EZENIA INC, DEF 14A, 2000-04-17

EZENIA INC
DEF 14A, 2000-04-17
COMPUTER COMMUNICATIONS EQUIPMENT

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<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Act of 1934

Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]

Check the appropriate box:

[ ] Preliminary Proxy Statement [ ] Confidential, for Use by the
[X] Definitive Proxy Statement Commission Only (as permitted by
[ ] Definitive Additional Materials Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12

EZENIA! 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 Rule 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
[EZEMIA LOGO]

April 17, 2000

Dear Shareholder:

You are cordially invited to attend the 2000 Annual Meeting of
Shareholders of Ezenia! Inc., which will be held at the offices of the Company,
Northwest Park, 63 Third Avenue, Burlington, Massachusetts 01803, on
Wednesday, May 31, 2000 at 10:00 a.m., EST.

The Notice of Annual Meeting of Shareholders and a Proxy Statement, which
describe the formal business to be conducted at the meeting, accompany this
letter. The Company's Annual Report to Shareholders is also enclosed for your
information.

All shareholders are invited to attend the Annual Meeting. To ensure your
representation at the Annual Meeting, however, you are urged to vote by proxy by
following one of these steps as promptly as possible:

(A) Complete, date, sign and return the enclosed Proxy Card (a
postage-prepaid envelope is enclosed for that purpose); or

(B) Vote via the Internet (see instructions on the enclosed Proxy Card);
or

The Internet and telephone voting procedures are designed to authenticate
shareholders' identities, to allow shareholders to vote their shares and to
confirm that their instructions have been properly recorded. Specific
instructions to be followed by any registered shareholder interested in voting
via the Internet or telephone are set forth in the Proxy Card. Your shares
cannot be voted unless you date, sign, and return the enclosed Proxy Card, vote
via the Internet or telephone 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,

Khoa D. Nguyen
Chairman and
Chief Executive Officer
<PAGE> 3
EZENIA! INC.
NORTHWEST PARK
63 THIRD AVENUE
BURLINGTON, MASSACHUSETTS 01803

NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS

TO OUR SHAREHOLDERS:

The Annual Meeting of Shareholders (the "Meeting") of Ezenia! Inc., a
Delaware corporation (the "Company"), will be held on Wednesday, May 31, 2000 at
10:00 a.m., EST, at the offices of the Company, Northwest Park, 63 Third Avenue,
Burlington, Massachusetts 01803. The purposes of the Meeting shall be:

1. To elect one Class II director to hold office for a three year term and
until such director's successors have been duly elected and qualified.

2. To approve an amendment to the Company's Amended and Restated 1991
Stock Incentive Plan extending the term of plan through March 31, 2011.

3. To approve an amendment to the Company's Amended and Restated 1991
Stock Incentive Plan making non-employee directors eligible to receive
options under the plan.

4. To ratify the appointment of the firm of Ernst & Young LLP, as
independent auditors for the Company for the fiscal year ending
December 31, 2000.

5. To transact such other business as may properly come before the meeting
or any adjournment thereof.

Shareholders of record on the books of the Company at the close of
business on April 13, 2000 will be entitled to notice of and to vote at the
Meeting.

Please sign, date, and return the enclosed Proxy Card in the enclosed
envelope, or vote via telephone or the Internet (pursuant to the instructions on
the enclosed Proxy Card) at your earliest convenience. If you return the proxy
or vote via telephone or the Internet, 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

Stephen G. Bassett
Secretary

Burlington, Massachusetts
April 17, 2000

- --------------------------------------------------------------------------------
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. WHETHER OR NOT
YOU PLAN TO ATTEND THE MEETING, PLEASE (I) SIGN, DATE, AND MAIL THE ENCLOSED
PROXY CARD IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED FROM
WITHIN THE UNITED STATES OR (II) OTHERWISE VOTE YOUR SHARES BY TELEPHONE OR THE
INTERNET.
- --------------------------------------------------------------------------------
<PAGE> 4
EZENIA! INC.
NORTHWEST PARK
63 THIRD AVENUE
BURLINGTON, MASSACHUSETTS 01803

PROXY STATEMENT

ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 31, 2000

Proxies enclosed with this Proxy Statement are solicited by the Board of
Directors of Ezenia! Inc., a Delaware corporation (the "Company"), for use at
the Annual Meeting of Shareholders (the "Meeting") to be held on Wednesday, May
31, 2000 at 10:00 a.m., EST, at the offices of the Company, Northwest Park, 63
Third Avenue, Burlington, Massachusetts 01803, and any
adjournments thereof.

Registered shareholders can vote their shares (1) via a toll-free
telephone call from the U.S. or Canada, or (2) via the Internet or (3) by
mailing their signed Proxy Card. The telephone and Internet voting procedures
are designed to authenticate shareholders' identities, to allow shareholders to
vote their shares and to confirm that their instructions have been properly
recorded. The Company believes that the procedures that have been put in place
are consistent with the requirements of applicable law. Specific instructions to
be followed by any registered shareholder interested in voting via telephone or
the Internet are set forth on the enclosed Proxy Card.

Shares represented by duly executed proxies 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 nominee for director
named below, FOR approval of each of the amendments to the Amended and Restated
1991 Stock Incentive Plan and FOR the ratification of selection of auditors
described in this Proxy Statement. 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.

Any shareholder may revoke a proxy at any time prior to its exercise by
delivering a later-dated proxy, by making an authorized telephone or Internet
communication on a later date in accordance with the instructions on the
enclosed Proxy Card, by 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 written
proxy or notice should be returned for receipt by the Company, and any
telephonic or Internet vote should be made, not later than the close of business
on May 30, 2000. 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 13, 2000
(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 13,694,105 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

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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.

An Annual Report to Shareholders, containing financial statements for the
fiscal year ended December 31, 1999, preceded or accompanies this Proxy
Statement. The mailing address of the Company's principal executive offices is
Northwest Park, 63 Third Avenue, Burlington, Massachusetts 01803.

This Proxy Statement and the proxy enclosed herewith were first mailed to
shareholders on or about April 17, 2000.

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<PAGE> 6
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 March 1, 2000 (i) by each person
who is known by the Company to own beneficially more than five percent 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>
DIRECTORS, OFFICERS AND 5% SHAREHOLDERS SHARES BENEFICIALLY OWNED
- --------------------------------------- ---------------------------
NUMBER PERCENT
----------- ------------
<S> <C> <C>
State of Wisconsin Investment Board (1) 2,423,000 17.83%
121 East Wilson Street
Madison, Wisconsin 53707
Kopp Investment Advisors, Inc. (2) 1,141,100 8.40%
7701 France Avenue South, Suite 500
Edina, Minnesota 55435
Wellington Management Company, LLP (3) 746,800 5.49%
75 State Street
Boston, Massachusetts 02109

Khoa D. Nguyen (4) 285,062 2.05%
William E. Foster (5) 27,000 0.20%
John F. Keane Jr (6). 7,000 0.05%
John A. McMullen (7) 7,000 0.05%
Roy G. Perry (8) 13,000 0.10%
Stephen P. Cummings(9) 35,262 0.26%
Dane A. Donaldson (10) 27,722 0.20%
Robert Lamkin 0 0.00%
Richard J. Moulds (11) 38,002 0.28%
Edward C. Wade (12) 30,096 0.22%

All executive officers and directors as a group
(11 persons)(13) 473,144 3.37%
</TABLE>

* Less than 1%

(1) Based on information contained in Schedule 13G/A filed by the State of
Wisconsin Investment Board, on February 4, 2000.

(2) Based on information contained in Schedule 13G/A filed by Kopp Investment
Advisors, Inc. ("KIA") on February 7, 2000. According to such filing, KIA
is wholly-owned by Kopp Holding Company, which is wholly-owned by LeRoy C.
Kopp. The number of shares listed as beneficially owned by KIA does not
include the additional 45,000 shares reported as beneficially owned by Mr.
Kopp.

(3) Based on information contained in Schedule 13G filed by Wellington
Management Company, LLP on February 11, 2000.

(4) Includes 223,814 shares that Mr. Nguyen has the right to acquire within 60
days of March 1, 2000 by the exercise of stock options.

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<PAGE> 7
(5) Includes 14,000 shares that Mr. Foster has the right to acquire within 60
days of March 1, 2000 by the exercise of stock options.

(6) Represents shares that Mr. Keane has the right to acquire within 60 days of
March 1, 2000 by the exercise of stock options.

(7) Represents shares that Mr. McMullen has the right to acquire within 60 days
of March 1, 2000 by the exercise of stock options.

(8) Includes 7,000 shares that Mr. Perry has the right to acquire within 60
days of March 1, 2000 by the exercise of stock options.

(9) Includes 32,562 shares that Mr. Cummings has the right to acquire within 60
days of March 1, 2000 by the exercise of stock options.

(10) Includes 26,876 shares that Mr. Donaldson has the right to acquire within
60 days of March 1, 2000 by the exercise of stock options.

(11) Includes 38,002 shares that Mr. Moulds has the right to acquire within 60
days of March 1, 2000 by the exercise of stock options.

(12) Includes 22,063 shares that Mr. Wade has the right to acquire within 60
days of March 1, 2000 by the exercise of stock options.

(13) Includes 378,317 shares that directors and executive officers of the
Company have the right to acquire within 60 days of March 1, 2000 by the
exercise of stock options.

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<PAGE> 8
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
OTHER ANNUAL COMPENSATION ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) (5) BONUS($) COMPENSATION ($) OPTIONS(#) COMPENSATION($)
- --------------------------- ---- -------------- -------- ---------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
KHOA D. NGUYEN 1999 200,000 120,000 -- 235,500 2,400 (3)
President and 1998 200,000 120,000 -- 150,000 --
Chief Executive Officer 1997 (1) 52,000 -- -- 225,000 (2) --
4/9/98 - Present

DANE A. DONALDSON 1999 149,974 65,000 -- 23,000 2,400 (3)
Vice President of Customer 1998 140,000 57,500 -- 10,000 2,370 (3)
Service and Support 1997 (1) 16,372 -- -- 30,000 (2) --

STEPHEN P. CUMMINGS 1999 (4) 133,942 77,000 (5) -- 93,000 2,335 (3)
Vice President of Research
and Development

EDWARD C. WADE 1999 139,974 30,000 -- 18,000 2,400 (3)
Vice President of 1998 130,000 19,600 -- 7,500 2,244 (3)
Manufacturing and Operations 1997 22,069 10,000 -- 25,000 --

RICHARD J. MOULDS 1999 149,942 15,000 32,692 (6) 20,500 --
Vice President of Strategic 1998 140,009 25,000 45,194 (6) 20,000 --
Business Development 1997 123,833 12,000 48,439 (6) 20,000 --

ROBERT LAMKIN 1999 124,000 (8) -- -- 0 58,144 (10)
Vice President of Sales (7) 1998 (2) 212,953 (9) -- -- 50,000 (2) --
</TABLE>

- -----------

(1) Messrs. Nguyen and Donaldson commenced their employment with the Company
during the year in 1997.

(2) Represents options granted upon the commencement of employment.

(3) Represents the dollar amount of the Company's matching contribution under
the Company's 401(k) Plan.

(4) Mr. Cummings commenced employment with the Company during the year in
1999.

(5) Includes a $29,000 signing bonus.

(6) Represents amounts paid in connection with an overseas cost of living
allowance and relocation expenses.

(7) Mr. Lamkin's employment with the Company ceased in January 1999.

(8) Consists of $80,000 in base salary and $44,000 in commissions.

(9) Consists of $136,667 in base salary and $76,286 in commissions.

(10) Represents amounts paid in connection with the termination of Mr. Lamkin's
employment with the Company.

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<PAGE> 9
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 1999.

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------------
PERCENT OF POTENTIAL REALIZABLE VALUE AT
TOTAL ASSUMED ANNUAL RATES OF
OPTIONS OPTIONS STOCK PRICE APPRECIATION
GRANTED GRANTED TO EXERCISE FOR OPTION TERM (1)
EMPLOYEES IN PRICE EXPIRATION ------------------------------
NAME DATE (#) FISCAL YEAR ($/SH) (2) DATE 5% 10%
---- ---- --- ----------- ---------- ---- -- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Khoa Nguyen 3/99 235,000 15.9851% 7.813 3/09 1,154,686 2,926,200
9/99 500 7.875 9/09 2,476 6,274

Stephen P. Cummings 4/99 92,500 6.3126% 8.438 4/09 490,862 1,243,940
9/99 500 7.875 9/09 2,476 6,274

Dane A. Donaldson 3/99 22,500 1.5612% 7.813 3/09 110,555 280,168
9/99 500 7.875 9/09 2,476 6,274

Robert Lamkin (3) -- 0 -- -- -- -- --

Richard J. Moulds 3/99 20,000 1.3915% 7.813 3/09 98,272 249,039
9/99 500 7.875 9/09 2,476 6,274

Edward C. Wade 3/99 17,500 1.2218% 7.813 3/09 85,988 217,909
9/99 500 7.875 9/09 2,476 6,274
</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.

(3) Mr. Lamkin ceased employment with the company in 1999 and did not receive
stock options grants during 1999.

6
<PAGE> 10
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 1999 and the
value of unexercised "in-the-money" options at the end of that fiscal year.

<TABLE>
<CAPTION>
SHARES NUMBER OF UNEXERCISED OPTIONS VALUE OF UNEXERCISED IN-THE-MONEY
ACQUIRED ON VALUE AT FISCAL YEAR-END OPTIONS AT FISCAL YEAR-END(1)
NAME EXERCISE (#) REALIZED ($) EXERCISABLE/UNEXERCISABLE (#) EXERCISABLE/UNEXERCISABLE ($)
---- ------------ ------------ ----------------------------- -----------------------------
<S> <C> <C> <C> <C>
Khoa D. Nguyen -- -- 190,344 / 420,156 11,225 / 37,188
Stephen P. Cummings -- -- 0 / 93,000 0 / 31
Dane A. Donaldson -- -- 19,250 / 43,750 909 / 3,197
Robert Lamkin (2) -- -- 0 / 0 0 / 0
Richard J. Moulds -- -- 33,781 / 46,719 1,233 / 3,837
Edward C. Wade -- -- 16,812 / 33,688 697 / 2,468
</TABLE>

- -----------

(1) Based on the closing price on the Nasdaq National Market System for a share
of Common Stock on December 31, 1999 of $7.938.

(2) Mr. Lamkin's options terminated upon his cessation of employment with the
company in January, 1999.

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 an 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, officers 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 entirely of
independent directors.

1995 Employee Stock Purchase Plan. The Company maintains a 1995 Employee
Stock Purchase Plan (the "Employee Plan") to provide incentive to employees and
to encourage ownership of Common Stock 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 in 1997, 1998 and 1999 the Company made a
matching contribution of 30% of employee contributions, up to

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<PAGE> 11
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.

EMPLOYMENT AGREEMENTS

The Company has entered into an agreement with Mr. Nguyen that provides
for certain benefits in the event of a termination of his employment without
cause and upon the occurrence of certain events. Under the agreement, in the
event the Company elects to terminate Mr. Nguyen's employment or to diminish his
status, other than for cause, Mr. Nguyen shall be entitled to receive, (i) for a
period of twelve months a salary equal to the highest annualized salary rate in
effect for him within the previous twelve months and (ii) his then-current
targeted Annual Incentive Bonus. The agreement also provides for certain
benefits in the event of a change in control. In the event of a change in
control, the outstanding options held by Mr. Nguyen under the Company's option
plans shall become exercisable in full. The agreement further provides that if
Mr. Nguyen is terminated or his status is diminished (other than for cause)
within twenty four months after a change in control, Mr. Nguyen is entitled to
an immediate payment of two times his base compensation for the fiscal year
immediately preceding the termination or change, plus two times his targeted
annual bonus for the fiscal year then in effect.

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 is composed of William Foster and John McMullen, two independent
directors who were appointed to the Committee in February 2000. During 1999, the
Committee comprised of Paul Ferri and Steven Walske. The Committee 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,

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<PAGE> 12
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.

Incentive Awards. The Company's executive officers are eligible to receive
cash bonus awards designed to motivate executives to attain short-term and
longer-term corporate and individual management goals. The Committee establishes
quarterly and annual incentive opportunities 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, and by 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
1999 the formula for these bonuses was based on a combination of individual
objectives and Company revenue and profitability objectives. The Company's
performance generally met the objectives set by the Committee in 1999.

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 four
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. Nguyen's annualized base salary for the year ended December 31,
1999 was $200,000. 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, 1999, Mr. Nguyen was paid a cash bonus of $120,000.

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,

William E. Foster
John A. McMullen

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<PAGE> 13
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Compensation Committee was formed on February 1, 1995. No current or
former member of the Compensation Committee is or has been 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, 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.

In March 1999, the Board approved an amendment to the Director Plan,
authorizing and granting to each non-employee member of the Board a one-time,
7,000 share stock option, at the fair market value of the stock on the date of
the grant. Pursuant to this amendment, Messrs. Castle, Ferri, Foster and Walske
were each granted an option to acquire 7,000 shares at an exercise price of
$7.813, the fair market value on the date of grant.

On February 21, 2000, Messrs. Keane, Perry and McMullen were each granted
an option to acquire 35,000 shares and Mr. Foster was granted an option to
acquire 70,000 shares at an exercise price of $9.125 per share, the fair market
value on the date of grant.

The Company pays each Director a fee of $2,000 per official meeting of the
Board attended by such Director. In addition, the Company pays each Director a
fee of $500 per official Committee meeting attended by such Director.

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, director and 10% holder complied with his/her obligations
in a timely fashion with respect to transactions in securities of the Company
during the year ended December 31, 1999, except that (i) Mr. Cummings will file
a late Form 5 reporting one transaction, (ii) Mr. Donaldson will file a late
Form 5 reporting two transactions, (iii) Mr. Glista will file a late Form 5
reporting one transaction, (iv) Mr. Moulds will file a late Form 5 reporting two
transactions, (v) Mr. Nguyen will file a late Form 5 reporting two transactions,
and (vi) Mr. Wade will file a late Form 5 reporting two transactions.

10
<PAGE> 14
STOCK PERFORMANCE GRAPH

The following graph compares the change in the shareholder return on the
Company's Common Stock against the 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 by the University of Chicago Graduate
School of Business, for the period beginning December 29, 1995 and ending
December 31, 1999.

[LINE GRAPH]

<TABLE>
<CAPTION>
Ezenia! Inc. NASDAQ Stock Market SIC Code
Index 367
------------ ------------------- --------
<S> <C> <C> <C>
12/29/1995 $100 $100 $100
12/31/1996 $135 $123 $173
12/31/1997 $50 $151 $181
12/31/1998 $58 $212 $280
12/31/1999 $25 $384 $550
</TABLE>

Assume $100 investment invested at May 31

This graph assumes the investment of $100 in the Company's Common Stock,
the Nasdaq Index and the Nasdaq Electronic Components Stock Index as of December
29, 1995 and assumes dividends were reinvested. Additional measurement points
are at the remaining month ends for the years ended December 31, 1996, December
31, 1997, December 31, 1998, and December 31, 1999.

11
<PAGE> 15
PROPOSAL NO. 1 - ELECTION OF DIRECTORS

The Board of Directors is divided into three classes. Each class serves a
three-year term. The Class II Director's term will expire at the Meeting. All
directors will hold office until their successors have been duly elected and
qualified.

The Board has nominated William E. Foster for reelection as a Class II
Director, to hold office until the Annual Meeting of Shareholders to be held in
2003 and until his respective successor is duly elected and qualified. Shares
represented by all proxies received by the Board of Directors and not marked so
as to withhold authority to vote for Mr. Foster will be voted FOR the election
of the nominee. The nominee has indicated his willingness to serve, if elected;
however, if Mr. Foster 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 nominee 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>
NOMINEE OR DIRECTOR'S NAME AGE POSITION(S) HELD DIRECTOR SINCE YEAR TERM CLASS OF
-------------------------- --- ---------------- -------------- ---------- --------
WILL EXPIRE DIRECTOR
----------- --------
<S> <C> <C> <C> <C> <C>
John A. McMullen 58 Director 2000 2002 I

Roy G. Perry 43 Director 2000 2002 I

William E. Foster 55 Director 1994 2000 II

Khoa D. Nguyen 46 President, Chief Executive 1997 2001 III
Officer, and Chairman

John F. Keane, Jr. 40 Director 2000 2001 III
</TABLE>

WILLIAM E. FOSTER has been a Director of the Company since November
1994. Mr. Foster is a founder and was Chairman of the Board of Stratus
Computer, Inc., a manufacturer of continuously available computer platforms,
from 1980 to 1998. He was Chief Executive Officer of Stratus Computer, Inc.
from 1980 to 1997. Mr. Foster also serves as a director of Avid Technology,
Inc.

JOHN F. KEANE, JR. became a Director of the Company in February 2000.
Mr. Keane has been employed at Keane, Inc., a provider of e-business,
Information Technology, and consulting services, since 1987 and was appointed
Executive Vice President and a member of the Office of the President in
September 1997. From December 1996 to September 1997, Mr. Keane had been
Senior Vice President. From December 1994 to December 1996, he was an Area
Vice President. From January 1994 to December 1994, Mr. Keane served as a
Business Area Manager. From July 1992 to January 1994, he acted as manager
of Software Reengineering, and from January 1991 to July 1992, he served as
Director of Corporate Development. Mr. Keane has been a director of Keane,
Inc. since May 1998.

JOHN A. MCMULLEN joined the Board of Directors of the Company in
February 2000. Since 1984, Mr. McMullen has been the Managing Principal of
Cambridge Meridian Group Inc., a management consulting and business advisory
company. Mr. McMullen also serves as a Director of Cambridge Meridian Group
Inc.

12
<PAGE> 16
KHOA D. NGUYEN has been a Director of the Company since December 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 had been 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.

ROY G. PERRY has been a Director of the Company since February 2000.
Since May 1997, Mr. Perry has been the Vice President of Operations for Home
and Small Business Group of Dell Computer Corporation and Vice President of
the Dell Computer Corporation Nashville Fulfillment Campus. Mr. Perry had
been employed at Allied Signal, where he served as Vice President of
Operations from January 1995 to May 1997. Previously, Mr. Perry held a
senior management position in Operations at IBM Corporation.

BOARD MEETINGS AND COMMITTEES

The Board of Directors held a total of 4 meetings during the year ended
December 31, 1999. During that period the Audit Committee of the Board held 1
meeting and the Compensation Committee of the Board held 3 meetings. Each of the
current 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. Foster and McMullen, and
during 1999, consisted of Paul Ferri and Steven Walske. The Compensation
Committee determines the compensation of the Company's senior management and
administers the Company's stock option plans. The Audit Committee is composed of
Messrs. Keane and Perry and during 1999, consisted of 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

No transactions occurring between January 1, 1999 and the date hereof are
to be reported in this section, other than compensatory arrangements discussed
elsewhere in this Proxy Statement.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION OF THE
NOMINEE LISTED ABOVE.

13
<PAGE> 17
PROPOSALS NO. 2 AND 3 - AMENDMENTS TO THE COMPANY'S
AMENDED AND RESTATED 1991 STOCK INCENTIVE PLAN

The Board of Directors has authorized, subject to shareholder
ratification, an extension to the term of our Amended and Restated 1991 Stock
Incentive Plan (the "Stock Incentive Plan") from March 31, 2001 to March 31,
2011. The primary purpose of the proposed amendment is to enable us to continue
issuing shares of the Company's Common Stock to existing personnel and to
attract and retain qualified employees, officers, directors and consultants
through grants of stock options.

The Board of Directors has also authorized, subject to shareholder
ratification, an amendment to the Stock Incentive Plan to allow non-employee
directors to be eligible to receive options granted under the plan. The purpose
of the proposed amendment is to increase the Company's ability to attract and
retain qualified non-employee directors to help guide the Company as it pursues
its strategy for growth and development.

As of March 31, 2000, (i) 938,700 shares of Common Stock were issued as
restricted stock awards and upon exercise of options granted under the Stock
Incentive Plan, (ii) options for 3,583,183 shares were outstanding, and (iii)
options to purchase 1,593,048 shares were available for future grant. On March
31, 2000, the closing price of the Company's Common Stock reported on Nasdaq
National Market was $10.50 per share.

In April 1995, the Company's Board of Directors and stockholders approved
the Company's Amended and Restated 1991 Stock Incentive Plan, which provides for
the grant of incentive stock options to employees (including officers and
employee directors) and the grant of non-qualified stock options or restricted
stock awards to employees (including officers and employee directors) and
consultants. A maximum of 2,850,000 shares of Common Stock were reserved for
issuance pursuant to the Stock Incentive Plan. This maximum number of shares
increases, effective as of January 1, 1996 and each January 1 thereafter during
the term of the Stock Incentive Plan, by an additional number of shares of
Common Stock equal to five percent of the total number of shares of Common Stock
issued and outstanding as of the close of business on December 31, of the
preceding year. No more than an aggregate of 5,000,000 shares of Common Stock
may be issued pursuant to the exercise of incentive stock options granted under
the Stock Incentive Plan. No participant in the Stock Incentive Plan may in any
year be granted stock options or awards with respect to more than 250,000 shares
of Common Stock.

Purpose of Plan; Eligibility. The purpose of the Stock Incentive Plan is
to attract and retain the best available personnel for positions of substantial
responsibility and to provide additional incentive to certain employees,
officers, employee directors, and consultants to contribute to the success of
the Company.

Administration. The Stock Incentive Plan is administered by the
Compensation Committee of the Board of Directors, which has the authority to
determine which eligible individuals are to receive options or restricted stock
awards, the terms of such options or awards, including the status of such
options as incentive or nonstatutory stock options under the federal income tax
laws, the numbers of shares, exercise or purchase prices and times at which the
options become and remain exercisable or restricted stock vests and the time,
manner and form of payment upon exercise of an option. The exercise price of
nonqualified options granted under the Incentive Stock Plan may not be less than
85% of the fair market value of a share of Common Stock on the date of grant,
and in the case of incentive stock options, not less than 100%.

14
<PAGE> 18
Exercisability. The options generally become exercisable over a four-year
period and expire after a specified period that may not exceed ten years.
Options must be exercised no more than 30 days following termination of
employment, except in the event that termination is due to death or disability,
in which case the option is exercisable for a maximum of 180 days after such
termination.

Transferability. No option and no right under the Stock Incentive Plan is
transferable or assignable or subject to any encumbrance, pledge or charge
except, in the event of death of a participant, a beneficiary may be designated
with respect to an option.

Effect of Significant Corporate Event. Each option granted to an officer
of the Company, subject to the short-swing profit restrictions of the Federal
securities laws, may provide that upon the acquisition of 50% or more of the
Company's outstanding common stock pursuant to a hostile tender offer, such
option, if outstanding for at least six months, will automatically be canceled
in exchange for a cash distribution to the officer based upon the difference
between the tender offer price and the exercise price of the option. In the
event the Company is acquired by merger, consolidation or asset sale, the
unvested shares of Common Stock held by employees as restricted stock awards
under the Stock Incentive Plan will immediately vest in full, except to the
extent the Company's repurchase rights with respect to those shares are to be
assigned to the acquiring entity, and options will accelerate to the extent not
assumed by the acquiring entity. The Compensation Committee also has discretion
to provide for the acceleration of one or more outstanding options under the
Stock Incentive Plan and the vesting of unvested shares held as restricted stock
awards upon the occurrence of certain changes in control. Such accelerated
vesting may be conditioned upon subsequent termination of the affected
optionee's service.

Amendments to Options and the Stock Incentive Plan. The Compensation
Committee has the authority to effect, from time to time, the cancellation of
outstanding options under the Stock Incentive Plan in return for the grant of
new option for the same or a different number of option shares with an exercise
price per share based upon the fair market value of the Common Stock on the new
grant date. The Board may amend or modify the Stock Incentive Plan at any time
subject to the rights of holders of outstanding options on the date of amendment
or modification, except stockholder approval is required for any such amendment
that would change the eligibility requirements of the Stock Incentive Plan,
extend the term of the Stock Incentive Plan, or increase the number of shares
subject to grant as options or restricted stock awards under the Stock Incentive
Plan.

Termination. The Stock Incentive Plan, as amended, will terminate on March
31, 2011. The existing Stock Incentive Plan terminates on March 31, 2001.

Summary of Tax Consequences. The following is a brief and general
discussion of the federal income tax rules applicable to stock options granted
under the Stock Incentive Plan. With respect to an incentive stock option, an
employee will generally not be taxed at the time of grant or exercise, although
exercise of an incentive option will give rise to an item of tax preference that
may result in an alternative minimum tax. If the employee holds the shares
acquired upon exercise of an incentive stock option until at least one year
after issuance and two years after the option grant, he or she will have
long-term capital gain, or loss, based on the difference between the amount
realized on the sale or disposition and his or her option price. If these
holding periods are not satisfied, then upon disposition of the shares the
employee will recognize ordinary income equal, in general, to the excess of the
fair market value of the shares at time of exercise over the option price, plus
capital gain in respect of any additional appreciation. With respect to a
nonqualified option, an employee will not be taxed at the time of grant; upon
exercise, he or she will generally realize compensation income to the extent the
then fair market value of the stock exceeds the option price. The Company will
generally have a tax deduction to the extent that, and at the time that, an
employee realizes compensation income with respect to an option.

15
<PAGE> 19
Options Granted Under the Stock Incentive Plan. The following table sets
forth information as of March 31, 2000 with respect to stock options which have
been granted under the Stock Incentive Plan since its adoption to:

- our chief executive officer and the Named Executive Officers

- all of our current executive officers as a group

- all of our current directors who are not executive officers as a
group

- all employees of the Company, excluding executive officers, as a
group

<TABLE>
<CAPTION>
NAME OPTIONS (SHARES)
---- ----------------
<S> <C>
Khoa D. Nguyen 860,500
Stephen P. Cummings 243,000
Dane A. Donaldson 130,000
Robert Lamkin 50,000
Richard J. Moulds 95,500
Edward C. Wade 90,500
Current Executive Officers as a Group (7 persons) 1,599,500
Current Directors of the Company, excluding Executive Officers,
as a Group (4 persons) 175,000
All Employees of the Company, excluding Executive Officers, as
a Group 1,808,683
</TABLE>

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" EACH OF THE PROPOSED
AMENDMENTS OF THE AMENDED AND RESTATED 1991 STOCK INCENTIVE PLAN.

16
<PAGE> 20
PROPOSAL NO. 4 - 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, 2000. 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 APPOINTMENT OF THE COMPANY'S AUDITORS.

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 the Class II Director and the affirmative vote of a majority of
such shares is required for the approval of each of the proposed amendments to
the Stock Incentive Plan and 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.

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 2001 Annual Meeting of Shareholders
will be held on or about May 24, 2001. 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 and/or for inclusion in the
agenda for that meeting must be received at the Company's principal executive
offices not later than December 18, 2000. It is suggested that proponents submit
their proposals by certified mail, return receipt requested.

Dated: April 17, 2000

17
<PAGE> 21
ANNEX

EZENIA! INC.

AMENDMENT NO. 1 TO

AMENDED AND RESTATED
1991 STOCK INCENTIVE PLAN

Subject to shareholder approval, effective as of February 21, 2000, the
Ezenia! Inc. Amended and Restated 1993 Stock Incentive Plan (the "Plan") is
amended as set forth below.

1. The last sentence of Section 11 of the plan is deleted and replaced in
its entirety with the following: "Unless previously terminated, the Plan will
terminate on March 31, 2101."

2. Section 2(i) of the Plan is deleted and replaced in its entirety with
the following:

"Eligible Employee" means any person who is, at the time of the
grant of an Option or Restricted Stock Award, an employee (including
officers and employee directors), director or consultant of the Company or
any Subsidiary.
<PAGE> 22
EZENIA! INC.
AMENDED AND RESTATED
1991 STOCK INCENTIVE PLAN

1. PURPOSES OF THE PLAN.

The purposes of this Amended and Restated 1991 Stock Incentive Plan of
Ezenia! Inc. are to promote the interests of the Company and its stockholders by
strengthening the Company's ability to attract, motivate, and retain employees
and consultants of exceptional ability and to provide a means to encourage stock
ownership and a proprietary interest in the Company to selected employees and
consultants of the Company upon whose judgment, initiative, and efforts the
financial success and growth of the business of the Company largely depend.

2. DEFINITIONS.

(a) "Accelerate," "Accelerated," and "Acceleration," when used with
respect to an Option, mean that as of the relevant time of reference, such
Option shall become fully exercisable with respect to the total number of shares
of Common Stock subject to such Option and may be exercised for all or any
portion of such shares.

(b) "Acquisition" means

(i) a merger or consolidation in which securities possessing
more than 50% of the total combined voting power of the Company's
outstanding securities are transferred to a person or persons
different from the persons who held those securities immediately
prior to such transaction, or

(ii) the sale, transfer, or other disposition of all or
substantially all of the Company's assets to one or more persons
(other than any wholly owned subsidiary of the Company) in a single
transaction or series of related transactions.

(c) "Beneficial Ownership" means beneficial ownership determined pursuant
to Securities and Exchange Commission Rule 13d-3 promulgated under the Exchange
Act.

(d) "Board" means the Board of Directors of the Company.

(e) "Committee" means the Compensation Committee of the Board; provided,
that the Board by resolution duly adopted may at any time or from
<PAGE> 23
- 2 -

time to time determine to assume any or all of the functions of the Committee
under the Plan, and during the period of effectiveness of any such resolution,
references herein to the "Committee" shall mean the Board acting in such
capacity.

(f) "Change in Control" means a change in ownership or control of the
Company effected through either of the following transactions:

(i) any person or related group of persons (other than the
Company or a person that directly or indirectly controls, is
controlled by, or is under common control with the Company) directly
or indirectly acquires Beneficial Ownership of securities possessing
more than 50% of the total combined voting power of the Company's
outstanding securities pursuant to a tender or exchange offer made
directly to the Company's stockholders that the Board does not
recommend such stockholders to accept, or

(ii) over a period of 36 consecutive months or less, there is
a change in the composition of the Board such that a majority of the
Board members (rounded up to the next whole number, if a fraction)
ceases, by reason of one or more proxy contests for the election of
Board members, to be composed of individuals who either (A) have
been Board members continuously since the beginning of such period,
or (B) have been elected or nominated for election as Board members
during such period by at least a majority of the Board members
described in the preceding clause (A) who were still in office at
the time such election or nomination was approved by the Board.

(g) "Common Stock" means the authorized common stock of the Company.

(h) "Company" means Ezenia! Inc., a Delaware corporation.

(i) "Eligible Employee" means any person who is, at the time of the grant
of an Option or Restricted Stock Award, an employee (including officers and
employee directors) or consultant of the Company or any Subsidiary.

(j) "Exchange Act" means the Securities Exchange Act of 1934, as amended
and in effect from time to time.

(k) "Fair Market Value" means the value of a share of Common Stock as of
the relevant time of reference, as determined as follows. If the Common Stock is
then publicly traded, Fair Market Value shall be (i) the
<PAGE> 24
- 3 -

last sale price of a share of Common Stock on the principal national securities
exchange on which the Common Stock is traded, if the Common Stock is then traded
on a national securities exchange; or (ii) the last sale price of the Common
Stock reported in the NASDAQ National Market System, if the Common Stock is not
then traded on a national securities exchange; or (iii) the average of the
closing bid and asked prices for the Common Stock quoted by an established
quotation service for over-the-counter securities, if the Common Stock is not
then traded on a national securities exchange or reported in the NASDAQ National
Market System. If the Common Stock is not then publicly traded, Fair Market
Value shall be the fair value of a share of the Common Stock as determined by
the Board or the Committee, taking into consideration such factors as it deems
appropriate, which may include recent sale and offer prices of Common Stock in
arms'-length private transactions.

(l) "Hostile Takeover" means a change in ownership of the Company effected
through the following transaction:

(ii) more than 50% of the securities so acquired in such
tender or exchange offer are accepted from holders other than the
officers and directors of the Company who are subject to the
short-swing profit restrictions of Section 16 of the Exchange Act.

(m) "Participant" means any Eligible Employee selected to receive an
Option or Restricted Stock Award pursuant to Section 5.

(n) "Restricted Stock Award" means a right to the grant or purchase, at a
price determined by the Committee, of Common Stock which is nontransferable and
subject to substantial risk of forfeiture until specific conditions of
continuing employment or performance are met.

(o) "Incentive Stock Option" means an Option intended to qualify as an
"incentive stock option" under Section 422A of the Internal Revenue Code and
regulations thereunder.
<PAGE> 25
- 4 -

(p) "Option" means an Incentive Stock Option or a nonqualified stock
option.

(q) "Plan" means this Amended and Restated 1991 Stock Incentive Plan as
set forth herein and as amended and/or restated from time to time.

(r) "Subsidiary" means any subsidiary corporation (as defined in Section
425 of the Internal Revenue Code) of the Company.

(s) "Takeover Price" means, with respect to any Incentive Stock Option,
the Fair Market Value per share of Common Stock on the date such Option is
surrendered to the Company in connection with a Hostile Takeover, or in the case
of a nonqualified Option, such Fair Market Value or, if greater, the highest
reported price per share of Common Stock paid by the tender offeror in effecting
such Hostile Takeover.

3. SHARES OF COMMON STOCK SUBJECT TO THE PLAN.

(a) Subject to adjustment in accordance with the provisions of Section
3(c) and Section 8 of the Plan, the aggregate number of shares of Common Stock
that may be issued or transferred pursuant to Options or Restricted Stock Awards
under the Plan shall not exceed 2,850,000 shares, which aggregate number of
shares, automatically and without further action, shall increase, effective as
of January 1, 1996 and each January 1 thereafter during the term of the Plan, by
an additional number of shares of Common Stock equal to five percent of the
total number of shares of Common Stock issued and outstanding as of the close of
business on December 31 of the preceding year.

(b) The shares of Common Stock to be delivered under the Plan will be made
available, at the discretion of the Committee, from authorized but unissued
shares of Common Stock and/or from previously issued shares of Common Stock
reacquired by the Company.

(c) If shares covered by any Option cease to be issuable for any reason,
and/or shares covered by Restricted Stock Awards are forfeited, such number of
shares will no longer be charged against the limitation provided in Section 3(a)
and may again be made subject to Options or Restricted Stock Awards.

4. ADMINISTRATION OF THE PLAN.

(a) The Plan will be administered by the Committee, which shall consist of
two or more persons.
<PAGE> 26
- 5 -

(b) The Committee has and may exercise such powers and authority of the
Board as may be necessary or appropriate for the Committee to carry out its
functions as described in the Plan. The Committee shall determine the Eligible
Employees to whom, and the time or times at which, Options or Restricted Stock
Awards may be granted and the number of shares subject to each Option or
Restricted Stock Award. The Committee also has authority (i) to interpret the
Plan, (ii) to determine the terms and provisions of the Option or Restricted
Stock Award instruments, and (iii) to make all other determinations necessary or
advisable for Plan administration. The Committee has authority to prescribe,
amend, and rescind rules and regulations relating to the Plan. All
interpretations, determinations, and actions by the Committee will be final,
conclusive, and binding upon all parties.

(c) No member of the Committee will be liable for any action taken or
determination made in good faith by the Committee with respect to the Plan or
any Option or Restricted Stock Award under it.

5. GRANTS.

(a) The Committee shall determine and designate from time to time those
Eligible Employees who are to be granted Options or Restricted Stock Awards, the
type of each Option to be granted and the number of shares covered thereby or
issuable upon exercise thereof, and the number of shares covered by each
Restricted Stock Award. Each Option and Restricted Stock Award will be evidenced
by a written agreement or instrument and may include any other terms and
conditions consistent with the Plan, as the Committee may determine.

(b) No person will be eligible for the grant of an Incentive Stock Option
who owns or would own immediately before the grant of such Option, directly or
indirectly, stock possessing more than ten percent of the total combined voting
power of all classes of stock of the Company or of any parent corporation or
Subsidiary. This will not apply if, at the time such Incentive Stock Option is
granted, its exercise price is at least 110% of the Fair Market Value of the
Common Stock and by its terms, it is not exercisable after the expiration of
five years from the date of grant. Subject to adjustment in accordance with the
provisions of Section 8 of the Plan, (i) no person may in any year be granted
Options or Restricted Stock Awards with respect to more than 250,000 shares of
Common Stock, and (ii) no more than an aggregate of 5,000,000 shares of Common
Stock may be issued pursuant to the exercise of Incentive Stock Options granted
under the Plan.
<PAGE> 27
- 6 -

6. TERMS AND CONDITIONS OF STOCK OPTIONS.

(a) The price at which Common Stock may be purchased by a Participant
under an Option shall be determined by the Committee; provided, however, that
the purchase price under a nonqualified Option shall not be less than 85% of the
Fair Market Value of the Common Stock on the date of grant of such Option, and
the purchase price under an Incentive Stock Option shall not be less than 100%
of the Fair Market Value of the Common Stock on the date of grant of such
Option.

(b) Each Option shall be exercisable at such time or time, during such
periods, and for such numbers of shares as shall be determined by the Committee
and set forth in the agreement or instrument evidencing the Option grant
(subject to Acceleration by the Committee, in its discretion). The Option shall
expire no later than 30 days following termination of the optionee's employment
or consulting relationship with the Company or a Subsidiary, except in the event
that such termination is due to death or disability, in which case the Option
may be exercisable for a maximum of 180 days after such termination. In any
event, the Option shall expire no later than the tenth anniversary of the date
of grant.

(c) Unless the Compensation Committee otherwise determines (whether at the
time the Option is granted or otherwise), upon the exercise of an Option, the
purchase price will be payable in full in cash.

(d) Incentive Stock Options may be granted under the Plan only to
employees of the Company or a Subsidiary, and the aggregate Fair Market Value
(determined as of the date the Incentive Stock Option is granted) of the number
of shares with respect to which Incentive Stock Options are exercisable for the
first time by a Participant in any calendar year shall not exceed one hundred
thousand dollars ($100,000) or such other limit as may be required by the
Internal Revenue Code. Any Options that purport to be Incentive Stock Options
but which are granted to persons other than employees of the Company or a
Subsidiary shall be, and any Options that purport to be Incentive Stock Options
but are granted in amounts in excess of those specified in this Section 6(d),
shall to the extent of such excess be, nonqualified Options.

(e) No fractional shares will be issued pursuant to the exercise of an
Option, nor will any cash payment be made in lieu of fractional shares.

(f) Subject to the short-swing profit restrictions of the Federal
securities laws, each Option granted to any officer of the Company may provide
that upon the occurrence of a Hostile Takeover, such Option, if outstanding for
at least six months, will automatically be canceled in
<PAGE> 28
- 7 -

exchange for a cash distribution from the Company in an amount equal to the
excess of (i) the aggregate Takeover Price of the shares of Common Stock at the
time subject to the canceled Option (regardless of whether the Option is
otherwise then exercisable for such shares) over (ii) the aggregate Option price
payable for such shares. Such cash distribution shall be made within five days
after the consummation of the Hostile Takeover. Neither the approval of the
Committee nor the consent of the Board shall be required in connection with such
Option cancellation and cash distribution.

7. TERMS AND CONDITIONS OF RESTRICTED STOCK AWARDS.

(a) All shares of Common Stock subject to Restricted Stock Awards granted
or sold pursuant to the Plan may be issued or transferred for such consideration
(which may consist wholly of services) as the Committee may determine, and will
be subject to the following conditions:

(i) The shares may not be sold, transferred, or otherwise alienated
or hypothecated until the restrictions are removed or expire, unless the
Committee determines otherwise.

(ii) The Committee shall provide in the agreement or instrument
evidencing the grant of the Restricted Stock Awards that the certificates
representing shares subject to Restricted Stock Awards granted or sold
pursuant to the Plan will be held in escrow by the Company until the
restrictions on the shares lapse in accordance with the provisions of
subsection (b) of this Section 7.

(iii) Each certificate representing shares subject to Restricted
Stock Awards granted or sold pursuant to the Plan will bear a legend
making appropriate reference to the restrictions imposed.

(iv) The Committee may impose other conditions on any shares subject
to Restricted Stock Awards granted or sold pursuant to the Plan as it may
deem advisable, including without limitation, restrictions under the
Securities Act of 1933, as amended, under the requirements of any stock
exchange or securities quotations system upon which such shares or shares
of the same class are then listed, and under any blue sky or other
securities laws applicable to such shares.

(b) The restrictions imposed under subparagraph (a) above upon Restricted
Stock Awards will lapse at such time or times, and/or upon the achievement of
such predetermined performance objectives, as shall be determined by the
Committee and set forth in the agreement or instrument evidencing the Option
grant, provided, however, that the restrictions on
<PAGE> 29
- 8 -

Restricted Stock Awards shall not fully lapse in less than three years from the
date of grant, or not less than one year from the date of grant if such
restrictions also require the achievement of one or more predetermined
performance objectives. In the event a holder of a Restricted Stock Award ceases
to be an employee or consultant of the Company, all shares under the Restricted
Stock Award that remain subject to restrictions at the time his or her
employment or consulting relationship terminates will be returned to or
repurchased by the Company unless the Committee determines otherwise.

(c) Subject to the provisions of subparagraphs (a) and (b) above, the
holder will have all rights of a shareholder with respect to the shares covered
by Restricted Stock Awards granted or sold, including the right to receive all
dividends and other distributions paid or made with respect thereto; provided,
however, that he or she shall execute an irrevocable proxy or enter into a
voting agreement with the Company as determined by the Committee for the purpose
of granting the Company or its nominee the right to vote all shares that remain
subject to restrictions under this Section 7 in the same proportions (for and
against) as the outstanding voting shares of the Company that are not subject to
such restrictions are voted by the other shareholders of the Company on any
matter, unless the Committee determines otherwise.

8. ADJUSTMENT PROVISIONS.

(a) All of the share numbers set forth in the Plan reflect the capital
structure of the Company immediately after the effectiveness of a one-for-two
reverse stock split effected on May 1, 1995. Subject to Section 8(b), if
subsequent to such date the outstanding shares of Common Stock of the Company
are increased, decreased, or exchanged for a different number or kind of shares
or other securities, or if additional shares or new or different shares or other
securities are distributed with respect to such shares of Common Stock or other
securities, through merger, consolidation, sale of all or substantially all the
property of the Company, reorganization, recapitalization, reclassification,
stock dividend, stock split, reverse stock split, or other distribution with
respect to such shares of Common Stock, or other securities, an appropriate and
proportionate adjustment may be made in (i) the maximum numbers and kinds of
shares provided in Sections 3 and 5, (ii) the numbers and kinds of shares or
other securities subject to the then outstanding Options and Restricted Stock
Awards, and (iii) the price for each share or other unit of any other securities
subject to then outstanding Options without change in the aggregate purchase
price as to which such Options remain exercisable.
<PAGE> 30
- 9 -

(b) The Committee shall have discretion to provide for the Acceleration of
one or more outstanding Options held by employees and the vesting of unvested
shares held by employees as Restricted Stock Awards upon the occurrence of a
Change in Control of the Company. Such Accelerated vesting may be conditioned on
the subsequent termination of the affected optionee's employment. Any Options
Accelerated in connection with a Change in Control shall remain fully
exercisable until the expiration or sooner termination of the Option Term.

(c) In the event of an Acquisition: The unvested shares of Common Stock
held by employees as Restricted Stock Awards shall immediately vest in full,
except to the extent that the Company's repurchase rights with respect to those
shares are to be assigned to the acquiring entity; and all outstanding Options
held by employees will Accelerate to the extent not assumed by the acquiring
entity or replaced by comparable options to purchase shares of the capital stock
of the successor or acquiring entity or parent thereof (the determination of
comparability to be made by the Committee, which determination shall be final,
binding, and conclusive). The Committee shall have discretion, exercisable
either in advance of an Acquisition or at the time thereof, to provide (upon
such terms as it may deem appropriate) for (i) the automatic Acceleration of one
or more outstanding Options held by employees that are assumed or replaced and
do not otherwise Accelerate by reason of the Acquisition, and/or (ii) the
subsequent termination of one or more of the Company's repurchase rights with
respect to shares held by employees as Restricted Stock Awards that are assigned
in connection with the Acquisition and do not otherwise terminate at that time,
in the event that the employment of the respective grantees of such Options or
Restricted Stock Awards should subsequently terminate following such
Acquisition.

(d) Each outstanding Option that is assumed in connection with an
Acquisition, or is otherwise to continue in effect subsequent to such
Acquisition, shall be appropriately adjusted, immediately after such
Acquisition, to apply to the number and class of securities that would have been
issued to the Option holder, in consummation of such Acquisition, had such
holder exercised such Option immediately prior to such Acquisition. Appropriate
adjustments shall also be made to the Option price payable per share, provided,
that the aggregate Option price payable for such securities shall remain the
same. The class and number of securities available for issuance under the Plan
following the consummation of such Acquisition shall be appropriately adjusted.

(e) Adjustments under this Section 8 will be made by the Committee in
accordance with the terms of such sections, whose determination as to what
adjustments will be made and the extent thereof
<PAGE> 31
- 10 -

so as to effectuate the intent of such sections will be final, binding, and
conclusive. No fractional shares will be issued under the Plan on account of any
such adjustments.
<PAGE> 32
- 11 -

9. GENERAL PROVISIONS.

(a) Nothing in the Plan or in any instrument executed pursuant to the Plan
will confer upon any Participant any right to continue in the employ of or as a
consultant to the Company or any of its Subsidiaries or affect the right of the
Company or any Subsidiary to terminate the employment or consulting relationship
of any Participant at any time, with or without cause.

(b) No shares of Common Stock will be issued or transferred pursuant to an
Option or Restricted Stock Award unless and until all then applicable
requirements imposed by Federal and state securities and other laws, rules and
regulations and by any regulatory agencies having jurisdiction, and by any stock
exchanges or securities quotations systems upon which the Common Stock may be
listed, have been fully met. As a condition precedent to the issuance of shares
pursuant to the grant or exercise of an Option or Restricted Stock Award, the
Company may require the Participant to take any reasonable action to meet such
requirements.

(c) No Participant and no beneficiary or other person claiming under or
through such Participant will have any right, title, or interest in or to any
shares of Common Stock allocated or reserved under the Plan or subject to any
Option, except as to such shares of Common Stock, if any, that have been issued
or transferred to such Participant.

(d) The Committee shall adopt rules regarding the withholding of federal,
state, or local taxes of any kind required by law to be withheld with respect to
payments and delivery of shares to Participants under the Plan. With respect to
any nonqualified stock option, the Committee, in its discretion, may permit the
Participant to satisfy, in whole or in part, any tax withholding obligation that
may arise in connection with the exercise of the nonqualified stock option by
electing to have the Company withhold shares of Common Stock having a Fair
Market Value equal to the amount of the tax withholding.

(e) No Option and no right under the Plan, contingent or otherwise, will
be transferable or assignable or subject to any encumbrance, pledge, or charge
of any nature except that, under such rules and regulations as the Committee may
establish pursuant to the terms of the Plan, a beneficiary may be designated
with respect to an Option in the event of death of a Participant. If such
beneficiary is the executor or administrator of the estate of the Participant,
any rights with respect to such Option may be transferred to the person or
persons or entity (including a trust) entitled thereto under the will of the
holder of such Option.
<PAGE> 33
- 12 -

(f) The Committee may cancel, with the consent of the Participant, all or
a portion of any Option granted under the Plan to be conditioned upon the
granting to the Participant of a new Option for the same or a different number
of shares as the Option surrendered, or may require such voluntary surrender as
a condition to a grant of a new Option to such Participant; in each case, such
new Options to have an exercise price per share based upon the Fair Market Value
of the Common Stock as of the new grant date (i.e., the purchase price under a
new nonqualified Option shall not be less than 85% of the Fair Market Value of
the Common Stock on the date of grant of such new nonqualified Option, and the
purchase price under a new Incentive Stock Option shall not be less than 100% of
the Fair Market Value of the Common Stock on the date of grant of such new
Incentive Stock Option (110%, if the grantee of such new Incentive Stock Option
is a greater-than-10% stockholder of the Company, as set forth in Section 5(b)
above)). Subject to the provisions of Section 6(d), such new Option shall be
exercisable at such time or time, during such periods, and for such numbers of
shares, and in accordance with any other terms or conditions, as are specified
by the Committee at the time the new Option is granted, all determined in
accordance with the provisions of the Plan without regard to the price, period
of exercise, or any other terms or conditions of the Option surrendered.

(g) The written agreements or instruments evidencing Restricted Stock
Awards or Options granted under the Plan may contain such other provisions as
the Committee may deem advisable. Without limiting the foregoing, and if so
authorized by the Committee, the Company may, with the consent of the
Participant and at any time or from time to time, cancel all or a portion of any
Option granted under the Plan then subject to exercise and discharge its
obligation with respect to the Option either by payment to the Participant of an
amount of cash equal to the excess, if any, of the Fair Market Value, at such
time, of the shares subject to the portion of the Option so canceled over the
aggregate purchase price specified in the Option covering such shares, or by
issuance or transfer to the Participant of shares of Common Stock with a Fair
Market Value at such time, equal to any such excess, or by a combination of cash
and shares. Upon any such payment of cash or issuance of shares, (i) there shall
be charged against the aggregate limitations set forth in Section 3(a) a number
of shares equal to the number of shares so issued plus the number of shares
purchasable with the amount of any cash paid to the Participant on the basis of
the Fair Market Value as of the date of payment, and (ii) the number of shares
subject to the portion of the Option so canceled, less the number of shares so
charged against such limitations, shall thereafter be available for other
grants.
<PAGE> 34
- 13 -

10. AMENDMENT AND TERMINATION.

(a) The Board shall have the power, in its discretion, to amend, modify,
suspend, or terminate the Plan at any time, subject to the rights of holders of
outstanding Options and Restricted Stock Awards on the date of such action, and
to the approval of the stockholders of the Company if an amendment or
modification would change the eligibility requirements of the Plan, extend the
term of the Plan, or increase the number of shares of Common Stock subject to
grant as Options or Restricted Stock Awards under the Plan.

(b) The Committee may, with the consent of a Participant, make such
modifications in the terms and conditions of an Option or Restricted Stock Award
held by such Participant as it deems advisable.

(c) No amendment, suspension or termination of the Plan will, without the
consent of the Participant, alter, terminate, impair, or adversely affect any
right or obligation under any Option or Restricted Stock Award previously
granted to such Participant under the Plan.

11. EFFECTIVE DATE OF PLAN AND DURATION OF PLAN.

The Plan, as amended and restated in its present form, became effective
upon its adoption by the Board on April 12, 1995, subject to subsequent approval
by the Company's stockholders, which was obtained in April 1995. Unless
previously terminated, the Plan will terminate on March 31, 2001.

<PAGE> 35
ANNEX

FORM OF PROXY CARD
[SIDE ONE]

PROXY

EZENIA! INC.

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF THE COMPANY FOR ITS ANNUAL MEETING
MAY 31, 2000

The undersigned hereby appoints Khoa D. Nguyen and Stephen G. Bassett 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 Ezenia! Inc. held of record by the undersigned on April 13, 2000 at the
Annual Meeting of Stockholders to be held at the Offices of the Company, 63
Third Avenue, Burlington, Massachusetts on May 31, 2000 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, THIS PROXY WILL
BE VOTED "FOR" THE ELECTION OF DIRECTORS AND "FOR" THE OTHER PROPOSALS.

CONTINUED AND TO BE SIGNED ON REVERSE SIDE
<PAGE> 36
[SIDE TWO]

<TABLE>
<CAPTION>
- ------------------------------ ------------------------
VOTE BY TELEPHONE VOTE BY INTERNET
- ------------------------------ ------------------------
<S> <C>
It's fast, convenient, and immediate! It's fast, convenient, and your vote is immediately
Call Toll-Free on a Touch-Tone Phone confirmed and posted.
1-877-PRX-VOTE (1-877-779-8683).
- ------------------------------------------------------------ ------------------------------------------------------------
Follow these four easy steps: Follow these four easy steps:

1. Read the accompanying Proxy Statement/Prospectus 1. Read the accompanying Proxy Statement/Prospectus
and Proxy Card. and Proxy Card.

2. Call the toll-free number 2. Go to the Website
1-877-PRX-VOTE (1-877-779-8683). http://www.eproxyvote.com/ezen

3. Enter your 14-digit Voter Control Number 3. Enter your 14-digit Voter Control Number
located on your Proxy Card above your name. located on your Proxy Card above your name.

4. Follow the recorded instructions. 4. Follow the Instructions provided.

- ------------------------------------------------------------ ------------------------------------------------------------
YOUR VOTE IS IMPORTANT! YOUR VOTE IS IMPORTANT!
CALL 1-877-PRX-VOTE ANYTIME! GO TO HTTP://WWW.EPROXYVOTE.COM/EZEN ANYTIME!
</TABLE>

DO NOT RETURN YOUR PROXY CARD IF YOU ARE VOTING BY TELEPHONE OR INTERNET

[X] PLEASE MARK VOTES AS IN THIS EXAMPLE.

1. Election of one Class II Director.
Nominee: (01) William E. Foster

|_| FOR |_| WITHHELD

2. Approval of amendment to extend the term of the Amended and Restated 1991
Stock Incentive Plan.
|_| FOR |_| AGAINST |_| ABSTAIN

3. Approval of amendment to allow non-employee directors to participate under
the Amended and Restated 1991 Stock Incentive Plan.

|_| FOR |_| AGAINST |_| ABSTAIN

4. Ratification of appointment of Independent Auditors.

|_| FOR |_| AGAINST |_| ABSTAIN

5. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournments
thereof.

MARK HERE FOR ADDRESS CHANGES AND NOTE AT LEFT |_|

PLEASE MARK, SIGN, DATE AND RETURN THE PROXY FORM PROMPTLY USING THE ENCLOSED
SELF-ADDRESSED ENVELOPE.

Please sign exactly as your 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:_____