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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
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
FVC.COM, INC.
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(Name of Registrant as Specified In Its Charter)
RICHARD M. BEYER
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box)
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1. Title of each class of securities to which transaction applies:
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2. Aggregate number of securities to which transaction applies:
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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):
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4. Proposed maximum aggregate value of transaction:
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5. Total fee paid:
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/ / 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.
6. Amount Previously Paid:
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7. Form, Schedule or Registration Statement No.:
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8. Filing Party:
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9. Date Filed:
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FVC.COM, INC.
3393 OCTAVIUS DRIVE
SANTA CLARA, CALIFORNIA 95054
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 2, 1999
------------------------
TO THE STOCKHOLDERS OF FVC.COM, INC.:
NOTICE IS HEREBY GIVEN that an annual meeting of stockholders of FVC.COM,
INC., a Delaware corporation (the "Company"), will be held on Wednesday, June 2,
1999 at 8:30 a.m. local time at the Company's offices at 3393 Octavius Drive,
Santa Clara, California 95054 (together with all adjournments and postponements
thereof, the "Annual Meeting"), for the following purposes, as more fully
described in the attached Proxy Statement:
1. To elect two directors to hold office until the 2002 Annual Meeting of
Stockholders.
2. To consider and vote upon a proposal to approve the Company's 1997
Employee Stock Purchase Plan, as amended, to increase the aggregate
number of shares of Common Stock authorized for issuance under such plan
by 200,000 shares to 350,000 shares.
3. To ratify the selection of PricewaterhouseCoopers LLP as independent
accountants of the Company for its fiscal year ending December 31, 1999.
4. To consider and act upon such other business and matters or proposals as
may come before the Annual Meeting.
The Board of Directors has fixed the close of business on April 16, 1999 as
the record date for the determination of stockholders entitled to notice of, and
to vote at, this Annual Meeting and at any adjournment or postponement thereof.
By Order of the Board of Directors,
/s/ LEE F. BENTON
LEE F. BENTON
SECRETARY
Santa Clara, California
May 3, 1999
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, WE HOPE YOU WILL VOTE AS SOON
AS POSSIBLE IN ORDER TO ENSURE YOUR REPRESENTATION AT THE MEETING. EVEN IF YOU
HAVE GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING.
PLEASE NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK
OR OTHER NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE
RECORD HOLDER A PROXY ISSUED IN YOUR NAME.
<PAGE>
FVC.COM, INC.
3393 OCTAVIUS DRIVE
SANTA CLARA, CALIFORNIA 95054
------------------------
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 2, 1999
------------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors (the
"Board") of FVC.COM, Inc., a Delaware corporation (the "Company"), for use at an
annual meeting of stockholders to be held on June 2, 1999 at 8:30 a.m. local
time (together with all adjournments and postponements thereof, the "Annual
Meeting"), for the purposes set forth herein and in the accompanying Notice of
Annual Meeting. The Annual Meeting will be held at the Company's offices, 3393
Octavius Drive, Santa Clara, California 95054. The Company intends to mail this
proxy statement and accompanying proxy card on or about May 3, 1999 to all
stockholders entitled to vote at the Annual Meeting.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies, including
preparation, assembly, printing and mailing of this proxy statement, the proxy
and any additional information furnished to stockholders. Copies of solicitation
materials will be furnished to banks, brokerage houses, fiduciaries and
custodians holding in their names shares of Common Stock beneficially owned by
others to forward to such beneficial owners. The Company may reimburse persons
representing beneficial owners of Common Stock for their costs of forwarding
solicitation materials to such beneficial owners. Original solicitation of
proxies by mail may be supplemented by telephone, telegram or personal
solicitation by directors, officers or other regular employees of the Company,
or at the Company's request, by D.F. King & Co., Inc. No additional compensation
will be paid to directors, officers or other regular employees for such
services, but D.F. King & Co., Inc. will be paid its customary fee, estimated to
be approximately $6,000, if it renders solicitation services.
VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of Common Stock at the close of business on April 16,
1999 will be entitled to notice of, and to vote at, the Annual Meeting. At the
close of business on April 16, 1999 the Company had outstanding and entitled to
vote 16,580,147 shares of Common Stock.
Each holder of record of Common Stock on such date will be entitled to one
vote for each share held on all matters to be voted upon at the Annual Meeting.
All votes will be tabulated by the inspector of election appointed for the
meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions will be counted towards the
tabulation of votes cast on the proposals presented to the stockholders and will
have the same effect as a negative vote. Broker non-votes are counted towards a
quorum, but are not counted for any purpose in determining whether a matter has
been approved.
REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
Secretary of the Company at the Company's principal executive office, 3393
Octavius Drive, Santa Clara, California 95054, a written notice of revocation or
a
<PAGE>
duly executed proxy bearing a later date, or it may be revoked by attending the
meeting and voting in person. Attendance at the meeting will not, by itself,
revoke a proxy.
STOCKHOLDER PROPOSALS
Proposals of stockholders that are intended to be presented at the Company's
2000 Annual Meeting of Stockholders pursuant to Rule 14a-8 of the Securities and
Exchange Commission (the "SEC") must be received by the Company no later than
January 4, 2000 in order to be included in the proxy statement relating to that
Annual Meeting. The deadline for submitting a stockholder proposal or a
nomination for director that is not to be included in such proxy statement and
proxy is not later than the close of business on March 14, 2000 nor earlier than
the close of business on February 13, 2000. Stockholders are also advised to
review the Company's Amended Bylaws, which contain additional requirements with
respect to advance notice of stockholder proposals and director nominations.
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Amended and Restated Certificate of Incorporation and Amended
Bylaws provide that the Board shall be divided into three classes, each class
consisting, as nearly as possible, of one-third of the total number of
directors, with each class having a three-year term. Vacancies on the Board may
be filled only by persons elected by a majority of the remaining directors. A
director elected by the Board to fill a vacancy (including a vacancy created by
an increase in the Board) shall serve for the remainder of the full term of the
class of directors in which the vacancy occurred and until such director's
successor is elected and qualified.
The Board is presently composed of eight members. There are three directors
in the class whose term of office expires in 1999. However, one member, Enzo
Torresi, will resign from the Board effective immediately prior to the Annual
Meeting and the size of the Board will be reduced to seven members at that time.
Each of the nominees for election to this class is currently a director of the
Company. If elected at the Annual Meeting, each of the nominees would serve
until the 2002 annual meeting and until his successor is elected and has
qualified, or until such director's earlier death, resignation or removal.
Directors are elected by a plurality of the votes present in person or
represented by proxy and entitled to vote at the meeting. Shares represented by
executed proxies will be voted, if authority to do so is not withheld, for the
election of the three nominees named below. In the event that any nominee should
be unavailable for election as a result of an unexpected occurrence, such shares
will be voted for the election of such substitute nominee as management may
propose. Each person nominated for election has agreed to serve if elected, and
management has no reason to believe that any nominee will be unable to serve.
Set forth below is biographical information for each person nominated and
each person whose term of office as a director will continue after the Annual
Meeting.
NOMINEES FOR ELECTION FOR A THREE-YEAR TERM EXPIRING AT THE 2002 ANNUAL MEETING
PIER CARLO FALOTTI
Mr. Falotti, age 56, has served as a director of the Company since April
1996. Since September 1996, Mr. Falotti has been a Senior Vice President at
Oracle Corp., a database software company. From February 1994 to September 1996,
Mr. Falotti was President and Chief Executive Officer of AT&T's European, Middle
Eastern and African Operations and subsequently Executive Vice President of its
International Operations. Mr. Falotti is also a director of Logitech
International S.A. He holds a degree in electrical engineering from the
Institute Avogadro, Torino, Italy.
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ROBERT W. WILMOT
Mr. Wilmot, age 54, has been a director of the Company since October 1998.
Since May 1995, he has been Chairman of Wilmot Capital, a private venture
capital firm. From April 1994 to May 1995, Mr. Wilmot was an independent
consultant and investor. From May 1985 through April 1994, Mr. Wilmot was
Chairman of Wilmot Enterprises Ltd. Mr. Wilmot is a founder of a number of
companies, including ES2 SA, the OASIS Group Plc, CMI Ltd., MOVID Technology
Inc., Poqet Computer Inc., VXtreme, Inc. and Integrity Arts, Inc. He is a
director of Com21, Inc. and Sequent Computer Systems. Mr. Wilmot received a B.S.
in electrical engineering from Nottingham University.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF EACH NAMED NOMINEE.
DIRECTORS CONTINUING IN OFFICE UNTIL THE 2000 ANNUAL MEETING
NEAL M. DOUGLAS
Mr. Douglas, age 40, has been a director of the Company since November 1994.
Since January 1993, he has been a General Partner of AT&T Ventures, a venture
capital firm. Mr. Douglas also serves as a director of Cellnet Data Systems, Tut
Systems, Inc. and several privately held companies. He received a B.S. degree
from Cornell University, an M.S. degree from Stanford University, and an M.B.A.
from the University of California at Los Angeles.
DAVID A. NORMAN
Mr. Norman, age 63, has served as a director of the Company since March
1994. From October 1993 to the present, Mr. Norman has been Chairman of
Apptitude, Inc., formally known as Technically Elite, Inc., an application
performance management company. From October 1993 to March 1998, Mr. Norman was
also Chief Executive Officer of Apptitude, Inc. He holds a B.S.M.E. from the
University of Minnesota and an M.S.I.A. from Stanford University.
DIRECTORS CONTINUING IN OFFICE UNTIL THE 2001 ANNUAL MEETING
RICHARD M. BEYER
Mr. Beyer, age 50, has been a director of the Company and has served as its
President and Chief Executive Officer since he joined the Company in January
1999. From September 1996 to August 1998, Mr. Beyer was President and Chief
Operating Officer of VLSI Technology, Inc., a semiconductor manufacturer. From
January 1993 to June 1996, Mr. Beyer was employed by National Semiconductor
Corporation ("National"), a semiconductor manufacturer. While at National, he
was Executive Vice President and Chief Operating Officer from 1995 to 1996 and
President of the Communications and Computing Group from 1993 to 1995. Prior to
that time, he was Vice President and General Manager of the Switching Systems
Division of Rockwell International Corporation. Mr. Beyer holds a B.S. and M.S.
from Georgetown University and an MBA from Columbia University.
JAMES R. SWARTZ
Mr. Swartz, age 56, has been a director of the Company since December 1993.
Mr. Swartz is a Founding Partner of Accel Partners, a venture capital investment
firm he co-founded in 1983. Mr. Swartz is also a director of Netopia, Inc.,
Polycom, Inc., Remedy Corporation, and a number of private companies. Mr. Swartz
holds an A.B. degree from Harvard University and an M.S.I.A. degree from
Carnegie Mellon University.
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RALPH UNGERMANN
Mr. Ungermann, age 57, has served as Chairman of the Board of the Company
since January 1999. Until January 1999, Mr. Ungermann served as a director of
the Company and as Chief Executive Officer and President since co-founding the
Company in October 1993. From July 1979 to July 1993, Mr. Ungermann was Chief
Executive Officer and co-founder of Ungermann-Bass, Inc., a computer networking
company (now a subsidiary of Newbridge Networks Corporation). Prior to his work
at Ungermann-Bass, Mr. Ungermann was the co-founder and Chief Operating Officer
of Zilog, Inc., an early leader in the microprocessor industry, where he
introduced the Z80 product line. He is also a director of Vertel Corporation.
Mr. Ungermann obtained a B.S.E.E. from the University of California at Berkeley
and a M.S.E.E. from the University of California at Irvine.
BOARD COMMITTEES AND MEETINGS
During the fiscal year ended December 31, 1998 the Board held eight
meetings. The Board has an Audit Committee and a Compensation Committee. The
Board does not have a Nominating Committee or a committee serving a similar
function.
The Audit Committee meets with the Company's independent accountants at
least annually to review the results of the annual audit and discuss the
financial statements; recommends to the Board the independent accountants to be
retained; and receives and considers the accountants' comments as to controls,
adequacy of staff and management performance and procedures in connection with
audit and financial controls. The Audit Committee is composed of two
non-employee directors, Messrs. Douglas and Norman. It met one time during the
fiscal year.
The Compensation Committee makes recommendations concerning salaries and
incentive compensation, awards stock options to employees and consultants under
the Company's stock option plans and otherwise determines compensation levels
and performs such other functions regarding compensation as the Board may
delegate. The Compensation Committee is currently composed of two non-employee
directors, Messrs. Swartz and Torresi. It met three times during the fiscal
year. Mr. Torresi will be replaced by Mr. Wilmot upon Mr. Torresi's resignation
from the Board effective immediately prior to the Annual Meeting.
During the fiscal year ended December 31, 1998, all directors except Mr.
Falotti attended at least 75% of the aggregate of the meetings of the Board and
of the committees on which they served, held during the period for which they
were a director or committee member, respectively.
PROPOSAL 2
APPROVAL OF THE 1997 EMPLOYEE STOCK PURCHASE PLAN, AS AMENDED
In October 1997, the Board adopted the Company's 1997 Employee Stock
Purchase Plan (the "Purchase Plan") and authorized for issuance 150,000 shares
of Common Stock under the Purchase Plan. Stockholders approved the Purchase Plan
in December 1997.
As of March 31, 1999, 26,025 shares had been issued under the Purchase Plan
and 123,975 shares remained available under the Purchase Plan.
In April 1999, the Board amended the Purchase Plan, subject to stockholder
approval, to increase by 200,000 shares the number of shares of Common Stock
authorized for issuance under the Purchase Plan, from a total of 150,000 shares
to a total of 350,000 shares. The Board adopted this amendment to ensure that
the Company can continue to grant purchase rights at levels determined
appropriate by the Board.
During the last fiscal year, no shares were purchased under the Purchase
Plan by executive officers and a total of 26,025 shares were purchased by all
employees as a group, all at a purchase price of $11.05 per share.
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Stockholders are requested in this Proposal 2 to approve the Purchase Plan,
as amended. The affirmative vote of the holders of a majority of the shares
present in person or represented by proxy and entitled to vote at the meeting
will be required to approve the amendment to the Purchase Plan.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 2.
The essential features of the Purchase Plan, as amended, are outlined below:
PURPOSE
The purpose of the Purchase Plan is to provide a means by which employees of
the Company (and any parent or subsidiary of the Company designated by the Board
to participate in the Purchase Plan) may be given an opportunity to purchase
Common Stock of the Company through payroll deductions to assist the Company in
retaining the services of its employees, to secure and retain the services of
new employees, and to provide incentives for such persons to exert maximum
efforts for the success of the Company. All of the Company's approximately 110
employees (except employees who customarily work fewer than either 20 hours per
week or 5 months per calendar year) are eligible to participate in the Purchase
Plan.
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(b) of the Internal Revenue Code of 1986, as
amended (the "Code").
ADMINISTRATION
The Board administers the Purchase Plan and has the final power to construe
and interpret both the Purchase Plan and the rights granted under it. The Board
has the power, subject to the provisions of the Purchase Plan, to determine when
and how rights to purchase Common Stock of the Company will be granted, the
provisions of each offering of such rights (which need not be identical), and
whether employees of any parent or subsidiary of the Company will be eligible to
participate in the Purchase Plan.
The Board has the power to delegate administration of the Purchase Plan to a
committee composed of members of the Board. The Board has delegated
administration of the Purchase Plan to the Compensation Committee of the Board.
As used herein with respect to the Purchase Plan, the "Board" refers to the
Compensation Committee as well as to the Board itself.
OFFERINGS
The Purchase Plan is implemented by offerings of rights to all eligible
employees from time to time by the Board. Generally, each offering is 24 months
long and is divided into four shorter "purchase periods," each approximately six
months long. If the price of the Common Stock is lower at the end of the
purchase period than its price at the beginning of the offering, then that
offering terminates after the purchase of Common Stock thereunder, and a new
offering commences.
ELIGIBILITY
Any person who is customarily employed at least 20 hours per week and five
months per calendar year by the Company (or by any parent or subsidiary of the
Company designated by the Board) on the first day of an offering is eligible to
participate in that offering. Officers of the Company who are "highly
compensated" as defined in the Code are eligible to participate in the Purchase
Plan.
However, no employee is eligible to participate in the Purchase Plan if,
immediately after the grant of purchase rights, 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
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options). In addition, no employee may accrue, in each calendar year during
which purchase rights are outstanding, the right to purchase more than $25,000
worth of Common Stock (determined at the fair market value of the shares at the
time such rights are granted) under all employee stock purchase plans of the
Company and its affiliates.
PARTICIPATION IN THE PURCHASE PLAN
An eligible employee may enroll in the Purchase Plan by delivering to the
Company, prior to the date selected by the Board as the offering date for the
offering, an agreement authorizing payroll deductions of up to 15% of such
employee's base compensation during the offering.
PURCHASE PRICE
The purchase price per share at which shares of Common Stock are sold in an
offering under the Purchase Plan is the lower of (i) 85% of the fair market
value of a share of Common Stock on the first day of the offering or (ii) 85% of
the fair market value of a share of Common Stock on the last day of the purchase
period.
PAYMENT OF PURCHASE PRICE; PAYROLL DEDUCTIONS
The purchase price of the shares is accumulated by payroll deductions over
the course of the offering. At any time during the offering, a participant may
increase, reduce or terminate his or her payroll deductions, as the Board
provides in the offering. The Board has provided in the current offering that a
participant may not increase the percentage of payroll deductions after the
beginning of any purchase period, except to take effect with the next purchase
period. Further, the current offering provides that in the case of an employee
who first becomes eligible to participate in the current offering after its
commencement, such employee can commence participation as of the date following
the end of the current purchase 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
additional payments into such account.
PURCHASE OF STOCK
By executing an agreement to participate in the Purchase Plan, an employee
is entitled to purchase shares under the Purchase Plan. In connection with
offerings made under the Purchase Plan, the Board may specify a maximum number
of shares of Common Stock an employee may be granted the right to purchase and
the maximum aggregate number of shares of Common Stock that may be purchased
pursuant to such offering by all participants. The current offering under the
Purchase Plan does not specify these per employee or per offering limits. If the
aggregate number of shares to be purchased upon exercise of rights granted in
the offering would exceed the maximum aggregate number of shares of Common Stock
available, the Board would make a pro rata allocation of available shares in a
uniform and equitable manner. Unless the employee's participation is
discontinued, his or her right to purchase shares is exercised automatically at
the end of the purchase period at the applicable price. See "Withdrawal" below.
WITHDRAWAL
While each participant in the Purchase Plan 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 to the
Company a notice of withdrawal from the Purchase Plan. A withdrawal may be
elected at any time up to 10 days prior to the end of the applicable purchase
period.
Upon any withdrawal from an offering by an employee, the Company will
distribute to the employee his or her accumulated payroll deductions without
interest, less any accumulated deductions previously applied to the purchase of
shares of Common Stock on the employee's behalf during such offering. Such
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employee's interest in the offering will be automatically terminated. The
employee is not entitled to again participate in that offering. However, an
employee's withdrawal from an offering will not have any effect upon such
employee's eligibility to participate in subsequent offerings under the Purchase
Plan.
TERMINATION OF EMPLOYMENT
Rights granted pursuant to any offering under the Purchase Plan terminate
immediately upon cessation of an employee's employment for any reason. The
Company will then distribute to such employee all of his or her accumulated
payroll deductions, without interest.
RESTRICTIONS ON TRANSFER
Rights granted under the Purchase Plan are not transferable and may be
exercised only by the person to whom such rights are granted.
DURATION, AMENDMENT AND TERMINATION
The Board may suspend or terminate the Purchase Plan at any time. Unless
terminated earlier, the Purchase Plan will effectively terminate (be suspended)
when all shares reserved for sale under the Purchase Plan have been sold.
The Board may amend the Purchase Plan at any time. Any amendment of the
Purchase Plan must be approved by the stockholders within 12 months of its
adoption by the Board if the amendment would (i) increase the number of shares
of Common Stock reserved for issuance under the Purchase Plan, (ii) modify the
requirements relating to eligibility for participation in the Purchase Plan, or
(iii) modify any other provision of the Purchase Plan in a manner that would
materially increase the benefits accruing to participants under the Purchase
Plan, if such approval is required in order to comply with the requirements of
Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), or under Section 423 of the Code.
Rights granted before amendment or termination of the Purchase Plan will not
be altered or impaired by any amendment or termination of the Purchase Plan
without consent of the employee to whom such rights were granted.
EFFECT OF CERTAIN CORPORATE EVENTS
In the event of a dissolution, liquidation, specified type of merger of the
Company, or acquisition by certain "persons" (within the meaning of Section
13(d) or Section 14(d) of the Exchange Act) of at least 50% of the combined
voting power entitled to vote in the election of directors, the Board may (as
applicable) require the assumption of the purchase rights under the Purchase
Plan or substitution of similar rights, permit the offering to continue
unchanged, or terminate any then ongoing offering by accelerating the occurrence
of all remaining purchase dates, so that the outstanding purchase rights may be
exercised immediately prior to, or concurrent with, any such event.
STOCK SUBJECT TO PURCHASE PLAN
Subject to stockholder approval of this Proposal 2, an aggregate of 350,000
shares of Common Stock is reserved for issuance under the Purchase Plan. If
rights granted under the Purchase Plan expire, lapse or otherwise terminate
without being exercised, the shares not purchased under such rights again become
available for issuance under the Purchase Plan.
FEDERAL INCOME TAX INFORMATION
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 provisions of Section 423 of the Code.
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A participant will be taxed on amounts withheld for the purchase of shares
of Common Stock as if such amounts were actually received. Other than this, no
income will be taxable to a participant until disposition of the acquired
shares, and the method of taxation will depend upon the holding period of the
acquired shares.
If the stock is disposed of at least two years after the beginning of the
offering period and at least one year after the stock is transferred to the
participant, then the lesser of (i) the excess of the fair market value of the
stock at the time of such disposition over the exercise price or (ii) the excess
of the fair market value of the stock as of the beginning of the offering period
over the exercise price will be treated as ordinary income. Any further gain or
any loss will be taxed as a long-term capital gain or loss. Such capital gains
currently are generally subject to lower tax rates than ordinary income.
If the stock is sold or disposed of before the expiration of either of the
holding periods described above, 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 balance of any gain will be treated
as capital gain. Even if the stock is later disposed of 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
such exercise date. Any capital gain or loss will be short-term or long-term,
depending on how long the stock has been held.
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 is entitled to
a deduction to the extent amounts are taxed as ordinary income to a participant
(subject to the requirement of reasonableness and the satisfaction of tax
reporting obligations).
PROPOSAL 3
RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
The Board has selected PricewaterhouseCoopers LLP as the Company's
independent accountants for the fiscal year ending December 31, 1999 and has
further directed that management submit the selection of independent accountants
for ratification by the stockholders at the Annual Meeting. Representatives of
PricewaterhouseCoopers LLP are expected to be present at the Annual Meeting,
will have an opportunity to make a statement if they so desire and will be
available to respond to appropriate questions.
Stockholder ratification of the selection of PricewaterhouseCoopers LLP as
the Company's independent accountants is not required by the Company's By-laws
or otherwise. However, the Board is submitting the selection of
PricewaterhouseCoopers LLP to the stockholders for ratification as a matter of
good corporate practice. If stockholders fail to ratify the selection, the Audit
Committee and the Board will reconsider whether or not to retain that firm. Even
if the selection is ratified, the Audit Committee and the Board in their
discretion may direct the appointment of different independent accountants at
any time during the year if they determine that such a change would be in the
best interests of the Company and its stockholders.
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy and entitled to vote at the Annual Meeting will
be required to ratify the selection of PricewaterhouseCoopers LLP.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 3
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EXECUTIVE OFFICERS
The executive officers of the Company and their ages as of March 31, 1999
are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------------- --- ------------------------------------------------------------------
<S> <C> <C>
Ralph Ungermann........................ 57 Chairman of the Board
Richard M. Beyer....................... 50 Chief Executive Officer and President
James O. Mitchell...................... 54 Vice President, Operations and Chief Financial Officer
Allwyn Sequeira........................ 38 Vice President, Engineering and Chief Technical Officer
Alan J. McMillan....................... 43 Vice President, Sales
James M. Nielsen....................... 40 Vice President, Access Business Unit
</TABLE>
Biographical information about Messrs. Ungermann and Beyer is set forth
under Proposal 1 above.
James O. Mitchell has served as the Company's Chief Financial Officer and
acted as its head of operations since June 1995. He was elected Vice President,
Operations in October 1997. From June 1989 to October 1994, Mr. Mitchell was
President and Chief Executive Officer of General Electric Computer Service, an
electronics service company and a division of General Electric Capital Services,
Inc., which is a division of General Electric Company. Mr. Mitchell holds a
Bachelor's degree in industrial management from Purdue University.
Allwyn Sequeira has headed the Company's product operations and acted as the
Company's Chief Technical Officer since co-founding First Virtual in October
1993. He was elected Vice President, Engineering and Chief Technical Officer in
October 1997. From February 1990 to October 1993, Mr. Sequeira served as
Business Unit Director at Ungermann-Bass, Inc. Mr. Sequeira holds a Bachelor's
degree in Computer Science from the Indian Institute of Technology, Bombay,
India, and a Master's degree in computer science from the University of
Wisconsin.
Alan J. McMillan has headed the Company's sales operations since September
1995. He was elected as the Company's Vice President, Sales in October 1997.
From June 1994 to September 1995, Mr. McMillan was a principal with Regis
McKenna, a consulting firm. From July 1992 to April 1994, Mr. McMillan was Vice
President of North American Sales at Software Publishing Corporation, a software
publishing company. Mr. McMillan holds an Associate Degree from Ohio University
and was a Sloan fellow at the Massachusetts Institute of Technology, where he
received an M.S. in Management Science.
James M. Nielsen has headed the Company's Access Business Unit since
November 1998. From October 1996 to November 1998, Mr. Nielsen headed the
Company's marketing operations and was elected Vice President, Marketing in
October 1997. From April 1996 to October 1996, Mr. Nielsen was Director of
Marketing at FORE, a computer networking company. From May 1991 to April 1996,
Mr. Nielsen held several product management and marketing management roles at
Bay Networks, a computer networking company that merged with Northern Telecom
Limited in 1998, and SynOptics Communications, Inc., a computer networking
company that merged with Wellfleet Communications Inc. to form Bay Networks in
1994. Mr. Nielsen holds a Bachelors degree in computer science from Deakin
University, Victoria, Australia.
9
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of March 1, 1999 by (i) all those
known by the Company to be the beneficial owner of more than 5% of the Company's
Common Stock, (ii) each director, (iii) each of the executive officers named in
the Summary Compensation Table, and (iv) all directors and executive officers as
a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP(1)
------------------------------------
BENEFICIAL OWNER NUMBER OF SHARES PERCENT OF TOTAL
- ------------------------------------------------------------------------------- ----------------- -----------------
<S> <C> <C>
Entities Affiliated with Accel IV L.P (2) ..................................... 1,301,404 7.9%
428 University Avenue
Palo Alto, CA 94301
Pilgrim Baxter & Associates, Ltd .............................................. 832,300 5.1
825 Duportail Road
Wayne, PA 19087
Ralph Ungermann (3) ........................................................... 2,571,824 15.4
c/o FVC.COM, Inc.
3393 Octavius Drive
Santa Clara, CA 95054
Richard M. Beyer............................................................... -- *
James O. Mitchell (4).......................................................... 372,512 2.3
Allwyn Sequeira (5)............................................................ 417,890 2.5
Alan J. McMillan (6)........................................................... 173,265 1.0
James M. Nielsen (7)........................................................... 38,603 *
Neal M. Douglas (8)............................................................ 66,884 *
Pier Carlo Falotti (9)......................................................... 94,384 *
David A. Norman (10)........................................................... 126,051 *
James R. Swartz (11)........................................................... 1,344,786 8.2
Enzo Torresi (12).............................................................. 172,060 1.0
Robert Wilmot (13)............................................................. 190,010 1.2
All directors and executive officers as a group (12 persons) (14).............. 5,568,269 33.0
</TABLE>
- ------------------------
* Less than one percent.
(1) This table is based upon information supplied by officers, directors,
principal stockholders and Schedules 13D and 13G filed with the SEC.
Beneficial ownership is determined in accordance with the rules of the SEC
and generally includes voting or investment power with respect to
securities. Beneficial ownership also includes shares of stock subject to
options and warrants currently exercisable or convertible, or exercisable or
convertible within 60 days of March 1, 1999. Percentage of beneficial
ownership is based on 16,456,134 shares of Common Stock outstanding as of
March 1, 1999. Unless otherwise indicated in the footnotes to this table and
subject to community property laws where applicable, the Company believes
that each of the stockholders named in this table has sole voting and
investment power with respect to the shares indicated as beneficially owned.
(2) Includes 1,047,675 shares held by Accel IV L.P., 42,319 shares held by
Accel Investors '93 L.P., 21,731 shares held by Accel Keiretsu L.P., 229
shares held by Accel Partners & Co. Inc., 3,083 shares held by Accel
Keiretsu V L.P., 9,248 shares held by Accel Investors '96 L.P., 156,165
shares held by Accel V L.P. and 20,954 shares held by Accel
Internet/Strategic Technology Fund L.P.
10
<PAGE>
(3) Includes 2,372,499 shares held in the name of Ralph Ungermann, Trustee or
Successor Trustee of the Ralph K. Ungermann Living Trust U/A/D May 18, 1988,
as amended. Also includes 199,325 shares Mr. Ungermann has the right to
acquire pursuant to outstanding options exercisable within 60 days of March
1, 1999.
(4) Includes 88,728 shares subject to repurchase by the Company as of the date
hereof. Also includes 36,019 shares Mr. Mitchell has the right to acquire
pursuant to outstanding options exercisable within 60 days of March 1, 1999.
(5) Includes 35,764 shares subject to repurchase by the Company as of the date
hereof. Also includes 77,890 shares Mr. Sequeira has the right to acquire
pursuant to outstanding options exercisable within 60 days of March 1, 1999.
(6) Includes 61,031 shares subject to repurchase by the Company as of the date
hereof. Also includes 49,574 shares Mr. McMillan has the right to acquire
pursuant to outstanding options exercisable within 60 days of March 1, 1999
and 250 shares held by Mr. McMillan's spouse.
(7) Includes 34,385 shares Mr. Nielsen has the right to acquire pursuant to
outstanding options exercisable within 60 days of March 1, 1999.
(8) Includes 62,500 shares held in the name of Venture Fund I, L.P., of which
Mr. Douglas is a general partner. Mr. Douglas disclaims beneficial ownership
of all shares owned by Venture Fund I, L.P., except to the extent of his pro
rata interest in the partnership. Also includes 4,384 shares Mr. Douglas has
the right to acquire pursuant to an outstanding option exercisable within 60
days of March 1, 1999.
(9) Includes 21,317 shares subject to repurchase by the Company as of the date
hereof. Also includes 4,384 shares Mr. Falotti has the right to acquire
pursuant to an outstanding option exercisable within 60 days of March 1,
1999.
(10) Includes 121,667 shares held in the name of David Arthur Norman and Mamie
R. Norman TTEE, Norman Family Revocable Trust, U/A DTD 8/20/87. Also
includes 4,384 shares Mr. Norman has the right to acquire pursuant to an
outstanding option exercisable within 60 days of March 1, 1999.
(11) Includes 1,047,675 shares held by Accel IV L.P., 42,319 shares held by
Accel Investors '93 L.P, 21,731 shares held by Accel Keiretsu L.P., 229
shares held by Accel Partners & Co. Inc., 3,083 shares held by Accel
Keiretsu V L.P., 9,248 shares held by Accel Investors '96 L.P., 156,165
shares held by Accel V L.P., 20,954 shares held by Accel Internet/Strategic
Technology Fund L.P., 24,613 shares held by James R. Swartz and 14,385
shares held by the Swartz Family Partnership. Mr. Swartz is a general
partner of partnerships which are the general partner of various Accel and
certain other partnerships and, as such may be deemed to share voting and
investment power with respect to such shares. Mr. Swartz disclaims
beneficial ownership of all shares held by such entities except to the
extent of his pro rata interests in such partnerships. Also includes 4,384
shares Mr. Swartz has the right to acquire pursuant to an outstanding option
exercisable within 60 days of March 1, 1999.
(12) Includes 4,825 shares subject to repurchase by the Company as of the date
hereof. Also includes 4,384 shares Mr. Torresi has the right to acquire
pursuant to an outstanding option exercisable within 60 days of March 1,
1999.
(13) Includes 178,750 shares held in the name of Robert W. Wilmot and Mary J.
Wilmot, trustees of the Wilmot Living Trust u/d/t dated April 18, 1995 (the
"Wilmot Living Trust"). Also includes 11,260 shares the Wilmot Living Trust
has the right to acquire pursuant to outstanding options exercisable within
60 days of March 1, 1999.
(14) Includes 430,373 shares issuable upon exercise of outstanding options
exercisable within 60 days of March 1, 1999. See footnotes (3) through (13)
above.
11
<PAGE>
COMPLIANCE WITH THE REPORTING REQUIREMENTS OF SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than ten percent of a registered
class of the Company's equity securities, to file with the SEC initial reports
of ownership and reports of changes in ownership of Common Stock and other
equity securities of the Company. Officers, directors and greater than ten
percent stockholders are required by SEC regulation to furnish the Company with
copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 1998, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten percent beneficial owners were complied with.
EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
The Company does not currently compensate directors for services in such
capacity, but directors may be reimbursed for certain expenses in connection
with attendance at Board and Committee meetings. The Company may compensate
non-employee directors in the future.
All of the Company's non-employee directors are entitled to receive
non-discretionary annual stock option grants under the 1997 Non-Employee
Directors' Plan, adopted in September 1997 (the "Directors' Plan"). Under the
Directors' Plan, each non-employee director who was a director at the time of
the adoption of the Directors' Plan was automatically granted an option to
purchase 10,000 shares of Common Stock. Each non-employee director who is first
elected to the Board after September 1997 is automatically granted an option to
purchase 30,000 shares of Common Stock. Each non-employee director will
additionally be granted an option to purchase 10,000 shares of Common Stock on
each anniversary of each such director's original grant under the Directors'
Plan. Options granted under the Directors' Plan are granted at the fair market
value of the Common Stock on the date of grant. Options granted to non-employee
directors under the Directors' Plan have a ten-year term and will vest over a
period of five years, with ten percent of the shares vesting after six months
and the remaining shares vesting ratably on a daily basis thereafter.
During fiscal 1998, pursuant to the terms of the Directors' Plan, Messrs.
Douglas, Falotti, Norman, Swartz and Torresi each were granted an option to
purchase 10,000 share of Common Stock at an exercise price per share of $9.875
and Mr. Wilmot was granted an option to purchase 30,000 shares of Common Stock
at an exercise price per share of $10.00, the fair market value of the Common
Stock on the respective dates of grant.
12
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following table shows for the fiscal years ended December 31, 1998, 1997
and 1996, certain compensation awarded or paid to, or earned by, the Company's
President and Chief Executive Officer and the Company's other four most highly
compensated executive officers who earned more than $100,000 in salary and bonus
(the "Named Executive Officers") at December 31, 1998:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION -------------
SECURITIES
FISCAL -------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS (#) COMPENSATION($)(1)
- ------------------------------------------------ ----------- --------- --------- ------------- -------------------
<S> <C> <C> <C> <C> <C>
Ralph Ungermann ................................ 1998 175,000 72,840 -- 3,412
Chairman (2) 1997 175,000 60,110 -- 4,770
1996 175,000 49,950 300,000 5,400
James O. Mitchell .............................. 1998 150,000 38,830 -- 2,224
Vice President, Operations and Chief 1997 150,000 24,110 25,000 2,440
Financial Officer 1996 150,000 17,045 66,666 2,400
Allwyn Sequeira ................................ 1998 156,250 73,700 205,000 6,746
Vice President, Engineering and Chief 1997 125,000 72,095 100,000 5,842
Technical Officer 1996 103,937 28,550 66,666 5,392
Alan J. McMillan ............................... 1998 96,635 96,209 75,000 1,734
Vice President, Sales 1997 96,000 58,515 15,000 2,200
1996 105,000 68,470 66,666 2,378
James M. Nielsen ............................... 1998 150,000 29,910 2,500 4,957
Vice President, Access Business Unit 1997 126,689 11,250 75,000 4,087
1996 22,119(3) -- 100,000 654
</TABLE>
- ------------------------
(1) Represents insurance premiums paid by the Company with respect to group life
and health insurance for the benefit of the Named Executive Officer.
(2) Mr. Ungermann resigned as President and Chief Executive Officer of the
Company on January 7, 1999, effective upon the election of Richard M. Beyer
to these positions.
(3) Mr. Nielsen commenced employment with the Company in October 1996.
13
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth each grant of stock options made during the
fiscal year ended December 31, 1998 to each of the Named Executive Officers:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------------------ VALUE AT ASSUMED
NUMBER OF PERCENTAGE OF ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED IN EXERCISE OPTION TERM (4)
OPTIONS GRANTED FISCAL YEAR PRICE EXPIRATION ----------------------
NAME AND PRINCIPAL POSITION (#)(1) (%)(2) ($/SH)(3) DATE 5% ($) 10% ($)
- --------------------------------- --------------- ----------------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Ralph Ungermann.................. -- -- -- -- -- --
James O. Mitchell................ -- -- -- -- -- --
Allwyn Sequeira.................. 5,000 * 10.20 04/19/08 32,074 81,281
200,000 7.9 10.00 10/12/08 1,257,789 3,187,485
Alan J. McMillan................. 25,000 1.0 10.20 04/19/08 160,368 406,404
25,000 1.0 10.00 10/12/08 157,224 398,436
25,000 1.0 8.25 10/27/08 129,710 328,709
James M. Nielsen................. 2,500(5) * 10.20 04/19/08 16,037 40,640
</TABLE>
- ------------------------
* Less than 1%.
(1) Generally, 10% of the options become exercisable six months after the grant
date and .0548% each day thereafter for 54 months. The term of each option
granted is generally the earlier of (i) ten years or (ii) 30 days after
termination of the employment of the holder.
(2) Based on an aggregate of 2,523,500 options granted to employees, consultants
and directors, including the Named Executive Officers, of the Company during
the fiscal year ended December 31, 1998.
(3) The exercise price per share of each option was equal to the fair market
value of the Common Stock on the date of grant.
(4) The potential realizable value is calculated based on the term of the option
at its time of grant. It is calculated by assuming that the stock price on
the date of grant appreciates at the indicated annual rate, compounded
annually for the entire term of the option and that the option is exercised
and sold on the last day of its term for the appreciated stock price. All
calculations are based on rounding the number of years remaining on the term
of the option to the nearest whole number. No gain to the option holder is
possible unless the stock price increases over the option term. The 5% and
10% assumed rates of appreciation are derived from the rules of the SEC and
do not represent the Company's estimate or projection of the future Common
Stock price.
(5) The shares subject to this option will be fully vested and exercisable as of
June 15, 1999.
14
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
This table discloses the aggregate dollar value realized upon exercise of
stock options in the last fiscal year by the Named Executive Officers. For each
Named Executive Officer, the table also includes the total number of unexercised
options and the aggregate dollar value of in-the-money unexercised options held
at the end of the last completed fiscal year, separately identifying the
exercisable and unexercisable options.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF IN-THE-MONEY
SHARES OPTIONS AS OF OPTIONS AS OF
ACQUIRED DECEMBER 31, 1998 DECEMBER 31, 1998(1)
ON VALUE -------------------------- -------------------------
EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME (#) ($) (#) (#) ($) ($)
- ---------------------------------------------- ------------- ----------- ----------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Ralph Ungermann............................... -- -- 146,090 153,910 1,899,170 2,000,830
James O. Mitchell............................. -- -- 30,044 51,622 333,653 535,922
Allwyn Sequeira............................... -- -- 66,672 304,994 755,882 2,170,193
Alan J. McMillan.............................. -- -- 42,613 114,053 483,430 941,144
James M. Nielsen.............................. -- -- 90,417 83,083 1,071,690 940,435
</TABLE>
- ------------------------
(1) Valuations above for unexercised in-the-money options are based on the
difference between the option price and fair market value of $15.75 per
share at December 31, 1998.
EMPLOYMENT AGREEMENT AND CHANGE-IN-CONTROL AGREEMENTS
RICHARD M. BEYER EMPLOYMENT AGREEMENT
In December 1998, the Company entered into an employment agreement with
Richard M. Beyer. Pursuant to the agreement, Mr. Beyer began serving as
President and Chief Executive Officer of the Company effective January 7, 1999.
Mr. Beyer was also appointed as a member of the Board. Mr. Beyer's compensation
pursuant to the employment agreement consists of a base salary of $300,000,
subject to annual adjustment, together with an annual bonus (not to be less than
one-third of Mr. Beyer's base salary for 1999) that is based on meeting or
exceeding certain performance targets. In addition, Mr. Beyer was granted a
stock option with a term of 10 years to purchase 600,000 shares of the Company's
Common Stock under the Company's 1997 Equity Incentive Plan, as amended. The
shares covered by the option are subject to vesting over a period of 60 months
with 10% of the shares vesting six months after the date of grant and the
remaining shares vesting on a daily basis thereafter.
In the event that Mr. Beyer's employment with the Company is terminated for
any reason other than cause, death or disability, he will be entitled to receive
(i) salary continuation payments (at his then monthly base salary rate) for 12
months after his date of termination, (ii) bonus continuation payments (totaling
the bonus in effect on the date of termination) for 12 months after his date of
termination, and (iii) extended health coverage for 12 months after his date of
termination or until he is covered under another employer's health plan,
whichever is earlier. In addition, the unvested portion of any stock options and
restricted stock subject to repurchase held by Mr. Beyer will accelerate by a
period of one year as of the date of termination. In the event that Mr. Beyer's
employment with the Company is terminated for death or disability on or prior to
January 1, 2001, the unvested portion of any stock options and restricted stock
subject to repurchase held by Mr. Beyer will accelerate by a period of one year
as of the date of termination.
Notwithstanding the above, if, within 18 months following the date of a
change of control of the Company, Mr. Beyer's employment with the Company is
terminated for any reason other than cause, death or disability, he will be
entitled to receive (i) salary continuation payments (at his then monthly base
salary rate) for 12 months after his date of termination, (ii) bonus
continuation payments (totaling the bonus in effect on the date of termination)
for 12 months after his date of termination, and (iii) extended
15
<PAGE>
health coverage for 12 months after his date of termination or until he is
covered under another employer's health plan, whichever is earlier. In addition,
the unvested portion of any options and restricted stock subject to repurchase
held by Mr. Beyer will accelerate by a period of 18 months as of the date of
termination.
In the event that the severance, acceleration of stock options and other
benefits provided for in Mr. Beyer's employment agreement (i) constitute
"parachute payments" within the meaning of Section 280G of the Code and (ii)
would be subject to the excise tax imposed by Section 4999 of the Code, then
such benefits will be either (a) delivered in full or (b) delivered as to such
lesser extent that would result in no portion of such benefits being subject to
such excise tax, whichever of the foregoing amounts, taking into account
applicable taxes (including the excise tax) results in receipt by Mr. Beyer, on
an after-tax basis, of the greatest amount of benefits. In the event of a
reduction in benefits, Mr. Beyer will choose which benefits to reduce.
NON-EMPLOYEE DIRECTORS' CHANGE OF CONTROL PLAN
In February 1999, the Board adopted the Non-Employee Directors' Change of
Control Plan to provide non-employee directors of the Company with the
protection of certain benefits in case of a termination of his or her status as
a director of the Company in connection with a change of control of the Company.
The Non-Employee Directors' Change of Control Plan provides, as of the date of a
change of control of the Company, that, subject to certain tax circumstances,
each of the Company's then non-employee director's outstanding stock options,
restricted stock awards and restricted stock purchases will vest and be
exercisable in full.
The Board will administer the Non-Employee Directors' Change of Control Plan
unless and until the Board delegates administration to a committee of the Board.
Prior to a change of control of the Company, the right to receive benefits
under this Non-Employee Directors' Change of Control Plan will automatically
terminate on the date upon which a non-employee director's status as a director
of the Company terminates, as evidenced by the written resignation of such
non-employee director, by action of the Board or of the stockholders of the
Company removing such non-employee director as a director, or otherwise.
The Board at any time, and from time to time, may amend or terminate the
Non-Employee Directors' Change of Control Plan; provided, however, that any such
termination must occur prior to the occurrence of a change of control of the
Company.
EXECUTIVE OFFICERS' CHANGE OF CONTROL PLAN
In February 1999, the Board adopted the Executive Officers' Change of
Control Plan (the "Executive Plan") to provide certain executive officers (each
individually, an "Executive") of the Company with protection of certain benefits
in case of a termination of his or her employment with the Company in connection
with a change of control of the Company. Messrs. Ungermann, Sequeira and
McMillan are currently covered by the Executive Plan. Each person who, after
February 17, 1999, is confirmed as a Section 16 Officer by action of the Board
will also be covered by the Executive Plan. "Section 16 Officer" means an
"officer" of the Company, as defined in Rule 16a-1(f) promulgated under the
Exchange Act, provided the officer is designated as such by action of the Board.
If within 18 months following the date of a change of control the
Executive's employment with the Company terminates involuntarily other than for
cause, death or disability, or if within such 18 month period, the Executive
terminates his or her employment with the Company voluntarily with Good Reason
(as defined below), then, subject to certain tax circumstances and limitations
and conditions on benefits: (i) the Executive will be entitled to receive base
salary continuation payments at the Executive's base salary rate in effect on
the date of termination, paid on a monthly basis, for 12 months after the date
of
16
<PAGE>
termination, in addition to any accrued but unpaid base salary, bonus payments,
and/or accrued and unused vacation; (ii) each of the Executive's outstanding
stock options, restricted stock awards and restricted stock purchases will have
their vesting and exercisability schedules accelerated by 18 months as of the
date of termination; (iii) the Executive will be entitled to receive bonus
continuation payments totaling the Executive's target bonus for the current
fiscal year in effect on the date of termination, paid on a monthly basis for 12
months after the date of termination; and (iv) if at the time of termination,
the Executive is covered by the Company's group health plan, the Company will
provide to the Executive, subject to the Executive and his or her eligible
spouse and/or dependents electing continuation coverage under COBRA, one hundred
percent (100%) Company-paid group health coverage at the same level of coverage
as was provided to the Executive immediately prior to the date of termination
(the "Company-Paid Coverage"). If such coverage included the Executive's spouse
and/or dependents immediately prior to the date of termination, such spouse
and/or dependents will also be covered at Company expense. Company-Paid Coverage
will continue until the earlier of (x) 12 months from the date of termination,
or (y) the date that the Executive and his or her spouse and/or dependents
become covered under another employer's group health plan that provides the
Executive and his or her spouse and/or dependents with comparable benefits and
levels of coverage. In no event will the Executive be obligated to seek other
employment or take any other action to mitigate the amounts payable to the
Executive under the Executive Plan.
"Good Reason" means: (i) any material reduction of the Executive's duties,
authority or responsibilities relative to the Executive's duties, authority, or
responsibilities as in effect immediately before such reduction, except if
agreed to in writing by the Executive; (ii) a reduction by the Company in the
base salary or target bonus opportunity of the Executive as in effect
immediately before such reduction; (iii) the relocation of the Executive to a
facility or a location more than 35 miles from the Executive's then present
location, without the Executive's written consent; or (iv) any failure of the
Company to obtain the assumption of the Executive Plan by any successor or
assign of the Company.
The Board will administer the Executive Plan unless and until the Board
delegates administration to a committee of the Board.
Prior to a change of control of the Company, the right to receive benefits
under the Executive Plan will automatically terminate on the date upon which the
Executive ceases to be a Section 16 Officer, for any reason or no reason, as
evidenced by the written resignation of such Executive, by action of the Board
removing such Executive as a Section 16 Officer or otherwise.
The Board at any time, and from time to time, may amend or terminate the
Executive Plan; provided, however, that any such termination must occur prior to
the occurrence of a change of control of the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No current member of the Compensation Committee is an officer or employee of
the Company. No executive officer of the Company serves as a member of the Board
of Directors or Compensation Committee of any entity that has one or more
executive officers serving as a member of the Company's Board or Compensation
Committee. In August 1998, the Company acquired ICAST Corporation ("ICAST"). Mr.
Torresi, a member of the Board and the Compensation Committee until his
resignation becomes effective immediately prior to the Annual Meeting, was
Chairman, Co-founder, Chief Executive Officer and a significant shareholder of
ICAST. Mr. Swartz, a member of the Board and the Compensation Committee, was a
director of ICAST and is a general partner of partnerships which were the
general partners of various entities that, collectively, were significant
shareholders of ICAST.
17
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION(1)
INTRODUCTION
The Company's executive compensation policies and practices are approved by
the Compensation Committee. The Compensation Committee consists of two directors
who are not employees of the Company. The Compensation Committee's
determinations on compensation of the Chief Executive Officer and other
executive officers are reviewed with all the non-employee directors.
PHILOSOPHY
The Compensation Committee has implemented compensation policies, plans and
programs which seek to enhance stockholder value by aligning the financial
interests of the executive officers with those of its stockholders. Annual base
salaries are generally set at market-based competitive median levels. The
Company relies on annual incentive compensation and stock options to attract,
retain, motivate and reward executive officers and other key employees.
Incentive compensation plans are variable and tied to corporate performance.
These plans are designed to provide an incentive to management to grow revenues,
provide quality returns on investment, enhance stockholder value and contribute
to the long-term growth of the Company. All incentive compensation plans are
reviewed at least annually to assure they meet the current strategies and needs
of the business.
COMPENSATION PLANS
The Company's executive compensation is based on three components: base
compensation; annual incentives; and equity incentives, each of which is
intended to support the overall compensation philosophy.
BASE COMPENSATION. Base salary is targeted at the median level for emerging
technology companies of similar characteristics, such as sales volume,
capitalization and financial performance. Salaries for executive officers are
reviewed by the Compensation Committee on an annual basis and may be changed
based on the individual's performance or a change in competitive pay levels in
the marketplace.
The Compensation Committee reviews with the Chief Executive Officer an
annual salary plan for the Company's executive officers (other than the Chief
Executive Officer). The salary plan is modified as deemed appropriate and
approved by the Compensation Committee. The annual salary plan is developed by
the Company's Chief Executive Officer based on publicly available information on
organizations with similar characteristics and on past and expected future
contributions of the individual executive. The Compensation Committee reviews
and establishes the base salary of the Chief Executive Officer based on similar
competitive compensation data and the Compensation Committee's assessment of his
past performance and its expectation as to his future contributions in directing
the long-term success of the Company.
Mr. Ungermann, the Chief Executive Officer of the Company as of December 31,
1998, did not receive a salary increase in 1998. As he did in 1997, Mr.
Ungermann volunteered to forego any salary increase in light of the Company's
stage of development.
In January 1999, Mr. Ungermann stepped down as the Company's President and
Chief Executive Officer and was appointed Chairman of the Company effective upon
the election of Mr. Beyer as President
- ------------------------
(1) The material in this report is not "soliciting material," is not deemed
"filed" with the SEC, and is not to be incorporated by reference into any
filing of the Company under the Securities Act or the Exchange Act, whether
made before or after the date hereof and irrespective of any general
incorporation language contained in such filing.
18
<PAGE>
and Chief Executive Officer of the Company. See "Employment Agreement and
Change-in-Control Agreements" for the details of Mr. Beyer's compensation
arrangements.
ANNUAL INCENTIVES. The Company's short-term cash incentives are paid
pursuant to annual bonus plans agreed to by the Compensation Committee and the
executive at the beginning of the year. The Compensation Committee believes that
the annual cash bonus for key employees, including executive officers, should be
based on optimizing revenues and margins, and on prudent management of the
expenses of the business. Accordingly, the bonus plan for 1998 was based on
achieving certain revenue levels and taking the Company public. The bonus of
$72,840 paid to the Chief Executive Officer for 1998 was based on the
pre-established performance goals as described.
EQUITY INCENTIVES. Long-term equity incentives are provided through grants
of stock options to executive officers and other key employees pursuant to the
Company's 1997 Equity Incentive Plan, as amended (the "Incentive Plan"). The
equity component of compensation is intended to retain and motivate employees to
improve long-term stockholder value. Stock options are granted at fair market
value, contain vesting restrictions and have value only if the Company's stock
price increases. The shares covered by the options are generally subject to
vesting over a period of 60 months with 10% of the shares vesting six months
after the date of grant and the remaining shares vesting on a daily basis
thereafter. The Compensation Committee believes that this element of the total
compensation program directly links the participant's interests with those of
the stockholders and the long-term performance of the Company.
The Compensation Committee establishes the number and terms of options
granted under the Incentive Plan. The Committee encourages executives to build a
substantial ownership investment in the Company's Common Stock. The table on
page 10 reflects the ownership position of the directors and executive officers
at March 1, 1999. Stock option grants awarded to each executive officer are
based on the Compensation Committee's judgment as to the performance of such
executive officer prior to the date of grant. The Compensation Committee also
considers the number of options already held by each executive officer when
determining such awards.
Out of a total of 2,161,000 stock options granted by the Company in 1998,
executive officers of the Company received grants for 282,500 shares, or
approximately 13.1% of the total options granted in 1998. For the same reasons
he agreed to forego a salary increase in 1998, Mr. Ungermann, the Chief
Executive Officer of the Company as of December 31, 1998, was not granted any
options to acquire shares in 1998.
The Compensation Committee believes that the programs described above
provide compensation that is competitive with comparable emerging technology
companies, links executive and stockholder interests and provides the basis for
the Company to attract and retain qualified executives. The Compensation
Committee will continue to monitor the relationship among executive
compensation, the Company's performance and stockholder value.
Section 162(m) of the Code limits the Company to a deduction for federal
income tax purposes of no more than $1 million of compensation paid to certain
executive officers in a calendar year. Compensation above $1 million may be
deducted if it is "performance-based compensation" within the meaning of the
Code. The Compensation Committee has determined that stock options granted under
the Incentive Plan with an exercise price at least equal to the fair market
value of the Company's Common Stock on the date of grant are considered to be
"performance based compensation."
COMPENSATION COMMITTEE
James R. Swartz
Enzo Torresi
19
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
JAMES M. NIELSEN
In December 1998, the Company and James M. Nielsen, the Company's Vice
President, Access Business Unit, entered into an agreement to amend each of Mr.
Nielsen's outstanding option agreements to provide for accelerated vesting and
exercisability of all his outstanding options, such that all of Mr. Nielsen's
shares subject to such options will be vested and exercisable on June 15, 1999.
See "Compensation of Executive Officers--Aggregated Option Exercises in Last
Fiscal Year and Fiscal Year-End Option Values" for the details of Mr. Nielsen's
outstanding options as of December 31, 1998.
ALLWYN SEQUEIRA
On August 26, 1998, the Company loaned Allwyn Sequeira, the Company's Vice
President of Engineering and Chief Technical Officer, the sum of $1,289,125, at
an annual interest rate of 7%, for the purchase of a primary residence. The loan
was evidenced by promissory notes that were secured by 150,000 shares of Common
Stock of the Company held by Mr. Sequeira. On September 30, 1998, the notes were
repaid in part to leave a remaining principle balance of $349,125. The original
note was canceled at that time and a new note was issued in the amount of
$349,125, with an annual interest rate of 7% payable from the date of the
original loan. The new note was secured by 50,000 shares of Common Stock of the
Company held by Mr. Sequeira. The new note was to be repaid on or before
December 29, 1998. On December 16, 1998, the new note was amended and restated
to extend the repayment date to on or before June 30, 1999. As of April 1, 1999,
the full amount of the note remains outstanding.
ICAST ACQUISITION
In August 1998, the Company acquired ICAST. Mr. Torresi, a member of the
Board until his resignation becomes effective immediately prior to the Annual
Meeting, was Chairman, Co-founder, Chief Executive Officer and a significant
shareholder of ICAST. Mr. Swartz, a member of the Board, was also a director of
ICAST and is a general partner of partnerships that were the general partners of
various entities that, collectively, were significant shareholders of ICAST. The
Company acquired all of the outstanding stock of ICAST in exchange for 401,389
shares of the Company's Common Stock, a cash payment of $327,000 and the
assumption of certain outstanding ICAST stock options, warrants and debt. Mr.
Torresi received 52,342 shares of the Company's Common Stock in the transaction
and Mr. Swartz and the entities associated with Mr. Swartz received 189,449
shares of the Company's Common Stock in the transaction. The Company believes
that the foregoing transaction was in its best interest and was made on terms no
less favorable to the Company than could have been obtained from unaffiliated
third parties. The transaction was approved by a majority of the independent and
disinterested members of the Board and was in connection with a bona fide
business purpose of the Company.
INDEMNIFICATION AGREEMENTS
The Company has entered into indemnification agreements with certain
officers and directors that provide, among other things, that the Company will
indemnify such officer or director, under the circumstances and to the extent
provided for therein, for expenses, damages, judgments, fines and settlements
such officer or director may be required to pay in actions or proceedings that
such officer or director is or may be made a party by reason of his position as
a director, officer or other agent of the Company, and otherwise to the full
extent permitted under Delaware law and the Company's Amended Bylaws.
20
<PAGE>
PERFORMANCE MEASUREMENT COMPARISON(1)
The SEC requires a comparison on an indexed basis of cumulative total
stockholder return for the Company, a relevant broad equity market index and a
published industry line-of-business index. The following graph shows a
comparison of cumulative stockholder return of an investment of $100 in cash on
April 29, 1998 (the date the Company's Common Stock began trading on the Nasdaq
National Market), June 30, 1998, September 30, 1998 and December 31, 1998 in (i)
the Nasdaq Stock Market (U.S.) Index, (ii) the Hambrecht & Quist ("H&Q")
Technology Index, and (iii) the Company's Common Stock. The H&Q Technology Index
is composed of approximately 200 technology companies in the semiconductor,
electronics, medical, and related technology industries. Historic stock price
performance is not necessarily indicative of future stock price performance. All
values assume reinvestment of the full amount of all dividends.
COMPARISON OF 8 MONTH CUMULATIVE TOTAL RETURN*
AMONG FVC.COM, INC., THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE H&Q TECHNOLOGY INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
FVC.COM, NASDAQ STOCK H&Q
<S> <C> <C> <C>
INC. MARKET (U.S.) TECHNOLOGY
4/29/98 100 100 100
Jun-98 93 102 99
Sep-98 72 92 88
Dec-98 121 120 125
</TABLE>
* $100 invested on 4/29/98 in stock or index--including reinvestment of
dividends. Fiscal year ending December 31.
- ------------------------
(1) This section is not "soliciting material," is not deemed "filed" with the
SEC, and is not to be incorporated by reference in any filing of the Company
under the Securities Act or the Exchange Act, whether made before or after
the date hereof and irrespective of any general incorporation language in
any such filing.
21
<PAGE>
OTHER MATTERS
The Board knows of no other matters that will be presented for consideration
at the Annual Meeting. If any other matters are properly brought before the
meeting, it is the intention of the persons named in the accompanying proxy to
vote on such matters in accordance with their best judgment.
By Order of the Board of Directors,
/s/ LEE F. BENTON
LEE F. BENTON
SECRETARY
Santa Clara, California
May 3, 1999
22
<PAGE>
FVC.COM, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR AN
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 2, 1999
The undersigned hereby appoints RALPH UNGERMANN and RICHARD M. BEYER and
each of them, as attorneys and proxies of the undersigned, with full power of
substitution, to vote all of the shares of stock of FVC.COM, Inc. (the
"Company") which the undersigned may be entitled to vote at the Annual Meeting
of Stockholders of the Company to be held at the Company's offices at 3393
Octavius Drive, Santa Clara, California on Wednesday, June 2, 1999, at 8:30
a.m., and at any and all continuations and adjournments thereof, with all powers
that the undersigned would possess if personally present, upon and in respect of
the following matters and in accordance with the following instructions, with
discretionary authority as to any and all other matters that may properly come
before the meeting.
MANAGEMENT RECOMMENDS A VOTE FOR THE NOMINEES FOR DIRECTOR LISTED BELOW.
<TABLE>
<S> <C> <C> <C>
PROPOSAL 1. To elect two directors FOR all nominees listed below WITHHOLD AUTHORITY
to hold office until (EXCEPT AS MARKED TO THE TO VOTE FOR ALL
the 2002 Annual CONTRARY BELOW) / / NOMINEES LISTED
Meeting of BELOW / /
Stockholders.
</TABLE>
NOMINEES Pier Carlo Falotti and Robert W. Wilmot
TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE(S) WRITE SUCH NOMINEE(S)'
NAME(S) BELOW:
- --------------------------------------------------------------------------------
MANAGEMENT RECOMMENDS A VOTE FOR PROPOSAL 2.
PROPOSAL 2: To approve the Company's 1997 Employee Stock Purchase Plan, as
amended, to increase the aggregate number of shares of Common Stock
authorized for issuance under such plan by 200,000 shares to
350,000 shares.
/ / FOR / / AGAINST / / ABSTAIN
MANAGEMENT RECOMMENDS A VOTE FOR PROPOSAL 3.
PROPOSAL 3: To ratify selection of PricewaterhouseCoopers LLP as independent
accountants of the Company for its fiscal year ending December 31,
1999.
/ / FOR / / AGAINST / / ABSTAIN
(CONTINUED ON REVERSE SIDE)
<PAGE>
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR ALL
NOMINEES LISTED IN PROPOSAL 1 AND FOR PROPOSALS 2 AND 3 AS MORE SPECIFICALLY
DESCRIBED IN THE PROXY STATEMENT. IF SPECIFIC INSTRUCTIONS ARE INDICATED, THIS
PROXY WILL BE VOTED IN ACCORDANCE THEREWITH.
Please vote, date and promptly return this proxy in the enclosed return
envelope which is postage prepaid if mailed in the United States.
Dated _______________________, 1999
___________________________________
___________________________________
Signature(s)
Please sign exactly as your name
appears hereon. If the stock is
registered in the names of two or
more persons, each should sign.
Executors, administrators,
trustees, guardians and
attorneys-in-fact should add their
titles. If signer is a corporation,
please give full corporate name and
have a duly authorized officer
sign, stating title. If signer is a
partnership, please sign in
partnership name by authorized
person.
