<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<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>
PowerCerv Corporation
- --------------------------------------------------------------------------------
(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
[POWERCERV LOGO]
400 North Ashley Drive
Suite 2700
Tampa, Florida 33602
-------------------------------------------------------
NOTICE OF
ANNUAL MEETING
AND
PROXY STATEMENT
-------------------------------------------------------
Annual Meeting of Shareholders
June 2, 1999
<PAGE> 3
(POWERCERV LOGO)
April 30, 1999
Dear PowerCerv Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders
of PowerCerv Corporation (the "Company") on Wednesday, June 2, 1999. The meeting
will begin promptly at 10:00 a.m. local time, at the executive offices of the
Company located at 400 North Ashley Drive, Suite 2700, in Tampa, Florida.
The notice of the meeting and proxy statement on the following pages
contain information on the formal business of the meeting. Whether or not you
expect to attend the meeting, please sign, date and return your proxy promptly
in the enclosed envelope to assure your stock will be represented at the
meeting. If you decide to attend the annual meeting and vote in person, you
will, of course, have that opportunity.
The continuing interest of the shareholders in the business of the
Company is gratefully acknowledged. We hope many will attend the meeting.
Sincerely,
/s/ Marc J. Fratello
----------------------------------------
MARC J. FRATELLO,
Chairman and Chief Executive Officer
EXECUTIVE OFFICES 400 N. ASHLEY DRIVE, SUITE 2700 TAMPA, FL 33602
PHONE: (813) 226-2600 FACSIMILE: (813) 222-0886 HTTP://WWW.POWERCERV.COM
<PAGE> 4
POWERCERV CORPORATION
400 NORTH ASHLEY DRIVE
SUITE 2700
TAMPA, FLORIDA 33602
------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JUNE 2, 1999
The Annual Meeting of Shareholders (the "Meeting") of PowerCerv
Corporation (the "Company") will be held in the executive offices of the Company
located at 400 North Ashley Drive, Suite 2700, Tampa, Florida 33602, on
Wednesday, June 2, 1999 at 10:00 a.m. (local time), for the following purposes:
1. To elect five (5) directors, each to hold office until the
2000 Annual Meeting of Shareholders and until his successor is
elected and qualified or his earlier resignation, removal from
office or death.
2. To amend the 1995 Stock Option Plan, as amended (the "Plan")
to increase the number of shares available for issuance under
the Plan from 3,675,000 shares to 4,675,000 shares.
3. To ratify the appointment of Ernst & Young LLP as the
independent auditors for the Company for the year ending
December 31, 1999.
4. To transact such other business as may properly come before
the Meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only shareholders of record at the close of business on April 30, 1999
are entitled to notice of and to vote at this Meeting and any adjournments
thereof. For ten (10) days prior to the Meeting, a complete list of the
shareholders entitled to vote at the Meeting will be available for examination
by any shareholder for any purpose relating to the Meeting during ordinary
business hours at the executive offices of the Company in Tampa, Florida.
By Order of the Board of Directors,
/s/ Stephen M. Wagman
-----------------------------------
Stephen M. Wagman
Secretary
Tampa, Florida
April 30, 1999
SHAREHOLDERS ARE REQUESTED TO COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND
PROMPTLY RETURN IT IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE, WHETHER OR NOT THEY
INTEND TO ATTEND THE MEETING. PROXIES ARE REVOCABLE, AND ANY SHAREHOLDER MAY
WITHDRAW THEIR PROXY AND VOTE IN PERSON AT THE MEETING.
<PAGE> 5
POWERCERV CORPORATION
PROXY STATEMENT
ANNUAL MEETING AND PROXY SOLICITATION INFORMATION
This Proxy Statement is first being sent to shareholders on or about
May 7, 1999, in connection with the solicitation of proxies by the Board of
Directors of PowerCerv Corporation, a Florida corporation (the "Company"), to be
voted at the Annual Meeting of Shareholders to be held on June 2, 1999, and at
any adjournment thereof (the "Meeting"). Only shareholders of record at the
close of business on April 30, 1999 (the "Record Date") are entitled to notice
of and to vote at the Meeting. There were 13,147,408 shares of the Company's
common stock, $0.001 par value ("Common Stock") outstanding and entitled to vote
at the close of business on the Record Date. Each share of Common Stock is
entitled to one vote on each matter properly brought before the Meeting.
Shares represented by duly executed proxies in the accompanying form
received by the Company prior to the Meeting will be voted at the Meeting. If a
shareholder specifies in the proxy a choice with respect to any matter to be
acted upon, the shares represented by such proxy will be voted as specified. If
a proxy card is signed and returned without specifying a vote or an abstention
on any proposal, it will be voted according to the recommendation of the Board
of Directors on that proposal. The Board of Directors recommends a vote FOR the
election of directors and the other proposals described in this Proxy Statement.
The Board of Directors knows of no other matters that may be brought before the
Meeting. However, if any other matters are properly presented for action, it is
the intention of the named proxies to vote on them according to their best
judgment.
Shareholders who hold their shares through an intermediary must provide
instructions on voting as requested by their bank or broker. A shareholder who
signs and returns a proxy may revoke it at any time before it is voted by taking
one of the following three actions: (i) giving written notice of the revocation
to the Secretary of the Company; (ii) executing and delivering a proxy with a
later date; or (iii) voting in person at the Meeting.
Approval of the election of directors will require a plurality of the
votes cast at the Meeting, provided a quorum is present. Votes cast by proxy or
in person at the Meeting will be tabulated by one or more inspectors of election
appointed at the Meeting, who will also determine whether a quorum is present
for the transaction of business. Abstentions and broker non-votes will be
counted as shares present in the determination of whether shares of the Common
Stock represented at the Meeting constitute a quorum. With respect to matters to
be acted upon at the Meeting, abstentions and broker non-votes will not be
counted for the purpose of determining whether a proposal has been approved.
The expense of preparing, printing, and mailing proxy materials to
shareholders of the Company will be borne by the Company. In addition to
solicitations by mail, regular employees of the Company may solicit proxies on
behalf of the Board of Directors in person or by telephone. The Company will
reimburse brokerage houses and other nominees for their expenses in forwarding
proxy material to beneficial owners of the Common Stock of the Company.
The executive offices of the Company are located at 400 North Ashley
Drive, Suite 2700, Tampa, Florida 33602, and the Company's telephone number is
(813) 226-2600.
<PAGE> 6
SECURITY OWNERSHIP OF MANAGEMENT AND
CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of April 20, 1999, information as to
the Company's Common Stock beneficially owned by: (i) each director of the
Company, (ii) each executive officer named in the Summary Compensation Table,
(iii) all directors and executive officers of the Company as a group, and (iv)
any person who is known by the Company to be the beneficial owner of more than
5% of the outstanding shares of Common Stock.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL
NAME OF BENEFICIAL OWNER (1) OWNERSHIP (2) PERCENT
--------------------------------------------------------------------------- ------------------- -----------
<S> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS:
Marc J. Fratello (3).................................................... 2,911,600 19.7%
Roy E. Crippen, III (4)................................................. 1,913,500 13.0%
Michael J. Simmons (5) ................................................. 443,165 3.0%
Stephen M. Wagman (6)................................................... 146,745 1.0%
Ronald D. Nall (7) ..................................................... 170,000 1.2%
O. G. Greene (8)........................................................ 25,725 *
Stuart C. Johnson (9)................................................... 25,725 *
M.J.F. Limited Partnership.............................................. 2,711,600 18.3%
R.C.F. Company Limited Partnership...................................... 1,338,500 9.0%
All directors and executive officers as a group
(13 persons) (10).................................................... 5,957,388 40.3%
5% SHAREHOLDERS:
Harold R. Ross(11)...................................................... 2,068,000 14.0%
Dimensional Fund Advisors Inc. (12) .................................... 881,400 6.0%
</TABLE>
- -------------------
*Less than 1%
(1) The business address for Messrs. Fratello, Crippen, Simmons, Wagman,
Nall, Greene and Johnson is c/o PowerCerv Corporation, 400 North Ashley
Drive, Suite 2700, Tampa, Florida 33602. The business address for
M.J.F. Limited Partnership, R.C.F. Company Limited Partnership and
H.R.R. Limited Partnership is 3773 Howard Hughes Parkway, 3rd Floor
South, Las Vegas, Nevada 81909. The business address for Dimensional
Fund Advisors Inc. is 1299 Ocean Avenue, 11th Floor, Santa Monica,
California 90401.
(2) Beneficial ownership of shares, as determined in accordance with
applicable Securities and Exchange Commission rules, includes shares as
to which a person has or shares voting power and/or investment power.
The Company has been informed that all shares shown are held of record
with sole voting and investment power, except as otherwise indicated.
(3) Includes 2,711,600 shares held by M.J.F. Limited Partnership, a Nevada
limited partnership in which Mr. Fratello and a trust, of which he is
trustee, are limited partners, and 200,000 shares that are subject to
stock options that are exercisable within 60 days of April 20, 1999.
(4) Includes 1,588,500 shares are held by R.C.F. Company Limited
Partnership, a Nevada limited partnership in which Mr. Crippen and a
trust, of which he is trustee, are limited partners, and 325,000 shares
that are subject to stock options that are exercisable within 60 days
of April 20, 1999.
-2-
<PAGE> 7
(5) Includes 441,665 shares that are subject to stock options that are
exercisable within 60 days of April 20, 1999.
(6) Includes 144,745 shares that are subject to stock options that are
exercisable within 60 days of April 20, 1999.
(7) Represents 170,000 shares that are subject to stock options that are
exercisable within 60 days of April 20, 1999.
(8) Represents 25,725 shares that are subject to stock options that are
exercisable within 60 days of April 20, 1999.
(9) Represents 25,725 shares that are subject to stock options that are
exercisable within 60 days of April 20, 1999.
(10) Represents 1,332,860 shares held by the Named Executive Officers and
directors that are subject to stock options exercisable within 60 days
of April 20, 1999 (see footnotes 3 - 9 above), and 320,928 shares held
by the other executive officers of the Company that are subject to
stock options exercisable within 60 days of April 20, 1999. Also
includes 170,000 shares that are subject to stock options that are
exercisable within 60 days of April 20, 1999 beneficially owned by
Ronald Nall. On January 11, 1999, the Company and Mr. Nall entered into
a letter agreement pursuant to which his employment agreement was
terminated. Mr. Nall is no longer an executive officer or employee of
the Company.
(11) Represents 2,068,000 shares held by H.R.R. Limited Partnership, a
Nevada limited partnership in which Harold R. Ross and certain trusts,
of which he is trustee, are limited partners.
(12) The number of shares shown is based upon a Schedule 13-G filed with the
Securities and Exchange Commission of February 11, 1999. Dimensional
Fund Advisors Inc. ("Dimensional") has informed the Company that
Dimensional, a registered investment advisor, is deemed to have
beneficial ownership of 881,400 shares of the Company, all of which
shares are held in portfolios of DFA Investment Dimensions Group Inc.,
a registered open-end investment company, or in series of the DFA
Investment Trust Company, a Delaware business trust, or the DFA Group
Trust and DFA Participation Group Trust, investment vehicles for
qualified employee benefit plans, all of which Dimensional Fund
Advisors Inc. serves as investment manager. Dimensional disclaims
beneficial ownership of all such shares.
-3-
<PAGE> 8
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Set forth below is certain information as of April 20, 1999, concerning
the Company's executive officers, continuing directors, and nominees for
director.
<TABLE>
<CAPTION>
YEAR FIRST
BECAME A
NAME POSITION(S) AGE DIRECTOR
----------------------------------- ------------------------------------------------ ------- --------------
<S> <C> <C> <C>
Marc J. Fratello................. Chairman, Chief Executive Officer and Director 41 1992
Michael J. Simmons............... President, Chief Operating Officer and Director 52 1998
Roy E. Crippen, III.............. Director 40 1992
O. G. Greene..................... Director 57 1996
Stuart C. Johnson................ Director 56 1996
Stephen M. Wagman................ Chief Financial Officer, Senior Vice President 38 --
and Secretary
</TABLE>
MARC J. FRATELLO has served as President and a director of the Company
since its inception in 1992, as Chief Operating Officer from December 1995 until
December 1997, and as Chairman and Chief Executive Officer since January 1,
1998. Prior to founding the Company in 1992, Mr. Fratello spent 10 years at
Unisys Corporation, the last position held being that of Director, CASE/4GL
Products. Mr. Fratello also is a director of Software Business Technologies,
Inc., a privately held financial software developer in San Rafael, California;
System One Corporation, privately held temporary services company located in
Tampa, Florida; and VitalCast.com, an internet alternative healthcare company
located in Tampa, Florida. Mr. Fratello earned a Bachelor of Science degree from
Franklin and Marshall College and a Masters degree in Administration from the
University of Pennsylvania's Wharton School.
MICHAEL J. SIMMONS has served as President and Chief Operating Officer
of the Company since March 1998. Mr. Simmons served as Chief Financial Officer
of Platinum Software Corporation, a financial applications software products
company located in Irvine, California, from May 1994 to March 1998. Mr. Simmons
served as Executive Vice President and Chief Financial Officer of Dynasty
Classics, a manufacturer of home lighting products, from April 1991 through
September 1993. From February 1990 through April 1991, Mr. Simmons served as
Chief Executive Officer and President of Pro-Tec Sports International, a
manufacturer of recumbent exercise bicycles. From August 1986 through May 1989,
Mr. Simmons served as Executive Vice President and Chief Financial Officer of
CPG, International, a privately held distributor of graphic and fine arts
supplies. From 1979 to 1986, Mr. Simmons was Chief Financial Officer and Senior
Vice President of Silicon Systems.
ROY E. CRIPPEN, III has served as a director of the Company since its
inception in 1992. In April 1999, Mr. Crippen became the President, Chief
Operating Officer and a director of Digital Fusion, Inc. (formerly known as
R.O.I. Consulting, Inc.), a privately held consulting services company which, on
March 31, 1999, purchased the net assets of the Company's general consulting and
general education businesses. From April 1992 to March 1999, Mr. Crippen served
in various executive management roles with the Company including Executive Vice
President (1992 - 1998), Chief Technology Officer (1992 - 1999), Acting
President and Chief Operating Officer (1998), and Vice Chairman (1998 - 1999).
Prior to co-founding the Company and from March 1991 to April 1992, Mr. Crippen
was the Florida Regional Manager for Spectrum Associates, an application and
consulting company.
-4-
<PAGE> 9
O. G. GREENE has served as a director of the Company since October
1996. Mr. Greene has served as the Chief Executive Officer of Speer
Communications, a Nashville, Tennessee provider of information and media
services on an out-source basis, since March 1998. From June 1995 to March 1998,
Mr. Greene served as President and Chief Executive Officer of GridNet
International LLC, an enhanced service provider in the telecommunications
industry located in Atlanta, Georgia. From May 1992 to June 1995, Mr. Greene was
the Executive Vice President and Chief Operating Officer of First Financial
Management Corporation, a firm providing payment systems services to the credit
card, check and health care industries in Atlanta. From February 1991 to May
1992, Mr. Greene was the President and CEO of National Data Corporation, a firm
providing payment systems services to the credit card, check and health care
industries in Atlanta. Mr. Greene also is on the board of directors of The
National Registry Inc. in St. Petersburg, Florida and Auburn University.
STUART C. JOHNSON. Mr. Johnson has served as a director of the Company
since November 1996. Mr. Johnson is Chairman and Chief Executive Officer of the
Empyrean Group, a firm specializing in information technology services that
assist mid-market companies in entering the electronic commerce marketplace. In
July 1997, Mr. Johnson founded S.C. Johnson & Associates, an investment banking
firm in Fairfax, Virginia. From 1993 to 1997, Mr. Johnson served as the Group
President for Large Business and Information Services at Bell Atlantic
Corporation in Arlington, Virginia. From April 1992 to June 1993, Mr. Johnson
served as Group President of Regional Services at Bell Atlantic Corporation.
While with Bell Atlantic, Mr. Johnson served as Chairman and Chief Executive
Officer of Bell Atlantic Video Services, developing interactive video content
and delivery methods. Prior to 1992, Mr. Johnson held executive positions with
Contel Corporation and Burroughs Corporation. Mr. Johnson has served as a
director, since March 1999, of musicmaker.com, an internet company located in
Reston, Virginia. He has also served, since July 1998, as a director of the
Virginia Tech Corporate Research Center, an incubator of entrepreneurial high
technology companies. Mr. Johnson earned a Bachelor of Science in Mathematics
from the United States Naval Academy and a Masters degree in Administration from
George Washington University. He is also a graduate of the Harvard Business
School's Advanced Management Program.
STEPHEN M. WAGMAN has served as Chief Counsel of the Company since
August 1995, as Secretary since October 1995, as Senior Vice President and
Treasurer since December 1996, and as Chief Financial Officer since March 1998.
From July 1988 to August 1995, Mr. Wagman was Vice President, Treasurer and
Secretary of International Data Matrix, Inc., a developer of machine vision
technology. Mr. Wagman is licensed to practice law in Florida and Ohio. Mr.
Wagman earned a Bachelor of Science degree in accounting and finance from the
Ohio State University and a J.D. degree from Case Western Reserve University
School of Law.
The Company's Board of Directors currently consists of five members.
During 1998, the Company's Board of Directors held eight meetings. Each
member of the Board of Directors attended at least 75% of the total number of
Board meetings and meetings of committees of which he is a member. In addition,
the Board of Directors took action one time during 1998 by written consent in
lieu of a meeting signed by all members of the Board of Directors then in office
as permitted by applicable state law.
The Company's Board of Directors has an Audit Committee and a
Compensation Committee. The Audit Committee, which met four times during 1998,
consists of Stuart Johnson, O.G. Greene and Roy Crippen. Mr. Johnson serves as
Chairman of this Committee. The duties of the Audit Committee are to recommend
to the Board of Directors the selection of the independent certified public
accountants, to meet with the independent certified public accountants to review
the scope and results of the audit, and to consider various accounting and
auditing matters related to the Company, including its system of internal
controls and financial management practices.
The Company's Compensation Committee consisted of O.G. Greene, Stuart
Johnson, Marc Fratello and Michael Simmons (who resigned from this role in
January 1999). Mr. Greene serves as the Chairman of this Committee. The
Compensation Committee recommends to the Board of Directors the base salary
levels and annual discretionary bonuses for the Company's executive officers.
See "Report of the Compensation Committee of the Board of Directors on Executive
Compensation." In addition, the Compensation Committee administers the Company's
1995 Stock Option Plan (the "Stock Option Plan") and makes determinations as to
grants of options; provided, however, with
-5-
<PAGE> 10
respect to options granted to persons subject to Section 16 of the Securities
Exchange Act of 1934, as amended, the entire Board of Directors shall make such
determinations. During 1998, the Compensation Committee took action 72 times in
1998 by written consent in lieu of a meeting signed by all members of the
Committee then in office as permitted by applicable state law. See "Executive
Compensation and Stock Option Plan."
The Company does not have a nominating committee. This function is
performed by the Board of Directors.
COMPENSATION OF DIRECTORS
Effective June 2, 1998, directors who are not employees of the Company
were paid $2,000 for each Board meeting attended. In addition, each non-employee
director received an option to purchase 15,000 shares of the Common Stock
pursuant to the Stock Option Plan. These options vest ratably over a
twelve-month period and have an exercise price of $5.16 per share. All
non-employee directors also receive reimbursement of reasonable out-of-pocket
expenses incurred in connection with attending meetings of the Board of
Directors. No director who is an employee of the Company receives separate
compensation for services rendered as a director.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers and directors, and persons who own more than ten
percent of the Common Stock of the Company, to file reports of ownership and
changes in ownership with the Securities and Exchange Commission (the
"Commission"). Officers, directors, and ten-percent shareholders are required by
the Commission regulations to furnish the Company with copies of all Section
16(a) reports they file.
Based solely on a review of the copies of such forms furnished to the
Company and written representations from the Company's executive officers and
directors, the Company believes that all Section 16(a) filing requirements
applicable to its executive officers, directors and greater than ten-percent
shareholders were complied with for fiscal 1998.
-6-
<PAGE> 11
EXECUTIVE COMPENSATION
The following table presents certain information concerning the
compensation earned during 1998, 1997 and 1996 by: (i) the current Chief
Executive Officer of the Company, and (ii) each of the four most highly
compensated executive officers of the Company who earned more than $100,000 in
salary and bonus in 1998 (collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE (1)
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION NUMBER OF
---------------------------------------- SECURITIES
OTHER OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY (2) BONUS (3) COMPENSATION(4) OPTIONS COMPENSATION(5)
- -------------------------------- ---- ---------- --------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Marc J. Fratello 1998 $ 79,980 $25,000 -- 200,000 $1,140
Chairman and 1997 192,000 -- $3,655 -- 2,450
Chief Executive Officer 1996 177,000 36,000 3,775 -- 3,100
Michael J. Simmons(6) 1998 143,679 50,000 -- 1,000,000 --
President and 1997 -- -- -- -- --
Chief Operating Officer 1996 -- -- -- -- --
Roy E. Crippen, III(7) 1998 77,972 25,000 1,425 200,000 1,140
Vice Chairman and 1997 192,000 -- 4,005 -- 2,406
Chief Technology Officer 1996 177,000 36,000 4,330 -- 3,100
Stephen M. Wagman 1998 150,000 7,734 -- 238,000 2,018
Chief Financial Officer, Senior Vice 1997 123,600 2,000 -- 36,000 3,600
President and Secretary 1996 100,683 5,072 -- 13,500 900
Ronald D. Nall(8) 1998 198,112 -- -- 240,000 2,530
Senior Vice President, 1997 158,592 -- -- 60,000 1,313
Services and Products 1996 -- -- -- -- --
</TABLE>
- --------------
(1) Excludes perquisites and other personal benefits, the aggregate annual
amount of which for each officer was less than the lesser of $50,000 or
10 percent of the total of annual salary and bonus reported.
(2) Includes any amount deferred by the Named Executive Officers pursuant
to the Company's 401(k) Plan.
(3) Bonuses are reported in the year earned, even if actually paid in a
subsequent year.
(4) Represents fees paid on the Named Executive Officers' behalf for
professional tax advice and other tax-related services.
(5) Except as further described below, "all other compensation" represents
matching contributions made by the Company to the Named Executive
Officers under the Company's 401(k) Plan.
(6) Mr. Simmons joined the Company in March 1998.
(7) Mr. Crippen resigned as an officer of the Company on March 31, 1999.
(8) Mr. Nall joined the Company on March 10, 1997. On January 11, 1999, the
Company and Mr. Nall entered into a letter agreement pursuant to which
his employment agreement was terminated. Mr. Nall is no longer an
executive officer or employee of the Company.
-7-
<PAGE> 12
OPTION GRANTS IN 1998
The following table sets forth certain information concerning grants of
stock options to each of the Named Executive Officers of the Company during the
year ended December 31, 1998. In accordance with the rules of the Securities and
Exchange Commission, the potential realizable values under such options are
shown based on assumed rates of annual compound stock price appreciation of 5%
and 10% over the full option term from the date the option was granted. These
assumed rates of appreciation do not represent the Company's estimate or
projection of the rate of appreciation of the shares of Common Stock.
STOCK OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF POTENTIAL REALIZABLE VALUE AT
COMMON STOCK ASSUMED ANNUAL RATES OF STOCK
UNDERLYING % OF TOTAL OPTIONS PRICE APPRECIATION FOR OPTION TERM
OPTIONS GRANTED TO EMPLOYEES EXERCISE PRICE EXPIRATION ----------------------------------
NAME GRANTED (1) FISCAL YEAR PER SHARE DATE 5% 10%
- ------------------- ------------ -------------------- -------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Marc J. Fratello 200,000 4.1% $ 1.81 2008 $ 228,000 $ 578,000
Michael J. Simmons 1,000,000 20.5% 1.66 2008 1,040,000 2,640,000
Roy E. Crippen, III 200,000 4.1% 1.81 2008 228,000 578,000
Stephen M. Wagman 20,000 0.4% 2.03 2008 25,600 64,800
140,000 2.9% 2.75 2008 242,200 613,200
78,000 1.6% 4.19 2008 205,140 520,260
Ronald D. Nall 150,000 3.1% 2.06 2008 195,000 493,500
90,000 1.8% 4.19 2008 236,700 600,300
</TABLE>
(1) All options granted to the Named Executive Officers were granted in 1998
pursuant to the Company's Stock Option Plan.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information concerning
exercisable and unexercisable stock options held by the Named Executive Officers
as of December 31, 1998. No stock options were exercised by the Named Executive
Officers during 1998.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
NAME AT DECEMBER 31, 1998 AT DECEMBER 31, 1998 (1)
------------------- -------------------------------- -------------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C>
Marc J. Fratello 200,000 -- -- --
Michael J. Simmons 400,000 600,000 $ 87,400 $ 131,100
Roy E. Crippen, III 200,000 -- -- --
Stephen M. Wagman 140,746 159,254 -- --
Ronald D. Nall 127,500 172,500 -- --
</TABLE>
(1) The market value at December 31, 1998 was equal to or lower than the
option exercise price of all unexercised options held by Fratello,
Crippen, Wagman and Nall at December 31, 1998.
STOCK OPTION PLAN
The Company established its Stock Option Plan in June 1995 to provide
incentives to key employees who contribute significantly to the strategic and
long-term performance objectives and growth of the Company. In
-8-
<PAGE> 13
January 1996, the Board of Directors and shareholders of the Company amended the
Stock Option Plan to increase the number of shares available for issuance from
800,000 to 1,250,000. In April and June 1997, the Board of Directors and the
shareholders of the Company amended and restated the Stock Option Plan
increasing the number of shares available for issuance from 1,250,000 to
2,250,000, and modifying the provisions of the Stock Option Plan relating to its
administration and amendment in order to reflect revisions to Commission
regulations. In April and June 1998, the Board of Directors and the shareholders
of the Company amended the Stock Option Plan to increase by 1,425,000 the
maximum aggregate number of shares available for issuance under the Stock Option
Plan and to modify the provisions of the Stock Option Plan relating to its
administration. In January 1999, the Board of Directors amended the Stock Option
Plan, subject to shareholder approval, to increase by 1,000,000 the maximum
aggregate number of shares available for issuance under the Stock Option Plan.
At the Meeting, the shareholders are being asked to vote for the approval of the
January 1999 amendment to the Stock Option Plan. See "Proposal 2 - Proposal to
Amend PowerCerv Corporation 1995 Stock Option Plan."
The Company's Stock Option Plan provides for the grant to employees of
both nonstatutory options and options intended to be treated as incentive stock
options within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code"). The Stock Option Plan is administered by the Stock
Option Committee, or in its absence, the Compensation Committee of the Board of
Directors (the "Committee"). The exercise price per share of Common Stock
deliverable upon the exercise of each stock option granted under the Plan is
determined by the Committee at the date the stock option is granted and as
provided in the terms of the Stock Option Plan. Stock options are exercisable in
whole or in part on such date or dates as are determined by the Committee at the
date of the grant. The duration of options granted under the Stock Option Plan
is ten years from the date of grant, or such shorter period as determined by the
Committee. The options are non-transferable other than by will or by the laws of
descent and distribution.
401(K) PLAN
On June 1, 1994, the Company's defined contribution plan (the "401(k)
Plan") became effective permitting employees to invest in a variety of funds on
a pre-tax basis. In January 1997, the Company amended and restated its 401(k)
Plan to provide that all current employees and future employees are eligible to
participate following six months of service to the Company. Participants in the
401(k) Plan may not contribute more than the greater of a specified statutory
amount or 12% of their pre-tax total compensation. Under the Company match
policy, the Company matches 50% of participant contributions up to a maximum
contribution of 6% of participant base compensation. Employee contributions vest
immediately and Company contributions vest over a six-year period. All Company
matching contributions are used to purchase shares of Common Stock on the open
market.
Effective January 1, 1998, the Company's 401(k) Plan was amended and
the Company match policy was changed to a formula based upon the Company's
financial performance. Under the amended Company match policy, the Company will
match either 30%, 50% or 70% of participant contributions up to a maximum
matching amount of 6% of participant base compensation. Based upon the Company's
net loss in 1998, the Company will match 30% of participant contributions up to
a maximum contribution of 6% of participant base compensation during 1999.
Effective March 27, 1998, the Company amended its 401(k) Plan to address certain
temporary vesting provisions for Company matched funds. Effective October 20,
1998, the Company amended its 401(k) Plan to shorten the service requirement for
employees' participation eligibility to ninety (90) days and to change the
vesting on Company contributions to a four-year period.
EMPLOYMENT AGREEMENTS
Effective April 10, 1997, Marc J. Fratello and Roy E. Crippen, III
entered into Employment, Non-competition, Development and Confidentiality
Agreements with the Company. These agreements are for a period of one year plus
renewable one-year extensions subject to either the Company's or the executives'
right of cancellation. In 1997, these agreements provided for an annual base
salary of $180,000, target annual bonus of up to $120,000, and certain other
benefits. These agreements also provide certain piggyback registration rights to
these executives. In addition, the
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Company agreed to pay the executives twelve months of severance pay, including
base salary and bonus, in the event their employment is terminated (i) by mutual
agreement of the executive and the Company, (ii) by either party after the
agreements' twelve month term has elapsed, (iii) by the Company following a
disability determination of the executive, or following the Company's early
termination of the agreement on certain notice, or (iv) by the executive if the
Company breaches the agreement, upon certain changes of control of the Company,
or following the executive's formal notice of termination after April 1998. Each
of these agreements also contains a one-year non-compete provision following its
expiration or earlier termination. In an effort to reduce the Company's
operating expenses during 1998, both Mr. Fratello and Mr. Crippen reduced their
1998 annual base salaries from $180,000 to $80,000. In return, the Board granted
them options for 200,000 shares of Common Stock under the Stock Option Plan. The
exercise price for these options was the fair market value on the date of grant.
These options, which expire in February 2008, vest ratably through December 31,
1998. In January 1999, the Compensation Committee established Messrs. Fratello's
and Crippen's base salary at $250,000, their target annual bonus up to $150,000,
and granted them options for 125,000 shares of Common Stock under the Stock
Option Plan which will vest on December 31, 2001 or earlier upon the Common
Stock, as traded on Nasdaq, closing at or above certain specified stock prices
($5, $9 and $14 per share) for at least twenty consecutive trading days.
Effective March 31, 1999, Mr. Crippen resigned as Vice Chairman and
Chief Technology Officer of the Company pursuant to an employment termination
agreement. This resignation was provided in connection with the Company's sale
of the net assets of its general consulting and general education business to
R.O.I. Consulting, Inc. on March 31, 1999. Mr. Crippen is the president and
chief operation officer of R.O.I. Consulting, Inc. Mr. Crippen will, however,
remain on the Company's Board of Directors and is standing for reelection at the
Meeting. Pursuant to his termination agreement (which superceded his employment
agreement), the Company has agreed to nominate Mr. Crippen to Board of Directors
as long as he holds at least 2.89% of the total outstanding shares of Common
Stock. In return for Mr. Crippen's agreement not to accept his $300,000
severance, as had been provided for under his employment agreement, the Company
released him from certain of his non-compete restrictions. All of Mr. Crippen's
unvested options, including all options issued in January 1999, expired on March
31, 1999. On March 31, 1999, the Company granted Mr. Crippen a vested option for
125,000 shares of Common Stock exercisable at the fair market value for the
price of the Common Stock on the date of grant. This option will expire, if not
exercised, on March 25, 2004. Mr. Crippen also agreed to provide the Company
with assistance in connection with ongoing business matters for a period of one
year following the agreement date.
Effective February 19, 1998, and in connection with his being hired as
the President and Chief Operating Officer of the Company, Michael J. Simmons
entered into an employment agreement with the Company and granted him stock
options outside of the Stock Option Plan. Mr. Simmons' employment agreement is
for a period commencing March 1998 and expiring December 31, 2000, plus
renewable one-year extensions subject to either the Company's or Mr. Simmons'
right of cancellation. The agreement provides for an annual base salary of
$175,000 in 1998 ($225,000 in 1999), an annual target bonus of $200,000 in 1998
(with a guaranteed minimum bonus of $50,000 in 1998 and no guaranteed minimum in
1999), and certain other benefits. The terms of Mr. Simmons' annual target bonus
are consistent with other members of the Company's executive management team. In
addition, the Company agreed to pay Mr. Simmons twelve months base salary and
vest certain of his outstanding stock options as follows: (i) upon a change of
control where Mr. Simmons is not offered an equal or better position and
compensation package, (ii) if the Company terminated Mr. Simmons without
"cause," (iii) if there were to be a change in the person to whom Mr. Simmons
reports (unless he were elected CEO), or (iv) if Mr. Simmons were constructively
terminated by the Company. In January 1999, the Compensation Committee confirmed
Mr. Simmons' 1998 bonus of $50,000 and in April 1999, granted him an option for
50,000 shares of Common Stock under the Stock Option Plan which will vest on
December 31, 2001 or earlier upon the Common Stock, as traded on Nasdaq, closing
at or above certain specified stock prices ($5, $9 and $14 per share) for at
least twenty consecutive trading days.
Effective April 7, 1998 and in connection with his assuming the
additional role as the Company's Chief Financial Officer, Stephen M. Wagman
entered into an employment agreement with the Company which superceded the terms
of his then existing employment agreement. Mr. Wagman's employment agreement is
for a period commencing April 7, 1998 and expiring December 31, 2000, plus
renewable one-year extensions subject to either the Company's or Mr. Wagman's
right of cancellation. The agreement provides for an annual base salary of
$150,000 in 1998 ($169,500 in 1999), an annual target bonus of $75,000, and
certain other benefits. The terms of Mr. Wagman's
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<PAGE> 15
annual target bonus are consistent with other members of the Company's executive
management team. In addition, the Company agreed to pay Mr. Wagman twelve months
base salary and vest certain of his outstanding stock options as follows: (i)
upon a change of control where Mr. Wagman is not offered an equal or better
position and compensation package, (ii) if the Company terminated Mr. Wagman
without "cause," or (iii) if Mr. Wagman were constructively terminated by the
Company. In January 1999, the Compensation Committee granted him an option for
21,500 shares of Common Stock under the Stock Option Plan which will vest on
December 31, 2001 or earlier upon the Common Stock, as traded on Nasdaq, closing
at or above certain specified stock prices ($5, $9 and $14 per share) for at
least twenty consecutive trading days.
Also effective on April 7, 1998, Ronald D. Nall entered into an
employment agreement with the Company which superceded the terms of his then
existing employment agreement. The employment agreement was for a period
commencing April 7, 1998 and expiring December 31, 2000, plus renewable one-year
extensions subject to either the Company's or Mr. Nall's right of cancellation.
On January 11, 1999, the Company and Mr. Nall entered into a letter agreement
pursuant to which the Company and Mr. Nall agreed to terminate his employment
agreement. Also under the letter agreement, the Company agreed to pay Mr. Nall a
severance of $175,000, terminate certain of his options and vest the remainder.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Director's Compensation Committee currently consists of
Messrs. Greene, Johnson and Fratello. Mr. Fratello is the Chairman and Chief
Executive Officer of the Company. Messrs. Greene and Johnson are outside
directors. In fiscal 1998, all compensation matters relative to Messrs. Fratello
and Crippen were addressed by the full Board of Directors. Messrs. Fratello and
Crippen have certain relationships with respect to the Company, described
elsewhere herein under "Certain Transactions".
Notwithstanding anything to the contrary set forth in any of the
Company's previous filings under the Securities Act of 1933 or the Securities
Exchange Act of 1934 that might incorporate future filings, including this Proxy
Statement, in whole or in part, the following "Report of the Compensation
Committee of the Board of Directors on Executive Compensation" and the
"Performance Graph" shall not be incorporated by reference into any such
filings.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION
GENERAL. The Compensation Committee (the "Committee") is currently
composed of the Company's Chief Executive Officer, Mr. Fratello, and two outside
directors of the Company, O.G. Greene and Stuart C. Johnson. The Committee, or
in its absence, the full Board of Directors reviews, recommends and approves
changes to the Company's compensation policies and programs. Compensation
packages granted to the Company's Chief Executive Officer and other senior
management are intended to enable the Company to attract, motivate, reward and
retain the management talent required to achieve its corporate objectives in a
rapidly changing industry and thereby increase shareholder value. It is the
Company's policy to provide incentives to its senior management to achieve these
objectives and to reward exceptional performance and contributions to the
development of the Company's business. To attain these objectives, the Company's
executive management team compensation program includes cash compensation in the
form of base salary, annual incentive compensation in the form of discretionary
cash bonuses, and long-term incentive awards in the form of stock option grants.
In addition, the compensation program is comprised of various benefits,
including medical and insurance plans, and the 401(k) Plan, which are generally
available to all employees of the Company.
BASE SALARIES; ANNUAL DISCRETIONARY BONUSES. Base salaries and annual
discretionary bonus amounts have been established for the Chief Executive
Officer and several other executive officers in their respective employment
agreements. In April 1997, the Board of Directors approved the Employment,
Noncompetition, Development and Confidentiality Agreements between the Company
and each of Messrs. Fratello and Crippen. In addition, Messrs. Simmons, Wagman
and other persons in the management team of the Company have entered into
employment agreements with the Company that, among other items, set their
respective base salaries and annual discretionary bonus
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<PAGE> 16
amounts. See "Executive Compensation - Employment Agreements." Factors taken
into account for setting the amount of base salary and annual discretionary
bonus amounts include current compensation, financial performance of the Company
and qualitative factors bearing on an individual's experience, responsibilities,
management, leadership abilities and job performance.
During fiscal 1998, the Chief Executive Officer and other executive
officers participated in a compensation plan based upon the performance of the
Company. Generally, each participant was eligible to earn an annual bonus target
based upon the Company attaining the annual revenue and operating income levels
in the Company's financial plan for the year, and also based upon the Company's
and/or the executive's fulfillment of certain strategic business accomplishments
for the year. For fiscal 1998, Messrs. Fratello and Crippen each received an
annual bonus of $25,000, Mr. Simmons received an annual bonus of $50,000, Mr.
Wagman and other persons on the Company's management team received additional
stock options in lieu of cash bonuses. These bonuses were paid in early 1999
following the January 25, 1999 meeting of the Committee.
STOCK OPTIONS. Stock options are the principal vehicle used by the
Company for the payment of long-term compensation, to provide a stock-based
incentive to improve the Company's financial performance, and to assist in the
recruitment, motivation and retention of key professional and managerial
personnel. Long-term incentive compensation in the form of stock options enables
senior management to share in the appreciation of the value of the Common Stock
of the Company. The Board of Directors believes that stock option participation
aligns senior management's objectives with long-term stock price appreciation.
The Company's Stock Option Plan is administered by the Committee. Prior to
February 1998, the three founders of the Company did not participate in the
Stock Option Plan. Starting in February 1998, the Company has granted stock
options to certain members of the Company's management team, including the CEO,
COO and CFO, which will become 100% vested on December 31, 2001 or earlier upon
the Common Stock, as traded on Nasdaq, closing at or above certain specified
stock prices ($5, $9 and $14 per share) for at least twenty consecutive trading
days. This vesting schedule is designed to further incentivize the Company's
management team to increase the value of the Company and the price of its Common
Stock.
OTHER BENEFITS. The Company also has various broad-based employee
benefit plans. Executive officers participate in these plans on the same terms
as eligible, non-executive employees, subject to any legal limits on the amounts
that may be contributed or paid to executive officers under these plans. The
Company offers a 401(k) Plan, maintains medical and insurance plans and other
benefits for its employees.
COMPENSATION OF CHIEF EXECUTIVE OFFICER. Compensation of the Company
Chief Executive Officer, Marc J. Fratello, was established in his April 1997
Employment, Noncompetition, Development and Confidentiality Agreement. The Board
of Directors approved this employment agreement on April 10, 1997. In 1997, Mr.
Fratello's compensation package consisted of the base salary, annual
discretionary bonus, and other employee benefit programs similar to other
executive officers of the Company. Prior to February 1998, Mr. Fratello did not,
however, participate in the Stock Option Plan. In February 1998 and in
connection with each of their 56% salary reductions, Mr. Fratello and Mr.
Crippen each received a stock option to purchase 200,000 shares of Common Stock
pursuant to the Stock Option Plan. See "Executive Compensation - Employment
Agreements."
TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION. Section 162(m) of the Code
limits the tax deduction to $1 million for compensation paid to any of the
executive officers, unless certain requirements are met. The Compensation
Committee considered these requirements and the related regulations with respect
to 1998 compensation.
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<PAGE> 17
PERFORMANCE GRAPH
The following graph presents the Company's total shareholder return of
an investment of $100 in cash on March 1, 1996(1) for (i) the Company's Common
Stock, (ii) the Nasdaq Stock Market - U.S. Index (the "Nasdaq Index")(2), and
(iii) the Nasdaq Computer & Data Processing Services Stocks represented by
companies in SIC code 737 (the "Computer & Data Processing Index")(2). All
values and returns assume reinvestment of the full amount of all dividends.
COMPARISON OF CUMULATIVE TOTAL RETURN
FOR THE PERIOD FROM 3/1/96 THROUGH 12/31/98
AMONG POWERCERV CORPORATION, THE NASDAQ INDEX
AND THE COMPUTER & DATA PROCESSING INDEX
[GRAPH]
The information presented in the graph above was obtained by the
Company from outside sources it considers to be reliable but has not been
independently verified by the Company.
The graph shown above plotted using the following data:
<TABLE>
<CAPTION>
POWERCERV COMPUTER & DATA
PERIOD ENDED CORPORATION NASDAQ INDEX PROCESSING INDEX
---------------- --------------- ---------------- --------------------
<S> <C> <C> <C>
03/01/96 $ 100.00 $ 100.00 $ 100.00
03/31/96 105.36 101.70 102.74
06/30/96 87.50 110.00 114.19
09/30/96 29.46 113.91 116.47
12/31/96 35.71 119.51 121.18
3/31/97 25.89 113.08 112.44
6/30/97 24.10 133.81 144.19
9/30/97 23.21 156.45 157.67
12/31/97 16.07 146.71 148.81
3/31/98 21.43 171.37 196.7
6/30/98 32.14 176.33 218.29
9/30/98 21.43 159.63 205.76
12/31/98 13.39 205.88 266.45
</TABLE>
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<PAGE> 18
(1) The Company completed the initial public offering of its Common Stock
on March 1, 1996. The Company's 1996 fiscal year ended December 31,
1996. This "Performance Graph" assumes that $100 was invested on March
1, 1996 in the Company's Common Stock at the Company's initial public
offering price of $14.00 per share and at the closing sales price for
each index on that date. No cash dividends have been declared on the
Company's Common Stock. Shareholder returns over the indicated periods
should not be considered indicative of future shareholder returns.
(2) The Nasdaq Index and the Computer & Data Processing Index are
calculated by the Center for Research in Securities Prices.
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<PAGE> 19
CERTAIN TRANSACTIONS
The Company obtains many of its new technical employees through
placements from a professional recruiting firm named PowerStaff Corporation
("PowerStaff"). The stock of PowerStaff is owned by Messrs. Fratello, Crippen
and Ross. See "Management." During 1998, the Company paid fees to PowerStaff of
approximately $7,500 for each employee placed with the Company by PowerStaff.
The Company believes that the rates it pays to PowerStaff are below the rates
that it would pay to unaffiliated placement services. During 1998, the Company
incurred approximately $149,000 in recruiting expenses payable to PowerStaff.
In September 1996, Marc J. Fratello, the Chairman and Chief Executive
Officer of the Company, joined the board of directors of Software Business
Technologies, Inc. ("SBT"). In December 1996, the Company purchased a
five-percent ownership interest in SBT for $1.5 million. During 1997, the
Company provided approximately $8,300 of technical services to SBT and amended
its June 1996 partnering agreement ("Partnering Agreement") by expanding the OEM
license rights for a license fee of $250,000. This 1997 amendment also provided
evaluation license rights to other application products of the Company and
reduced the total royalties due under the Partnering Agreement to $1.75 million
from $2 million. In 1998, the Company further amended its Partnering Agreement,
expanding certain rights of SBT, eliminating future royalties, and providing for
additional license payments in 1998 totaling $825,000. Also during 1998, the
Company also received approximately $17,000 in royalty and service payments from
SBT under the Partnering Agreement, as amended. Separately, in 1998 the Company
expanded its rights to exercise its "put" options on its shares of preferred
stock of SBT, and exercised its option on 98,232 shares for $500,000. The
remaining put options can be exercised on the remaining 196,679 shares of SBT
preferred stock at various dates through June 2000.
On November 24, 1998, the Company loaned $72,000 to Stephen Wagman, the
Company's Chief Financial Officer, to purchase a primary residence. This loan is
evidenced by a promissory note bearing interest at 6% per annum and is secured
by Mr. Wagman's pledge of Common Stock issued upon the exercise of stock
options. The loan is due upon the earlier of the separation of his employment
with the Company or November 15, 1999.
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<PAGE> 20
PROPOSAL 1 - ELECTION OF DIRECTORS
The Board of Directors of the Company currently consists of five
members. At the Meeting, the same five members of the Board of Directors will
stand for re-election. The Company's bylaws currently authorize up to nine
directors. All directors hold office until the next annual meeting of
shareholders or until their successors are elected and qualified or their
earlier resignation, removal from office or death.
The nominees for election to the Board of Directors are Roy E. Crippen,
III, Marc J. Fratello, O.G. Greene, Stuart C. Johnson and Michael J. Simmons.
All of the nominees are currently members of the Board of Directors. See
"Management - Directors and Executive Officers" for information on such
nominees. Mr. Crippen's nomination was made pursuant to his March 1999
employment termination agreement. Unless otherwise indicated, votes will be cast
pursuant to the accompanying proxy FOR the election of these nominees. Should
any nominee become unable or unwilling to accept nomination or election for any
reason, it is intended that votes will be cast for a substitute nominee
designated by the Board of Directors, which has no reason to believe the
nominees named will be unable or unwilling to serve if elected.
PROPOSAL 2 - PROPOSAL TO AMEND
POWERCERV CORPORATION 1995 STOCK OPTION PLAN
The Board of Directors and the stockholders approved the adoption of
the PowerCerv Corporation 1995 Stock Option Plan (the "Stock Option Plan") in
June 1995. Amendments to the Stock Option Plan have been adopted by the Board of
Directors and approved by the stockholders from time to time. As of December 31,
1998, the maximum number of shares of the Common Stock of the Company ("Shares")
which may be issued upon the exercise of options granted pursuant to the Stock
Option Plan was 3,675,000, of which 3,532,840 Shares were outstanding and 42,202
Shares remained available for future stock option grants. On January 25, 1999,
the Board of Directors amended the Stock Option Plan, subject to stockholder
approval, to increase by 1,000,000 the maximum aggregate number of Shares that
may be issued under the Stock Option Plan. The Board of Directors believes that
approval of the amendment to the Stock Option Plan is in the best interests of
the Company and its stockholders because the availability of an adequate number
of Shares reserved for issuance under the Stock Option Plan and the ability to
grant stock options is an important factor in attracting, motivating and
retaining qualified personnel essential to the success of the Company.
SUMMARY DESCRIPTION OF THE STOCK OPTION PLAN.
Certain features of the Stock Option Plan are summarized below.
GENERAL. Awards under the Stock Option Plan consist of options to
purchase a specified number of Shares at a stated price per share (the
"Options"). Generally, the exercise price per share of an Option may not be less
than the closing price of a share of Company Common Stock on the Nasdaq Stock
Market's National Market on the date the Option is granted. Options granted
under the Stock Option Plan may be Options that qualify as "incentive stock
options" ("ISOs") pursuant Section 422 of the Code or nonqualified stock options
("NSOs"). The Board of Directors may amend the Stock Option Plan from time to
time without approval of the shareholders of the Company. The Board may,
however, condition any amendment on the approval of the shareholders of the
Company if such approval is necessary or advisable with respect to tax,
securities or other applicable laws. Currently, federal income tax law requires
that the shareholders must approve any amendment to increase the maximum number
of Shares that may be issued under the Stock Option Plan. Each Option granted
under the Stock Option Plan will be exercisable by the Option recipient in
accordance with the vesting schedule established by the Stock Option Committee
at the time of grant, during a term not to exceed ten years fixed by the Stock
Option Committee. Upon exercise of any Option, payment for Shares as to which
the Option is exercised shall be make in cash or by check or wholly or partially
in the form of Shares having a fair market value on the date of exercise equal
to the
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<PAGE> 21
exercise price.
ADMINISTRATION. The Stock Option Plan is administered by the Stock
Option Committee (or, in the event no such committee has been established at any
point in time, the Compensation Committee) appointed by the Board of Directors
from among its members (the "Committee"). With respect to Options granted to
persons subject to Section 16 of the Securities Exchange Act of 1934, the
Committee shall be the entire Board of Directors. The Committee selects the
recipients of Options, determines the terms and conditions and number of Shares
subject to each Option, and makes any other determinations necessary or
advisable for the administration of the Stock Option Plan.
SHARES SUBJECT TO THE STOCK OPTION PLAN. The Stock Option Plan provides
that the total number of Shares that may be purchased pursuant to Options shall
not exceed 4,675,000 Shares, representing approximately 26% of the
then-currently outstanding Shares. Previously, the number of Shares issuable
pursuant to Options under the Stock Option Plan was limited to 3,675,000.
Authority to grant Options under the Stock Option Plan will continue until June
15, 2005, subject to the continued availability of Shares for the granting of
Options under the Stock Option Plan. The Shares subject to Options which expire
unexercised or are terminated shall again become available for the granting of
Options under the Stock Option Plan. In the event of changes in the number or
kind of outstanding Shares or certain other events, an appropriate adjustment
will be made with respect to existing and future awards.
ELIGIBILITY. Any person that the Committee designates is eligible to
receive an Option under the Stock Option Plan. Only employees of the Company,
however, are eligible to receive grants of ISOs. Because the employees of the
Company who may participate in the Stock Option Plan and amount of their Options
are determined by the Committee in its discretion, it is not possible to state
the names or positions of, or the number of Options that may be granted to, the
Company's officers and employees.
TRANSFERABILITY; TERMINATION OF EMPLOYMENT. All Options granted under
the Stock Option Plan will be nontransferable and nonassignable except by will
or by the laws of descent and distribution.
An Option generally expires either immediately following the last day
that the Option recipient is employed by or affiliated with the Company or after
the 60th day following termination of employment. However, the Committee may
delay the expiration date of the Option to a date after termination of
employment or affiliation with the Company. The maximum delay that may be
allowed, however, shall be 90 days for an ISO and four years for an NSO. If an
Option recipient's employment is terminated for cause, any Option granted to the
Option recipient shall expire on the date his/her employment terminates. In the
event of an Option recipient's death, an unexercised Option shall expire within
12 months of the date of death.
CHANGE IN CONTROL AND OTHER EVENTS. Contingent upon the occurrence of
one of several events referred to in the Stock Option Plan as "Trigger Events,"
the Board of Directors may terminate all Options outstanding under the Stock
Option Plan effective upon the date of the Trigger Event or may accelerate the
expiration of the Options to a date not earlier than the fifteenth day after the
date of the Trigger Event. Furthermore, the Board of Directors may accelerate
the vesting of any Option in the event of a Trigger Event. If the Board
terminates the Options, it shall make, within 60 days after the date of the
Trigger Event, cash payments to the Option recipients equal to the difference
between the exercise price and the fair market value of the Shares that would
have been subject to each recipient's terminated Option on the date of the
Trigger Event. Since June 1998, most Options issued contain a provision that if
there is a Trigger Event, the Options will become 100% vested.
FEDERAL INCOME TAX CONSEQUENCES.
INCENTIVE STOCK OPTIONS. An ISO results in no taxable income to the
Option recipient or deduction to the Company at the time it is granted or
exercised. If the Option recipient retains the stock received as a result of the
exercise of an ISO for at least two years from the date of the grant and one
year from the date of exercise, then any gain on the sale of such stock will be
treated as long-term capital gain. If the Shares are disposed of during this
period, the Option recipient realize taxable ordinary income equal to the lesser
of (i) the gain realized by the Option recipient upon such disposition or (ii)
the difference between the exercise price and the fair market value of the
Shares on the date of
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<PAGE> 22
exercise. The Company receives a tax deduction only if the Shares are disposed
of during such period. The deduction is equal to the amount of taxable income to
the Option recipient. To the extent that the aggregate exercise price of the
Shares subject to ISOs granted to a key employee under all plans of the Company
and any parent or subsidiary of the Company, and that become exercisable for the
first time during any calendar year, exceeds $100,000, such ISOs shall be
treated as NSOs.
NON-QUALIFIED STOCK OPTIONS. An NSO results in no taxable income to the
Option recipient or deduction to the Company at the time it is granted. Upon
exercising such an Option, the Option recipient will realize taxable ordinary
income in the amount of the difference between the Option exercise price and the
then fair market value of the Shares. Subject to the applicable provisions of
the Code, a deduction for federal income tax purposes will be allowable to the
Company in the year of exercise in an amount equal to the taxable ordinary
income realized by the Option recipient.
VOTE REQUIRED AND BOARD OF DIRECTOR RECOMMENDATION. The affirmative
vote of the holders of a majority of the Shares represented at the Meeting, at
which a quorum is present, is required to approve the Stock Option Plan
amendment to increase the maximum aggregate number of Shares that may be issued
under the Stock Option Plan. The Board of Directors unanimously recommends a
vote FOR approval of the amendment to the Stock Option Plan.
PROPOSAL 3 - RATIFICATION OF
THE APPOINTMENT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Company's Board of Directors has appointed Ernst & Young LLP,
independent certified public accountants, to audit the consolidated financial
statements of the Company for the year ending December 31, 1999. Ernst & Young
LLP has served as the Company's independent certified public accountants since
June 1998. Representatives of Ernst & Young LLP are expected to be present at
the Meeting with the opportunity to make a statement if they desire to do so and
to respond to appropriate questions posed by shareholders.
The Board of Directors recommends a vote FOR the ratification of this
selection.
PROPOSALS OF SHAREHOLDERS FOR THE NEXT ANNUAL MEETING
Proposals of shareholders intended for presentation at the 2000 Annual
Meeting of Shareholders must be received by the Company on or before December
30, 1999, in order to be considered for inclusion in the Company's proxy
statement and form of proxy for that meeting.
The Company's Articles of Incorporation also require advance notice to
the Company of any shareholder proposal and of any nominations by shareholders
of persons to stand for election as directors at a shareholders' meeting. Notice
of shareholder proposals and of director nominations must be timely given in
writing to the Secretary of the Company prior to the meeting at which the
directors are to be elected. To be timely, notice must be received at the
principal executive office of the Company not less than 60 days prior to the
meeting of shareholders; provided, however, that in the event that less than 70
days' notice prior to public disclosure of the date of the meeting is given or
made to the shareholders, notice by the shareholder, in order to be timely, must
be so delivered or received not later than the close of business on the tenth
day following the day on which such notice of the date of the annual meeting was
mailed or public disclosure of the date of the annual meeting was made,
whichever first occurs.
In addition to the matters required to be set forth by the rules of the
Securities and Exchange Commission, a shareholder's notice with respect to a
proposal to be brought before the annual meeting must set forth (a) a brief
description of the proposal and the reasons for conducting such business at the
annual meeting, (b) the name and address, as they appear on the Company's books,
of the shareholder proposing such business and any other shareholders
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<PAGE> 23
known by such shareholder to be supporting such proposal, (c) the class and
number of shares of the Company that are beneficially owned by such shareholder
on the date of such shareholder notice and by other shareholders known to such
shareholder to be supporting such proposal on the date of such shareholder
notice, and (d) any financial interest of the shareholder in such proposal.
A shareholder's notice with respect to a director nomination must set
forth (a) as to each nominee (i) the name, age, business address, and residence
address of the person, (ii) the principal occupation or employment of the
person, (iii) the class and number of shares of the Company that are
beneficially owned by such person, (iv) all information that would be required
to be included in the proxy statement soliciting proxies for the election of the
nominee director (including such person's written consent to serve as a director
if so elected), and (b) as to the shareholder providing such notice (i) the name
and address, as they appear on the Company's books, of the shareholder, and (ii)
the class and number of shares of the Company that are beneficially owned by
such shareholder on the date of such shareholder notice.
The complete Articles of Incorporation provisions governing these
requirements are available to any shareholder without charge upon request from
the Secretary of the Company.
OTHER MATTERS
The Board of Directors knows of no other matter to be presented at the
Meeting. If any other matter should be presented properly, it is intended that
the enclosed proxy will be voted in accordance with the judgment of the
individuals named in the proxy.
The Company will provide to any shareholder, upon the written request
of any such person, a copy of the Company's Annual Report on Form 10-K,
including the financial statements and the schedules thereto, for its fiscal
year ended December 31, 1998, as filed with the Securities and Exchange
Commission pursuant to Rule 13a-1 under the Securities Exchange Act of 1934. All
such requests should be directed to Stephen Wagman, Secretary, PowerCerv
Corporation, 400 North Ashley Drive, Suite 2700, Tampa, Florida 33602. No charge
will be made for copies of such annual report; however, a reasonable charge for
the exhibits will be made.
By Order of the Board of Directors,
/s/ Stephen M. Wagman
-------------------------------------
Stephen M. Wagman,
Secretary
Tampa, Florida
April 30, 1999
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<PAGE> 24
DETACH HERE
POWERCERV CORPORATION
400 NORTH ASHLEY DRIVE, SUITE 2700
TAMPA, FLORIDA 33602
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD ON JUNE 2, 1999
The undersigned hereby appoints Marc J. Fratello and Stephen M. Wagman, or
either of them, as Proxies, each with the power to appoint his substitute, and
hereby authorizes them or their substitutes to represent and to vote, as
designated below, all the shares of stock of PowerCerv Corporation held of
record by the undersigned on April 30, 1999, at the annual meeting of
shareholders to be held on June 2, 1999 or any adjournment thereof.
<TABLE>
<S> <C>
------------------------
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE
------------------------
</TABLE>
<TABLE>
<S> <C>
PLEASE MARK DETACH HERE
[X] VOTES AS IN
THIS EXAMPLE.
</TABLE>
1. Election of Directors
[ ]FOR ALL NOMINEES LISTED BELOW [ ] WITHHOLD AUTHORITY
(except as marked to the contrary below). to vote for all
nominees listed below.
(INSTRUCTION: To withhold authority to vote for any individual nominee, strike
a line through the nominee's name in the list below.)
Roy E. Crippen, III, Marc J. Fratello, O.G. Greene, Stuart C. Johnson, Michael
J. Simmons
2. To consider and vote upon a proposal to amend the Company's 1995 Stock Option
Plan, as amended (the "Plan") to increase the number of shares available for
issuance under the Plan from 3,675,000 shares to 4,675,000 shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To ratify the appointment of Ernst & Young LLP as the independent auditors
for the Company for the fiscal year ending December 31, 1999.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. In their discretion the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED. IF NO DIRECTION
IS GIVEN, THEY WILL BE VOTED FOR THE ELECTION OF DIRECTORS AND FOR PROPOSALS IN
ITEMS 2, 3 AND 4.
When signing as attorney, executor,
administrator, trustee or guardian,
please give full title as such. If a
corporation, please sign in full
corporate name by president or other
authorized officer. If a partnership,
please sign in partnership name by
authorized person.
DATED:
,1999
---------------------------------
PLEASE MARK, SIGN, DATE, AND RETURN THE
PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE
---------------------------------------
Signature
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Signature, if held jointly
