<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 / / 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)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
/ / No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
PICTURETEL CORPORATION
100 MINUTEMAN ROAD
ANDOVER, MASSACHUSETTS 01810
April 29, 1997
Dear Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders of
PictureTel Corporation which will be held on Thursday, June 12, 1997 at 10:00
a.m. at the World Trade Center, 164 Northern Avenue, Boston, Massachusetts.
We ask for your support in approving the election of directors (Item 1),
for approval of an amendment to the 1994 Employee Stock Purchase Plan to reduce
the waiting period before employees become eligible to participate in the plan
from twelve months to six months (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 1996 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 12, 1997
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
PictureTel Corporation (the "Company") will be held at the World Trade Center,
164 Northern Avenue, Boston, Massachusetts, on the 12th day of June, 1997 at
10:00 a.m. for the following purposes:
1. To fix the number of directors at six and to elect six 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 1994
Employee Stock Purchase Plan to reduce the waiting period before
employees become eligible to participate in the plan from 12 months to 6
months.
3. To consider and act upon a proposal to ratify the selection of Coopers &
Lybrand L.L.P. as independent auditors for the 1997 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 April 18, 1997 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
Andover, Massachusetts
April 29, 1997
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
100 MINUTEMAN ROAD
ANDOVER, MASSACHUSETTS 01810
ANNUAL MEETING OF STOCKHOLDERS
JUNE 12, 1997
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 World Trade Center, 164
Northern Avenue, Boston, Massachusetts, on June 12, 1997 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 April 18, 1997 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 April 18, 1997, there
were outstanding and entitled to vote 34,154,299 shares of Common Stock.
It is expected that the form of proxy and proxy statement will first be
mailed to stockholders on or about April 29, 1997.
ITEM 1 -- ELECTION OF DIRECTORS
The directors propose that the stockholders fix the number of directors at
six. All of the nominees are currently directors, and, all directors, with the
exception of Enzo Torresi, were elected at the 1996 Annual Meeting of
Stockholders on June 17, 1996. Six 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, 59, is currently Chairman of the Board and Chief
Executive Officer of the Company. Dr. Gaut became President and Chief Executive
Officer of the Company in January, 1986, and was elected Chairman of the Board
on April 9, 1987. Dr. Gaut has been a Director of the Company since September,
1984.
Vinod Khosla, 42, 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 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 Excite Inc., which develops management tools for the Internet. Mr. Khosla is
also a Director of several other private companies.
<PAGE> 5
Robert T. Knight, 59, was elected a Director in December, 1992 and is a
member of the Compensation Committee. Mr. Knight became President of Technology
Venture Services in January, 1996. Mr. Knight was Chairman of Digital Sound
Corporation, a voice processing company, from December, 1994 to December, 1995.
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 Wellpoint Health Networks, a
medical insurance company, and Data Dimensions, Inc., a consulting company
specializing in year 2000 software issues. Mr. Knight is also a Director of a
private company.
David B. Levi, 64, has been a Director of the Company since September, 1986
and is a member of the Audit Committee. Mr. Levi is currently Chief Operating
Officer of Voice Control Systems, a speech recognition company. Previously, Mr.
Levi was President of Voice Processing Corporation, a speech recognition
technology company for telephony markets, from November, 1995 to November, 1996.
From July, 1991 to November, 1995, Mr. Levi held positions at Natural
Microsystems Corporation, a manufacturer of voice processing systems. From
April, 1995 to November, 1995, Mr. Levi was Chairman and from July, 1991 to
April, 1995, Mr. Levi was President. Mr. Levi is also a member of the Board of
Trustees of the Harvard Radio Broadcasting Company and is also a Director of two
private companies.
James R. Swartz, 54, 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 Farallon Computing, Inc., an Internet
collaboration tools company, Polycom, Inc., an advanced teleconferencing
equipment company, Remedy Corporation, a client server application software
company, and numerous private companies.
Enzo Torresi, 52, was elected a Director of the Company in August, 1996. He
is currently Chairman, Cofounder, and Chief Executive Officer of Icast
Corporation, a privately held Internet software company that specializes in IP
Broadcast and multimedia networking technology. Mr. Torresi is also Vice
Chairman and a Cofounder of Power Computing Corporation, a PC manufacturer of
Mac OS compatible products. From January, 1989 to October, 1994, Mr. Torresi was
President, Chief Executive Officer, and Cofounder of NetFRAME Systems
Incorporated, a public company in the network server business. Mr. Torresi is
also a Director of SCO Incorporated, a public company leader in Unix based host
systems.
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 6 meetings during the fiscal
year ended December 31, 1996. 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, and the
Employee Stock Purchase Plan of the Company. During the fiscal year ended
December 31, 1996, the Compensation Committee took action by written consent 9
times, and held 2 meetings.
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
2 meetings during the fiscal year ended December 31, 1996.
Each director attended at least 80% of the total number of meetings of the
Board of Directors and all committees of the Board on which he served.
2
<PAGE> 6
DIRECTORS COMPENSATION
During fiscal 1996, each director who is not an officer, employee, or
consultant to the Company or any subsidiary (an "Outside Director") received an
annual retainer of $5,000 and received $1,000 for each meeting of the Board of
Directors that such Outside Director attended. Outside Directors also received
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.
Effective January 1997, each Outside Director will receive an annual
retainer of $20,000 and will receive $1,000 for each meeting, including
Compensation Committee and Audit Committee meetings, that such Outside Director
attends.
Outside Directors are also entitled to participate in the Amended 1992
Non-Employee Directors' Stock Option Plan. The plan provides that each Outside
Director who had been a Director for more than two years on August 1, 1996 and
each other Outside Director first elected a Director after August 1, 1996
("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 (August 1, 1996 or the
date of election, respectively). The Plan also provides for the annual grant of
stock options to purchase 5,000 shares of the Company's Common Stock to each
Eligible Director on August first of each year, commencing on August 1, 1997,
provided that no such annual option for 5,000 shares shall be granted to a
director who first became a director of the Company within six months prior to
August first of said year. 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 until 10 years after
date of grant unless an Eligible Director ceases to be a director for any reason
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.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under Section 16(a) of the Securities Exchange Act of 1934, the Company's
directors, executive 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. Executive officers, directors and greater than ten-percent
shareholders are required by applicable regulations to furnish the Company with
copies of all Section 16(a) forms they file. Based solely upon a review of the
copies of the forms furnished to the Company, or written representations from
certain reporting persons that no Forms 5 were required to be filed, the Company
believes that all filing requirements applicable to its executive officers and
directors were satisfied in 1996.
Unless authority to do so has been withheld or limited in proxies, proxies
will be voted to fix the number of directors at six 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 SIX AND FOR EACH OF THE SIX NOMINEES.
3
<PAGE> 7
SECURITY OWNERSHIP
The following table sets forth certain information as of April 18, 1997 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.
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
BENEFICIALLY OWNED
-------------------------
NAME AND ADDRESS OF HOLDER NUMBER PERCENT
- --------------------------------------------------------------------- --------- -------
<S> <C> <C>
Norman E. Gaut(1).................................................... 621,540 1.8%
Vinod Khosla(2)...................................................... 54,296 *
Robert T. Knight(3).................................................. 19,000 *
David B. Levi(4)..................................................... 44,300 *
James R. Swartz(5)................................................... 85,222 *
Enzo Torresi......................................................... -0- *
Les B. Strauss(6).................................................... 31,096 *
Domenic J. LaCava(7)................................................. 122,219 *
Stephen J. Crummey(8)................................................ -0- *
David W. Grainger(9)................................................. 36,250 *
Kopp Investment Advisors, Inc.(10)................................... 3,132,798 9.2%
6600 France Avenue South
Suite 672
Edina, MN 55435
Pilgrim Baxter & Associates(11)...................................... 2,406,800 7.0%
11255 Drummers Lane
Suite 300
Wayne, PA 19087
Fred Alger Management, Inc.(12)...................................... 2,002,600 5.9%
Fred M. Alger III
75 Maiden Lane
New York, NY 10038
The Capital Group Companies, Inc.(13)................................ 1,802,000 5.3%
333 South Hope Street
Los Angeles, CA 90071
All Directors and Executive Officers as a Group (consisting of 11
persons)(14)....................................................... 1,036,226 3.0%
</TABLE>
- ---------------
* Less than one percent.
(1) Includes 451,797 shares issuable upon exercise of options which are
exercisable within 60 days after April 18, 1997 and 28,000 shares of Common
Stock owned by a trust which Dr. Gaut may be deemed to beneficially own.
(2) Includes 40,000 shares issuable upon exercise of options which are
exercisable within 60 days after April 18, 1997.
(3) Includes 15,000 shares issuable upon exercise of options which are
exercisable within 60 days after April 18, 1997.
(4) Includes 24,000 shares issuable upon exercise of options which are
exercisable within 60 days after April 18, 1997.
(5) Includes 40,000 shares issuable upon exercise of options which are
exercisable within 60 days after April 18, 1997; and 4,320 shares held by
the Swartz Family Partnership L.P. with respect to which Mr. Swartz is a
general partner and 378 shares held by Hamilton Assets Limited of which Mr.
Swartz controls 50%.
(6) Includes 27,343 shares issuable upon exercise of options which are
exercisable within 60 days after April 18, 1997.
4
<PAGE> 8
(7) Includes 119,937 shares issuable upon exercise of options which are
exercisable within 60 days after April 18, 1997.
(8) Mr. Crummey left the employment of the Company on January 6, 1997.
(9) Represents 36,250 shares issuable upon exercise of options which are
exercisable within 60 days after April 18, 1997.
(10) Kopp Investment Advisors, Inc. holds 3,090,798 of these shares as
investment advisor for its investment management clients; 2,000 are held
indirectly as sole trustee of Kopp Investment Advisors, Inc. Profit Sharing
Plan on behalf of their employees; 20,000 shares are held by Kopp Family
Foundation, which is controlled by LeRoy C. Kopp and, 20,000 shares are
owned by LeRoy C. Kopp in his individual retirement account. This
information is based, in part, on a Schedule 13G filed with the Commission
on January 29, 1997.
(11) Pilgrim Baxter & Associates holds these shares as investment adviser for
its investment management clients. This information is based, in part, on a
Schedule 13G filed with the Commission on February 14, 1997.
(12) These shares are held by Fred Alger Management, Inc., its affiliates or its
pension and profit sharing plans, as well as shares held by Fred M. Alger
III, Chairman of Fred Alger Management, Inc. This information is based, in
part, on a Schedule 13G filed with the Commission on January 10, 1997.
(13) The Capital Group Companies, Inc. is the parent holding company of a group
of investment management companies that hold investment power and, in some
cases, voting power over the securities reported. This information is
based, in part, on a Schedule 13G filed with the Commission on February 12,
1997.
(14) 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 April 18, 1997, 776,045
shares of Common Stock may be acquired by such persons on exercise of
options which are exercisable within sixty days.
EXECUTIVE OFFICERS
Norman E. Gaut. See "Nominees for Election" above.
Les B. Strauss, 53, joined the Company in March, 1990 as Vice President,
Chief Financial Officer and Secretary, and since March, 1994, Mr. Strauss has
also been Treasurer of the Corporation. Mr. Strauss held similar positions at
Camex Inc., a desktop publishing company, from 1987 to 1990.
Domenic J. LaCava, 56, became President and Chief Operating Officer of the
Company in January, 1997. Mr. LaCava joined the Company in December, 1993 as
Vice President, Personal Systems Division, and effective early 1996, he held the
position of Vice President Enterprise Systems Group which combined the Personal
Systems Division and the Group 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.
David W. Grainger, 54, joined the Company in September, 1994 as Vice
President, Worldwide Customer Services (changed to Enterprise Services Division
in early 1996). 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.
Lawrence M. Bornstein, 54, 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
5
<PAGE> 9
Struggles, an executive search firm, from June, 1993 to January, 1994. Mr.
Bornstein also served as the Human Resources Officer for Computervision from
October, 1985 to April, 1993, and previously held like positions with Fidelity
and Digital Equipment Corporation.
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).
MANAGEMENT COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the cash and non-cash compensation for each
of the last three fiscal years, awarded or accrued, to the Company's Chief
Executive Officer and the four other most highly compensated Executive Officers
(collectively the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
OTHER -----------------------
ANNUAL COMPENSATION ANNUAL RESTRICTED ALL OTHER
------------------------------ COMPEN- STOCK COMPEN-
NAME AND PRINCIPAL SALARY BONUS SATION AWARD(S) OPTIONS SATION
POSITION YEAR ($) ($) ($) ($) (SHARES) ($)(1)
- ------------------------- ---- -------- -------- ------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Dr. Norman E. Gaut 1996 $280,000 $ 50,000 -0- 50,000 $ 2,250
Chairman and CEO 1995 280,000 150,000 -0- -0- 2,250
1994 235,000 100,000 -0- 200,000 1,499
Les B. Strauss 1996 $195,000 $ 40,000 -0- 27,500 $ 2,250
Vice President and CFO, 1995 195,000 85,000 -0- -0- 2,250
Treasurer 1994 180,000 80,000 -0- 150,000 1,499
Domenic J. LaCava 1996 $190,000 $ 50,000 -0- 19,800 $ 2,250
President and COO 1995 190,000 75,000 -0- -0- 2,250
1994 170,000 85,000(2) -0- 100,000 1,499
Stephen J. Crummey 1996 $175,000 -0- $44,000(3) 20,000 $ 2,250
Vice President 1995 175,000 $125,000(4) 32,000 (5) -0- 2,250
World Wide Sales 1994(6) 27,936 -0- -0- 150,000 -0-
(terminated employment
1/6/97)
David W. Grainger 1996 $160,000 $ 40,000 -0- 20,000 $ 2,250
Vice President, 1995 160,000 35,000(8) -0- -0- 2,250
Enterprise Services 1994(7) 50,556 30,000(8) -0- 80,000 -0-
Division
</TABLE>
- ---------------
(1) Unless otherwise indicated, Company contributions to 401(k) plan.
(2) Represents a sign-on bonus of $10,000 and $75,000 annual management
incentive bonus award.
(3) Represents special Sales Incentive Compensation for product revenue
achievement in 1996.
(4) Represents a sign-on bonus of $50,000 and $75,000 annual management
incentive bonus award.
(5) Represents special Sales Incentive Compensation for product revenue
achievement in 1995.
(6) Mr. Crummey joined the Company in November, 1994.
(7) Mr. Grainger joined the Company in September, 1994.
(8) Includes sign-on bonus of $50,000; paid $30,000 in 1994 and $20,000 in 1995.
6
<PAGE> 10
OPTIONS/SAR GRANTS IN 1996
The following table shows all grants of options to the Named Executive
Officers of PictureTel in 1996. Pursuant to the Securities and Exchange
Commission (the "SEC") rules, the table also shows the potential realizable
value of the options assuming PictureTel's stock price appreciates annually by
5% and 10% respectively from the date of grant until the end of the option term
(10 years). These rates are mandated by the SEC rules and do not represent the
Company's estimate or projection of the future Common Stock price. The Company
does not agree that the value of an option can properly be determined by this
method.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
PERCENTAGE VALUE AT ASSUMED
OF TOTAL ANNUAL RATES OF
OPTIONS/ STOCK PRICE
SARS APPRECIATION
OPTIONS/ GRANTED TO EXERCISE OR FOR OPTION TERM
SARS EMPLOYEES BASE PRICE EXPIRATION -----------------------
NAME GRANTED(1) IN 1996 (PER SHARE) DATE 5% ($) 10% ($)
- ---------------------------- ---------- ---------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Norman E. Gaut.............. 50,000 3.47% $ 40.50 1/24/2006 $1,273,500 $3,227,500
Les B. Strauss.............. 27,500 1.91% $ 40.50 1/24/2006 700,425 1,775,125
Domenic J. LaCava........... 19,800 1.38% $ 40.50 1/24/2006 504,306 1,278,090
Stephen J. Crummey(2)....... 20,000 1.39% $ 40.50 1/24/2006 509,400 1,291,000
David W. Grainger........... 20,000 1.39% $ 40.50 1/24/2006 509,400 1,291,000
</TABLE>
- ---------------
(1) Options granted on January 25, 1996, have a ten year term, and are
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) Options granted to Mr. Crummey have since expired due to his termination,
dated January 6, 1997.
AGGREGATED OPTION/SAR EXERCISES IN 1996
AND 1996 YEAR-END OPTION/SAR VALUES
The following table provides information as to options exercised by each of
the Named Executive Officers of PictureTel during 1996 and the value of options
held by such officers at year end 1996 measured in terms of the closing price of
PictureTel's Common Stock on NASDAQ on December 31, 1996 ($26.00). (No stock
appreciation rights were granted by PictureTel in 1996 and none were outstanding
at December 31, 1996.)
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED IN-
NUMBER OF UNEXERCISED THE-MONEY OPTIONS/SARS
SHARES OPTIONS/SARS AT 12/31/96 AT 12/31/96($)(2)
ACQUIRED ON VALUE ----------------------------- -----------------------------
NAME EXERCISE(#) REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Norman E. Gaut........... 165,000 $ 5,241,438 411,172 150,000 $ 7,034,154 $ 1,712,500
Les B. Strauss........... 193,766 4,334,992 -0- 102,500 -0- 1,284,375
Domenic J. LaCava........ -0- -0- 95,000 94,800 1,621,250 1,281,250
Stephen J. Crummey....... 50,000 1,249,198 -0- 120,000(3) -0- 1,625,000
David W. Grainger........ -0- -0- 20,000 60,000 348,125 696,250
</TABLE>
- ---------------
(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, 1996 less the exercise price. The actual value of unexercised options
fluctuates with stock market activity.
(3) Mr. Crummey's unexercisable shares at the end of the year have since expired
due to his termination, dated January 6, 1997.
7
<PAGE> 11
EMPLOYMENT, SEVERANCE AND OTHER AGREEMENTS
The Company has executed severance agreements with the Named Executive
Officers which 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 or LaCava'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.
In the event that Mr. Grainger's employment is terminated by the Company
without cause, he shall receive a continuation of his then base pay for a period
of six months. If after six months, he has not found permanent employment, his
pay would continue at the same rate minus any earned income derived from any
source other than the Company for another six months or until he is employed
full time, whichever is less.
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 Equity Incentive Plan, under which grants may be made
to such officers, key employees at all levels in the Company and consultants to
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
8
<PAGE> 12
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, the Committee determined that no 1996
base salary adjustments were to be made for four 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 1996 these bonus targets ranged
from 25% to 50% 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
Company's achievement level of the business plan targets established for 1996,
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 ("LTIP"). The LTIP is the second "at risk"
element of the Company's compensation program in which executive officers and
all other Company employees participate. This program has consisted solely of
stock options, not cash (although cash and other stock based awards are
permitted under the Company's 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, which bring into balance
short and long-term compensation with the Company's goals, fostering the
retention of key executive and management personnel, and incenting 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, unvested stock option holdings, 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 prior option grants made to Company
executives, a competitive analysis of the Company's option program and overall
compensation programs against the programs of companies of similar size and
industry, 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 and Chairman of the Board of Directors of the Company. Dr.
Gaut's compensation for fiscal 1996 reflects the Committee's evaluation of his
overall leadership of the Company. The Committee considered, among other
factors, the Company's revenue and profitability in prior and current fiscal
years, the Company's market share in key segments, the creation of new ventures
and products 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 1996, 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 under "Base Salary" above, the Committee
determined not to increase Dr. Gaut's base salary for 1996. Dr. Gaut's salary
has not
9
<PAGE> 13
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 1996, the Committee established a target bonus
for Dr. Gaut at 50% of base salary under the Company's management bonus program
described above. After giving consideration to the criteria deemed relevant by
the Committee, including the Company's achievement level of performance
objectives established for 1996, as well as 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 below the 50%
target established for Dr. Gaut.
In 1996, the Committee reviewed Dr. Gaut's stock option position, and after
considering factors deemed relevant by the Committee, including those considered
for the other Named Executive Officers under "Long-Term Incentives" above, 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, the Committee approved the stock option grant to the
set forth in the Option/SAR Grant Table. This stock option granted under the
Equity Incentive Plan becomes exercisable over four years and has a term of ten
years.
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 (the
"Code")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 one (1) million dollars per officer in any one
year, except for, among other matters, "performance-based compensation" approved
by stockholders. At the 1995 Annual Meeting, the shareholders approved certain
amendments to the Company's Equity Incentive Plan (the "Plan") which were
designed to assure that any compensation deemed paid in connection with the
exercise of stock options granted under the Plan would qualify as
"performance-based compensation".
Because it is very unlikely that the cash compensation payable to any of
the Company's executive officers in the foreseeable future will approach the one
(1) million dollar limitation, the Committee has decided not to take any action
to limit or restructure the elements of cash compensation payable to the
Company's executive officers. The Committee will reconsider this decision should
the individual compensation of any executive officer ever approach the one (1)
million dollar level.
Compensation Committee
Robert T. Knight
James R. Swartz
April 4, 1997
10
<PAGE> 14
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, 1991. 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.
[Performance Graph here]
<TABLE>
<CAPTION>
NASDAQ
Measurement Period PictureTel NASDAQ Stock Electronics
(Fiscal Year Covered) Corporation Market Index Components Index
<S> <C> <C> <C>
1991 100.00 100.00 100.00
1992 53.30 116.38 156.35
1993 39.58 133.59 214.66
1994 50.66 130.59 237.17
1995 182.08 184.67 392.86
1996 109.76 227.14 678.89
</TABLE>
ITEM 2 -- PROPOSED AMENDMENT TO THE PICTURETEL 1994 EMPLOYEE STOCK PURCHASE PLAN
TO REDUCE THE WAITING PERIOD BEFORE EMPLOYEES BECOME ELIGIBLE TO
PARTICIPATE IN THE PLAN FROM 12 MONTHS TO 6 MONTHS.
GENERAL; PROPOSED AMENDMENT.
The 1994 Employee Stock Purchase Plan (the "Purchase Plan") was adopted by
the Board of Directors effective April 15, 1994 and approved by the Company's
stockholders at the Annual Meeting in June, 1994. The Purchase Plan currently
provides for the delivery from time to time of up to 1,000,000 shares of the
Company's Common Stock, $.01 par value per share (the "Common Stock") on terms
set forth in the Purchase Plan. As of April 18, 1997, a total of 288,560 shares
have been purchased under the Purchase Plan.
The proposed amendment, which was approved by the Board of Directors on
October 18, 1996 (subject to stockholder approval at the 1997 Annual Meeting),
provides for the reduction of the waiting period before
11
<PAGE> 15
employees become eligible to participate in the plan from 12 months to 6 months.
The following is a summary of the essential features of the Purchase Plan.
DESCRIPTION OF THE 1994 EMPLOYEE STOCK PURCHASE PLAN, AS AMENDED.
Purpose. The purpose of the 1994 Employee Stock Purchase Plan, as amended
(the "Purchase Plan") is to provide a means by which employees of the Company
(and any subsidiary of the Company designated by the Board of Directors to
participate in the Purchase Plan) may be encouraged to purchase Common Stock of
the Company through payroll deductions.
The rights to purchase Common Stock granted under the Purchase Plan are
intended to qualify as options issued under an "employee stock purchase plan" as
that term is defined in Section 423 of the Internal Revenue Code (the "Code").
Administration. The Purchase Plan is administered by the Compensation
Committee (the "Committee") of the Board of Directors. The Committee has the
power to construe and interpret the Purchase Plan and the rights granted under
it. No member of the Committee is eligible to purchase stock under the Purchase
Plan.
Stock Subject to Plan. A total of 1,000,000 shares of Common Stock are
authorized for delivery from time to time under the Purchase Plan. Shares may be
either authorized but unissued shares or treasury shares. If options granted
under the Purchase Plan expire, lapse or otherwise terminate without being
exercised, the Common Stock not purchased under such options again become
available for delivery under the Purchase Plan. As of April 18, 1997, a total of
288,560 shares have been purchased under the Purchase Plan.
Offerings. The Purchase Plan is implemented by a series of six-month
offerings to purchase stock to all eligible employees from time to time.
Eligible Employees. Any person who is customarily employed at least 20
hours per week and five months per calendar year on the first day of a six-month
offering period is eligible to participate in that offering, provided such
employee has been in the continuous employ of the Company (or a designated
subsidiary) for at least six months. Notwithstanding the foregoing, no employee
is eligible for the grant of any option rights under the Purchase Plan if,
immediately after such grant, the employee would own, directly or indirectly,
stock possessing 5% or more of the total combined voting power or value of all
classes of stock of the Company or of any parent or subsidiary of the Company
(including any stock which such employee may purchase under all outstanding
rights and options), nor will any employee be granted option rights that would
permit him or her to buy more than $25,000 worth of stock (determined at the
fair market value of the shares at the time such option rights are granted)
under all employee stock purchase plans of the Company in any calendar year.
Participation in the Plan. Eligible employees become participants in the
Purchase Plan by delivering to the Company, prior to the commencement date for
the six-month offering period, an agreement authorizing payroll deductions of up
to 10% of such employees' base compensation during the offering period.
Purchase Price. The purchase price at which shares are sold in an offering
under the Purchase Plan is the lower of (a) 85% of the fair market value of a
share of Common Stock on the date of commencement of the six-month offering
period, or (b) 85% of the fair market value of a share of Common Stock on the
last day of the six-month offering period. Fair market value is determined by
reference to the sales price of the common stock on the NASDAQ. It is not
possible to determine the amount of any "benefits" which may be realized by any
employee under the Purchase Plan.
Payment of Purchase Price. The purchase price is accumulated by payroll
deductions over the offering period. At any time during the offering period, a
participant may reduce or terminate his or her payroll deductions. A participant
may not increase or begin such payroll deductions after the beginning of any
offering period. All payroll deductions made for a participant are credited to
his or her account under the Purchase Plan and deposited with the general funds
of the Company. A participant may not make any additional payments into such
account.
12
<PAGE> 16
Purchase of Stock. By executing an agreement to participate in the
Purchase Plan, the employee is entitled to purchase shares under such plan. In
connection with offerings made under the Purchase Plan, the Committee will
specify a maximum number of shares any employee may be granted the right to
purchase and the maximum aggregate number of shares which may be purchased
pursuant to such offering by all participants. If the aggregate number of shares
to be purchased upon exercise of rights granted in the offering would exceed the
maximum aggregate number, the Committee would make a pro rata allocation of
shares available in a uniform and equitable manner. Unless the employee's
participation is discontinued, his or her right to purchase shares is exercised
automatically on the exercise date at the end of the offering period at the
applicable price. See "Withdrawal" below.
Withdrawal. While each participant is required to sign an agreement
authorizing payroll deductions, the participant may withdraw from a given
offering by terminating his or her payroll deductions and by delivering a notice
of withdrawal to the Company. Such withdrawal may be elected at any time prior
to the end of the applicable six-month offering period.
Upon withdrawal by the employee from an offering, the Company will
distribute to the employee his or her accumulated payroll deductions without
interest, and such employee's participation in the offering will be
automatically terminated. An employee's withdrawal from an offering will not
have any effect upon such employee's eligibility to participate in subsequent
six-month offerings under the Purchase Plan.
Termination of Employment. Option rights granted pursuant to any offering
terminate immediately upon cessation of an employee's employment for any reason,
and the Company will distribute to such employee all of his or her accumulated
payroll deductions, without interest, upon such termination. In the event of a
participating employee's death, the balance in his or her account will be held
and used to purchase stock on the exercise date at the end of the six-month
offering, provided that the estate or representative of the deceased employee
does not withdraw from the offering.
Restrictions on Transfer. Option rights granted under the Purchase Plan
are not transferable and may be exercised only by the person to whom such rights
are granted, or, in the case of death, by the estate of the deceased employee.
Duration, Amendment and Termination. The Board may suspend or terminate
the Purchase Plan at any time. Unless terminated earlier, the Purchase Plan will
terminate on April 15, 2004.
The Board may amend the Purchase Plan at any time. Any amendment must be
approved by the stockholders within 12 months of its adoption by the Board if
the amendment would (1) increase the number of shares of Common Stock reserved
for delivery under the Purchase Plan, (2) change the designation of corporations
whose employees may be offered rights to purchase shares under the Purchase
Plan, (3) materially increase the benefits to participants, (4) materially
modify the requirements relating to eligibility for participation in the
Purchase Plan, or (5) cause the rights previously granted under the Purchase
Plan to fail to meet the requirements of Section 423 of the Code.
Option rights granted before amendment or termination of the Purchase Plan
will not be altered or impaired by any amendment or termination of such plan
without consent of the participant to whom such option rights were granted.
Effect of Certain Corporate Events. In the event of any reorganization,
recapitalization, stock split, reverse stock split, stock dividend, combination
of shares, merger, consolidation, or other similar change in the capital
structure of the Company, the Committee may make such adjustment, if any, as it
deems appropriate in the number, kind and purchase price of the shares available
for purchase under the Purchase Plan, and in the maximum number of shares which
may be issued under the Purchase Plan, subject to the approval of the Board.
Federal Income Tax Information. The following summarizes certain federal
income tax consequences of participation in the Purchase Plan. It does not cover
employment taxes except as specified, nor does it cover other federal, state,
local or foreign tax consequences, if any.
13
<PAGE> 17
Rights granted under the Purchase Plan are intended to qualify for
favorable federal income tax treatment associated with rights granted under an
employee stock purchase plan which qualifies under Section 423 of the Code.
A participant will be taxed on amounts withheld for the purchase of shares
as if such amounts were actually received. Other than this, no income will be
taxable to a participant until disposition of the shares acquired, and the
method of taxation will depend upon the holding period of the purchase shares.
If the stock is disposed of more than two years after the beginning of the
applicable offering period and more than one year after the exercise date or if
the participant dies at any time while holding the stock, then the lesser of (a)
the excess of the fair market value of the stock at the time of such disposition
over the purchase price or (b) 15% of fair market value of the stock as of the
beginning of the applicable offering period will be treated as ordinary income.
Any further gain or loss will be taxed as a long-term capital gain or loss. Net
long-term capital gains for individuals are currently subject to a maximum
marginal federal income tax rate of 28%, and the maximum marginal rate for
ordinary income is currently 39.6%.
If the stock is sold or disposed of by the participant before the
expiration of either of the holding periods described above (a "disqualifying
disposition"), then the excess of the fair market value of the stock on the
exercise date over the exercise price will be treated as ordinary income at the
time of such disposition. The Company may, in the future, be required to
withhold income taxes relating to such ordinary income from other payments made
to the participant. The balance of any gain on a sale will be treated as capital
gain. Even if the stock is sold for less than its fair market value on the
exercise date, the same amount of ordinary income is attributed to the
participant, and a capital loss is recognized equal to the difference between
the sales price and the fair market value of the stock on the exercise date. Any
capital gain or loss will be long or short-term depending on whether the stock
has been held for more than one year.
There are no federal income tax consequences to the Company by reason of
the grant or exercise of rights under the Purchase Plan. The Company will, in
general, be entitled to a deduction to the extent amounts are taxed as ordinary
income to a participant by reason of a disqualifying disposition, but will not
be entitled to a deduction in respect of the ordinary income realized by a
participant upon a later disposition, or realized upon death. The Company's
deduction may be limited under Code 162(m) and may be subject to disallowance
for failure to satisfy related withholding obligations, if any.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors believes it is important to have an Employee Stock
Purchase Plan to encourage the purchase by employees of Common Stock of the
Company. Accordingly, the Board of Directors believes that the proposal to adopt
the amendment to the 1994 Employee Stock Purchase Plan described above is in the
best interests of the Company and its stockholders and recommends that the
stockholders approve the amendment.
VOTE REQUIRED
The affirmative vote of a majority of the votes properly cast by
stockholders on the proposal at the Annual Meeting is required for approval of
the amendment to the 1994 Employee Stock Purchase Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSED AMENDMENT TO THE
1994 EMPLOYEE STOCK PURCHASE 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 1997. 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.
14
<PAGE> 18
Neither the firm of Coopers & Lybrand L.L.P. nor any of its partners has a
material direct or 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 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 six 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 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 1998 ANNUAL MEETING
Proposals intended for inclusion in next year's annual meeting proxy
statement should be sent to the Secretary of the Company at 100 Minuteman Road,
Andover, MA 01810 and must be received by December 18, 1997.
15
<PAGE> 19
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
$5,000 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
April 29, 1997
16
<PAGE> 20
DETACH HERE
PICTURETEL CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
P PICTURETEL CORPORATION FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 12, 1997
R
The undersigned hereby appoints Les B. Strauss and Norman E. Gaut
O 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
X reverse side at the Annual Meeting of Stockholders of PictureTel
Corporation (the "Company") to be held on June 12, 1997 at 10:00 a.m. at
Y the World Trade Center, 164 Northern Avenue, Boston, Massachusetts and
any adjournments 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
-----------
<PAGE> 21
DETACH HERE
Please mark
[X] votes as in
this sample.
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 other motions that
may be presented at the meeting.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FOR WITHHELD
1. Election of Directors [ ] [ ]
Nominees: Norman E. Gaut,
Robert T. Knight, Vinod
Khosla, David B. Levi,
James R. Swartz and
Enzo Torresi.
[ ]
--------------------------------------
For all nominees except as noted above
2. To amend the PictureTel 1984 Employee FOR AGAINST ABSTAIN
Stock Purchase Plan to reduce the waiting [ ] [ ] [ ]
period before employees become eligible to
participate in the plan from 12 months to
8 months.
3. To ratify the selection of Coopers & FOR AGAINST ABSTAIN
Lybrand LLP as the Company's auditor's [ ] [ ] [ ]
for fiscal year 1997.
</TABLE>
MARK HERE
FOR ADDRESS [ ]
CHANGE AND
NOTE AT LEFT
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
--------------- ----- ---------------- -----
