<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Forte Software, 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/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
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:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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FORTE SOFTWARE, INC.
1800 HARRISON STREET
OAKLAND, CALIFORNIA 94612
July 12, 1996
TO THE STOCKHOLDERS OF FORTE SOFTWARE, INC.
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Forte Software, Inc. (the "Company"), which will be held at the Lakeview Club,
300 Lakeside Drive, 28th Floor, Oakland, California 94612, on Wednesday,
August 14, 1996, at 11:00 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,
/s/ Martin J. Sprinzen
Martin J. Sprinzen
PRESIDENT, CHIEF EXECUTIVE OFFICER AND
CHAIRMAN OF THE BOARD OF DIRECTORS
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FORTE SOFTWARE, INC.
1800 HARRISON STREET
OAKLAND, CALIFORNIA 94612
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 14, 1996
The Annual Meeting of Stockholders ("Annual Meeting") of Forte Software,
Inc. (the "Company") will be held at the Lakeview Club, 300 Lakeside Drive, 28th
Floor, Oakland, California 94612, on Wednesday, August 14, 1996, at 11:00 a.m.
Pacific Time for the following purposes:
1. To elect five 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 ratify the appointment of Ernst & Young LLP as the Company's
independent public accountants for the fiscal year ending March 31, 1997; and
3. 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 July 1, 1996 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 1800 Harrison
Street, 24th Floor, Oakland, California during ordinary business hours for the
ten-day period prior to the Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS,
/s/ Rodger Weismann
Rodger Weismann
SECRETARY
Oakland, California
July 12, 1996
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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.
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FORTE SOFTWARE, INC.
1800 HARRISON STREET
OAKLAND, CALIFORNIA 94612
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 14, 1996
These proxy materials are furnished in connection with the solicitation of
proxies by the Board of Directors of Forte Software, Inc., a Delaware
corporation (the "Company"), for the Annual Meeting of Stockholders (the "Annual
Meeting") to be held at the Lakeview Club, 300 Lakeside Drive, 28th Floor,
Oakland, California 94612, on Wednesday, August 14, 1996, at 11:00 a.m. Pacific
Time, on Wednesday, August 14, 1996, at 11:00 a.m., and at any adjournment or
postponement of the Annual Meeting. These proxy materials were first mailed to
stockholders on or about July 12, 1996.
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 July 1, 1996, the record date for determination of
stockholders entitled to vote at the Annual Meeting, there were 18,339,072
shares of Common Stock outstanding. Each stockholder of record on July 1, 1996
is entitled to one vote for each share of Common Stock held by such stockholder
on July 1, 1996. 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 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. Ratification of the appointment of Ernst & Young LLP as the
Company's independent public accountants for the fiscal year ending March 31,
1997 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 counted as
having been voted on the proposal.
1.
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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 Nominees of the Board of Directors (as set forth in
Proposal No. 1) and FOR Proposal No. 2, 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. Except as described above, the Company does not
presently intend to solicit proxies other than by mail.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The directors who are being nominated for election to the Board of
Directors (the "Nominees"), their ages as of May 31, 1996, their positions and
offices held with the Company and certain biographical information are set forth
below. 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 five 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.
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Nominees Age Position
-------- --- --------
Martin J. Sprinzen . . . . . . . . . 47 President, Chief Executive Officer
and Chairman of the Board of
Directors
Promod Haque (1) . . . . . . . . . . 48 Director
Thomas A. Jermoluk(2). . . . . . . . 39 Director
David N. Strohm (2). . . . . . . . . 48 Director
William H. Younger, Jr. (1)(2) . . . 46 Director
- - ----------
(1) Member of Audit Committee
(2) Member of Compensation Committee
MARTIN J. SPRINZEN co-founded the Company in February 1991 and has served
as its President, Chief Executive Officer and Chairman of the Board of Directors
since inception. Mr. Sprinzen also served as the Company's Secretary from
inception to January 1996. From May 1988 to November 1990, Mr. Sprinzen was
employed by Ingres Corp., a relational database management system company, as
Executive Vice President, International Operations. From October 1986 to May
1988, Mr. Sprinzen was President and Chief Executive Officer of NASTEC, Corp., a
computer-aided software engineering company. From July 1984 to October 1986,
Mr. Sprinzen was employed by Ingres Corp., as Vice President, Engineering. From
December 1979 to June 1984, Mr. Sprinzen was employed by Candle Corp., a
mainframe software management tools company, where his last position was Vice
President, Technology. Mr. Sprinzen holds a B.S. degree in electrical
engineering from The Cooper Union.
PROMOD HAQUE has been a director of the Company since May 1992. Mr. Haque
joined Norwest Venture Capital Management, Inc., a venture capital firm, in
November 1990 and currently serves as its Vice President, and is also a General
Partner of Itasca Partners, which is the General Partner of Norwest Equity
Partners IV, L.P., a Minnesota Limited Partnership. Mr. Haque currently serves
as a director of Transaction Systems Architects, Inc., Optical Sensors, Inc.,
Prism Solutions, Inc. and several privately held companies. Mr. Haque holds a
B.S.E.E. from the University of Delhi, India; and an M.S.E.E., a Ph.D.E.E. and
an M.B.A. from Northwestern University.
THOMAS A. JERMOLUK has been a director of the Company since February 1996.
Mr. Jermoluk is President, Chief Operating Officer and a member of the board of
directors of Silicon Graphics, Inc., a manufacturer of high performance visual
computing systems. Prior to being elected President in 1994 and Chief Operating
Officer in 1992, Mr. Jermoluk served as Executive Vice President of Silicon
Graphics, Inc. from 1991 to 1992 and as Vice President/General Manager, Advanced
Systems Division, from 1988 to 1991. Mr. Jermoluk currently serves as a
director of Pure Software, Inc. Mr. Jermoluk holds a B.S. degree in computer
science/electrical engineering and an M.S. degree in computer science from
Virginia Tech.
DAVID N. STROHM has been a Director of the Company since February 1991.
Mr. Strohm joined Greylock Management Corporation ("Greylock"), a venture
capital management company, in 1980 and is a general partner of several venture
capital funds affiliated with Greylock. Mr. Strohm currently serves as a
director of Banyan Systems, Inc., Legato Systems, Inc. and MDL Information
Systems, Inc. Mr. Strohm holds a B.A. degree from Dartmouth College and an
M.B.A. from Harvard University.
WILLIAM H. YOUNGER, JR., has been a director of the Company since February
1991. Mr. Younger is a general partner of the general partner of Sutter Hill
Ventures, L.P., a venture capital management firm, where he has been employed
since 1981. Mr. Younger currently serves as a director of COR Therapeutics,
Inc., Celeritek, Inc., and Oasis Health Care Systems. Mr. Younger holds a
B.S.E.E. degree from the University of Michigan and an M.B.A. from Stanford
University.
3.
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The Company currently has authorized five directors. Each director holds
office until the next annual meeting of stockholders or until his successor is
duly elected and qualified. The officers serve at the discretion of the Board.
There are no family relationships between any of the directors or officers of
the Company.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
During the fiscal year ended March 31, 1996, the Board of Directors held
seven meetings and acted by written consent on seven occasions. For the fiscal
year, each of the current directors during the term of their tenure attended or
participated in at least 75% of the aggregate of (i) the total number of
meetings or actions by written consent of the Board of Directors and (ii) the
total number of meetings held by all Committees of the Board of Directors on
which each such director served. The Board of Directors has two standing
committees: the Audit Committee and the Compensation Committee.
During the fiscal year ended March 31, 1996, the Audit Committee of the
Board of Directors met once. 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 Audit Committee are Messrs. Haque and Younger.
During the fiscal year ended March 31, 1996, the Compensation Committee of
the Board of Directors met one time. The Compensation Committee reviews the
performance and sets the compensation of the Chief Executive Officer of the
Company, and approves the compensation of the other executive officers of the
Company and reviews the compensation programs for other key employees, including
salary and cash bonus levels. The Compensation Committee administers the 1996
Stock Option Plan and the Employee Stock Purchase Plan. The members of the
Compensation Committee are Messrs. Jermoluk, Strohm and Younger.
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.
On February 21, 1996 (prior to the Company's initial public offering), Mr.
Jermoluk was granted an option to purchase 15,000 shares of Common Stock under
the 1991 Equity Incentive Plan at an exercise price of $11.00 per share; the
option shares vest over 48 months. Non-employee Board members are eligible for
option grants pursuant to the provisions of the Automatic Option Grant Program
under the Company's 1996 Stock Option Plan. Under the Automatic Option Grant
Program, each individual who first becomes a non-employee Board member after the
date of the Company's initial public offering will be granted an option to
purchase 15,000 shares on the date such individual joins the Board, provided
such individual has not been in the prior employ of the Company. In addition,
at each Annual Stockholders Meeting, beginning with the 1996 Annual Meeting,
each individual who continues to serve and has served as a non-employee Board
member for at least six months prior to such Annual Meeting will receive an
additional option grant to purchase 3,000 shares of Common Stock, whether or not
such individual has been in the prior employ of the Company. For further
information concerning the terms of these automatic grants, please see the
summary of the Automatic Option Grant Program below under the heading, "1996
Stock Option Plan."
Directors who are also employees of the Company are eligible to receive
options under the 1996 Stock Option Plan. Such employee-directors are also
eligible to participate in the Company's Employee Stock Purchase Plan, provided
that such employee-director does not hold an amount of Common Stock equal to or
greater than five percent of the total outstanding Common Stock.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES LISTED HEREIN.
4.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of June 30, 1996 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
current directors and executive officers as a group. Beneficial ownership has
been determined in accordance with Rule 13d-3 under the Securities Exchange Act
of 1934, as amended. 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 sixty
(60) days of the date as of which the information is provided; in computing the
percentage ownership of any person, the amount of shares is deemed to include
the amount of shares beneficially 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.
SHARES BENEFICIALLY OWNED
------------------------------------------
BENEFICIAL OWNER NUMBER OF SHARES PERCENTAGE OF CLASS
- - ---------------------------------- -------------------- -------------------
Greylock Limited Partnership
One Federal Street
Boston, MA 02110. . . . . . . . 2,724,412 14.9%
Norwest Equity Partners,
a Minnesota Limited Partnership
222 S. Ninth Street
Minneapolis, MN 55402 . . . . . 1,645,620 9.0
Promod Haque (10) . . . . . . . . 1,645,620 9.0
Thomas A. Jermoluk (1) . . . . . . 18,000 *
David N. Strohm (11) . . . . . . . 2,734,792 14.9
William H. Younger, Jr. (12) . . . 247,022 1.3
Martin J. Sprinzen (2) . . . . . . 1,863,761 10.0
Paul Butterworth (3) . . . . . . . 582,437 3.2
Michael Hedger (4) . . . . . . . . 142,500 *
Edward A. Michehl (5). . . . . . . 138,100 *
Richard Scheffer (6) . . . . . . . 337,500 1.8
Jay Shiveley (7) . . . . . . . . . 300,333 1.6
Rodger Weismann (8). . . . . . . . 538,400 2.9
All directors and executive officers
as a group (11 persons) (9) . . 8,548,465 43.9
* Less than 1% of the outstanding shares of Common Stock.
(1) Includes options immediately exercisable into 15,000 shares of Common Stock
under the Option Plan.
(2) Includes options immediately exercisable into 375,000 shares of Common
Stock under the Option Plan.
(3) Includes options immediately exercisable into 140,625 shares of Common
Stock under the Option Plan.
(4) Includes options immediately exercisable into 127,500 shares of Common
Stock under the Option Plan.
(5) Includes options immediately exercisable into 100,975 shares of Common
Stock under the Option Plan.
(6) Includes options immediately exercisable into 45,000 shares of Common Stock
under the Option Plan.
(7) Includes options immediately exercisable into 280,333 shares of Common
Stock under the Option Plan.
(8) Includes options immediately exercisable into 52,500 shares of Common Stock
under the Option Plan.
(9) Includes options immediately exercisable into 1,136,934 shares of Common
Stock under the Option Plan.
(10) Includes 1,630,620 shares of Common Stock owned beneficially by Norwest
Equity Partners IV, L.P. The General Partner of Norwest Equity Partners,
L.P. is Itasca Partners, of which Messrs. Daniel J. Haggerty and Robert F.
Zicarelli are Managing Partners and Dr. Haque is a General Partner. In
such capacities, Messrs. Haggerty and Zicarelli and Dr. Haque may be deemed
to be beneficial owners of such shares, although they
5.
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disclaim such beneficial ownership except to the extent of their pecuniary
interest therein, if any. Does not include 15,000 shares held by Norwest
Equity Partners V, L.P. ("NEP V"). Mr. Haggerty is also a managing general
partner of, and Dr. Haque is a partner of Itasca Partners V, L.L.P., the
general partner of NEP V, and in such capacities may be deemed also to
beneficially own shares held by NEP V. Mr. Haggerty and Dr. Haque each
disclaim such beneficial ownership, except to the extent of his indirect
pecuniary interests therein.
(11) Includes 2,724,412 shares of Common Stock owned beneficially by Greylock
Limited Partnership ("Greylock"), of which Messrs. David N. Strohm, Howard
E. Cox, Jr., William W. Helman, Robert P. Henderson, William S. Kaiser,
Henry F. McCance and Rodger L. Evans are general partners. Each of these
individuals disclaims beneficial ownership of the shares held by Greylock
except to the extent of his pecuniary interest therein arising from his
general partnership interest in Greylock.
(12) Includes 93,018 shares of Common Stock held of record by Sutter Hill
Ventures, a California Limited Partnership, and beneficially owned by Mr.
Younger.
6.
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EMPLOYMENT CONTRACTS AND CHANGE IN CONTROL ARRANGEMENTS
The Compensation Committee as administrator of the Option Plan will have
the authority to provide for the accelerated vesting of the shares of Common
Stock subject to outstanding options held by the Chief Executive Officer and any
other executive officer in connection with certain changes in control of the
Company or the subsequent termination of the officer's employment following the
change in control event.
None of the Named Officers have employment agreements with the Company, and
their employment may be terminated at any time. However, the Company has
entered into agreements with its executive officers that provide for
acceleration of vesting of one-half of the unvested option shares or restricted
stock in the event the officer's employment is involuntarily terminated within
one year following certain acquisitions or changes in control of the Company.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Company's Board of Directors (the
"Committee") has the authority to establish the level of base salary payable to
the Chief Executive Officer ("CEO") and to administer the Company's 1996 Stock
Option Plan and Employee Stock Purchase Plan. In addition, the Committee has
the responsibility for approving the individual bonus program to be in effect
for the CEO and all other employees of the Company, including all executive
officers. In addition, the CEO has the responsibility for approving the bonus
programs to be in effect for all other executive officers and other key
employees each fiscal year, subject to the approval of the Committee.
For fiscal 1996, the process utilized by the CEO in determining executive
officer compensation levels took into account both qualitative and quantitative
factors. Among the factors considered by the CEO were informal surveys
conducted by Company personnel among local companies. However, the CEO made the
final compensation decisions concerning such officers.
GENERAL COMPENSATION POLICY. The CEO'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 CEO'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.
In preparing the performance graph for this Proxy Statement, the Company
has selected the Nasdaq Stock Market-U.S. Companies Index and the Nasdaq Stock
Market Computer & Data Processing Index. The companies included in the
Company's informal survey are not necessarily those included in the Indices,
because the latter were determined not to be competitive with the Company for
executive talent or because compensation information was not available to the
Company.
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 with the Company for executive talent on the
basis of informal surveys conducted by the Company.
ANNUAL CASH BONUSES. Each executive officer has an established bonus
target each fiscal year. 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 and a range for
the executive's contribution. For fiscal 1996, the Company exceeded its
performance targets. Actual bonuses paid reflect an individual's accomplishment
of both corporate and functional objectives, with greater weight being given to
achievement of corporate rather than functional objectives.
7.
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LONG-TERM INCENTIVE COMPENSATION. During fiscal 1996, the Committee made
an option grant to Messrs. Hedger and Shiveley under the 1996 Stock Option Plan.
Generally, a significant grant is made in the year that an officer commences
employment. Grants in subsequent years may also occur, depending on officers
performance. Generally, the size of each 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, 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 five
year period, contingent upon the executive officer's continued employment with
the Company. Accordingly, the option will provide a return to the executive
officer only if he 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. Sprinzen, the Company's
President and CEO, was established by the Committee primarily on the basis of
Mr. Sprinzen's personal performance of his duties.
The remaining components of the CEO's fiscal 1996 incentive compensation
were entirely dependent upon the Company's financial performance and provided no
dollar guarantees. The bonus paid to the CEO for fiscal 1996 was based on the
same incentive plan as for all other officers. Specifically, a target incentive
was established at the beginning of the fiscal year using an agreed-upon formula
based on Company revenue and profit. Each fiscal year, the annual incentive
plan is reevaluated with a new achievement threshold and new targets for revenue
and profit.
TAX LIMITATION. As a result of Federal tax legislation enacted in 1993, 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. This limitation
will be in effect for all fiscal years of the Company ending after the Company's
initial public offering. The stockholders approved the Company's 1996 Stock
Option Plan, which includes a provision that limits the maximum number of shares
of Common Stock for which any one participant may be granted stock options per
calendar year. Accordingly, any compensation deemed paid to an executive
officer when he exercises an option under the 1996 Stock Option Plan with an
exercise price equal to the fair market value of the option shares on the grant
date generally 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 the cash compensation payable
to the Company's executive officers to the $1 million cap.
Compensation Committee
Thomas A. Jermoluk
David N. Strohm
William H. Younger, Jr.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Company's Board of Directors was formed
in May 1995, and the members of the Compensation Committee are Messrs. Jermoluk,
Strohn and Younger. None of these individuals was at any time during fiscal
1996, 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.
8.
<PAGE>
STOCK PERFORMANCE GRAPH
The graph set forth below compares the cumulative total stockholder return
on the Company's Common Stock between March 11, 1996 (the date the Company
effected its initial public offering) and March 31, 1996 with the cumulative
total return of (i) the Nasdaq Stock Market-U.S. Companies Index (the "Nasdaq
Stock Market-U.S. Index") and (ii) the Nasdaq Stock Market Computer & Data
Processing Index (the "Nasdaq Computer & Data Processing Index"), over the same
period. This graph assumes the investment of $100.00 on March 11, 1996 in the
Company's Common Stock, the Nasdaq Stock Market-U.S. Index and the Nasdaq
Computer & Data Processing 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
the Nasdaq Stock Market, 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 FORTE SOFTWARE, INC.,
THE NASDAQ STOCK MARKET-U.S. INDEX AND THE NASDAQ COMPUTER &
DATA PROCESSING INDEX
[GRAPH]
3/11/96 3/31/96
Forte Software, Inc. 100 193
Nasdaq Stock Market-U.S. Index 100 102
Nasdaq Computer & Data Processing Index 100 103
The Company effected its initial public offering on March 11, 1996 at a per
share price of $21.00. The closing price of Common Stock on March 12, 1996, its
first day of public trading, was $38.25 per share. The graph above commences
with the initial public offering price of $21.00.
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.
9.
<PAGE>
EXECUTIVE COMPENSATION AND RELATED INFORMATION
The following Summary Compensation Table sets forth the compensation earned
for the two fiscal years ended March 31, 1996 by the Company's Chief Executive
Officer and the four other most highly compensated executive officers
(collectively, the "Named Officers"), each of whose aggregate compensation for
fiscal 1996 exceeded $100,000 for services rendered in all capacities to the
Company and its subsidiaries for that fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
NUMBER OF
SECURITIES
FISCAL ANNUAL COMPENSATION UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS OPTIONS COMPENSATION(2)
- - --------------------------- ---- --------- ----- ------- ---------------
<S> <C> <C> <C> <C> <C>
Martin J. Spinzen. . . . . . . . . . 1996 $209,494 $105,000 0 $1,496
President and Chief Executive 1995 208,008 128,918 (3) 375,000 1,496
Officer
Paul Butterworth . . . . . . . . . . 1996 130,000 48,500 0 546
Vice President and Chief 1995 130,003 53,390 (3) 150,000 546
System Architect
Richard Scheffer . . . . . . . . . . 1996 115,000 57,700 0 1,388
Vice President, Marketing 1995 115,000 72,128 (3) 52,500 1,388
Jay Shiveley . . . . . . . . . . . . 1996 103,500 209,208 (4) 45,000 450
Vice President, North 1995 103,502 202,452 (4) 120,000 450
American and Australian
Sales
Rodger Weismann. . . . . . . . . . . 1996 125,000 60,600 0 1,454
Vice President, Finance and 1995 125,003 56,500 52,500 1,454
Administration, Chief
Financial Officer and
Secretary
</TABLE>
- - ----------
(1) Salary includes amounts deferred under the Company's 401(k) Plan.
(2) Represents premiums for term life insurance.
(3) Includes forgiveness of the principal amount and interest on loans from the
Company as follows: Mr. Sprinzen $38,918, Mr. Butterworth $5,390 and Mr.
Scheffer $9,795.
(4) Represents sales commissions.
10.
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table contains information concerning the stock option grants
made to each of the Named Officers in the fiscal year ended March 31, 1996. No
stock appreciation rights were granted to these individuals during such year.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION FOR
INDIVIDUAL GRANT OPTION TERM (4)
----------------------------------------- ------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION
NAME GRANTED (#)(1) 1996 (2) ($/SH) (3) DATE 5% ($) 10% ($)
- - ---- -------------- ------------ -------------- ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Martin J. Sprinzen 0 --- --- --- --- ---
Paul Butterworth 0 --- --- --- --- ---
Richard Scheffer 0 --- --- --- --- ---
Jay Shiveley 30,000 2.5% $2.33 5/3/05 $44,022 $111,562
15,000 1.2% 10.00 1/12/06 94,334 239,061
Rodger Weismann 0 --- --- --- --- ---
</TABLE>
(1) Each of the options listed in the table is immediately exercisable.
The shares purchasable thereunder are subject to repurchase by the
Company at the original exercise price paid per share upon the
optionee's cessation of service prior to vesting in such shares. In
the case of the option for 30,000 shares, the repurchase rights lapse
and the optionee vests in 60 monthly installments from the grant date.
In the case of the option for 15,000 shares, the repurchase rights
lapse and the optionee vests as to the option shares 7 years from the
grant date; vesting may be accelerated upon completion of certain
performance objectives established by the Board of Directors. The
option shares will also vest upon an acquisition of the Company by
merger or asset sale, unless the Company's repurchase right with
respect to the unvested option shares is transferred to the acquiring
entity and as to 50% of the option shares upon the optionee's
subsequent involuntary termination of employment without cause. Each
option has a maximum term of ten (10) years, subject to earlier
termination in the event of the optionee's cessation of employment
with the Company.
(2) Based on an aggregate of 1,181,075 options granted in the 1996 fiscal
year.
(3) The exercise price may be paid in cash, in shares of the Company's
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 rules of the Securities and Exchange
Commission. There can be no assurance provided to any executive
officer or any other holder of the Company's securities 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 the option grants made to
the executive officers.
11.
<PAGE>
The following table sets forth information concerning option exercises in
fiscal 1996 and option holdings as of the end of fiscal 1996 with respect to
each of the Named Officers. No stock appreciation rights were outstanding at
the end of that year.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE REALIZED
(MARKET PRICE AT NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES ACQUIRED ON EXERCISE LESS UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
EXERCISE EXERCISE PRICE) (1) OPTIONS AT FY-END(#) AT FY-END ($)(2)
--------------------------------------------------------------------------------------------------------
NAME VESTED (3) UNVESTED (3) VESTED UNVESTED
----- ---------- ------------ -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Martin J. Sprinzen 0 --- 7,812 367,188 $311,178 $14,626,322
Paul Butterworth 0 --- 3,125 146,875 124,479 5,850,521
Richard Scheffer 7,500 $61,250 --- 45,000 --- 1,792,500
Jay Shiveley 20,000 218,666 132,463 162,537 5,326,421 6,312,413
Rodger Weismann 0 --- 11,375 41,125 453,104 1,638,146
</TABLE>
(1) Upon exercise of the options, an option holder did not receive the amount
reported above under the column "Value Realized." The amounts reported
above under the column "Value Realized" merely reflect the amount by which
the fair market value of the Common Stock of the Company on the date the
option was exercised exceeded the exercise price of the option. The option
holder does not realize any cash until the shares of Common Stock issued
upon exercise of the options are sold.
(2) Based on the closing price of the Company's Common Stock at year-end
($40.50) less the exercise price payable for such shares.
(3) Each of the options listed in the table is immediately exercisable, but any
shares purchased under the option will be subject to repurchase by the
Company at the original exercise price per share upon the optionee's
cessation of service until such shares have vested. The table indicates
the number and value of shares no longer subject to the Company's
repurchase right (vested) and the number and value of shares subject to the
repurchase right (unvested) as of fiscal year-end. In addition to the
shares listed in the table as subject to unexercised options, Mr. Weismann
has exercised options and holds 69,000 unvested shares and Mr. Scheffer has
exercised options and holds 6,407 unvested shares.
Bonus Plan. In fiscal 1996, the Company maintained a bonus program
pursuant to which bonuses were paid to executive officers based on individual
and Company performance targets.
12.
<PAGE>
DESCRIPTION OF THE 1996 STOCK OPTION PLAN
The Board adopted the Forte Software, Inc. 1996 Stock Option Plan ("Option
Plan") and the stockholders approved the Option Plan in January 1996. The
following is a description of the Option Plan. The Company established the
Option Plan as a successor to the 1991 Equity Incentive Plan ("Predecessor
Plan") to provide a means whereby employees, officers, directors, consultants,
and independent advisers of the Company or parent or subsidiary corporations may
be given an opportunity to purchase shares of Common Stock. The Board believes
that option grants under the Option Plan play an important role in the Company's
efforts to attract, employ, and retain employees, directors, and consultants of
outstanding ability. This description is included to satisfy the requirements
of Rule 16b-3(b)(2) which provides an exception from the short-swing profit
liability rules of the Federal securities laws for the officers and directors
participating in the Option Plan.
The principal terms and provisions of the Option Plan are summarized below.
The summary, however, is not intended to be a complete description of all the
terms of the Option Plan. A copy of the Option Plan will be furnished by the
Company to any stockholder upon written request to the Corporate Secretary at
the executive offices in Oakland, California.
STRUCTURE. The Option Plan contains two separate equity incentive
programs: (i) a Discretionary Option Grant Program under which employees,
consultants and certain board members may be granted stock options to purchase
shares of Common Stock, and (ii) an Automatic Option Grant Program under which
option grants will be made at specified intervals to the non-employee Board
members.
ADMINISTRATION. The Compensation Committee of the Board, which is
comprised of two (2) or more Board members ("Committee"), administers the Option
Plan. Committee members serve for such period of time as the Board may
determine. No Board member may serve on the Committee if he or she has received
an option grant or stock award under the Option Plan or under any other stock
plan of the Company or its parent or subsidiary corporations within the twelve
(12) month period preceding his or her appointment to the Committee (or, if
shorter, the period commencing on the date of effectiveness of the Company's
initial public offering and ending with the date of appointment to the
Committee), other than grants under the Automatic Option Grant Program. The
Option Plan may also be administered with respect to optionees who are not
executive officers subject to the short-swing profit rules of Federal securities
laws by the Board or a secondary committee comprised of one or more Board
members.
The Committee (or Board or secondary committee to the extent acting as plan
administrator) has full authority (subject to the express provisions of the
Option Plan) to determine the eligible individuals who are to receive grants
under the Option Plan, the number of shares to be covered by each granted
option, the date or dates on which the option is to become exercisable, the
maximum term for which the option is to remain outstanding, whether the granted
option will be an incentive stock option ("Incentive Option") which satisfies
the requirements of section 422 of the Internal Revenue Code (the "Code") or a
non-statutory option not intended to meet such requirements, and the remaining
provisions of the option grant.
ELIGIBILITY. Employees (including officers), consultants and independent
contractors who render services to the Company or its parent or subsidiary
corporations (whether now existing or subsequently established) are eligible to
receive option grants under the Discretionary Option Grant Program. A member of
the board of directors of any parent or subsidiary corporation is also eligible
for option grants under the Discretionary Option Grant Program. A non-employee
member of the Company's Board is only eligible to participate in the Automatic
Option Grant Program.
As of May 31, 1996, approximately 239 persons (including seven officers and
four directors) were eligible to participate in the Option Plan.
SECURITIES SUBJECT TO OPTION PLAN. The maximum number of shares of Common
Stock which may be issued over the term of the Option Plan shall not exceed
4,654,162 shares. Such authorized share reserve is comprised of (i) the number
of shares which remained available for issuance, including the shares subject to
13.
<PAGE>
outstanding options as of the Plan effective date, under the Predecessor Plan as
last approved by the Company's stockholders prior to such date, plus (ii) an
additional increase of 1,200,000 shares. Such share reserve will be subject to
further adjustment in the event of subsequent changes to the capital structure
of the Company. The shares may be made available either from the Company's
authorized but unissued Common Stock or from Common Stock reacquired by the
Company, including shares purchased on the open market.
No one person participating in the Option Plan may receive options or
separately exercisable stock appreciation rights for more than 50% of the share
reserve and in any event not more than 2,000,000 shares of Common Stock over the
term of the Option Plan.
Should an option expire or terminate for any reason prior to exercise in
full, including options incorporated from the Predecessor Plan, the shares
subject to the portion of the option not so exercised will be available for
subsequent option grants under the Option Plan.
DISCRETIONARY OPTION GRANT PROGRAM
PRICE AND EXERCISABILITY. The option exercise price per share in the case
of an Incentive Option may not be less than one hundred percent (100%) of the
fair market value of the Common Stock on the grant date and, in the case of a
non-statutory option, eighty-five percent (85%) of the fair market value of the
Common Stock on the grant date. Options granted under the Discretionary Option
Grant Program become exercisable at such time or times and during such period,
as the Committee may determine and set forth in the instrument evidencing the
option grant. In any event, options granted under the Option Plan may not have
a term in excess of 10 years.
The exercise price may be paid in cash or in shares of Common Stock.
Options may also be exercised through a same-day sale program, pursuant to which
a designated brokerage firm is to effect the immediate sale of the shares
purchased under the option and pay over to the Company, out of the sale proceeds
on the settlement date, sufficient funds to cover the exercise price for the
purchased shares plus all applicable withholding taxes. The Committee may also
assist any optionee (including an officer or director) in the exercise of his or
her outstanding options by authorizing a Company loan to the optionee. The
terms and conditions of any such loan will be established by the Committee in
its sole discretion.
No optionee is to have any stockholder rights with respect to the option
shares until the optionee has exercised the option and paid the exercise price.
Options are not assignable or transferable other than by will or the laws of
descent and distribution, and during the optionee's lifetime, the option may be
exercised only by the optionee.
TERMINATION OF SERVICE. Any option held by the optionee at the time of
cessation of service will not remain exercisable beyond the designated post-
service exercise period. Under no circumstances, however, may any option be
exercised after the specified expiration date of the option term. Each such
option will normally, during such limited period, be exercisable only to the
extent of the number of shares of Common Stock in which the optionee is vested
at the time of cessation of service. The optionee will be deemed to continue in
service for so long as such individual performs services for the Company (or any
parent or subsidiary corporation), whether as an employee, independent
contractor, consultant or Board member.
The Committee has complete discretion to extend the period following the
optionee's cessation of service during which his or her outstanding options may
be exercised and/or to accelerate the exercisability of such options in whole or
in part. Such discretion may be exercised at any time while the options remain
outstanding, whether before or after the optionee's actual cessation of service.
The shares of Common Stock acquired upon the exercise of one or more
options may be subject to repurchase by the Company at the original exercise
price paid per share upon the optionee's cessation of service prior to vesting
in such shares. The Committee has complete discretion in establishing the
vesting schedule to be in
14.
<PAGE>
effect for any such unvested shares and may cancel the Company's outstanding
repurchase rights with respect to those shares at any time, thereby accelerating
the vesting of the shares subject to the canceled rights.
INCENTIVE OPTIONS. Incentive Options may only be granted to individuals
who are employees of the Company or its parent or subsidiary corporation.
During any calendar year, the aggregate fair market value (determined as of the
grant date(s)) of the Common Stock for which one or more options granted to any
employee under the Option Plan (or any other option plan of the Company or its
parent or subsidiary corporations) may for the first time become exercisable as
incentive stock options under section 422 of the Code shall not exceed one
hundred thousand dollars ($100,000).
If an employee to whom an Incentive Option is granted is the owner of stock
possessing more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company or any of its parent or subsidiary corporations,
then the option price per share will be at least one hundred and ten percent
(110%) of the fair market value per share on the grant date, and the option term
will not exceed five (5) years, measured from the grant date.
LIMITED STOCK APPRECIATION RIGHTS. One or more officers of the Company
subject to the short-swing profit restrictions of the Federal securities laws
may, at the discretion of the Committee, be granted limited stock appreciation
rights in connection with their option grants under the Option Plan. Any option
with such a limited stock appreciation right in effect for at least six (6)
months may be unconditionally surrendered by the officer, to the extent
exercisable for one or more vested option shares, upon the successful completion
of a hostile tender offer for more than 50% of the Company's outstanding voting
stock. In return, the officer will be entitled to a cash distribution from the
Company in an amount per canceled option share equal to the excess of (i) the
highest price per share of Common Stock paid in the tender offer over (ii) the
option exercise price.
TANDEM STOCK APPRECIATION RIGHTS. The Committee is authorized to issue
tandem stock appreciation rights in connection with option grants under the
Discretionary Option Grant Program. Tandem stock appreciation rights provide
the holders with the right to surrender their options for an appreciation
distribution from the Company equal in amount to the excess of (a) the fair
market value of the vested shares of Common Stock subject to the surrendered
option over (b) the aggregate exercise price payable for such shares. Such
appreciation distribution may, at the discretion of the Committee, be made in
cash or in shares of Common Stock.
AUTOMATIC OPTION GRANT PROGRAM
Under the Automatic Option Grant Program, non-employee Board members will
receive option grants at specified intervals over their period of Board service.
These special grants may be summarized as follows:
* Each individual who first becomes a non-employee Board member after
the date of the initial public offering, 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 nonstatutory stock option to
purchase 15,000 shares of Common Stock, provided such individual has not
previously been in the employ of the Company.
* On the date of each Annual Stockholders Meeting beginning with the
1996 Annual Meeting, each individual who is to continue as a non-employee Board
member will receive an additional grant of a nonstatutory stock option under the
Option Plan to purchase 3,000 shares of Common Stock, provided such individual
has been a member of the Board for at least six months.
Each option grant under the Automatic Option Grant Program will be subject
to the following terms and conditions:
1. The option price per share will be equal to 100% of the fair market
value per share of Common Stock on the automatic grant date and each option is
to have a maximum term of ten years measured from the grant date.
15.
<PAGE>
2. Each automatic option grant will be immediately exercisable for all of
the option shares; the shares purchasable under the option shall be subject to
repurchase at the original exercise price in the event the optionee's Board
service should cease prior to full vesting. With respect to each initial grant,
the repurchase right shall lapse and the optionee vest in a series of 48
successive equal monthly installments, measured from the grant date, provided
such optionee continues service as a Board member. Each annual grant shall vest
in a series of 24 monthly installments.
3. The option will remain exercisable for a twelve (12)-month period
following the optionee's termination of service as a Board member for any
reason. Should the optionee die while serving as a Board member or during the
twelve (12)-month period following his or her cessation of Board service, then
such option may be exercised during the twelve (12)-month period following such
optionee's cessation of service by the personal representatives of the
optionee's estate or the person to whom the grant is transferred by the
optionee's will or the laws of inheritance. In no event, however, may the
option be exercised after the expiration date of the option term. During the
applicable exercise period, the option may not be exercised for more than the
number of vested shares (if any) for which it is exercisable at the time of the
optionee's cessation of Board service.
4. The option shares will become fully vested in the event of a Corporate
Transaction (as defined below) or a Change in Control (as defined below). The
option shares will become fully vested in the event of the optionee's cessation
of Board service by reason of death or permanent disability.
5. Upon the occurrence of a hostile tender offer, the optionee shall have
a thirty (30) day period in which to surrender to the Company each automatic
option which has been in effect for at least six (6) months (whether or not the
optionee is vested in such option) and the optionee will in return be entitled
to a cash distribution from the Company in an amount per canceled option share
equal to the excess of (i) the highest reported price per share of Common Stock
paid in the tender offer over (ii) the option exercise price payable per share.
6. Option grants under the Automatic Option Grant Program will be made in
strict compliance with the express provisions of that program. The remaining
terms and conditions of the option will in general conform to the terms for
option grants under the Discretionary Option Grant Program and will be
incorporated into the option agreement evidencing the automatic grant.
GENERAL PROVISIONS
ACCELERATION OF OPTIONS/TERMINATION OF REPURCHASE RIGHTS. Upon the
occurrence of either of the following transactions (a "Corporate Transaction"):
(i) the sale, transfer, or other disposition of all, or substantially all,
of the Company's assets in complete liquidation or dissolution of the Company,
or
(ii) 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,
each outstanding option under the Option Plan will, immediately prior to the
effective date of the Corporate Transaction, become fully exercisable for all of
the shares at the time subject to such option. However, an outstanding option
shall not accelerate if and to the extent: (i) such option is, in connection
with the Corporate Transaction, either to be assumed by the successor
corporation (or parent) or to be replaced with a comparable option to purchase
shares of the capital stock of the successor corporation (or parent), (ii) such
option is to be replaced with a cash incentive program of the successor
corporation which preserves the spread existing on the unvested option shares at
the time of the Corporate Transaction and provides for subsequent payout in
accordance with the same vesting schedule applicable to such option or (iii) the
acceleration of such option is subject to other limitations imposed by the
Committee at the time of the option grant. Immediately following the
consummation of the Corporate Transaction, all outstanding options will
terminate and cease to be exercisable, except to the extent assumed by the
successor corporation.
16.
<PAGE>
Also upon a Corporate Transaction, the Company's outstanding repurchase
rights will terminate automatically unless assigned to the successor
corporation.
The Committee may provide that any options which are assumed or replaced in
the Corporate Transaction and do not otherwise accelerate at that time shall
automatically accelerate (and any of the Company's outstanding repurchase rights
which do not otherwise terminate at the time of the Corporate Transaction shall
automatically terminate and the shares of Common Stock subject to those
terminated rights shall immediately vest in full) in the event the optionee's
service should subsequently terminate by reason of an involuntary termination
within twelve (12) months following the effective date of such Corporate
Transaction. Any options so accelerated shall remain exercisable for fully-
vested shares until the earlier of (i) the expiration of the option term or (ii)
the expiration of the one (1)-year period measured from the effective date of
the involuntary termination.
Upon the occurrence of the following transactions ("Change in Control"):
(i) any person or related group of persons (other than the Company or a
person that directly or indirectly controls, is controlled by, or is under
common control with, the Company) acquires beneficial ownership of more than
fifty percent (50%) of the Company's outstanding voting stock without the
Board's recommendation, or
(ii) there is a change in the composition of the Board over a period of
thirty-six (36) consecutive months or less such that a majority of the Board
members ceases by reason of a proxy contest, to be comprised of individuals who
(a) have been Board members continuously since the beginning of such period or
(b) have been elected or nominated for selection as Board members by a majority
of the continuing Board members who were still in office at the time such
election or nomination was approved by the Board,
the Committee has the discretion to accelerate outstanding options and terminate
the Company's outstanding repurchase rights. The Committee also has the
discretion to accelerate outstanding options and terminate the Company's
outstanding repurchase rights upon the subsequent termination of the optionee's
service within a specified period following the Change in Control.
The acceleration of options in the event of a Corporate Transaction or
change in control may be seen as an anti-takeover provision and may have the
effect of discouraging a merger proposal, a takeover attempt, or other efforts
to gain control of the Company.
VALUATION. For purposes of establishing the option price and for all other
valuation purposes under the Option Plan, the fair market value of a share of
Common Stock on any relevant date will be the closing price per share of Common
Stock on that date, as such price is reported on the Nasdaq National Market.
The closing price of the Common Stock on July 1, 1996 was $56.00 per share.
CHANGES IN CAPITALIZATION. In the event any change is made to the Common
Stock issuable under the Option Plan by reason of any stock split, stock
dividend, 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 will be made to (i) the maximum number
and/or class of securities issuable under the Option Plan, (ii) the maximum
number and/or class of securities for which any one person may be granted
options and separately exercisable stock appreciation rights per calendar year,
(iii) the number and/or class of securities for which automatic option grants
are to be subsequently made per director under the Automatic Option Grant
Program and (iv) the number and/or class of securities and the exercise price
per share in effect under each outstanding option (including any option
incorporated from the Predecessor Plan) in order to prevent the dilution or
enlargement of benefits thereunder.
Each outstanding option which is assumed in connection with a Corporate
Transaction will be appropriately adjusted to apply and pertain to the number
and class of securities which would otherwise have been issued, in consummation
of such Corporate Transaction, to the option holder had the option been
exercised
17.
<PAGE>
immediately prior to the Corporate Transaction. Appropriate adjustments will
also be made to the option price payable per share and to the class and number
of securities available for future issuance under the Option Plan on both an
aggregate and a per-participant basis.
OPTION PLAN AMENDMENTS. The Board may amend or modify the Option Plan in
any and all respects whatsoever, provided that the Automatic Option Grant
Program may not be amended more often than every six (6) months. However, the
Board may not, without the approval of the Company's stockholders, (i)
materially increase the maximum number of shares issuable under the Option Plan
(except in connection with certain changes in capitalization), (ii) materially
modify the eligibility requirements for option grants, or (iii) otherwise
materially increase the benefits accruing to participants under the Option Plan.
Unless sooner terminated by the Board, the Option Plan will in all events
terminate on January 31, 2006. Any options outstanding at the time of such
termination will remain in force in accordance with the provisions of the
instruments evidencing such grants.
As of May 31, 1996 options covering 3,008,632 shares were outstanding under
the Option Plan, 1,537,227 shares remained available for future option grant,
and 54,326 shares have been issued under the Option Plan. The expiration dates
for all such options range from November 19, 2001 to April 26, 2006.
NEW PLAN BENEFITS AND OPTION GRANT TABLE
Except as set forth above under the caption "Automatic Option Grant
Program," grants to be made under the Option Plan in the future are at the
discretion of the Committee and are not determinable at this time. The table
below shows, as to each of the executive officers named in the Summary
Compensation Table and the various indicated groups, (i) the number of shares of
Common Stock for which options have been granted, for the one (1)-year period
ending March 31, 1996 plus the period through July 1, 1996 and (ii) the weighted
average exercise price per share. Each of Messrs. Haque, Jermoluk, Strohm and
Younger will receive an option grant to purchase 3,000 shares under the
Automatic Option Grant Program on the date of the Annual Meeting; each of the
options will have an exercise price per share equal to the closing price per
share of Common Stock on the date of that Annual Meeting, as quoted on the
Nasdaq National Market.
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
NUMBER OF OPTION EXERCISE PRICE OF
NAME OF GROUP SHARES GRANTED OPTIONS
- - ------------- ---------------- -----------------
<S> <C> <C>
Martin J. Sprinzen -- --
Paul Butterworth -- --
Richard Scheffer -- --
Jay Shiveley 45,000 $4.89
Rodger Weismann -- --
All current executive officers as a group (7 persons) 172,500 $4.10
All current directors (other than executive officers) as a group (4 persons) 15,000 $11.00
All employees, including current officers who are not executive officers,
as a group (228 persons) 1,006,587 $6.99
</TABLE>
18.
<PAGE>
FEDERAL INCOME TAX CONSEQUENCES OF OPTIONS GRANTED UNDER THE OPTION PLAN
Options granted under the Option Plan may be either incentive stock options
that satisfy the requirements of Section 422 of the Internal Revenue Code or
non-statutory options that are not intended to meet such requirements. The
Federal income tax treatment for the two types of options differs as follows:
INCENTIVE STOCK OPTIONS. No taxable income is recognized by the optionee
at the time of the option grant, and no taxable income is generally recognized
at the time the option is exercised. However, the excess of the fair market
value of the purchased shares on the exercise date over the exercise price paid
for the shares generally is includable in alternative minimum taxable income.
The optionee will, however, recognize taxable income in the year in which the
purchased shares are sold or otherwise made the subject of disposition.
For Federal tax purposes, dispositions are divided into two categories:
(i) qualifying and (ii) disqualifying. The optionee will make a qualifying
disposition of the purchased shares if the sale or other disposition of such
shares is made after the optionee has held the shares for more than two (2)
years after the grant date of the option and more than one (1) year after the
exercise date. If the optionee fails to satisfy either of these two holding
periods prior to the sale or other disposition of the purchased shares, then a
disqualifying disposition will result.
Upon a qualifying disposition of the shares, the optionee will recognize
long-term capital gain in an amount equal to the excess of (i) the amount
realized upon the sale or other disposition of the purchased shares over (ii)
the exercise price paid for such shares. If there is a disqualifying
disposition of the shares, then the excess of (i) the fair market value of those
shares on the date the option was exercised over (ii) the exercise price paid
for the shares will be taxable as ordinary income. Any additional gain
recognized upon the disposition will be a capital gain.
If the optionee 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 excess of (i) the fair market
value of such shares on the date the option was exercised over (ii) the exercise
price paid for the shares. In no other instance will the Company be allowed a
deduction with respect to the optionee's disposition of the purchased shares.
The Company anticipates that any compensation deemed paid by the Company upon
one or more disqualifying dispositions of incentive stock option shares by the
Company's executive officers will remain deductible by the Company and will not
have to be taken into account for purposes of the $1 million limitation per
covered individual on the deductibility of the compensation paid to certain
executive officers of the Company.
NON-STATUTORY OPTIONS. No taxable income is recognized by an optionee upon
the grant of a non-statutory option.
The optionee will in general recognize ordinary income in the year in which
the option is exercised equal to the excess of the fair market value of the
purchased shares on the exercise date over the exercise price paid for the
shares, and the optionee will be required to satisfy the tax withholding
requirements applicable to such income.
Special provisions of the Internal Revenue Code apply to the acquisition of
Common Stock under a non-statutory option if the purchased shares are subject to
repurchase by the Company. These special provisions may be summarized as
follows:
(i) If the shares acquired upon exercise of the non-statutory option
are subject to repurchase by the Company at the original exercise price in the
event of the optionee's termination of service prior to vesting in such shares,
the optionee will not recognize any taxable income at the time of exercise but
will have to report as ordinary income, as and when the Company's repurchase
right lapses, an amount equal to the excess of (a) the fair market value of the
shares on the date such repurchase right lapses with respect to such shares over
(b) the exercise price paid for the shares.
(ii) The optionee may, however, elect under Section 83(b) of the
Internal Revenue Code to include as ordinary income in the year of exercise of
the non-statutory option an amount equal to the excess of (a)
19.
<PAGE>
the fair market value of the purchased shares on the exercise date (determined
as if the shares were not subject to the Company's repurchase right) over (b)
the exercise price paid for such shares. If the Section 83(b) election is made,
the optionee will not recognize any additional income as and when the repurchase
right lapses.
The Company will be entitled to a business expense deduction equal to
the amount of ordinary income recognized by the optionee with respect to the
exercised non-statutory option. The deduction will in general be allowed for
the taxable year of the Company in which such ordinary income is recognized by
the optionee. The Company anticipates that the compensation deemed paid by the
Company upon the exercise of non-statutory options with exercise prices equal to
the fair market value of the option shares on the grant date will remain
deductible by the Company and will not have to be taken into account for
purposes of the $1 million limitation per covered individual on the
deductibility of the compensation paid to certain executive officers of the
Company.
STOCK APPRECIATION RIGHTS. An optionee who is granted a stock
appreciation right will recognize ordinary income in the year of exercise equal
to the amount of the appreciation distribution. The Company will be entitled to
a business expense deduction equal to the appreciation distribution for the
taxable year of the Company in which the ordinary income is recognized by the
optionee.
DESCRIPTION OF THE EMPLOYEE STOCK PURCHASE PLAN
The following is a description of the Forte Software, Inc. Employee Stock
Purchase Plan (the "Purchase Plan"). The Purchase Plan was adopted by the Board
of Directors and approved by the stockholders in January 1996. 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"). In addition, this description is
included to satisfy the requirements of Rule 16b-3(b)(2) under the Federal
securities laws in order to ensure the favorable treatment of Rule 16b-3 for the
officers participating in the Purchase Plan. The Company also maintains the
International Employee Stock Purchase Plan ("International Purchase Plan"),
pursuant to which eligible individuals employed outside the United States by one
of the Company's foreign subsidiaries may purchase shares of Common Stock.
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 Oakland, 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.
Currently, 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.
All cash proceeds received by the Company from payroll deductions under the
Purchase Plan 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 and the International Purchase Plan is 400,000, adjusted as described in
the "Adjustment" section of this description. Common Stock subject to a
terminated purchase right shall be available for purchase pursuant to purchase
rights subsequently granted.
20.
<PAGE>
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 individual who 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.
Approximately 234 employees (including six officers) were eligible to
participate in the Purchase Plan as of May 31, 1996.
OFFERING PERIODS. The Purchase Plan is implemented by offering periods
which generally have a duration of twenty-four months; each offering period is
comprised of a series of one or more successive purchase periods, which will
have a duration of six (6) months. The first offering period began on the date
of execution of the underwriting agreement in connection with the Company's
initial public offering and will end on April 30, 1998; the next offering period
will commence on May 1, 1998 and will end on the last business day in April
2000, unless terminated earlier. The purchase periods during the initial
offering period will end on October 31, 1996, April 30, 1997, October 31, 1997,
and April 30, 1998. The Committee in its discretion may vary the beginning date
and ending date of the offering periods provided no offering period shall exceed
twenty-four (24) months in length, except for the initial offering period.
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 participant's entry date into an 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. If a participant's entry date is on a day
other than the first day of an offering period, the clause (i) amount will in no
event be less than the fair market value of the shares on the first day 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 System. The market value of the Common Stock as reported on the
Nasdaq National Market as of July 1, 1996, was $56.00 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
1,500 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.
21.
<PAGE>
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 10% of a participant's cash
compensation paid during a purchase period. Cash compensation includes regular
base pay, any pre-tax contributions made by a participant to any Code
section 401(k) plan or section 125 cafeteria benefit program plus any of the
following amounts to the extent paid in cash: overtime payments, bonuses,
commissions, profit-sharing distributions and other incentive-type payments.
However, cash compensation does not include any contributions made on a
participant's behalf by the Corporation or any corporate affiliate to any
deferred compensation plan or welfare benefit program (other than a section
401(k) or 125 plan) now or hereafter maintained by the Corporation.
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). No fractional shares shall be purchased. 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 (i) the participant
terminates employment and then any payroll deductions which the participant may
have made with respect to a terminated purchase right will be refunded or (ii)
the participant elects to withdraw from the Purchase Plan. Any payroll
deductions which the participant may have made with respect to a terminated
purchase right under clause (ii) will be refunded unless the participant elects
to have the funds applied to the purchase of shares on the next purchase date.
Unless a participant has irrevocably elected otherwise, he or she may decrease
his or her deductions once during a purchase period.
AMENDMENT AND TERMINATION. The Purchase Plan shall continue in effect
until the earlier of (i) the last business day in October 2006, (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, provided that, without the approval of the stockholders, no such action
may (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.
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 the (i) 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. If a
participant's entry date is not the first day of the offering period, the clause
(i) amount will in no event be less than the fair market value of such shares on
the first day of the offering period. Any payroll deductions not applied to
such purchase shall be promptly refunded to the participant.
22.
<PAGE>
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. No income is recognized by a participant
at the time a right to purchase shares is granted. Likewise, no taxable income
is recognized at the time of the purchase, even though the purchase price
reflects a discount from the market value of the shares at that time.
A participant must recognize taxable income upon a disposition of shares
acquired under the Purchase Plan. The tax treatment may be more favorable if
the disposition occurs after the holding-period requirements of section 423 have
been satisfied (a "qualifying disposition"). To satisfy the holding-period
requirements of section 423, shares acquired under the Purchase Plan cannot be
disposed of within two years after the first day of the offering period during
which the shares were purchased (or within two years after the participant's
entry date, if that date is later than the beginning of the offering period) nor
within one year after the shares were purchased. The U.S. income tax
consequences of a qualifying disposition are follows:
* The participant recognizes ordinary income equal to the lower of (a)
the excess of the fair market value of the shares on the date of the
disposition over the purchase price or (b) 15% of the fair market
value of the shares on the first day of the applicable offering period
(or on the participant's entry date, if that date is later than the
first day of the offering period and if the market value is higher on
that date). The Company will not be entitled to any deduction under
these circumstances.
* The excess, if any, of the fair market value of the shares on the date
of the disposition over the sum of the purchase price plus the amount
of ordinary income recognized (as described above) will be taxed as a
long-term capital gain. If a taxable disposition produces a loss
(i.e., the fair market value of the shares on the date of the
disposition is less than the purchase price) and the disposition
involves certain unrelated parties, then the loss will be a long-term
capital loss.
A participant who disposes of shares acquired under the Purchase Plan
without meeting the holding-period requirements makes a disqualifying
disposition of such shares. The U.S. income tax consequences of a disqualifying
disposition are as follows:
* The entire difference between the purchase price and the market value
of the shares on the date of purchase will be taxed to the participant
as ordinary income in the year of disposition. The Company will be
entitled to a deduction for the same amount, subject to certain
conditions.
* The excess, if any, of the market value of the shares on the date of
disposition over their market value on the date of purchase will be
taxed as a capital gain (long-term or short term, depending on how
long the shares have been held). If the value of the shares on the
date of disposition is less than their value on the date of purchase,
then the difference will result in a capital loss (long-term or short-
term, depending on your holding period), provided the disposition
involves certain unrelated parties. Any such loss will not affect the
ordinary income recognized upon the disposition.
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. However, each of the Named Officers except Mr. Sprinzen has the
right to purchase a maximum of
23.
<PAGE>
1,500 shares of Common Stock at a price that will not exceed $17.85 per share on
each of the October 31, 1996, April 30, 1997, October 31, 1997, and April 30,
1998 purchase dates.
PROPOSAL NO. 2
RATIFICATION OF INDEPENDENT ACCOUNTANTS
The Company is asking the stockholders to ratify the appointment of Ernst &
Young LLP as the Company's independent public accountants for the fiscal year
ending March 31, 1997. 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. Representatives of Ernst &
Young LLP 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 ERNST & YOUNG LLP TO SERVE AS THE COMPANY'S INDEPENDENT PUBLIC
ACCOUNTANTS FOR THE FISCAL YEAR ENDING MARCH 31, 1997.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company's Certificate of Incorporation limits the liability of its
directors for monetary damages arising from a breach of their fiduciary duty as
directors, except to the extent otherwise required by the Delaware General
Corporation Law. Such limitation of liability does not affect the availability
of equitable remedies such as injunctive relief or rescission.
The Company's Bylaws provide that the Company shall indemnify its directors
and officers to the fullest extent permitted by Delaware law, including in
circumstances in which indemnification is otherwise discretionary under Delaware
law. The Company has also entered into indemnification agreements with its
officers and directors containing provisions that may require the Company, among
other things, to indemnify such officers and directors against certain
liabilities that may arise by reason of their status or service as directors or
officers (other than liabilities arising from willful misconduct of a culpable
nature), to advance their expenses incurred as a result of any proceeding
against them as to which they could be indemnified, and to obtain directors' and
officers' insurance if available on reasonable terms.
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 transactions in
the Common Stock and their Common Stock holdings for the fiscal year ending
March 31, 1996 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 1996 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 10% stockholders.
24.
<PAGE>
FORM 10-K
THE COMPANY WILL MAIL WITHOUT CHARGE, UPON WRITTEN REQUEST, A COPY OF THE
COMPANY'S FORM 10-K REPORT FOR FISCAL 1996, INCLUDING THE FINANCIAL STATEMENTS,
SCHEDULES AND LIST OF EXHIBITS. REQUESTS SHOULD BE SENT TO FORTE SOFTWARE,
INC., 1800 HARRISON STREET, 15TH FLOOR, OAKLAND, CALIFORNIA 94612, ATTN: MARY
LLEWELLYN, INVESTOR RELATIONS.
STOCKHOLDER PROPOSALS FOR 1997 ANNUAL MEETING
Stockholder proposals that are intended to be presented at the 1997 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 April 16, 1997 in order to be included. Such stockholder proposals should
be addressed to Forte Software, Inc.
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,
/s/ Rodger Weismann
Rodger Weismann
SECRETARY
Oakland, California
July 12, 1996
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.
25.
<PAGE>
PROXY PROXY
FORTE SOFTWARE, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON AUGUST 14, 1996
The undersigned appoints Martin J. Sprinzen and Rodger Weismann, or any of
them, proxies for the undersigned, each with full power of substitution, to
attend the Annual Meeting of Shareholders of Forte Software, Inc., to be
held on August 14, 1996 at 11:00 a.m., Pacific time, and at any adjournments
or postponements of the Annual Meeting, and to vote as specified in this
Proxy all the Common Shares of the Company which the undersigned would be
entitled to vote if personally present. This proxy when properly executed
will be voted in accordance with your indicated directions. If no direction
is made, this Proxy will be voted FOR the election of Directors and FOR
proposal 2.
The Board of Directors recommends a vote FOR the election of Directors
and FOR proposal 2.
YOUR VOTE IS IMPORTANT! PLEASE MARK, SIGN AND DATE THIS PROXY ON THE REVERSE
SIDE AND RETURN IT PROMPTLY IN THE ACCOMPANYING ENVELOPE.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE.)
<PAGE>
FORTE SOFTWARE, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY //
[ ]
For All
For Withheld Except
1. Election of Directors --
Nominees: P. Hague, T. Jermoluk, M. Sprinzen,
D. Strohm, W. Younger // // //
________________________________________
(Except nominees written above.)
For Against Abstain
2. Ratification of Auditors for fiscal year 1997. // // //
The undersigned acknowledges receipt of
the Notice of Annual Meeting of
Shareholders and of the Proxy Statement.
Dated: ___________________, 1996
Signature(s) ___________________________
________________________________________
Please sign exactly as your name
appears. Joint owners should each sign
personally. Where applicable, indicate
your official position or representation
capacity.
