<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 [ ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
CLARIFY 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
LOGO
CLARIFY INC.
2125 O'NEL DRIVE
SAN JOSE, CALIFORNIA 95131
April 28, 1998
TO THE STOCKHOLDERS OF CLARIFY INC.
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Clarify Inc. (the "Company"), which will be held at the offices of the Company,
2125 O'Nel Drive, San Jose, CA 95131, on Thursday, June 4, 1998, at 10:00 a.m.
Details of the business to be conducted at the Annual Meeting are given in
the attached Proxy Statement and Notice of Annual Meeting of Stockholders.
It is important that your shares be represented and voted at the meeting.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, SIGN,
DATE AND PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID
ENVELOPE. Returning the proxy does NOT deprive you of your right to attend the
Annual Meeting. If you decide to attend the Annual Meeting and wish to change
your proxy vote, you may do so automatically by voting in person at the meeting.
On behalf of the Board of Directors, I would like to express our
appreciation for your continued interest in the affairs of the Company. We look
forward to seeing you at the Annual Meeting.
Sincerely,
LOGO
Anthony Zingale
President and Chief Executive Officer
<PAGE> 3
CLARIFY LOGO
CLARIFY INC.
2125 O'NEL DRIVE
SAN JOSE, CALIFORNIA 95131
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 4, 1998
The Annual Meeting of Stockholders ("Annual Meeting") of Clarify Inc. (the
"Company") will be held at the offices of the Company, 2125 O'Nel Drive, San
Jose, CA 95131, on Thursday, June 4, 1998, at 10:00 a.m. for the following
purposes:
1. To elect five (5) directors of the Board of Directors to serve
until the next Annual Meeting or until their successors have been duly
elected and qualified;
2. To approve an amendment to the Company's Employee Stock Purchase
Plan, including an increase to the number of shares available for issuance
thereunder, as set forth in the accompanying proxy;
3. To ratify the appointment of Coopers & Lybrand L.L.P. as the
Company's independent public accountants for the fiscal year ending
December 31, 1998; and
4. To transact such other business as may properly come before the
meeting or any adjournments or postponements thereof.
The foregoing items of business are more fully described in the attached
Proxy Statement.
Only stockholders of record at the close of business on April 6, 1998 are
entitled to notice of, and to vote at the Annual Meeting and at any adjournments
or postponements thereof. A list of such stockholders will be available for
inspection at the Company's headquarters located at 2125 O'Nel Drive, San Jose,
California, during ordinary business hours for the ten-day period prior to the
Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS,
ZINGALE SIG.
Anthony Zingale
President and Chief Executive Officer
San Jose, California
April 28, 1998
IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, SIGN,
DATE AND PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID
ENVELOPE. YOU MAY REVOKE YOUR PROXY AT ANY TIME PRIOR TO THE ANNUAL MEETING. IF
YOU DECIDE TO ATTEND THE ANNUAL MEETING AND WISH TO CHANGE YOUR PROXY VOTE, YOU
MAY DO SO AUTOMATICALLY BY VOTING IN PERSON AT THE MEETING.
<PAGE> 4
CLARIFY INC.
2125 O'NEL DRIVE
SAN JOSE, CALIFORNIA 95131
------------------------
PROXY STATEMENT
------------------------
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 4, 1998
These proxy materials are furnished in connection with the solicitation of
proxies by the Board of Directors of Clarify Inc., a Delaware corporation (the
"Company"), for the Annual Meeting of Stockholders (the "Annual Meeting") to be
held at the offices of the Company, 2125 O'Nel Drive, San Jose, CA 95131, on
Thursday, June 4, 1998, at 10:00 a.m., and at any adjournment or postponement of
the Annual Meeting. These proxy materials were first mailed to stockholders on
or about April 28, 1998.
PURPOSE OF MEETING
The specific proposals to be considered and acted upon at the Annual
Meeting are summarized in the accompanying Notice of Annual Meeting of
Stockholders. Each proposal is described in more detail in this Proxy Statement.
VOTING RIGHTS AND SOLICITATION OF PROXIES
The Company's Common Stock is the only type of security entitled to vote at
the Annual Meeting. On April 6, 1998, the record date for determination of
stockholders entitled to vote at the Annual Meeting, there were 21,415,750
shares of Common Stock outstanding. Each stockholder of record on April 6, 1998
is entitled to one vote for each share of Common Stock held by such stockholder
on April 6, 1998. Shares of Common Stock may not be voted cumulatively. All
votes will be tabulated by the inspector of election appointed for the meeting,
who will separately tabulate affirmative and negative votes, abstentions and
broker non-votes.
QUORUM REQUIRED
The Company's bylaws provide that the holders of a majority of the
Company's Common Stock issued and outstanding and entitled to vote at the Annual
Meeting, present in person or represented by proxy, shall constitute a quorum
for the transaction of business at the Annual Meeting. Abstentions and broker
non-votes will be counted as present for the purpose of determining the presence
of a quorum.
VOTES REQUIRED
Proposal 1. Directors are elected by a plurality of the affirmative votes
cast by those shares present in person, or represented by proxy, and entitled to
vote at the Annual Meeting. The five (5) nominees for director receiving the
highest number of affirmative votes will be elected. Abstentions and broker
non-votes are not counted toward a nominee's total. Stockholders may not
cumulate votes in the election of directors.
Proposal 2. Approval of the adoption of the amendment to the Company's
Employee Stock Purchase Plan requires the affirmative vote of a majority of
those shares present in person or represented by proxy, and entitled to vote at
the Annual Meeting. Abstentions are not affirmative votes and, therefore, will
have the same effect as a vote against the proposal. Broker non-votes will not
be treated as entitled to vote on the matter and thus, will not affect the
outcome of the voting on the proposal.
Proposal 3. Ratification of the appointment of Coopers & Lybrand L.L.P. as
the Company's independent public accountants for the fiscal year ending December
31, 1998 requires the affirmative vote of a majority of those shares present in
person, or represented by proxy, and cast either affirmatively or negatively at
the Annual Meeting. Abstentions and broker non-votes will not be treated as
entitled to vote on the proposal.
1
<PAGE> 5
PROXIES
Whether or not you are able to attend the Company's Annual Meeting, you are
urged to complete and return the enclosed proxy, which is solicited by the
Company's Board of Directors and which will be voted as you direct on your proxy
when properly completed. In the event no directions are specified, such proxies
will be voted FOR the proposals set forth in this Proxy Statement and in the
discretion of the proxy holders as to other matters that may properly come
before the Annual Meeting. You may also revoke or change your proxy at any time
before the Annual Meeting. To do this, send a written notice of revocation or
another signed proxy with a later date to the Secretary of the Company at the
Company's principal executive offices before the beginning of the Annual
Meeting. You may also automatically revoke your proxy by attending the Annual
Meeting and voting in person. All shares represented by a valid proxy received
prior to the Annual Meeting will be voted.
SOLICITATION OF PROXIES
The Company will bear the entire cost of solicitation, including the
preparation, assembly, printing, and mailing of this Proxy Statement, the proxy,
and any additional soliciting material furnished to stockholders. Copies of
solicitation material will be furnished to brokerage houses, fiduciaries, and
custodians holding shares in their names that are beneficially owned by others
so that they may forward this solicitation material to such beneficial owners.
In addition, the Company may reimburse such persons for their costs of
forwarding the solicitation material to such beneficial owners. The original
solicitation of proxies by mail may be supplemented by solicitation by
telephone, telegram, or other means by directors, officers, employees or agents
of the Company. No additional compensation will be paid to these individuals for
any such services. The Company has also retained Corporate Investor
Communications, Inc. ("CIC") to assist in the solicitation of proxies. CIC will
receive a fee for such services of approximately $4,500 plus out-of-pocket
expenses, which will be paid by the Company. Except as described above, the
Company does not presently intend to solicit proxies other than by mail.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The proxy holders intend to vote all proxies received by them in the
accompanying form FOR the Nominees listed below unless otherwise instructed. In
the event any Nominee is unable or declines to serve as a director at the time
of the Annual Meeting, the proxies will be voted for any nominee who may be
designated by the present Board of Directors to fill the vacancy. As of the date
of this Proxy Statement, the Board of Directors is not aware of any Nominee who
is unable or will decline to serve as a director. The bylaws of the Company
provide that the authorized number of directors of the Company shall be set by
resolution of the Board of Directors. As of the date of this Proxy Statement,
the number of directors presently authorized by the Board of Directors is six
(6) directors. One of the present directors of the Company, Frederick Fluegel,
will not be standing for re-election at the Annual Meeting and his term will
expire upon the date of the Annual Meeting. The Board of Directors has adopted a
resolution, effective upon the date of the Annual Meeting, that reduces the
authorized number of directors of the Company to five (5). The directors who are
being nominated for election to the Board of Directors (the "Nominees"), their
ages as of April 6, 1998, their positions and offices held with the Company and
certain biographical information are set forth below. The five (5) Nominees
receiving the highest number of affirmative votes of the shares entitled to vote
at the Annual Meeting will be elected directors of the Company to serve until
the next Annual Meeting or until their successors have been duly elected and
qualified.
2
<PAGE> 6
<TABLE>
<CAPTION>
NOMINEES AGE POSITIONS AND OFFICES HELD WITH THE COMPANY
-------- --- -------------------------------------------
<S> <C> <C>
David A. Stamm.................... 45 Chairman of the Board
Anthony Zingale(1)................ 42 President, Chief Executive Officer and Director
Thomas H. Bredt(2)................ 57 Director
Mary Jane Elmore(3)............... 44 Director
James L. Patterson(2)(3).......... 60 Director
</TABLE>
- ---------------
(1) Member of Stock Option Committee
(2) Member of Compensation Committee
(3) Member of Audit Committee
Mr. Stamm co-founded the Company in August 1990 and served as President and
Chief Executive Officer of the Company until March 1998. In March 1998, Mr.
Stamm was appointed Chairman of the Board of the Company. Mr. Stamm also
co-founded Daisy Systems Corporation ("Daisy"), a computer-aided engineering
hardware and software company, in August 1980, and served in a variety of
executive positions with Daisy through late 1988, most recently as Executive
Vice President, and served as a director until late 1989. Prior to joining
Daisy, Mr. Stamm was employed by Intel Corporation, a semiconductor company, for
seven years. Mr. Stamm holds a B.S.E.E. degree from Purdue University and holds
a patent on single-chip microprocessor technology.
Mr. Zingale was named President and Chief Executive Officer of the Company
in March 1998. Prior to joining the Company, Mr. Zingale was at Cadence Design
Systems ("Cadence") from May 1989 to November 1997, serving as senior vice
president of worldwide marketing and in a variety of other executive positions.
Prior to joining Cadence, Mr. Zingale was vice president of marketing at EDA
Systems, Inc., a Santa Clara, California, start-up that was acquired by Digital
Equipment Corporation, and held a variety of positions with Daisy and Intel
Corporation. Mr. Zingale holds a B.S. degree in electrical and computer
engineering and a B.A. degree in business administration from the University of
Cincinnati.
Mr. Bredt has been a director of the Company since February 1991. Since
April 1986, Mr. Bredt has been a general partner and managing member of several
venture capital investment partnerships, known collectively as Menlo Ventures.
Mr. Bredt is also a director of FlexiInternational Software, Inc., an accounting
software company, Interlink Computer Services, Inc., a computer software and
hardware company, and Red Brick Systems, Inc., a data warehousing company. Mr.
Bredt holds a B.S.E. degree in science engineering from the University of
Michigan, an M.E.E. degree in electrical engineering from New York University
and a Ph.D. degree in computer science from Stanford University.
Ms. Elmore has been a director of the Company since February 1991. Since
1983, Ms. Elmore has been a general partner of Institutional Venture Management,
the general partner of several Institutional Venture Partners venture capital
investment partnerships. Ms. Elmore is also a director of Storm Technology,
Inc., a provider of digital photo solutions. Ms. Elmore holds a B.S. degree in
mathematics from Purdue University and an M.B.A. from Stanford University.
Mr. Patterson served as Chairman of the Board of the Company from April
1991 to March 1998. Mr. Patterson is also a director of Aspect
Telecommunications Corp., a provider of call transmission processing systems,
and a director of several private companies. Mr. Patterson has been an
independent consultant since June 1987. Mr. Patterson holds a B.S.E.E. degree in
electrical engineering from the University of Colorado.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
During the fiscal year ended December 31, 1997, the Board of Directors held
nine meetings. For the fiscal year, each of the directors during the term of
their tenure attended or participated in at least 75% of the aggregate of (i)
the total number of meetings of the Board of Directors and (ii) the total number
of meetings or actions by written consent of all committees of the Board of
Directors on which each such director served.
3
<PAGE> 7
The Board of Directors has three standing committees: the Audit Committee, the
Compensation Committee, and the Stock Option Committee.
During the fiscal year ended December 31, 1997, the Audit Committee of the
Board of Directors met two times. The Audit Committee reviews, acts on and
reports to the Board of Directors with respect to various auditing and
accounting matters, including the selection of the Company's auditors, the scope
of the annual audits, fees to be paid to the Company's auditors, the performance
of the Company's auditors and the accounting practices of the Company. The
members of the Compensation Committee for the fiscal year ended December 31,
1997 are Ms. Elmore and Mr. Fluegel. Mr. Patterson was appointed to the Audit
Committee in March, 1998.
During the fiscal year ended December 31, 1997, the Compensation Committee
of the Board of Directors met twice and acted by unanimous written consent five
times. The Compensation Committee reviews the performance of the executive
officers of the Company and reviews the compensation programs for other key
employees, including salary and cash bonus levels and administers the 1995 Stock
Option/Stock Issuance Plan. The members of the Compensation Committee are
Messrs. Bredt and Patterson.
During the fiscal year ended December 31, 1997, the Stock Option Committee
of the Board of Directors acted by written consent 99 times. The Stock Option
Committee has the authority to make option grants under the 1995 Stock
Option/Stock Issuance Plan to non-officers of the Company. The sole member of
the Stock Option Committee during 1997 was Mr. David Stamm. Effective March 20,
1998, Mr. Anthony Zingale was elected the sole member of the Stock Option
Committee.
DIRECTOR COMPENSATION
Except for grants of stock options, directors of the Company generally do
not receive compensation for services provided as a director. The Company also
does not pay compensation for committee participation or special assignments of
the Board of Directors, except for reimbursement of their expenses in attending
Board and committee meetings.
Non-employee Board members are eligible for option grants pursuant to the
provisions of the Automatic Option Grant Program under the Company's 1995 Stock
Option/Stock Issuance Plan ("Option Plan"). On June 11, 1997, Messrs. Patterson,
Bredt, and Fluegel and Ms. Elmore were each granted an option to purchase 6,000
shares at an exercise price of $11.4843 per share and each, other than Mr.
Fluegel, will be granted an additional option for 6,000 shares on the date of
the Annual Meeting under the Automatic Option Grant Program. Under the Automatic
Option Grant Program, each individual who becomes a non-employee Board member,
whether through election by the stockholders or appointment by the Board, will
automatically be granted, at the time of such initial election or appointment, a
non-statutory stock option to purchase 10,000 shares of Common Stock. On the
date of each Annual Stockholders Meeting beginning with the 1996 Annual Meeting,
each individual who continues to serve as a non-employee Board member will
receive an additional grant of a non-statutory stock option under the Option
Plan to purchase 6,000 shares of Common Stock, provided such individual has been
a member of the Board for at least six months.
Non-employee members of the Board not serving on the Compensation Committee
and directors who are employees of the Company are eligible to receive options
and be issued shares of Common Stock directly under the Option Plan. A director
who is also an employee of the Company is eligible to participate in the
Company's Employee Stock Purchase Plan and, if an executive officer of the
Company, the Executive Bonus Plan.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES LISTED HEREIN.
4
<PAGE> 8
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of April 6, 1998, certain information
with respect to shares beneficially owned by (i) each person who is known by the
Company to be the beneficial owner of more than five percent of the Company's
outstanding shares of Common Stock, (ii) each of the Company's directors and the
executive officers named in the Summary Compensation Table and (iii) all
directors and executive officers as a group. Beneficial ownership has been
determined in accordance with Rule 13d-3 under the Exchange Act. Under this
rule, certain shares may be deemed to be beneficially owned by more than one
person (if, for example, persons share the power to vote or the power to dispose
of the shares). In addition, shares are deemed to be beneficially owned by a
person if the person has the right to acquire shares (for example, upon exercise
of an option or warrant) within (60) days of the date as of which the
information is provided and in computing the percentage owned by such person
(and only such person) by reason of such acquisition rights. As a result, the
percentage of outstanding shares of any person as shown in the following table
does not necessarily reflect the person's actual voting power at any particular
date.
<TABLE>
<CAPTION>
5% STOCKHOLDERS, DIRECTORS, NAMED OFFICERS SHARES BENEFICIALLY PERCENT BENEFICIALLY
AND OFFICERS AND DIRECTORS AS A GROUP OWNED(1) OWNED(1)
------------------------------------------ ------------------- --------------------
<S> <C> <C>
Franklin Resources, Inc........................ 1,767,900 8.26%
David A. Stamm(2).............................. 1,628,122 7.60
c/o Clarify Inc.
2125 O'Nel Drive
San Jose, California 95131
Thomas H. Bredt(3)............................. 86,715 *
Mary Jane Elmore(4)............................ 937,584 4.37
Frederick Fluegel(5)........................... 172,382 *
James L. Patterson(6).......................... 208,974 *
Donna J.H. Novitsky(7)......................... 268,415 1.25
Randy Raynor(8)................................ 178,579 *
Ray M. Fritz................................... 40,352 *
Robert A. Spinner(9)........................... 130,610 *
Christopher C. Liotta(10)...................... 120,913 *
All officers and directors as a group(11)...... 3,893,057 17.83
(13 persons)
</TABLE>
- ---------------
* Less than 1%
(1) Except as indicated in the footnotes to this table and pursuant to
applicable community property laws, the persons named in the table have
sole voting and investment power with respect to all shares of Common
Stock.
(2) Includes 20,000 shares of Common Stock issuable pursuant to options
exercisable within 60 days of April 6, 1998.
(3) Includes 22,000 shares of Common Stock issuable pursuant to currently
exercisable options.
(4) Includes (i) 22,000 shares of Common Stock issuable pursuant to currently
exercisable options; (ii) 349,176 shares held by Institutional Venture
Partners IV ("IVP IV"); (iii) 5,318 shares held by Institutional Venture
Management IV ("IVM IV"); (iv) 380,000 shares held by Institutional Venture
Partners VII ("IVP VII"); and (v) 6,000 shares held by Institutional
Venture Management VII ("IVM VII"). Ms. Elmore, a director of the Company,
is a general partner of IVM IV, which is the general partner of IVP IV and
a general partner of IVM VII, which is the general partner of IVP VII. Ms.
Elmore disclaims beneficial ownership of shares held by IVP IV and IVP VII
and persons and entities affiliated therewith except to the extent of her
pecuniary interest in IVP IV and IVP VII.
(5) Includes 22,000 shares of Common Stock issuable pursuant to options
exercisable within 60 days of April 6, 1998.
5
<PAGE> 9
(6) Includes 22,000 shares of Common Stock issuable pursuant to options
exercisable within 60 days of April 6, 1998.
(7) Includes 16,666 shares of Common Stock issuable pursuant to options
exercisable within 60 days of April 6, 1998.
(8) Includes 75,800 shares of Common Stock issuable pursuant to options
exercisable within 60 days of April 6, 1998.
(9) Includes 102,640 shares of Common Stock issuable pursuant to options
exercisable within 60 days of April 6, 1998.
(10) Includes 33,332 shares of Common Stock issuable pursuant to options
exercisable within 60 days of April 6, 1998.
(11) Includes 417,132 shares of Common Stock issuable pursuant to options
exercisable within 60 days of April 6, 1998.
6
<PAGE> 10
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Company's Board of Directors (the
"Compensation Committee") has the exclusive authority to establish the level of
base salary payable to the Chief Executive Officer ("CEO") and the executive
officers of the Company and to administer the Company's 1995 Stock Option/ Stock
Issuance Plan ("Option Plan") and Employee Stock Purchase Plan. In addition, the
Committee has the responsibility for approving the individual bonus programs to
be in effect for the CEO and the other executive officers and certain key
employees each fiscal year.
For the 1997 fiscal year, the process utilized by the Committee in
determining executive officer compensation levels took into account both
qualitative and quantitative factors. Among the factors considered by the
Committee were survey data disclosing executive compensation programs in place
at similar-size companies and the recommendations of the Company's CEO. However,
the Committee made the final compensation decisions concerning such officers.
General Compensation Policy. The Committee's fundamental policy is to offer
the Company's executive officers competitive compensation opportunities based
upon overall Company performance, their individual contribution to the financial
success of the Company and their personal performance. It is the Committee's
objective to have a substantial portion of each officer's compensation
contingent upon the Company's performance, as well as upon his or her own level
of performance. Accordingly, each executive officer's compensation package
consists of: (i) base salary, (ii) cash bonus awards and (iii) long-term
stock-based incentive awards.
Base Salary. The base salary for each executive officer is set on the basis
of personal performance and the salary level in effect for comparable positions
at companies that compete for executive talent on the basis of executive
management surveys conducted by the Company.
Annual Cash Bonuses. Each executive officer has an established target. The
annual pool of bonuses for executive officers is determined on the basis of the
Company's achievement of the financial performance targets established at the
start of the fiscal year, a range for the executive's contribution and a measure
of customer satisfaction. For the 1997 fiscal year, no bonuses were paid to the
executive officers because the Company did not achieve its performance targets.
Each year, the annual incentive plan is reevaluated with a new achievement
threshold and new targets for revenue and profit.
Long-Term Incentive Compensation. During fiscal 1997, the Committee, in its
discretion, made option grants to Messrs. Stamm, Raynor, Spinner, Liotta, and
Ms. Novitsky under the Option Plan. Generally, a significant grant is made in
the year that an officer commences employment and no grant is made in the second
year. Grants may or may not be made in subsequent years. Generally, the size of
the initial grant and each subsequent grant is set at a level that the Committee
deems appropriate to create a meaningful opportunity for stock ownership based
upon the individual's position with the Company, the individual's potential for
future responsibility and promotion and, for subsequent grants, the individual's
performance in the recent period and the number of unvested options held by the
individual at the time of the new grant. The relative weight given to each of
these factors will vary from individual to individual at the Committee's
discretion.
Each grant allows the officer to acquire shares of the Company's Common
Stock at a fixed price per share (the market price on the grant date) over a
specified period of time. The option vests in periodic installments over a two
to five year period, contingent upon the executive officer's continued
employment with the Company and the vesting schedule is adjusted to reflect
existing grants to ensure a meaningful incentive in each year following the year
of grant. Accordingly, the option will provide a return to the executive officer
only if he or she remains in the Company's employ, and then only if the market
price of the Company's Common Stock appreciates over the option term.
CEO Compensation. The annual base salary for Mr. Stamm, the Company's
President and Chief Executive Officer during fiscal year 1997, was established
by the Committee in February 1994 and increased in March 1997. The Committee's
decision was made primarily on the basis of Mr. Stamm's personal performance of
his duties.
7
<PAGE> 11
The remaining components of the Chief Executive Officer's 1997 fiscal year
incentive compensation were entirely dependent upon the Company's financial
performance and provided no dollar guarantees. No bonus was paid to the Chief
Executive Officer for fiscal year 1997 based on the same incentive plan as all
other officers. An option grant was made to the Chief Executive Officer during
the 1997 fiscal year and was intended to reflect his years of service with the
Company and to place a significant portion of his total compensation at risk,
because the options will have no value unless there is appreciation in the value
of the Company's Common Stock over the option term.
Tax Limitation. Under the Federal tax laws, a publicly-held company such as
the Company will not be allowed a federal income tax deduction for compensation
paid to certain executive officers to the extent that compensation exceeds $1
million per officer in any year. To qualify for an exemption from the $1 million
deduction limitation, the stockholders were asked to approve a limitation under
the Company's Option Plan on the maximum number of shares of Common Stock for
which any one participant may be granted stock options over the term of the
Option Plan. Because this limitation was adopted, any compensation deemed paid
to an executive officer when he exercises an outstanding option under the Option
Plan with an exercise price equal to the fair market value of the option shares
on the grant date will qualify as performance-based compensation that will not
be subject to the $1 million limitation. Since it is not expected that the cash
compensation to be paid to the Company's executive officers for the 1997 fiscal
year will exceed the $1 million limit per officer, the Committee will defer any
decision on whether to limit the dollar amount of all other compensation payable
to the Company's executive officers to the $1 million cap.
Compensation Committee
Thomas H. Bredt
James L. Patterson
8
<PAGE> 12
COMPENSATION COMMITTEE REPORT ON REPRICED OPTIONS
On May 9, 1997, the Compensation Committee of the Board of Directors
approved a plan pursuant to which certain officers and employees were allowed to
exchange options with exercise prices ranging from $15.00 to $51.88 for new
options having exercise prices equal to $13.50, the then current fair market
value of the Common Stock. Each repriced option retained its original vesting
schedule except that no portion of the option could be exercised prior to
December 9, 1997 and no vesting accrued between May 9, 1997 and December 9,
1997. Certain options granted within 12 months of May 9, 1997 were subject to a
longer vesting schedule. Approximately 1,008,000 stock options were repriced
pursuant to this program.
The objectives of the Company's 1995 Stock Option/Stock Issuance Plan (the
"Option Plan") are to promote the interests of the Company by providing
employees, non-employee directors and consultants or independent contractors an
incentive to acquire a proprietary interest in the Company and to continue to
render services to the Company. The Compensation Committee further believes
that, at their original exercise prices, the disparity between the exercise
price of these options and recent market prices for the Common Stock did not
provide meaningful incentives to the officers and employees holding the options.
The Committee concluded that such option grants seriously undermined the
specific objectives of the Option Plan and should be canceled and replaced. A
review of other companies in the software industry indicates that some of these
companies have been confronted with this problem and have made similar
adjustments in option prices to motivate their employees. In making this
decision, the Committee also considered the fairness of such a determination in
relation to other stockholders. In the opinion of the Committee, the
stockholders' long-term best interests were clearly served by the retention and
motivation of the optionees.
Compensation Committee
Thomas H. Bredt
James L. Patterson
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Company's Board of Directors was formed
in July 1993, and the members of the Compensation Committee are Messrs.
Patterson and Bredt. Neither of these individuals was at any time during 1997,
or at any other time, an officer or employee of the Company. No executive
officer of the Company serves as a member of the board of directors or
compensation committee of any entity that has one or more executive officers
serving as a member of the Company's Board of Directors or Compensation
Committee.
9
<PAGE> 13
STOCK PERFORMANCE GRAPH
The graph set forth below compares the cumulative total stockholder return
on the Company's Common Stock between November 3, 1995 (the date the Company's
Common Stock commenced public trading) and December 31, 1997 with the cumulative
total return of (i) the CRSP Total Return Index for the Nasdaq Stock Market
(U.S. Companies) (the "Nasdaq Stock Market-U.S. Index") and (ii) the Hambrecht &
Quist Software Sector Index (the "H&Q Software Sector Index"), over the same
period. This graph assumes the investment of $100.00 on November 3, 1995 in the
Company's Common Stock, the Nasdaq Stock Market-U.S. Index and the H&Q Software
Sector Index, and assumes the reinvestment of dividends, if any.
The comparisons shown in the graph below are based upon historical data and
the Company cautions that the stock price performance shown in the graph below
is not indicative of, nor intended to forecast, the potential future performance
of the Company's Common Stock. Information used in the graph was obtained from
Hambrecht & Quist LLC, a source believed to be reliable, but the Company is not
responsible for any errors or omissions in such information.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG CLARIFY INC.,
THE NASDAQ STOCK MARKET-U.S. INDEX AND THE H&Q SOFTWARE SECTOR INDEX
<TABLE>
<CAPTION>
H&Q
MEASUREMENT PERIOD NASDAQ STOCK COMPUTER
(FISCAL YEAR COVERED) CLARIFY INC. MARKET (U.S.) SOFTWARE
<S> <C> <C> <C>
11/3/95 100 100 100
12/95 135 99 96
12/96 431 122 116
12/97 104 149 140
</TABLE>
Notwithstanding anything to the contrary set forth in any of the Company's
previous or future filings under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, that might incorporate this Proxy
Statement or future filings made by the Company under those statutes, the
Compensation Committee Report and Stock Performance Graph are not deemed filed
with the Securities and Exchange Commission and shall not be deemed incorporated
by reference into any of those prior filings or into any future filings made by
the Company under those statutes.
10
<PAGE> 14
EXECUTIVE COMPENSATION AND RELATED INFORMATION
The following Summary Compensation Table sets forth the compensation earned
by the Company's Chief Executive Officer and four (4) other executive officers
who were serving as such at the end of the fiscal year each of whose salary and
bonus for fiscal year 1997 exceeded $100,000 for services rendered in all
capacities to the Company and its subsidiaries for that fiscal year and one
other individual who was no longer an executive officer on December 31, 1997 but
whose salary and bonus for 1997 exceeded $100,000 (collectively, the "Named
Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
ANNUAL COMPENSATION ---------------------
----------------------- SECURITIES UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS (#) COMPENSATION (1)($)
--------------------------- ---- ---------- --------- --------------------- -------------------
<S> <C> <C> <C> <C> <C>
David A. Stamm................. 1997 174,923 0 135,000(3) 468
President and Chief 1996 173,269 111,540 35,000 336
Executive Officer(2) 1995 139,706 158,834 20,000 600
Donna J. H. Novitsky........... 1997 149,903 0 55,000(3) 432
Former Vice President, 1996 139,850 55,770 15,000 313
Marketing 1995 130,311 57,949 16,666 626
Randy Raynor................... 1997 149,980 0 25,000(3) 456
Vice President, 1996 149,623 59,826 5,000 339
Research and Development(4) 1995 141,006 62,705 80,000 677
Robert A. Spinner.............. 1997 340,902(5) 0 102,500(3) 432
Senior Vice President, 1996 308,426(5) 27,040 22,500 327
Worldwide Sales 1995 296,695(5) 47,750 33,332 670
Christopher C. Liotta.......... 1997 149,903 0 45,000(3) 432
Former Vice President, 1996 139,811 55,770 20,000 313
Customer Service and Support 1995 130,429 68,001 16,666 626
Ray M. Fritz(6)................ 1997 147,501 0 15,000(3) 432
Former Vice President, 1996 143,129 56,784 15,000 313
Finance and Chief Financial 1995 128,422 83,751 13,332 626
Officer
</TABLE>
- ---------------
(1) Represents life insurance premiums paid by the Company.
(2) Effective March 2, 1998, Anthony Zingale became President and Chief
Executive Officer and Mr. Stamm became Chairman of the Board.
(3) Each of the options granted to the Named Officers in 1996 were canceled and
subsequently regranted on May 9, 1997. Accordingly, a portion of the options
shown as granted in 1997 replace the options granted in 1996.
(4) Effective March 2, 1998, Mr. Raynor became Chief Technology Officer.
(5) Includes commissions of $159,094 earned in 1997, $131,083 earned in 1996,
and $57,200 earned in 1995.
(6) Mr. Fritz terminated employment effective on December 15, 1997.
11
<PAGE> 15
OPTION GRANTS IN LAST FISCAL YEAR
The following table contains information concerning the stock option grants
made to each of the Named Officers in fiscal year 1997. No stock appreciation
rights were granted to these individuals during such year.
<TABLE>
<CAPTION>
INDIVIDUAL GRANT POTENTIAL
--------------------------------- REALIZABLE VALUE AT
NUMBER OF ASSUMED ANNUAL
SECURITIES RATES OF STOCK
UNDERLYING % OF TOTAL PRICE APPRECIATION
OPTIONS OPTIONS GRANTED EXERCISE FOR OPTION TERM(4)
GRANTED TO EMPLOYEES OR BASE EXPIRATION -------------------
NAME (#)(1) IN 1997(2)(%) PRICE($/SH)(3) DATE 5%($) 10%($)
---- ------------ --------------- --------------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
David A. Stamm........... 29,628 1.3013 13.5000 5/9/07 251,544 637,462
5,372 0.2360 13.5000 5/9/07 45,609 115,581
100,000 4.3923 11.0625 12/22/07 695,715 1,763,077
Donna J.H. Novitsky...... 15,000 0.6588 13.5000 5/9/07 127,351 322,733
16,359 0.7185 11.0625 12/22/07 113,812 288,422
23,641 1.0384 11.0625 12/22/07 164,474 416,809
Randy Raynor............. 5,000 0.2196 13.5000 5/9/07 42,450 107,578
20,000 0.8785 11.0625 12/22/07 139,143 352,616
Robert A. Spinner........ 43,126 1.8942 7.0000 4/21/07 189,852 481,122
6,874 0.3019 7.0000 4/21/07 30,261 76,688
20,971 0.9211 13.5000 5/9/07 178,045 451,202
1,529 0.0672 13.5000 5/9/07 12,981 32,897
30,000 1.3177 11.0625 12/22/07 208,714 528,923
Christopher C. Liotta.... 20,000 0.8785 13.5000 5/9/07 169,802 430,310
9,502 0.4174 11.0625 12/22/07 66,107 167,528
15,498 0.6807 11.0625 12/22/07 107,822 273,242
Ray M. Fritz............. 15,000 0.6588 13.5000 5/9/07 127,351 322,732
</TABLE>
- ---------------
(1) Options become exercisable to the extent of 25% after one year from the
vesting commencement date and the remainder in a series of equal monthly
installments over a period of 36 months. The plan administrator has the
discretionary authority to reprice the options through the cancellation of
those options and the grant of replacement options with an exercise price
based on the fair market value of the option shares on the regrant date. The
option will become fully exercisable and any unvested option shares will
vest immediately upon an acquisition of the Company by merger or asset sale
unless assumed or replaced by the acquiring entity. Any options which are
assumed or replaced in the transaction and do not otherwise accelerate at
that time shall automatically accelerate (and any unvested option shares
which do not otherwise vest at that time shall automatically vest) in the
event the optionee's service terminates by reason of an involuntary or
constructive termination within 18 months following the transaction. The
options have a maximum term of 10 years measured from the option grant date,
subject to earlier termination in the event of the optionee's cessation of
service with the Company.
(2) The Company granted options to employees to purchase 2,276,729 shares of
Common Stock in 1997.
(3) The exercise price for each option may be paid in cash, in shares of Common
Stock valued at fair market value on the exercise date or through a cashless
exercise procedure involving a same-day sale of the purchased shares. The
Company may also finance the option exercise by loaning the optionee
sufficient funds to pay the exercise price for the purchased shares,
together with any federal and state income tax liability incurred by the
optionee in connection with such exercise.
(4) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by the rules of the Commission. There is no assurance that the
actual stock price appreciation over the 10-year option term will be at the
assumed 5% and 10% levels or at any other defined level. Unless the market
price of the Common Stock appreciates over the option term, no value will be
realized from option grants made to the executive officers.
12
<PAGE> 16
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information concerning the shares acquired
and the value realized upon the exercise of stock options during fiscal year
1997 and the year-end number and value of unexercised options with respect to
each of the Named Officers. No stock appreciation rights were exercised by the
Named Officers in fiscal year 1997 or were outstanding at the end of that year.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT FY-END (#) AT FY-END ($)(2)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE (#) REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David A. Stamm........... 0 0 6,667 148,333 72,504 201,247
Donna J.H. Novitsky...... 0 0 0 71,666 0 203,743
Randy Raynor............. 3,000 62,250 29,133 71,667 316,821 518,754
Robert A. Spinner........ 17,500 214,875 47,293 164,305 516,892 897,079
Christopher C. Liotta.... 0 0 16,667 61,666 134,370 148,432
Ray M. Fritz............. 75,050 2,403,476 6,666 0 53,745 0
</TABLE>
- ---------------
(1) Based on the fair market value of the Company's Common Stock on the date of
exercise, less the exercise price payable for such shares.
(2) Based on the fair market value of the Company's Common Stock at year-end of
$11.625 per share less the exercise price payable for such shares.
TEN-YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
LENGTH OF
SECURITIES ORIGINAL OPTION
UNDERLYING EXERCISE PRICE TERM
NUMBER OF MARKET PRICE OF AT TIME OF REMAINING
OPTIONS STOCK AT TIME OF REPRICING OR AT DATE OF
REPRICED OR REPRICING OR AMENDMENT EXERCISE REPRICING OR
NAME DATE AMENDED (#) AMENDMENT ($) ($) PRICE ($) AMENDMENT
---- ----------- ----------- ---------------- -------------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C>
David Stamm............ May 9, 1997 35,000 13.50 51.88 13.50 115 mos.
Donna J.H. Novitsky.... May 9, 1997 15,000 13.50 51.88 13.50 115 mos.
Randy Raynor........... May 9, 1997 5,000 13.50 51.88 13.50 115 mos.
Robert A. Spinner...... May 9, 1997 22,500 13.50 51.88 13.50 115 mos.
Christopher C.
Liotta............... May 9, 1997 20,000 13.50 51.88 13.50 115 mos.
Ray M. Fritz........... May 9, 1997 15,000 13.50 51.88 13.50 115 mos.
Samuel Rahmil.......... May 9, 1997 10,000 13.50 51.88 13.50 115 mos.
Laraine Sanford........ May 9, 1997 80,000 13.50 21.38 13.50 111 mos.
</TABLE>
13
<PAGE> 17
EXECUTIVE OFFICERS
Executive officers of the Company are appointed by the Board of Directors
and serve at the discretion of the Board of Directors. The executive officers of
the Company as of April 6, 1998 are as follows:
<TABLE>
<CAPTION>
OFFICERS AGE POSITIONS AND OFFICES HELD WITH THE COMPANY
-------- --- -------------------------------------------
<S> <C> <C>
Anthony Zingale............................ 42 President, Chief Executive Officer and Director
Robert A. Spinner.......................... 40 Senior Vice President of Worldwide Sales
Tanya Johnson.............................. 44 Senior Vice President of Engineering
Randy Raynor............................... 49 Chief Technology Officer
Samuel Rahmil.............................. 44 Vice President of Customer Services
Laraine Sanford............................ 48 Vice President of Human Resources
</TABLE>
Mr. Spinner has been Senior Vice President of Worldwide Sales at the
Company since January, 1997, having joined the Company in January 1995 as Vice
President of Sales. From October 1988 to December 1994, Mr. Spinner served as
Director of Western Region Sales for Sybase, Inc., a data management company.
Mr. Spinner has a B.A. in mathematics from Washington University.
Ms. Johnson has been Senior Vice President of Engineering since joining the
Company in April 1997. Previously, Ms. Johnson was Senior Director of Groupware
Development at Oracle Corporation, a software company, from February 1992 to
February 1997. From 1987 to 1992, Ms. Johnson worked at Wang Laboratories, Inc.,
a global network and desktop and integration services company. Ms. Johnson holds
a B.S. degree in mathematics and an M.S. degree in statistics from Oklahoma
State University.
Mr. Raynor was appointed Chief Technology Officer in March 1998, having
joined the Company in September 1992 as Vice President of Engineering. From
August 1991 to August 1992, Mr. Raynor was Vice President of Engineering at
Alisa Systems, a client-server software company. Prior to joining Alisa Systems,
Mr. Raynor was Vice President of Engineering at Computer Associates, a software
company supporting mainframe computers, and Inference Corporation, a company
that offers consulting, support and training services to enable companies to
improve customer service. Mr. Raynor also worked as Development Manager at Texas
Instruments, Inc., a diversified electronics manufacturer. Mr. Raynor has a B.S.
in computer science from North Carolina State University and a M.S. and Ph.D. in
computer science from Georgia Institute of Technology.
Mr. Rahmil was appointed Vice President of Customer Services in March 1998.
Mr. Rahmil joined the Company in March 1992 as Manager of Product Quality
Assurance. In August 1995, he was promoted to Vice President of Product Quality
Assurance, having served as Director of Product Quality Assurance previously.
From August 1991 to March 1992, Mr. Rahmil was employed as a Senior Test
Engineer by Netlabs, a software development company. From 1987 to 1991, Mr.
Rahmil also worked as a Senior Test Engineer and Test Manager at Convergent
Technologies, a computer system manufacturer. Mr. Rahmil has a B.A. in computer
science and mathematics from Ben Gurion University of Negev, Beer-Sheva, Israel.
Ms. Sanford has been Vice President of Human Resources at the Company since
joining in August 1996. From September 1993 to July 1996, Ms. Sanford was Vice
President of Human Resources at Spectrian, Inc., a telecommunications company.
Ms. Sanford has a B.S. in Business Administration from the University of San
Francisco.
EMPLOYMENT AGREEMENTS
On February 23, 1998, the Company entered into an employment agreement with
Anthony Zingale, the Company's President and Chief Executive Officer. The
agreement provides for accelerated vesting of his options as if his service
continued for an additional twelve months should there be certain changes in
control involving the Company.
14
<PAGE> 18
PROPOSAL NO. 2
AMENDMENT TO THE EMPLOYEE STOCK PURCHASE PLAN
The stockholders are being asked to approve an amendment to the Clarify
Inc. Employee Stock Purchase Plan (the "Purchase Plan") to increase the number
of shares issuable thereunder by 500,000 shares. The Purchase Plan was adopted
by the Board and approved by the stockholders on September 14, 1995. The share
reserve for the Purchase Plan was increased on September 30, 1996 to reflect the
stock dividend which was approved by the Board on September 18, 1996. The Board
and stockholders approved an amendment to the Purchase Plan on April 9, 1997 and
June 11, 1997, respectively, which increased the share reserve by 500,000. The
Board approved the amendment to the Purchase Plan, which is the subject of this
Proposal No. 2, on March 20, 1998. The Purchase Plan, and the right of
participants to make purchases thereunder, is intended to meet the requirements
of an "employee stock purchase plan" as defined in Section 423 of the Internal
Revenue Code (the "Code").
The following summary of certain Purchase Plan provisions is qualified, in
its entirety, by reference to the Purchase Plan. Copies of the Purchase Plan
document may be obtained by a stockholder upon written request to the Secretary
of the Company at the executive offices in San Jose, California.
Purpose. The purpose of the Purchase Plan is to provide employees of the
Company and designated parent or subsidiary corporations (collectively,
"Participating Companies") an opportunity to participate in the ownership of the
Company by purchasing Common Stock of the Company through payroll deductions.
The Company is the only Participating Company in the Purchase Plan.
The Purchase Plan is intended to benefit the Company as well as its
stockholders and employees. The Purchase Plan gives employees an opportunity to
purchase shares of Common Stock at a favorable price. The Company believes that
the stockholders will correspondingly benefit from the increased interest on the
part of participating employees in the profitability of the Company. Finally,
the Company will benefit from the periodic investments of equity capital
provided by participants in the Purchase Plan.
Administration. The Purchase Plan is administered by the Compensation
Committee of the Board (the "Committee"). All costs and expenses incurred in
plan administration will be paid by the Company without charge to participants.
Cash proceeds received by the Company from payroll deductions under the Purchase
Plan generally shall be credited to a non-interest bearing book account.
Shares and Terms. The stock issuable under the Purchase Plan is the
Company's authorized but unissued or reacquired Common Stock. The maximum number
of shares of Common Stock that may be issued in the aggregate under the Purchase
Plan is 1,870,000, adjusted as described in the "Adjustment" section of this
description, including the 500,000 shares which is the subject of this Proposal
No. 2. Common Stock subject to a terminated purchase right shall be available
for purchase pursuant to purchase rights subsequently granted.
Adjustments. If any change in the Common Stock occurs (through
recapitalization, stock dividend, stock split, combination of shares, exchange
of shares, or other change affecting the outstanding Common Stock as a class
without the Company's receipt of consideration), appropriate adjustments shall
be made by the Company to the class and maximum number of shares subject to the
Purchase Plan, to the class and maximum number of shares purchasable by each
participant on any one purchase date, and the class and number of shares and
purchase price per share subject to outstanding purchase rights in order to
prevent the dilution or enlargement of benefits thereunder.
Eligibility. Generally, any employee who has completed thirty (30) days of
service and is customarily employed by a Participating Company more than 20
hours per week and for more than five months per calendar year is eligible to
participate in the Purchase Plan and may enter an offering period on the start
date of any purchase period within such offering period. Approximately 510
employees (including 6 officers) were eligible to participate in the Purchase
Plan as of April 6, 1998.
Offering Periods. The Purchase Plan is implemented by a series of
successive offering periods which generally have a duration of twenty-four
months; each offering period is comprised of a series of one or more
15
<PAGE> 19
successive purchase periods, which will have a duration of six (6) months. The
current offering period commenced on May 1, 1997 and will end on April 30, 1999.
The purchase periods during the current offering period ended or will end on
October 31, 1997, April 30, 1998, October 30, 1998, and April 30, 1999. The
Committee in its discretion may vary the beginning date and ending date of the
offering periods prior to their commencement, provided no offering period shall
exceed twenty-four (24) months in length.
The participant will have a separate purchase right for each offering
period in which he or she participates. The purchase right will be granted on
the first day of the offering period and will be automatically exercised in
successive installments on the last day of each purchase period within the
offering period.
Purchase Price. The purchase price per share under the Purchase Plan is 85%
of the lower of (i) the fair market value of a share of Common Stock on the
first day of the applicable offering period or, if later, the participant's
entry date into the offering period, or (ii) the fair market value of a share of
Common Stock on the purchase date. However, if the participant's entry date is
not the first day of the applicable offering period, the clause (i) amount will
not be less than the fair market value of a share of Common Stock on the start
date of such offering period. Generally, the fair market value of the Common
Stock on a given date is the closing price of the Common Stock, as reported on
the Nasdaq National Market. The market value of the Common Stock as reported on
the Nasdaq National Market as of April 6, 1998 was $13.625 per share.
Limitations. The plan imposes certain limitations upon a participant's
rights to acquire Common Stock, including the following:
1. No purchase right shall be granted to any person who immediately
thereafter would own, directly or indirectly, stock or hold outstanding
options or rights to purchase stock possessing five percent (5%) or more
of the total combined voting power or value of all classes of stock of
the Company or any of its parent or subsidiary corporations.
2. In no event shall a participant be permitted to purchase more than 2,000
shares on any one purchase date.
3. The right to purchase Common Stock under the Purchase Plan (or any other
employee stock purchase plan that the Company or any of its subsidiaries
may establish) in an offering intended to qualify under Section 423 of
the Code may not accrue at a rate that exceeds $25,000 in fair market
value of such Common Stock (determined at the time such purchase right
is granted) for any calendar year in which such purchase right is
outstanding.
The purchase right shall be exercisable only by the Participant during the
Participant's lifetime and shall not be assignable or transferable by the
Participant.
Payment of Purchase Price; Payroll Deductions. Payment for shares by
participants shall be by accumulation of after-tax payroll deductions during the
purchase period. The deductions may not exceed 15% of a participant's cash
earnings paid during a purchase period, up to $12,500 per purchase period.
Earnings for this purpose will include elective pre-tax contributions under a
Code Section 125 or 401(k) plan, bonuses, overtime, commissions, profit-sharing
distributions and other incentive-type payments but will not include
contributions to any deferred compensation plan or welfare benefit program
(except a 125 or 401(k) plan).
The participant will receive a purchase right for each offering period in
which he or she participates to purchase up to the number of shares of Common
Stock determined by dividing such participant's payroll deductions accumulated
prior to the purchase date by the applicable purchase price (subject to the
"Limitations" section). Any payroll deductions accumulated in a participant's
account that are not sufficient to purchase a full share will be retained in the
participant's account for the subsequent purchase period. No interest shall
accrue on the payroll deductions of a participant in the Purchase Plan.
Termination and Change to Payroll Deductions. A purchase right shall
terminate at the end of the offering period or earlier if the participant
terminates employment for any reason, and then any payroll deductions which the
participant may have made with respect to a terminated purchase right will be
refunded. A participant may decrease his or her deductions once during a
purchase period and may increase the rate of his or her deductions up to 15% of
earnings, effective as of the start date of the next purchase period.
16
<PAGE> 20
Amendment and Termination. The Purchase Plan shall continue in effect until
the earlier of (i) the last business day in October 2005, (ii) the date on which
all shares available for issuance under the Purchase Plan shall have been issued
or (iii) a Corporate Transaction, unless the Purchase Plan is earlier terminated
by the Board in its discretion.
The Board may at any time alter, amend, suspend or discontinue the Purchase
Plan. The approval of the stockholders will be obtained to the extent required
by applicable law. Prior to the amendment which is the subject of this Proposal
No. 2, the Board could not amend the Purchase Plan without stockholder approval
if it would, (i) alter the purchase price formula so as to reduce the purchase
price payable for shares under the Purchase Plan, (ii) materially increase the
number of shares issuable under the Purchase Plan or the maximum number of
shares purchasable per participant, or (iii) materially increase the benefits
accruing to participants under the Purchase Plan or materially modify the
eligibility requirements.
In addition, the Company has specifically reserved the right, exercisable
in the sole discretion of the Board, to terminate the Purchase Plan immediately
following any six-month purchase period. If such right is exercised by the
Board, then the Purchase Plan will terminate in its entirety and no further
purchase rights will be granted or exercised, and no further payroll deductions
shall thereafter be collected under the Purchase Plan. In addition, the Board
may terminate an offering period under the Purchase Plan immediately following
any six-month purchase period and begin a new offering period. On April 24,
1997, the Compensation Committee terminated the offering period that had begun
on November 3, 1995 and was scheduled to end on October 31, 1997 and began a new
offering period effective May 1, 1997. As a result, employees participating in
the Purchase Plan will be able to purchase Common Stock at a price that will not
exceed $8.50 per share on the October 31, 1997, April 30, 1998, October 30,
1998, and April 30, 1999 purchase dates.
Corporate Transaction. In the event of (i) a merger or consolidation in
which securities possessing more than fifty percent (50%) of the total combined
voting power of the Company's outstanding securities are transferred to a person
or persons different from the persons holding those securities immediately prior
to such transaction or (ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company in complete liquidation or
dissolution of the Company (a "Corporate Transaction"), each purchase right
under the Purchase Plan will automatically be exercised immediately before
consummation of the Corporate Transaction as if such date were the last purchase
date of the offering period. The purchase price per share shall be equal to
eighty-five percent (85%) of the lower of (i) the fair market value per share of
Common Stock on the start date of the offering period (or on the participant's
entry date, if later) or (ii) the fair market value per share of Common Stock
immediately prior to the effective date of such Corporate Transaction. However,
if the participant's entry date is not the first day of the applicable offering
period, the clause (i) amount will not be less than the fair market value of a
share of Common Stock on the start date of such offering period. Any payroll
deductions not applied to such purchase shall be promptly refunded to the
participant.
The grant of purchase rights under the Purchase Plan will in no way affect
the right of the Company to adjust, reclassify, reorganize, or otherwise change
its capital or business structure or to merge, consolidate, dissolve, liquidate
or sell or transfer all or any part of its business or assets.
Proration of Purchase Rights. If the total number of shares of Common Stock
for which purchase rights are to be granted on any date exceeds the number of
shares then remaining available under the Purchase Plan, the Committee shall
make a pro rata allocation of the shares remaining.
Federal Income Tax Consequences. The following is a general description of
certain federal income tax consequences of the Purchase Plan. This description
does not purport to be complete.
The Purchase Plan is intended to qualify as an "employee stock purchase
plan" under Section 423 of the Code. Under a plan which so qualifies, no taxable
income will be reportable by a participant, and no deductions will be allowable
to the Company, by reason of the grant or exercise of the purchase rights issued
thereunder. A participant will, however, recognize taxable income in the year in
which the purchased shares are sold or otherwise made the subject of
disposition.
17
<PAGE> 21
A sale or other disposition of the purchased shares will be a disqualifying
disposition if made before the later of two years after the start of the
offering period in which such shares were acquired or one year after the shares
are purchased. If the participant makes a disqualifying disposition of the
purchased shares, then the Company will be entitled to an income tax deduction,
for the taxable year in which such disposition occurs, equal to the amount by
which the fair market value of such shares on the date of purchase exceeded the
purchase price, and the participant will be required to satisfy the employment
and income tax withholding requirements applicable to such income. In no other
instance will the Company be allowed a deduction with respect to the
participant's disposition of the purchased shares.
Any additional gain or loss recognized upon the disposition of the shares
will be a capital gain, which will be mid or long-term if the shares have been
held for more than one (1) year following the date of purchase under the
Purchase Plan.
The foregoing is only a summary of the federal income taxation consequences
to the participant and the Company with respect to the shares purchased under
the Purchase Plan. In addition, the summary does not discuss the tax
consequences of a participant's death or the income tax laws of any city, state
or foreign country in which the participant may reside.
New Purchase Plan Benefits. Since purchase rights are subject to
discretion, including an employee's decision not to participate in the Purchase
Plan, awards under the Purchase Plan for the current fiscal year are not
determinable. On April 30, 1997 and October 31, 1997, each of the Named Officers
purchased the number of shares set forth beside his/her name: Mr. Stamm: 0 and
0; Mr. Fritz: 2,000 and 1,470; Ms. Novitsky: 2,000 and 1,470; Mr. Raynor: 2,000
and 1,150; Mr. Spinner: 2,000 and 1,470; and Mr. Liotta: 2,000 and 1,470. In
addition, each of Ms. Novitsky and Messrs. Raynor and Spinner has the right to
purchase a maximum of 2,000 shares of Common Stock at a price that will not
exceed $8.50 per share on each of the April 30, 1998, October 30, 1998, and
April 30, 1999 purchase dates. Mr. Zingale will have the right to purchase a
maximum of 2,000 shares of Common Stock on each of the October 30, 1998 and
April 30, 1999 purchase dates.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE AMENDMENT
TO THE COMPANY'S PURCHASE PLAN.
PROPOSAL NO. 3
RATIFICATION OF INDEPENDENT ACCOUNTANTS
The Company is asking the stockholders to ratify the appointment of Coopers
& Lybrand L.L.P. as the Company's independent public accountants for the fiscal
year ending December 31, 1998. The affirmative vote of the holders of a majority
of shares present or represented by proxy and voting at the Annual Meeting will
be required to ratify the appointment of Coopers & Lybrand L.L.P.
In the event the stockholders fail to ratify the appointment, the Board of
Directors will reconsider its selection. Even if the appointment is ratified,
the Board of Directors, in its discretion, may direct the appointment of a
different independent accounting firm at any time during the year if the Board
of Directors feels that such a change would be in the Company's and its
stockholders' best interests.
Coopers & Lybrand L.L.P. has audited the Company's financial statements for
its last eight fiscal years. Its representatives are expected to be present at
the Annual Meeting, will have the opportunity to make a statement if they desire
to do so, and will be available to respond to appropriate questions.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
SELECTION OF COOPERS & LYBRAND L.L.P. TO SERVE AS THE COMPANY'S INDEPENDENT
PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDING DECEMBER 31, 1998.
18
<PAGE> 22
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The members of the Board of Directors, the executive officers of the
Company and persons who hold more than 10% of the Company's outstanding Common
Stock are subject to the reporting requirements of Section 16(a) of the
Securities Exchange Act of 1934, as amended, which require them to file reports
with respect to their ownership of the Company's Common Stock and their
transactions in such Common Stock. Based upon (i) the copies of Section 16(a)
reports that the Company received from such persons for their 1997 fiscal year
transactions in the Common Stock and their Common Stock holdings and (ii) the
written representations received from one or more of such persons that no annual
Form 5 reports were required to be filed by them for the 1997 fiscal year, the
Company believes that all reporting requirements under Section 16(a) for such
fiscal year were met in a timely manner by its executive officers, Board members
and greater than ten-percent stockholders.
FORM 10-K
THE COMPANY WILL MAIL WITHOUT CHARGE, UPON WRITTEN REQUEST, A COPY OF THE
COMPANY'S FORM 10-K REPORT FOR FISCAL YEAR 1997, INCLUDING THE FINANCIAL
STATEMENTS, SCHEDULE AND LIST OF EXHIBITS. REQUESTS SHOULD BE SENT TO CLARIFY
INC., 2125 O'NEL DRIVE, SAN JOSE, CALIFORNIA 95131, ATTN: CORPORATE FINANCE.
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Stockholder proposals that are intended to be presented at the 1998 Annual
Meeting that are eligible for inclusion in the Company's proxy statement and
related proxy materials for that meeting under the applicable rules of the
Securities and Exchange Commission must be received by the Company not later
than January 5, 1999 in order to be included. Such stockholder proposals should
be addressed to Clarify Inc., 2125 O'Nel Drive, San Jose, California 95131,
Attn: Corporate Finance.
19
<PAGE> 23
OTHER MATTERS
The Board knows of no other matters to be presented for stockholder action
at the Annual Meeting. However, if other matters do properly come before the
Annual Meeting or any adjournments or postponements thereof, the Board intends
that the persons named in the proxies will vote upon such matters in accordance
with their best judgment.
BY ORDER OF THE BOARD OF DIRECTORS,
ZINGALE SIG.
Anthony Zingale
President and Chief Executive Officer
San Jose, California
April 28, 1998
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE,
SIGN, DATE AND PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE. YOU MAY REVOKE YOUR PROXY AT ANY TIME PRIOR TO THE ANNUAL
MEETING. IF YOU DECIDE TO ATTEND THE ANNUAL MEETING AND WISH TO CHANGE YOUR
PROXY VOTE, YOU MAY DO SO AUTOMATICALLY BY VOTING IN PERSON AT THE MEETING.
THANK YOU FOR YOUR ATTENTION TO THIS MATTER. YOUR PROMPT RESPONSE WILL
GREATLY FACILITATE ARRANGEMENTS FOR THE ANNUAL MEETING.
20
<PAGE> 24
CLARIFY INC.
ANNUAL MEETING OF STOCKHOLDERS, JUNE 4, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF CLARIFY INC.
The undersigned revokes all previous proxies, acknowledges receipt of the notice
of stockholders meeting to be held June 4, 1998 and the proxy statement, and
appoints Anthony Zingale the proxy of the undersigned, with full power of
substitution, to vote all shares of Common Stock of Clarify Inc. that the
undersigned is entitled to vote, either on his or her own behalf or on behalf of
an entity or entities, at the Annual Meeting of Stockholders of the Company to
be held at the offices of the Company, 2125 O'Nel Drive, San Jose, California
95131, on Thursday, June 4, 1998 at 10:00 a.m., and at any adjournment or
postponement thereof, with the same force and effect as the undersigned might or
could do if personally present thereat. The shares represented by this proxy
shall be voted in the manner set forth on the reverse side.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
PLEASE MARK VOTES AS IN THIS EXAMPLE. [x]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE MATTERS LISTED
BELOW. THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS SPECIFIED BELOW.
THIS PROXY WILL BE VOTED FOR PROPOSALS NO. 1, 2, 3 AND 4, IF NO SPECIFICATION
IS MADE.
1. Election of all nominees listed below to the Board of Directors to serve
until the next Annual Meeting and until their successors have been duly elected
and qualified, except as noted (write the names, if any, of nominees for whom
you withhold authority to vote).
Nominees: Thomas H. Bredt, Mary Jane Elmore, James L. Patterson, David A.
Stamm and Anthony Zingale
For [ ] Withheld [ ] Abstain [ ]
For all nominees except as noted above.
<PAGE> 25
2. Proposal to amend the Company's Employee Stock Purchase Plan, including an
increase by 500,000 shares to the number of shares available.
For [ ] Withheld [ ] Abstain [ ]
3. Proposal to ratify the selection of Coopers & Lybrand L.L.P. as the Company's
independent auditors for the fiscal year ending December 31, 1998.
For [ ] Withheld [ ] Abstain [ ]
4. Proposal to transact such other business as may properly come before the
Annual Meeting or any adjournment or postponement thereof.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
Please sign your name exactly as it appears hereon. If acting as attorney,
executor, trustee, or in their representative capacity, sign name and title.
Signature: Date:
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Signature: Date:
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