<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
- --------------------------------------------------------------------------------
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
VIDEOSERVER, INC.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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
[VideoServer Logo]
April 14, 1998
Dear Shareholder:
You are cordially invited to attend the 1998 Annual Meeting of Shareholders
of VideoServer, Inc., which will be held at The Wyndham Garden Hotel,
Burlington, Massachusetts 01803, on Wednesday, May 13, 1998 at 9:00 a.m., EDT.
The Notice of Annual Meeting of Shareholders and a Proxy Statement, which
describe the formal business to be conducted at the meeting, follow this letter.
The Company's Annual Report to Shareholders is also enclosed for your
information.
Please promptly mark, sign, and return the enclosed proxy card in the
prepaid envelope so that your shares can be voted at the meeting in accordance
with your instructions. Your shares cannot be voted unless you date, sign, and
return the enclosed proxy card or attend the annual meeting in person.
Regardless of the number of shares you own, your careful consideration of, and
vote on, the matters before the shareholders is important.
Very truly yours,
/s/ Khoa D. Nguyen /s/ Robert L. Castle
KHOA D. NGUYEN ROBERT L. CASTLE
President and Chairman
Chief Executive Officer
<PAGE> 3
VIDEOSERVER, INC.
63 THIRD AVENUE
BURLINGTON, MASSACHUSETTS 01803
------------------------
NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS
------------------------
To Our Shareholders:
The Annual Meeting of Shareholders (the "Meeting") of VideoServer, Inc., a
Delaware corporation (the "Company"), will be held on Wednesday, May 13, 1998 at
9:00 a.m., EDT, at The Wyndham Garden Hotel, Burlington, Massachusetts 01803.
The purposes of the Meeting shall be:
1. To elect two Class III directors to hold office for a three year term
and until their successors have been duly elected and qualified.
2. To ratify the appointment of the firm of Ernst & Young LLP, as
independent auditors for the Company for the fiscal year ending December
31, 1998.
Shareholders of record on the books of the Company at the close of business
on April 1, 1998 will be entitled to notice of and to vote at the Meeting.
Please sign, date, and return the enclosed proxy card in the envelope
enclosed at your earliest convenience. If you return the proxy, you may
nevertheless attend the Meeting and vote your shares in person.
All shareholders of the Company are cordially invited to attend the
Meeting.
By Order of the Board of Directors
/s/ Paul L. Criswell
PAUL L. CRISWELL
Assistant Secretary
Burlington, Massachusetts
April 14, 1998
IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. WHETHER OR NOT
YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN, DATE, AND MAIL THE ENCLOSED PROXY
IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED FROM WITHIN THE
UNITED STATES.
<PAGE> 4
VIDEOSERVER, INC.
63 THIRD AVENUE
BURLINGTON, MASSACHUSETTS 01803
------------------------
PROXY STATEMENT
------------------------
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 13, 1998
Proxies enclosed with this Proxy Statement are solicited by the Board of
Directors of VideoServer, Inc., a Delaware corporation (the "Company"), for use
at the Annual Meeting of Shareholders (the "Meeting") to be held on Wednesday,
May 13, 1998 at 9:00 a.m., EDT, at the Wyndham Garden Hotel, Burlington,
Massachusetts 01803, and any adjournments thereof.
Shares represented by duly executed proxies in the form enclosed herewith
received by the Company prior to the Meeting will be voted as instructed in the
proxy on each matter submitted to the vote of shareholders. If any duly-executed
proxy is returned without voting instructions, the persons named as proxies
thereon intend to vote all shares represented by such proxy FOR the election of
the nominees for director named below and FOR the ratification of selection of
auditors described in this Proxy Statement.
Any shareholder may revoke a proxy at any time prior to its exercise by
delivering a later-dated proxy or written notice of revocation to the Secretary
of the Company at the address of the Company set forth above, or by voting in
person at the Meeting. If a shareholder does not intend to attend the Meeting,
any proxy or notice should be returned for receipt by the Company not later than
the close of business on May 12, 1998. The persons named in the proxies are
employees of the Company. The Company will bear the cost of solicitation of
proxies relating to the Meeting.
Only shareholders of record as of the close of business on April 1, 1998
(the "Record Date") will be entitled to notice of and to vote at the Meeting and
any adjournments thereof.
As of the Record Date there were 13,183,092 shares (excluding treasury
shares) of the Company's Common Stock, $.01 par value (the "Common Stock"),
issued and outstanding. Such shares of Common Stock are the only voting
securities of the Company. Shareholders are entitled to cast one vote for each
share of Common Stock held of record on the Record Date.
The Board of Directors of the Company (the "Board of Directors") is not
aware of any other matters to be presented at the Meeting. If any other matter
should be presented at the Meeting upon which a vote properly may be taken,
shares represented by all duly executed proxies received by the Company will be
voted with respect thereto in accordance with the best judgment of the persons
named in the proxies. An Annual Report to Shareholders, containing financial
statements for the fiscal year ended December 31, 1997, preceded or accompanies
this Proxy Statement. This Proxy Statement and the proxy enclosed herewith were
first mailed to shareholders on or about April 14, 1998.
The mailing address of the Company's principal executive offices is 63
Third Avenue, Burlington, Massachusetts 01803.
1
<PAGE> 5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of April 1, 1998 (i) by each person
who is known by the Company to own beneficially more than five percent (5%) of
the Company's Common Stock, (ii) by each of the Company's directors, (iii) by
each of the Named Executive Officers (as defined under "Summary Compensation"
below) and (iv) by all directors and executive officers as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED
----------------------
DIRECTORS, OFFICERS AND 5% SHAREHOLDERS NUMBER PERCENT
--------------------------------------- ------ -------
<S> <C> <C>
Wellington Management Company(1)............................ 1,641,800 12.58%
75 State Street
Boston Massachusetts, 02109
Kopp Investment Advisors, Inc.(2)........................... 1,380,629 10.6%
7701 France Avenue South, Suite 500
Edina, Minnesota 55435
State of Wisconsin Investment Board(3)...................... 1,205,000 9.23%
P.O. Box 7842 Madison, Wisconsin 53707
Paul Ferri(4)............................................... 25,910 *
William E. Foster(5)........................................ 26,500 *
Steven C. Walske(6)......................................... 23,500 *
Robert L. Castle(7)......................................... 197,063 1.4%
Khoa D. Nguyen.............................................. 25,000 *
Paul C. Moeller(8).......................................... 21,878 *
Walter A. Jones Jr.(9)...................................... 21,000 *
Stephen J. Nill(10)......................................... 68,440 *
Richard J. Moulds(11)....................................... 10,001 *
All executive officers and directors as a group (13 persons)
(12)...................................................... 419,292 3.1%
</TABLE>
- ---------------
* Less than 1%
(1) Based on information contained in Schedule 13G/A filed by Wellington
Management on February 11, 1998.
(2) Based on information contained in Schedule 13G filed by Kopp Investment
Advisors, Inc. on March 9, 1998.
(3) Based on information contained in Schedule 13G filed by the State of
Wisconsin Investment Board, on January 28, 1998.
(4) Includes 13,500 shares that Mr. Ferri has the right to acquire within 60
days of April 1, 1998 by the exercise of stock options.
(5) Includes 13,500 shares that Mr. Foster has the right to acquire within 60
days of April 1, 1998 by the exercise of stock options.
(6) Includes 13,500 shares that Mr. Walske has the right to acquire within 60
days of April 1, 1998 by the exercise of stock options.
(7) Includes 62,000 shares that Mr. Castle has the right to acquire within 60
days of April 1, 1998 by the exercise of stock options.
(8) Includes 20,251 shares that Mr. Moeller has the right to acquire within 60
days of April 1, 1998 by the exercise of stock options.
(9) Consists of 21,000 shares that Mr. Jones has the right to acquire within 60
days of April 1, 1998 by the exercise of stock options.
2
<PAGE> 6
(10) Includes 29,125 shares that Mr. Nill has the right to acquire within 60
days of April 1, 1998 by the exercise of stock options.
(11) Consists of 10,001 shares that Mr. Moulds has the right to acquire within
60 days of April 1, 1998 by the exercise of stock options.
(12) Includes 182,877 shares that directors and executive officers of the
Company have the right to acquire within 60 days of April 1, 1998 by the
exercise of stock options.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
CONCERNING DIRECTORS AND EXECUTIVE OFFICERS
SUMMARY COMPENSATION
The following table sets forth information concerning the annual and
long-term compensation in each of the last three fiscal years for the Company's
Chief Executive Officer* and the next four most highly compensated executive
officers (the "Named Executive Officers").
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM
------------------------ COMPENSATION ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($)(1) BONUS($) OPTIONS(#) COMPENSATION($)
--------------------------- ---- ------------ -------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Robert L. Castle(2)............. 1997 210,000 30,000 70,000 2,400(3)
President and 1996 192,718 90,000 60,000 --
Chief Executive Officer 1995 170,000 75,000 37,500
Stephen J. Nill................. 1997 172,155 15,000 30,000 2,400(3)
Vice President of Finance and 1996 149,940 51,150 25,000
Chief Financial Officer, 1995 145,801 45,871 2,500
Treasurer, and Secretary
Paul Moeller (4)................ 1997 212,553 -- 25,000 2,400(3)
Vice President of Sales - 1996 22,140 4,396 55,000(5)
Americas
Walter Jones, Jr. (4)........... 1997 152,448 -- 30,000 2,400(3)
Vice President of 1996 42,692 5,500 55,000(6)
Research and Development
Richard J. Moulds (4)........... 1997 142,730 12,000 20,000 62,066(7)
Vice President of Network 1996 45,978 4,888 20,000(8)
Access Products
</TABLE>
- ---------------
* Effective April 9, 1998, Robert L. Castle assumed the sole role of Chairman
of the Board, and the Board named Khoa D. Nguyen as President and Chief
Executive Officer.
(1) Salary includes amount deferred by the named executive officers under the
Company's 401(k) Plan.
(2) On July 20, 1992, the Company issued 550,000 shares of restricted Common
Stock to Robert L. Castle. As of December 31, 1993, 40% of such shares were
vested and the remainder vested thereafter at the rate of 5% per fiscal
quarter. As of December 31, 1996, all such shares of restricted stock were
fully vested.
(3) Represents the dollar amount of the Company's matching contribution under
the Company's 401(k) Plan.
(4) Messrs. Moeller, Jones and Moulds each commenced employment with the Company
in 1996.
(5) Represents options granted to Mr. Moeller upon his commencement of
employment in October 1996.
(6) Represents options granted to Mr. Jones upon his commencement of employment
in September 1996.
(7) Consists of $55,816 paid to Mr. Moulds in respect of his relocation, at the
behest of the Company, from the United Kingdom to the United States and
$6,250, which represents the Company's contribution to a United
Kingdom-based retirement account for Mr. Moulds.
(8) Represents options granted to Mr. Moulds upon his commencement of employment
in August 1996.
3
<PAGE> 7
OPTIONS GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning individual stock
option grants made to each of the Named Executive Officers during fiscal 1997.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT
INDIVIDUAL GRANTS ASSUMED ANNUAL
-------------------------------------------------------- RATES OF STOCK
PERCENT OF TOTAL PRICE APPRECIATION FOR
OPTIONS GRANTED EXERCISE OPTION TERM(1)
OPTIONS TO EMPLOYEES IN PRICE EXPIRATION ----------------------
NAME GRANTED(#) FISCAL YEAR ($/SH)(2) DATE 5% 10%
---- ---------- ---------------- --------- ---------- -- ---
<S> <C> <C> <C> <C> <C> <C>
Robert L. Castle.......... 70,000 5.2 $ 10.00 7/25/03 238,066 540,092
Stephen J. Nill........... 30,000 2.2 $ 10.00 7/25/03 102,028 231,468
Paul Moeller.............. 25,000 1.8 $ 10.00 7/25/03 85,024 192,890
Walter Jones.............. 30,000 2.2 $ 10.00 7/25/03 102,028 231,468
Richard Moulds............ 20,000 1.4 $ 10.00 7/25/03 68,019 154,312
</TABLE>
- ---------------
(1) Potential gains are net of exercise price, but before taxes associated with
exercise. These amounts represent certain assumed rates of appreciation
only, based on the Securities and Exchange Commission rules. Actual gains,
if any, on stock option exercises are dependent on the future performance of
the Common Stock, the timing of such exercises and the option holder's
continued employment through the vesting period. The amounts reflected in
this table may not accurately reflect or predict the actual value of the
stock options.
(2) All options were granted at fair market value as determined by the Board of
Directors of the Company on the date of the grant.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth information concerning each exercise of
stock options by each of the Named Executive Officers during fiscal 1997 and the
value of unexercised "in-the-money" options at the end of that fiscal year.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
SHARES NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
ACQUIRED ON VALUE OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END(1)
NAME EXERCISE(#) REALIZED($) EXERCISABLE/UNEXERCISABLE(#) EXERCISABLE/UNEXERCISABLE($)
---- ----------- ----------- ---------------------------- ----------------------------
<S> <C> <C> <C> <C>
Robert L. Castle....... 45,000 441,000 26,625/85,875 211,859/554,328
Stephen J. Nill........ 29,750 223,125 7,250/42,750 77,468/351,281
Paul Moeller........... -- -- 1,250/23,750 7,343/139,531
Walter Jones........... -- -- 1,500/28,500 8,812/167,437
Richard Moulds......... -- -- 1,000/19,000 5,875/111,625
</TABLE>
- ---------------
(1) Based on the closing price on the NASDAQ National Market System for a share
of Common Stock on December 31, 1997 of $15.875.
OTHER BENEFIT PLANS
The Company currently provides certain benefits to its eligible employees
(including its executive officers) through the benefit plans described below:
1991 Stock Incentive Plan. The Company maintains the VideoServer, Inc.
Amended and Restated 1991 Stock Incentive Plan (the "Stock Incentive Plan") to
attract and retain the best available personnel for positions of substantial
responsibility and to provide additional incentives to certain employees and
consultants to contribute to the success of the Company. The Stock Incentive
Plan is administered by a committee of the Board of Directors that consists of
independent directors.
1995 Employee Stock Purchase Plan. The Company maintains the 1995 Employee
Stock Purchase Plan (the "Employee Plan") to provide incentive to employees and
to encourage ownership of Common Stock
4
<PAGE> 8
by all eligible employees of the Company and its subsidiaries. Employees of the
Company may participate in the Employee Plan by authorizing payroll deductions
generally over a six month period, with the proceeds being used to purchase
shares of Common Stock for the participant at a discounted price. The Employee
Plan is intended to be an "employee stock purchase plan" under Section 423 of
the Internal Revenue Code.
Savings Plan. The Company sponsors a savings plan for its employees which
has been qualified under Section 401(k) of the Internal Revenue Code. Eligible
employees are permitted to contribute to the 401(k) plan through payroll
deductions within statutory and plan limits. Contributions from the Company are
made at the discretion of the Board of Directors. Beginning in 1997, the Board
of Directors authorized the Company to match a portion of its employees'
contributions to the plan, and the Company made a matching contribution of 30%
of employee contributions, up to contributions of 5% of the employee's gross
compensation. The Company maintains comparable plans under local laws and
regulations for its non-U.S. employees.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's executive compensation program is administered by the
Compensation Committee of the Board of Directors (the "Committee"). The
Committee, which is composed of two independent directors, establishes and
administers the Company's executive compensation policies and plans and
administers the Company's stock option and other equity-related employee
compensation plans. The Committee considers internal and external information in
determining officers' compensation, including outside survey data.
Compensation Philosophy
The Company's compensation policies for executive officers are based on the
belief that the interests of executives should be closely aligned with those of
the Company's shareholders. The Compensation policies are designed to achieve
the following objectives:
- Offer compensation opportunities that attract highly qualified
executives, reward outstanding initiative and achievement, and retain
the leadership and skills necessary to build long-term shareholder
value.
- Maintain a significant portion of executives' total compensation at
risk, tied to both the annual and long-term financial performance of the
Company and the creation of shareholder value.
- Further the Company's short and long-term strategic goals and values by
aligning compensation with business objectives and individual
performance.
Compensation Program
The Company's executive compensation program has three major integrated
components, base salary, annual incentive awards, and long term incentives.
Base Salary. Base salary levels for executive officers are determined
annually by reviewing the competitive pay practices of networking companies of
similar size and market capitalization, the skills, performance level, and
contribution to the business of individual executives, and the needs of the
Company. Overall, the Committee believes that base salaries for executive
officers are approximately competitive with median base salary levels for
similar positions in these networking companies.
Annual Incentive Awards. The Company's executive officers are eligible to
receive annual cash bonus awards designed to motivate executives to attain
short-term and longer-term corporate and individual management goals. The
Committee establishes the annual incentive opportunity for each executive
officer in relation to his or her base salary. Awards under this program are
based on the attainment of specific Company performance measures established by
the Compensation Committee early in the fiscal year, the achievement of
specified individual objectives and the degree to which each executive officer
contributes to the overall success of the Company and the management team. In
1997 the Company did not achieve the performance goals established by the
Compensation Committee. As a result awards granted were significantly below pre-
determined incentive opportunities, and were made in recognition of the
executive's achievement of certain individual goals.
5
<PAGE> 9
Long Term Incentives. The Committee believes that stock options are an
excellent vehicle for compensating its officers and employees. The Company
provides long term incentives through its Amended and Restated 1991 Stock
Incentive Plan, the purpose of which is to create a direct link between
executive compensation and increases in shareholder value. Stock options are
granted at fair market value and vest in installments, generally over five
years. When determining option awards for an executive officer, the Committee
considers the executive's current contribution to Company performance, the
anticipated contribution to meeting the Company's long-term strategic
performance goals, and industry practices and norms. Long-term incentives
granted in prior years and existing levels of stock ownership are also taken
into consideration. Because the receipt of value by an executive officer under a
stock option is dependent upon an increase in the price of the Company's Common
Stock, this portion of the executive's compensation is directly aligned with an
increase in shareholder value.
Chief Executive Officer Compensation
The Chief Executive Officer's base salary, annual incentive award and
long-term incentive compensation are determined by the Committee based upon the
same factors as those employed by the Committee for executive officers
generally. Mr. Castle's annual base salary for the year ended December 31, 1997
was $210,000. The Chief Executive Officer may also be entitled to an annual cash
bonus, depending on the Company's achievement of certain performance objectives,
including certain growth milestones in sales and earnings during a fiscal year,
as compared to the preceding fiscal year. Any such cash bonus will be computed
on a formula basis established by the Committee. For the year ended December 31,
1997, Mr. Castle was paid a cash bonus of $30,000, compared to a bonus of
$90,000 in respect of 1996.
Section 162(m) of the Internal Revenue Code limits the tax deduction to $1
million for compensation paid to certain executives of public companies. Having
considered the requirements of Section 162(m), the Committee believes that
grants made pursuant to the Company's Amended and Restated 1991 Stock Incentive
Plan meet the requirement that such grants be "performance based" and are,
therefore, exempt from the limitations on deductibility. Historically, the
combined salary and bonus of each executive officer has been well below the $1
million limit. The Committee's present intention is to comply with Section
162(m) unless the Committee feels that required changes would not be in the best
interest of the Company or its shareholders.
Respectfully Submitted by the Compensation
Committee,
Paul J. Ferri
Steven C. Walske
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee was formed on February 1, 1995. Prior to that
date, the Board of Directors carried out compensation related functions. No
member of the Compensation Committee was or is an officer or employee of the
Company or any of its subsidiaries.
COMPENSATION OF DIRECTORS
In April 1995, the Company's Board of Directors and shareholders approved
the Amended and Restated 1994 Non-Employee Director Stock Option Plan (the
"Director Plan"). The Director Plan provides that each non-employee director of
the Company be granted an option to acquire 15,000 shares of common stock on the
date that person becomes a director, but, in any event, not earlier than the
effective date of the Director Plan, and annually be granted, beginning with the
January 1 falling at least 12 months after a Director's initial grant, an option
to purchase an additional 3,000 shares. Options are granted at a price equal to
the fair market value on the date of grant. The option becomes exercisable over
a four-year period, and the term of the option is ten years from the date of
grant.
Pursuant to the Director Plan, on January 1, 1998 Messrs. Ferri, Foster,
and Walske were each granted an option to acquire 3,000 shares at an exercise
price of $16.00 per share.
6
<PAGE> 10
SECTION 16(A) -- BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities and Exchange Act of 1934, as amended,
requires the Company's officers, directors, and persons who own more than ten
percent (10%) of a registered class of the Company's equity securities to file
reports of ownership on Forms 3, 4, and 5 with the Securities and Exchange
Commission and the Company. Based on the Company's review of copies of such
forms, each officer and director complied with his/her obligations in a timely
fashion during the year ended December 31, 1997.
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total returns for VideoServer's
Common Stock with the comparable return for the NASDAQ Stock Market Index and
the NASDAQ Electronic Components Stock Index (SIC Code 367), as calculated by
the Center for Research in Security Prices at the University of Chicago,
Graduate School of Business, for the period beginning May 25, 1995 and ending
December 31, 1997.
CHART IS CAMERA READY COPY
<TABLE>
<CAPTION>
VIDEOSERVER, INC. NASDAQ STOCK SIC CODE 367
MARKET INDEX
<S> <C> <C> <C>
Base Value 17 286.394 $668.501
</TABLE>
<TABLE>
<CAPTION>
VIDEOSERVER, INC. NASDAQ STOCK SIC CODE 367
MARKET INDEX
<S> <C> <C> <C>
5/25/95 $100 $100 $100
6/30/95 $229 $106 $109
9/29/95 $207 $119 $118
12/29/95 $185 $121 $102
3/29/96 $149 $126 $101
6/28/96 $229 $137 $116
9/30/96 $204 $142 $140
12/31/96 $250 $149 $176
3/31/97 $139 $140 $177
6/30/97 $ 78 $166 $190
9/30/97 $ 62 $194 $246
12/31/97 $ 93 $182 $185
</TABLE>
Assume $100 investment invested at May 31
This graph assumes the investment of $100 in VideoServer's Stock, the
NASDAQ Index and the NASDAQ Electronic Components Stock Index as of May 25, 1995
(the date on which VideoServer's Common Stock was first registered with the SEC)
and assumes dividends were reinvested. Additional measurement points are at the
remaining quarter ends thereafter during the years ended December 31, 1995,
December 31, 1996 and December 31, 1997.
7
<PAGE> 11
PROPOSAL NO. 1 -- ELECTION OF DIRECTORS
The Board of Directors is divided into three classes. Each class serves a
three-year term. The Class III Directors' terms will expire at the Meeting. All
directors will hold office until their successors have been duly elected and
qualified.
The Board's nominees for Class III Directors are Khoa D. Nguyen and Steven
C. Walske. Shares represented by all proxies received by the Board of Directors
and not marked so as to withhold authority to vote for Messrs. Nguyen or Walske
will be voted FOR the election of the nominees. Messrs. Nguyen and Walske will
be elected to hold office until the Annual Meeting of Shareholders to be held in
2001 and until their respective successors are duly elected and qualified. The
nominees have indicated their willingness to serve, if elected; however, if
either of them should be unable or unwilling to serve, the proxies will be voted
for the election of a substitute nominee designated by the Board of Directors or
for fixing the number of directors at a lesser number.
The following table sets forth for the nominees to be elected at the
Meeting and for each director whose term of office will extend beyond the
Meeting, his age, the position(s) currently held by each nominee or director
with the Company, the year such nominee or director was first elected a
director, the year each nominee's or director's term will expire and the class
of director of each nominee or director.
<TABLE>
<CAPTION>
YEAR TERM CLASS OF
NOMINEE OR DIRECTOR'S NAME AGE POSITION(S) HELD DIRECTOR SINCE WILL EXPIRE DIRECTOR
-------------------------- --- ---------------- -------------- ----------- --------
<S> <C> <C> <C> <C> <C>
Khoa D. Nguyen................ 44 President, Chief Executive 1997 2001 III
Officer, and Director
Steven C. Walske.............. 46 Director 1994 2001 III
Robert L. Castle.............. 48 Chairman 1992 1999 I
Paul J. Ferri................. 59 Director 1991 1999 I
William E. Foster............. 53 Director 1994 2000 II
</TABLE>
Khoa D. Nguyen has been a Director of the Company since December 1997,
having been appointed at that time to fulfill the unexpired term of Rubin
Gruber, who resigned as Director in September 1997. Mr. Nguyen was named
President and Chief Executive Officer of the Company effective April 9, 1998.
Previously he had been Executive Vice President and Chief Operating Officer of
the Company since September 1997. Prior to joining the company Mr. Nguyen was
employed at PictureTel Corporation, a videoconferencing company, where he served
as Vice President of Engineering from January 1993 to February 1994, and as
Chief Technology Officer and General Manager of the Group Systems and Networking
Products divisions from February 1994 to August 1996. From August 1991 to
December 1992, he was Vice President of Engineering at VTEL Corporation, a
videoconferencing company. Previously, Mr. Nguyen held various research and
development positions at IBM Corporation.
Steven C. Walske has been a Director of the Company since July 1994. He has
been Chairman of the Board and Chief Executive Officer of Parametric Technology
Corporation, a supplier of mechanical design and manufacturing software, since
August 1994. Previously, he had been President and Chief Executive Officer of
Parametric since 1986. Mr. Walske also serves as a director of Synopsys, Inc.
and Object Design, Inc..
Robert L. Castle has served as a Director since March 1992 and as Chairman
of the Board of Directors since April 1998. He served as President of the
Company from February 1992 until April, 1998, and as Chief Executive Officer of
the Company from March 1993 to April 1998. Prior to joining the Company, Mr.
Castle was employed for eight years at FileNet Corporation, a supplier of
document imaging equipment, in various positions including Senior Vice President
of Marketing from October 1990 to February 1992 and Vice President of Marketing
from December 1987 to October 1990. Previously, Mr. Castle held marketing and
general management positions at Basic Four Corp., a developer of software
applications, and Sycor, Inc., a developer and manufacturer of data-entry
terminals.
8
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Paul J. Ferri has been a Director of the Company since March 1991. He has
served as a General Partner of Matrix Partners, a venture capital firm, since
1982. Mr. Ferri also serves as a director of Applix, Inc., BancTec. Inc.,
Stratus Computer Inc., and Tech Force Corp.
William E. Foster has been a Director of the Company since November 1994.
Mr. Foster is a founder and has been Chairman of the Board of Stratus Computer,
Inc., a manufacturer of continuously available computer platforms, since 1980.
Previously, he was Chief Executive Officer of Stratus Computer, Inc. from 1980
to 1997. Mr. Foster also serves as a director of Avid Technology, Inc.
BOARD MEETINGS AND COMMITTEES
The Board of Directors held a total of six meetings during the year ended
December 31, 1997. During that period the Audit Committee of the Board held two
meetings and the Compensation Committee of the Board held six meetings. Each of
the directors attended at least seventy-five percent (75%) of the meetings of
the Board of Directors and committees of the Board on which the director served
during the year.
The Compensation Committee consists of Messrs. Ferri and Walske. The
Compensation Committee determines the compensation of the Company's senior
management and administers the Company's stock option plans. The Audit Committee
comprises Messrs. Ferri, Foster, and Walske. The Audit Committee recommends
engagement of the Company's independent auditors, consults with the Company's
auditors concerning the scope of the audit, reviews the results of their
examination, reviews and approves any material accounting policy changes
affecting the Company's operating results, and reviews the Company's financial
controls.
The Board of Directors has no standing nominating committee.
CERTAIN TRANSACTIONS
There were no transactions to be reported in this section for the year
ended December 31, 1997.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION OF
THE NOMINEES LISTED ABOVE.
PROPOSAL NO. 2 -- RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors has appointed the firm of Ernst & Young LLP,
certified public accountants, to serve as independent auditors for the fiscal
year ending December 31, 1998. Ernst & Young LLP has served as the Company's
independent auditors since 1993. It is expected that a member of the firm of
Ernst & Young LLP will be present at the Meeting and will be available to make a
statement and to respond to appropriate questions. If the shareholders do not
ratify the selection of Ernst & Young LLP, the Board of Directors may consider
selection of other independent certified public accountants to serve as
independent auditors, but no assurances can be made that the Board of Directors
will do so or that any other independent certified public accountants would be
willing to serve.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE RATIFICATION
OF THE APPOINTEES.
VOTING PROCEDURES
The affirmative vote of a plurality of the shares of the Company's Common
Stock present or represented at the Meeting and entitled to vote is required for
the election of each Class III Director and the affirmative vote of a majority
of such shares is required for the ratification of the appointment of the
Company's auditors. For purposes of determining whether a proposal has received
a majority vote, abstentions will be included in the vote totals, with the
results that an abstention will have the same effect as a negative vote. In
instances where brokers are prohibited from exercising discretionary authority
for beneficial holders who have not returned a proxy (so-called "broker
non-votes"), those shares will not be included in the vote totals and,
therefore, will have no effect on the outcome of the vote. Shares that abstain
or for which the authority to vote is withheld on certain matters will, however,
be treated as present for quorum purposes on all matters.
9
<PAGE> 13
OTHER BUSINESS
The Board of Directors knows of no business which will be presented for
consideration at the Meeting other than that stated above. If other business
should come before the Meeting, the persons named in the proxies solicited
hereby, each of whom is an employee of the Company, may vote all shares subject
to such proxies with respect to any such business in the best judgment of such
persons.
SHAREHOLDER PROPOSALS
It is currently contemplated that the 1999 Annual Meeting of Shareholders
will be held on or about May 12, 1999. Proposals of shareholders intended for
inclusion in the proxy statement to be furnished to all shareholders entitled to
vote at the next annual meeting of the Company must be received at the Company's
principal executive offices not later than December 15, 1998. It is suggested
that proponents submit their proposals by certified mail, return receipt
requested.
Dated: April 14, 1998
10
<PAGE> 14
1402-PS-98
<PAGE> 15
DETACH HERE
PROXY
VIDEOSERVER, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS OF THE COMPANY FOR ITS ANNUAL MEETING
MAY 13, 1998
The undersigned appoints Paul L. Criswell and Stephen J. Nill as proxies,
each with full power of substitution, and hereby authorizes them or either of
them to represent and to vote as designated below all shares of Common Stock of
VideoServer, Inc., held of record by the undersigned on April 1, 1998 at the
Annual Meeting of Stockholders to be held at The Wyndham Garden Hotel,
Burlington, Massachusetts on May 13, 1998 and at any adjournments or
postponements thereof.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN THE MANNERS DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS GIVEN, THE PROXY WILL
BE VOTED "FOR" THE ELECTION OF DIRECTORS AND "FOR" THE OTHER PROPOSAL.
- ----------- -----------
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
- ----------- -----------
DETACH HERE
PLEASE MARK
[X] VOTES AS IN
THIS EXAMPLE.
<TABLE>
<S> <C>
1. Election of two Class III Directors
FOR AGAINST ABSTAIN
NOMINEES: Khoa D. Nguyen and Steven C. Walske 2. Ratification of Appointment of [ ] [ ] [ ]
Independent Accountants.
FOR WITHHELD
NOMINEES NOMINEES 3. In their discretion, the proxies are authorized to vote upon
[ ] [ ] such other business as amy properly come before the meeting.
[ ]
-------------------------------------------------
For both nominees except as noted above
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY FORM PROMPTLY
USING THE ENCLOSED SELF-ADDRESSED ENVELOPE.
Please sign exactly as name appears hereon. Joint owners should
each sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If shares
are held of record by a corporation, please sign in full
corporate name by president or other authorized officer.
Partnerships should sign in partnership name by an authorized
signatory.
Signature: _______________________________ Date: ___________ Signature: _______________________________ Date: ___________
</TABLE>
