares of Common Stock
(as such term is defined in the Company's Equity Incentive Plan) which may be
delivered under the Company's Equity Incentive Plan from 3,300,000 to 4,500,000.
An additional amendment to the Equity Incentive Plan is being proposed to
impose a limit of 250,000 options that may be granted to any participant in any
fiscal year. This is being proposed as a result of federal tax legislation
enacted in 1993. Under Section 162(m) of the Internal Revenue Code of 1986, as
amended, a publicly-held company such as the Company will not be allowed a
federal income tax deduction for compensation paid to certain executive
officers, to the extent that compensation exceeds $1,000,000 per officer in any
year. At present, since both the 1984 Amended and Restated Stock Option Plan and
the Equity Incentive Plan were approved by the shareholders prior to December
20, 1993, as well as any amendments requiring such approval under Rule 16b-3 of
the Securities Exchange Act of 1934, the stock option grants that have been made
to date have been exempt from the $1,000,000 limitation under "transitional
rules" contained in the proposed tax regulations. The shareholders are being
asked at the 1995 Annual Meeting to approve an amendment to the Company's Equity
Incentive Plan which will impose a limit on the maximum number of shares of
Common Stock for which any one participant may be granted stock options in any
one fiscal year. If such amendment is approved, any compensation deemed paid
(realized gains) to an executive officer when he exercises an outstanding option
under the Equity Incentive Plan with an exercise price equal to the fair market
value of the option shares on the grant date will qualify as performance-based
compensation which will not be subject to the $1,000,000 limitation.
On May 1, 1995, the last sale price of the Company's Common Stock as
reported by NASDAQ was $46.375 per share.
DESCRIPTION OF THE PICTURETEL CORPORATION EQUITY INCENTIVE PLAN:
On November 14, 1989, the stockholders approved the PictureTel Corporation
Equity Incentive Plan (the "Equity Plan"). The Equity Plan, which is
administered by the Compensation Committee (the "Committee"), permits the
granting of a variety of stock and stock-based awards and related benefits,
including stock options, restricted and unrestricted shares, deferred stock,
cash and stock performance awards, rights to receive cash or shares with respect
to increases in the value of the Common Stock, cash payments sufficient to
offset the federal, state, and local ordinary income taxes of participants
resulting from transactions under the Equity Plan, and loans to participants in
connection with awards, all as more fully described below. The Equity Plan's
eligibility encompasses key officers and other employees of the Company and its
subsidiaries, and other persons who are in a position to make a significant
contribution to the Company and its subsidiaries.
Subject to adjustment for stock splits and similar events, the total number
of shares of Common Stock that can be issued under the Equity Plan, during the
term of that plan, is 4,500,000 (including the 1,200,000
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<PAGE> 17
shares subject to approval by the shareholders as part of this proposal). If any
award under the Equity Plan which requires exercise by the participant for
delivery of Common Stock terminates without having been exercised in full, or if
any award payable in Common Stock or cash is satisfied in cash rather than
Common Stock, the number of shares of Common Stock as to which such award was
not exercised or for which cash was substituted will be available for future
grants.
In no event may any one individual participating in the Equity Plan be
granted stock options for more than 250,000 shares of Common Stock in the
aggregate in any fiscal year.
The Equity Plan is not required to be qualified under Section 401(a) of the
Internal Revenue Code, nor is it subject to the provisions of the Employees
Retirement Income Security Act of 1974.
Stock Options; Exercise Price; Term; Payment. The Equity Plan permits the
granting of options that qualify as incentive stock options under the Internal
Revenue Code ("incentive options" or "ISOs") and stock options that do not so
qualify ("nonstatutory options"). The option exercise price of each option shall
be determined by the Committee. The option price of an ISO may not be less than
100% of the fair market value of the shares on the date of grant in the case of
ISOs (110% in the case of ISOs granted to a greater than ten percent
stockholder). The option price of a nonstatutory option may be either par value
or an amount not less than 50% of fair market value. Subject to these
limitations, the Committee may reduce the exercise price of an option at any
time after the time of grant with the consent of the participant, but the option
will be treated as a new option granted on the date of reduction.
The term of each option will be fixed by the Committee, but may not exceed
ten years from the date of grant (five years in the case of an ISO granted to a
greater than ten-percent stockholder). The Committee will determine at what time
or times each option may be exercised. Options may be made exercisable in
installments, and the exercisability of options may be accelerated by the
Committee. The committee may in its discretion provide that upon exercise of an
option, instead of receiving shares free from restrictions under the plan, the
participant will receive shares of Restricted Stock or Deferred Stock Awards as
defined below. Also, if the market price of the Common Stock subject to an
option exceeds the price of the option at the time of exercise, the Committee
may in its discretion and upon request by an employee, cancel the option and pay
to the employee an amount in cash or Common Stock equal to the difference
between the fair market value of the Common Stock which would have been
purchased pursuant to the exercise (determined on the date the option is
cancelled) and the aggregate exercise price which would have been paid.
The exercise price of options granted under the Equity Plan must be paid in
full in cash or by check, bank draft or money order, or if the terms of the
option permit (or for a nonstatutory option, if the Committee so permits at or
after the grant of the option), by shares of Common Stock, by a promissory note
(so long as the par value of shares issued is paid in cash or by instrument
acceptable to the Company), by delivery of an unconditional and irrevocable
undertaking by a broker to deliver promptly to the Company sufficient funds to
pay the exercise price, or by any combination of the foregoing.
Stock Appreciation Rights. The Committee may also grant stock appreciation
rights, alone or in conjunction with options, entitling the holder upon exercise
to receive an amount in any combination of cash or shares of unrestricted Common
Stock, Restricted Stock or Deferred Stock Awards (as determined by the
Committee), in general measured by the increase since the date of grant in the
value of the shares covered by such right. Stock appreciation rights granted in
tandem with options will be exercisable only at such time or times, and to the
extent, that the related option is exercisable and will terminate upon the
exercise of the related stock appreciation right.
Treatment of Options and Stock Appreciation Rights Upon Termination of
Employment. If a participant retires after age 65 (or earlier in the case of
ISO's or if the Committee so specifies), any option or stock appreciation right
then held by the participant will become exercisable in full and will remain
exercisable for one year. If a participant's employment terminates by reason of
death or total and permanent disability, any option or stock appreciation right
then held by the participant that is not exercisable on the thirtieth day
following termination of employment will terminate on that date. Any remaining
options and stock appreciation rights will remain exercisable for one year from
date of termination of the employment. In the
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<PAGE> 18
event of any other termination of employment (or, in the case of non-employee
participant, in the event such participant ceases to be affiliated with the
Company) all options and stock appreciation rights held by the participant that
are not then exercisable shall promptly terminate; the participant's remaining
options and stock appreciation rights will remain exercisable for a period of
three months (Termination of an employee for cause will result in immediate
termination of all awards, however.) Notwithstanding the post-termination
exercise periods described above, no option or stock appreciation right may be
exercised beyond its original term.
Restricted Stock and Unrestricted Stock. The Committee may also award
shares of Common Stock subject to such conditions and restrictions as the
Committee may determine ("Restricted Stock"). The purchase price of shares of
Restricted Stock shall be either (i) par value (or past services of equivalent
value), or (ii) an amount equal to at least 50% of the shares' fair market
value. Recipients of Restricted Stock must accept an award within 60 days of the
grant of such award by written instrument and tender full payment, if any, in
order to have any rights with respect to the Restricted Stock. The Committee may
at any time accelerate the dates on which the restrictions will lapse.
Generally, shares of Restricted Stock are non-transferable and if a participant
who holds shares of Restricted Stock terminates employment or otherwise ceases
to be affiliated with the Company for any reason except retirement prior to the
lapse or waiver of the restrictions, the employee must resell to the Company the
shares of Restricted Stock for the amount paid for such shares, or forfeit them
to the Company if no cash was paid. In the event the employee retires with the
consent of the Company (a) after attainment of age 65 or (b) prior to attainment
of age 65 if the Committee so specifies at or prior to such retirement, all
shares subject to restrictions will become free of restrictions, except for
restrictions based on performance or other conditions (other than conditions
relating to the mere passage of time and continued employment), which were not
satisfied at such time. In such case, the Committee may remove or modify such
conditions or provide that the restrictions will lapse if and when the
conditions are subsequently satisfied, but if no such action is taken by the
Committee, the employee must resell to the Company the shares of Restricted
Stock for the amount paid for such shares, or forfeit them to the Company if no
cash was paid. Prior to the lapse of restrictions on shares of Restricted Stock
the participant will have all rights of a stockholder with respect to the
shares, including voting and dividend rights, subject only to the conditions and
restrictions generally applicable to Restricted Stock.
Any participant making an election under Section 83(b) of the Internal
Revenue Code with respect to Restricted Stock must provide a copy thereof to the
Company within 10 days of the filing of such election with the Internal Revenue
Service.
The Committee may also grant shares which are free from any restrictions
under the Equity Plan ("Unrestricted Stock"). The purchase price of Unrestricted
Stock must be either (i) par value (or past services of equivalent value), or
(ii) an amount equal to at least 50% of the shares' fair market value.
Deferred Stock. The Committee may also make deferred stock awards under
the Equity Plan ("Deferred Stock Awards"). Deferred Stock Awards entitle the
recipient to receive shares of Common Stock in one or more installments at a
future date or dates, and on such conditions as determined by the Committee.
Except as otherwise specified in the grant or agreed to by the Committee, all
such rights to which the participant has not become irrevocably entitled will
terminate upon the participant's death, retirement or other termination of
employment or other affiliation with the Company. The Committee may at any time
accelerate the time at which delivery of all or any part of the shares will take
place.
Performance Awards. The Committee may also grant awards based on certain
performance criteria ("Performance Awards") entitling the recipient to receive,
without payment, shares of Common Stock or cash in such combinations as the
Committee may determine. Payment of the award may be conditioned on achievement
of personal, corporate, departmental or any other category of performance goals
and such other conditions as the Committee shall determine. Except as otherwise
specified in the grant or agreed to by the Committee, rights under a Performance
Award to which the participant has not become irrevocably entitled will
terminate upon a participant's death, retirement or other termination of
employment or other affiliation with the Company.
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<PAGE> 19
Loans. The Company may make a loan to a participant ("Loan"), either on
the date of or after the grant of any award to the participant. A Loan may be
made either in connection with the purchase of Common Stock under the award or
with the payment of any Federal, State and local income tax with respect to
income recognized as a result of the award. The Board will have full authority
to decide whether to make a Loan and to determine the amount, terms and
conditions of the Loan, including the interest rate. However, no Loan may have a
term (including extensions) exceeding ten years in duration.
Supplemental Grants. In connection with any award, the Committee may at
the time such award is made or at a later date, provide for and grant a cash
award to the participant ("supplemental Grant") not to exceed an amount equal to
(1) the amount of any Federal, state and local income tax on ordinary income for
which the participant will be liable with respect to the award, plus (2) an
additional amount on a grossed-up basis necessary to make the participant whole
after tax, discharging all the participant's income tax liabilities arising from
the Supplemental Grant. Except as otherwise specified in the grant or agreed to
by the Committee, rights under a Supplemental Grant to which the participant has
not become irrevocably entitled will terminate upon a participant's death,
retirement or other termination of employment or other affiliation with the
Company.
No award granted under the Equity Plan (other than an award in the form of
an outright transfer of cash or Unrestricted Stock) may be transferred other
than by will or by the laws of descent and distribution and during an employee's
lifetime an award requiring exercise may be exercised only by the participant
(or in the event of the participant's incapacity, the person or persons legally
appointed to act on the participant's behalf).
Adjustments in Common Stock; Change in Control; Certain Corporate
Transactions. In the event of a stock dividend, stock split and certain other
changes in the Company's capitalization, including extraordinary distributions
to shareholders, the Committee will make appropriate adjustment to the maximum
number of shares that may be delivered under the Plan, the number of shares
subject to outstanding awards, the exercise price of outstanding awards, and
other appropriate adjustments. The Committee may also make such adjustments in
other circumstances if it deems the adjustments necessary to avoid distortion in
the operation of the Plan.
In the event of a Change in Control (as defined), all options and stock
appreciation rights then outstanding and unexercisable shall become fully
exercisable unless the Committee shall otherwise expressly provide at the time
of grant and all restrictions and conditions on restricted stock, deferred
stock, performance units and other stock-based awards shall automatically be
deemed waived to the extent, if any, specified (whether at or after time of
grant) by the Committee. In the event the Company is acquired under
circumstances prescribed in the Equity Plan, all outstanding awards will
terminate, provided that at least 20 days prior to the effective date of such
transaction the Committee shall make all options exercisable (to the extent that
they have not already become exercisable upon the occurrence of a Change in
Control (as defined)), and the Committee may, in its discretion, remove
restrictions and conditions on restricted stock and other outstanding awards and
take such other action in connection thereafter as is provided under the Equity
Plan.
Withholding Requirements. The grant or exercise of awards may be subject
to tax withholding requirements as described below. Where Common Stock may be
delivered under an award, the Committee may require that the participant or
other appropriate person either remit to the Company an amount necessary to
satisfy withholding requirements or make other satisfactory arrangements
(including if the Committee so permits, the holding back of shares from payments
under the award).
The Committee may at any time discontinue granting awards under the Equity
Plan. The Board may at any time or times amend the Equity Plan or any
outstanding award for any purpose which may at the time be permitted by law, or
may at any time terminate the Equity Plan as to any further grants of awards,
except that certain specified amendments may not be made without the approval of
the stockholders of the Company and no amendment or termination of the Equity
Plan may adversely affect the rights of any participant (without the
participant's consent) under any award previously granted.
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FEDERAL INCOME TAX EFFECTS
In general, neither the grant nor the exercise of an incentive stock option
will result in taxable income to the option holder or a deduction to the
Company. However, option holders exercising incentive stock options may become
subject to the alternative minimum tax by reason of that exercise.
If the stock received upon the exercise of an incentive stock option is
held for at least two years from the date of grant and at least one year after
the date of exercise, any gain or loss recognized upon the disposition of the
stock will be considered long-term capital gain or loss and will be taxed
accordingly. If shares received upon exercise of an incentive stock option are
disposed of before the holding period requirements described above have been
satisfied (a "disqualifying disposition"), the option holder will realize
ordinary income, and the Company will be entitled to a deduction, equal in
general to the difference between the option price and the value of the stock on
the date of exercise. The amount of ordinary income realized on a disqualifying
disposition may be limited when the stock is sold for less than its value on the
exercise date. Incentive options granted to an optionee will be treated for
Federal income tax purposes as non-statutory options (see below) to the extent
the aggregate value (determined as of the time of grant) of the stock for which
the options first become exercisable in any calendar year exceeds $100,000.
In the case of non-statutory options, no income results upon the grant of
the option. When an option holder exercises a non-statutory option, he or she
will realize ordinary income, subject to withholding, equal in general to the
excess of the then-fair market value of the stock over the option price. The
Company will in general be entitled to a deduction equal to the amount of
ordinary income realized by the optionee, provided the Company satisfies certain
withholding and reporting requirements.
Special rules will apply in the case of officers or directors subject to
the short-swing profit limitations of Section 16(b) of the Securities Exchange
Act of 1934, as amended, who exercise options within six months of the grant of
those options.
Section 162(m) of the Internal Revenue Code limits to $1 million the
deduction a public corporation may claim with respect to the remuneration paid
in any year to any of the Corporation's top five officers. The deduction
limitation is subject to a number of important exceptions, including an
exception for so-called "performance-based" compensation. It is anticipated that
options granted under the Plan as proposed to be amended will be eligible for an
exception from the $1 million deduction limitation. However, final regulations
under Section 162(m) have not yet been issued.
The Internal Revenue Code also imposes a 20% additional tax, and denies a
deduction, where remuneration paid in connection with a change in control
exceeds specified limits. In determining whether these limits have been
exceeded, options that vest upon a change in control of the Company may be taken
into account.
The foregoing summary is limited to Federal income tax consequences with
respect to options under the Equity Plan and does not purport to be a complete
description of tax consequences under the Equity Plan, nor does it describe any
state or local tax consequences.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors believes it is important to have stock and
stock-based awards available in order to retain, attract and motivate high
quality personnel who are likely to contribute to the long-term success of the
Company. As of May 1, 1995, only future options or other stock-based awards for
an aggregate of 223,315 shares may be granted under the Company's Equity Plan.
Accordingly, the Board of Directors believes that the proposal to increase the
number of shares of capital stock that may be awarded under the Equity Incentive
Plan is in the best interests of the Company and its stockholders. The Board
also believes the imposition of a maximum limit on the number of options that
may be granted to any individual in a fiscal year is necessary to preserve the
possibility of a tax deduction for the Company under certain circumstances.
Accordingly, the Board believes that this second amendment is also in the best
interests of the Company and its stockholders. The Board recommends that the
stockholders approve the amendments to the Company's Equity Incentive Plan.
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<PAGE> 21
VOTE REQUIRED
The amendments to the Equity Plan must be approved by a majority of the
votes properly cast on this Item 2 at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSED AMENDMENTS TO THE
EQUITY INCENTIVE PLAN.
ITEM 3 -- RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors has selected the independent public accounting firm
of Coopers & Lybrand L.L.P. to audit the accounts of the Company for the fiscal
year 1995. The Board of Directors has recommended that stockholders ratify this
selection. The Board of Directors will review its selection if this proposal is
not approved by the holders of a majority of the voting power of the outstanding
shares of the Common Stock of the Company present in person or represented by
proxy at the Annual Meeting.
Neither the firm of Coopers & Lybrand L.L.P. nor any of its partners has a
direct or materially indirect financial interest in the Company. Representatives
of the firm of Coopers & Lybrand L.L.P. will be present at the Annual Meeting
with the opportunity to make a statement if they desire to do so and will be
available to reply to stockholder inquiries.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors has approved the selection of Coopers & Lybrand
L.L.P. as the Company's auditors and believes that such selection is advisable
and in the best interests of the Company and its stockholders. Accordingly, the
Board of Directors recommends that the stockholders ratify the selection of
Coopers & Lybrand L.L.P. as the Company's auditors.
VOTE REQUIRED
The affirmative vote of a majority of the votes properly cast on the matter
at the Annual Meeting is required to ratify the selection of Coopers & Lybrand
L.L.P. as the Company's auditors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO RATIFY THE
SELECTION OF THE COMPANY'S AUDITORS.
OTHER BUSINESS
The Board of Directors has no reason to believe that any other business in
addition to the foregoing will be presented at the Annual Meeting, but if any
other business shall be presented, votes pursuant to the proxy will be cast
thereon in accordance with the judgment of the persons named as proxy in the
accompanying proxy.
VOTING
Consistent with state law and under the Company's by-laws, a majority of
the shares entitled to be cast on a particular matter, present in person or
represented by proxy, constitutes a quorum as to such matter. Votes cast by
proxy or in person at the Annual Meeting will be counted by persons appointed by
the Company to act as Judges of Election for the meeting.
The five nominees for election as Directors at the Annual Meeting who
receive the greatest number of votes properly cast for the election of Directors
shall be elected Directors. A majority of the votes properly cast on the matter
is necessary to approve the actions proposed in Items 2 and 3 and as well as any
other matter which comes before the Annual Meeting, except where law or the
Company's certificate of incorporation or by-laws require otherwise.
The Judges of Election will count the total number of votes cast "for"
approval of proposals, other than the election of Directors, for purposes of
determining whether sufficient affirmative votes have been cast. The Judges of
Election will count shares represented by proxies that withhold authority to
vote for a nominee for
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election as a Director or that reflect abstentions and "broker non-votes" (i.e.,
shares represented at the Annual Meeting held by brokers or nominees as to which
(i) instructions have not been received from the beneficial owners or persons
entitled to vote and (ii) the broker or nominee does not have the discretionary
voting power on a particular matter) only as shares that are present and
entitled to vote on the matter for purposes of determining the presence of a
quorum, but neither abstentions nor broker non-votes will have any effect on the
outcome of voting on the matter.
STOCKHOLDER PROPOSALS FOR 1996 ANNUAL MEETING
Proposals intended for inclusion in next year's annual meeting proxy
statement should be sent to the Secretary of the Company at 222 Rosewood Drive,
Danvers, MA 01923 and must be received by January 4, 1996.
MISCELLANEOUS
In addition to the solicitation of proxies by mail, management and
employees of the Company may also assist in soliciting proxies in person or by
mail, telecopy, telephone, telegram and personal interviews for which they will
receive no additional compensation. The costs of solicitation of proxies will be
borne by the Company. The Company has also retained The Altman Group, Inc. to
assist in the solicitation of proxies and will pay such firm a fee estimated at
$8,500, plus reimbursement of reasonable out-of-pocket expenses.
Each of the Report of the Compensation Committee and the Performance Graph
shall not be deemed incorporated by reference by any general statement
incorporating this proxy statement into any filing under the Securities Act of
1933 or under the Securities Exchange Act of 1934, except to the extent that the
Company specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such Acts.
YOU ARE ENCOURAGED TO EXERCISE YOUR RIGHT TO VOTE BY MARKING THE
APPROPRIATE BOXES, AND DATING AND SIGNING THE ENCLOSED PROXY CARD. IT IS NOT
NECESSARY TO MARK ANY BOX IF YOU WISH TO VOTE IN ACCORDANCE WITH THE
RECOMMENDATIONS OF THE BOARD OF DIRECTORS. THE PROXY CARD MAY BE RETURNED IN THE
ENCLOSED ENVELOPE, WHICH IS POSTAGE-PAID IF MAILED IN THE UNITED STATES. A
PROMPT RESPONSE WILL BE HELPFUL AND YOUR COOPERATION IS APPRECIATED.
PICTURETEL CORPORATION
LES B. STRAUSS
Secretary
May 12, 1995
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PROXY PROXY
PICTURETEL CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
PICTURETEL CORPORATION FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 29, 1995.
The undersigned hereby appoints Les B. Strauss and Norman E. Gaut and
each of them, as attorneys and proxies of the undersigned, with full power of
substitution to vote and act in the manner designated on the reverse side at
the Annual Meeting of Stockholders of PictureTel Corporation (the "Company") to
be held on June 29, 1995 at 10:00 a.m. at the Westin Hotel, 10 Huntington
Avenue, Boston, Massachusetts and any adjourments thereof, in respect of all of
the common stock of the Company as to which the undersigned may be entitled to
vote or act, with all powers the undersigned would possess if personally
present, and, without limiting the general authorization hereby given, the
undersigned directs that his vote be cast as specified in this proxy. The
undersigned hereby revokes any other proxy previously granted to vote the same
shares of stock for said meeting.
CONTINUED AND TO BE SIGNED AND DATED ON REVERSE SIDE / SEE REVERSE SIDE /
/ X / PLEASE MARK
VOTES AS IN
THIS EXAMPLE.
The shares represented hereby will be voted as directed by this Proxy, but IF
NO DIRECTIONS ARE INDICATED HEREON THEY WILL BE VOTED "FOR" THE ELECTION OF
DIRECTORS AND "FOR" PROPOSALS 2 AND 3, AND FOR RECONSIDERATION/ADJOURNMENT
DEEMED DESIRABLE BY THE COMPANY. This proxy delegates discretionary authority
with respect to matters not known or determined at the time of solicitation of
this Proxy.
1. The nominees for the Board of Directors are: Norman Gaut, Robert Knight,
Vinod Khosia, David B. Levi and James R. Swartz.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF ALL DIRECTORS
LISTED ABOVE.
FOR WITHHELD
/ / / /
/ /__________________________________________________________
INSTRUCTION: To withhold authority to vote for any individual
nominee, write that nominee's name in the space provided above.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 2-3.
FOR AGAINST ABSTAIN
2. To consider and act upon a proposal / / / / / /
to amend the PictureTel Equity
Incentive Plan to increase the aggregate
number of shares of Common Stock which
may be delivered under the Plan from
3,300,000 to 4,500,000 and to limit the
number of options that may be granted
to any participant in any fiscal year to
250,000 shares.
FOR AGAINST ABSTAIN
3. To ratify the selection of Coopers & / / / / / /
Lybrand L.L.P. as the Company's auditors
for fiscal year 1995.
I PLAN TO / / I DO NOT / /
ATTEND THE PLAN TO
MEETING ATTEND THE
MEETING
Signature(s) must correspond with the name(s) as imprinted hereon. When
signed as attorney, executor, administrator, trustee or guardian,
please give full title as such.
Signature _______________________________________ Date ___________________
Signature _______________________________________ Date ___________________
