<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
H.T.E., Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
H.T.E., INC.
1000 BUSINESS CENTER DRIVE
LAKE MARY, FLORIDA 32746
April 7, 1999
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
H.T.E., Inc., a Florida corporation (the "Company"). The Annual Meeting will be
held on Wednesday, May 12, 1999 at 11:00 a.m. at The Peabody Orlando located at
9801 International Drive, Orlando, Florida.
Details of the business to be conducted at the Annual Meeting are given in
the attached Notice of Annual Meeting and Proxy Statement.
Whether or not you attend the Annual Meeting, it is important that your
shares be represented and voted at the meeting. Therefore, I urge you to sign,
date and promptly return the enclosed proxy in the enclosed postage-paid
envelope. If you decide to attend the Annual Meeting and vote in person, you
will of course have that opportunity.
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,
Dennis J. Harward
Chairman of the Board, President
and Chief Executive Officer
<PAGE> 3
H.T.E., INC.
1000 BUSINESS CENTER DRIVE
LAKE MARY, FLORIDA 32746
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 12, 1999
To Our Shareholders:
The Annual Meeting of Shareholders of the Company will be held on
Wednesday, May 12, 1999 at 11:00 a.m., at The Peabody Orlando located at 9801
International Drive, Orlando, Florida, for the following purposes, as described
in the attached Proxy Statement:
1. To elect two members to the Company's Board of Directors to hold
office until the 2002 Annual Meeting of Shareholders or until their
successors are duly elected and qualified.
2. To consider and act upon a proposal to increase the number of
shares of the Company's common stock reserved for issuance under the 1997
Employee Stock Purchase Plan from 400,000 shares to 600,000 shares.
3. To consider and act upon a proposal to increase the number of
shares of the Company's common stock reserved for issuance under the 1997
Executive Incentive Compensation Plan from 1,908,000 shares to 2,908,000
shares.
4. To transact such other business as may properly come before the
Annual Meeting and any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on April 7, 1999 as
the record date for determining those shareholders entitled to notice of, and to
vote at, the Annual Meeting and any adjournments or postponements thereof.
By Order of the Board of Directors,
L. A. Gornto, Jr.
Executive Vice President, Secretary
and General Counsel
Lake Mary, Florida
Date: April 7, 1999
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, SIGN, DATE AND
RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE PAID ENVELOPE AS PROMPTLY
AS POSSIBLE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES. SHAREHOLDERS
WHO EXECUTE A PROXY CARD MAY NEVERTHELESS ATTEND THE MEETING, REVOKE THEIR PROXY
AND VOTE THEIR SHARES IN PERSON.
<PAGE> 4
H.T.E., INC.
PROXY STATEMENT FOR ANNUAL MEETING
OF SHAREHOLDERS
TO BE HELD MAY 12, 1999
This Proxy Statement has been prepared and is furnished by the Board of
Directors of H.T.E., Inc., a Florida corporation (the "Company"), in connection
with the solicitation of proxies for the 1999 Annual Meeting of Shareholders of
the Company, to be held at 11:00 a.m. on Wednesday, May 12, 1999, at The Peabody
Orlando located at 9801 International Drive, Orlando, Florida, and any
adjournments or postponements thereof, for the purposes set forth in the
accompanying notice of meeting.
It is anticipated that this Proxy Statement and the accompanying form of
proxy will be mailed to shareholders on or about April 14, 1999. The Company's
Annual Report, including audited financial statements for the fiscal year ended
December 31, 1998, is being mailed or delivered concurrently with this Proxy
Statement. The Annual Report is not to be regarded as proxy soliciting material.
The Company's principal executive offices are located at 1000 Business Center
Drive, Lake Mary, Florida 32746.
INFORMATION CONCERNING PROXY
The enclosed proxy is solicited on behalf of the Board of Directors of the
Company. The giving of a proxy does not preclude the right to vote in person
should any shareholder giving the proxy so desire. Shareholders have an
unconditional right to revoke their proxy at any time prior to the exercise
thereof, either in person at the Annual Meeting or by filing with the Secretary
of the Company at the Company's headquarters a written revocation or duly
executed proxy bearing a later date; however, no such revocation will be
effective until written notice of the revocation is received by the Company at
or prior to the Annual Meeting.
The expense of soliciting proxies will be borne by the Company. Proxies
will be solicited principally by mail, but directors, officers and regular
employees of the Company may solicit proxies personally, by telephone or by
facsimile transmission without additional compensation in respect therefor. The
Company will reimburse custodians, nominees or other persons for their
out-of-pocket expenses in sending proxy material to beneficial owners.
PURPOSES OF THE MEETING
At the Annual Meeting, the Company's shareholders will consider and vote
upon the following matters:
1. To elect two members to the Company's Board of Directors to hold
office until the 2002 Annual Meeting of Shareholders or until their
successors are duly elected and qualified.
2. To consider and act upon a proposal to increase the number of
shares of the Company's common stock reserved for issuance under the 1997
Employee Stock Purchase Plan from 400,000 shares to 600,000 shares.
3. To consider and act upon a proposal to increase the number of
shares of the Company's common stock reserved for issuance under the 1997
Executive Incentive Compensation Plan from 1,908,000 shares to 2,908,000
shares.
4. To transact such other business as may properly come before the
Annual Meeting and any adjournments or postponements thereof.
Shares represented by a properly executed proxy received in time to permit
its use at the Annual Meeting and any adjournments or postponements thereof will
be voted in accordance with the instructions indicated therein. If no
instructions are indicated, the shares represented by the proxy will be voted
(a) FOR the election of both nominees for director, (b) FOR the proposal to
increase the number of shares of the Company's common stock reserved for
issuance under the 1997 Employee Stock Purchase Plan from 400,000 shares to
600,000 shares, (c) FOR the proposal to increase the number of shares of the
Company's common
<PAGE> 5
stock reserved for issuance under the 1997 Executive Incentive Compensation Plan
from 1,908,000 shares to 2,908,000 shares, and (d) in the discretion of the
proxy holders as to any other matter which may properly come before the Annual
Meeting.
OUTSTANDING SHARES AND VOTING RIGHTS
The Board of Directors has set the close of business on April 7, 1999 as
the record date (the "Record Date") for determining shareholders of the Company
entitled to notice of and to vote at the Annual Meeting. As of the Record Date,
there were 17,165,140 shares of common stock issued and outstanding, all of
which are entitled to be voted on each matter to be presented at the Annual
Meeting on the basis of one vote for each share held. A majority of these shares
of common stock will constitute a quorum for the transaction of business at the
Annual Meeting.
In determining the presence of a quorum at the Annual Meeting, abstentions
are counted and broker or nominee non-votes (instances where brokers or nominees
are prohibited from exercising discretionary authority for beneficial owners who
have not returned a proxy) are not. As to all matters to be voted on by
shareholders at the Annual Meeting, abstentions and broker non-votes have no
legal effect on whether a matter is approved. Directors or nominees are elected
by a plurality of the votes cast. The affirmative vote of a majority of the
votes cast is required for increasing the number of shares of the Company's
common stock authorized to be issued under the 1997 Executive Incentive
Compensation Plan and the 1997 Employee Stock Purchase Plan and any other matter
that may be submitted to the vote of the shareholders.
As of the Record Date, the directors and executive officers of the Company
beneficially owned common stock representing 38.8% of the issued and outstanding
shares of voting stock. Such persons have informed the Company that they intend
to vote all of their shares of common stock in favor of all proposals set forth
in this Proxy Statement.
You are requested, regardless of the number of shares you hold, to sign the
proxy and return it promptly in the enclosed envelope.
2
<PAGE> 6
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of April 7, 1999,
with respect to the beneficial ownership of the Company's common stock by: (i)
each shareholder known by the Company to be the beneficial owner of more than 5%
of the Company's common stock; (ii) each director; (iii) each executive officer
named in the Summary Compensation Table; and (iv) all executive officers and
directors as a group.
<TABLE>
<CAPTION>
PERCENTAGE OF
SHARES OUTSTANDING
NAME AND ADDRESS OF BENEFICIALLY SHARES
BENEFICIAL OWNER(1)(2) OWNED(3) OWNED
- ---------------------- ------------ -------------
<S> <C> <C>
Dennis J. Harward(4)........................................ 3,638,798 20.3%
Jack L. Harward............................................. 2,505,154 14.0
BancBoston Ventures, Inc.................................... 1,112,432 6.2
175 Federal Street, 10th floor
Boston, Massachusetts 02110
O. F. Ramos................................................. 407,422 2.3
Daniel E. Catan(5).......................................... 123,282 *
Bernard B. Markey........................................... 46,000 *
Charlotte B. Hill(6)........................................ 45,307 *
Raymond Ambrose(7).......................................... 11,666 *
Edward A. Moses............................................. -- --
All executive officers and directors as a group (11
persons)(8)............................................... 7,076,475 38.5
</TABLE>
- ---------------
* Less than one percent
(1) Except as otherwise noted, and subject to community property laws where
applicable, each person named in the table has sole voting and investment
power with respect to all securities owned by such person.
(2) Unless otherwise noted, the address of each person or entity listed is
H.T.E., Inc., 1000 Business Center Drive, Lake Mary, Florida 32764.
(3) A person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days from the date hereof either from the
exercise of options or from the conversion of a security.
(4) Includes 10,000 shares of common stock that Mr. Harward may acquire within
60 days from the date hereof upon exercise of stock options.
(5) Includes 122,400 shares of common stock that Mr. Catan may acquire within 60
days from the date hereof upon exercise of stock options.
(6) Includes 42,400 shares of common stock that Ms. Hill may acquire within 60
days from the date hereof upon exercise of stock options.
(7) Includes 5,000 shares Mr. Ambrose holds jointly with his wife and 6,666
shares of common stock that Mr. Ambrose may acquire within 60 days from the
date hereof upon exercise of stock options.
(8) Excludes shares beneficially owned by former executive officers Mr. Catan
and Ms. Hill.
I. ELECTION OF DIRECTORS AND MANAGEMENT INFORMATION
NOMINEES
The Company's Articles of Incorporation and Bylaws provide that the number
of directors shall be a minimum of three and a maximum of nine, which number is
fixed from time-to-time by the Board of Directors. The number of directors is
currently fixed at six. The Company's Articles of Incorporation further provides
that the Board of Directors shall consist of three classes of directors, as
nearly equal in number as possible, to serve in staggered terms of office for
three years. Messrs. O. F. Ramos and Edward A. Moses, as Class I directors,
serve until the 2000 Annual Meeting of Shareholders. Messrs. Jack L. Harward and
Raymond Ambrose, as Class II directors, serve until the 2001 Annual Meeting of
Shareholders. Messrs. Dennis J. Harward and Bernard B. Markey, as Class III
directors, serve until this 1999 Annual
3
<PAGE> 7
Meeting of Shareholders. The Company's officers serve at the discretion of the
Board of Directors and are elected by the Board annually.
Each director elected at the Annual Meeting will serve for a term expiring
at the 2002 Annual Meeting of Shareholders or until a successor has been duly
elected and qualified. Mr. Dennis J. Harward and Mr. Bernard B. Markey have been
nominated as the Class III directors to be elected by the shareholders at this
Annual Meeting, and proxies will be voted for Messrs. Dennis J. Harward and
Bernard B. Markey absent contrary instructions.
The Board of Directors has no reason to believe that any nominee will
refuse or be unable to accept election; however, in the event that a nominee is
unable to accept election or if any other unforeseen contingencies should arise,
each proxy that does not direct otherwise will be voted for the remaining
nominee, if any, and for such other person as may be designated by the Board of
Directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" BOTH
NOMINEES FOR DIRECTORS.
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Dennis J. Harward.............. 42 Director -- Class III, Chairman, President and Chief
Executive Officer
Jack L. Harward................ 67 Director -- Class II, Executive Vice President, Assistant
Secretary and Assistant Treasurer
O. F. Ramos.................... 40 Director -- Class I and Executive Vice President
L. A. Gornto, Jr............... 56 Executive Vice President, Secretary and General Counsel
Susan D. Falotico.............. 36 Vice President, Treasurer and Chief Financial Officer
Gilbert O. Santos.............. 38 Vice President -- Customer Services
Brian B. Heafy................. 37 Vice President -- Human Resources & Organizational
Development
Robert E. Gosselin............. 39 Vice President -- Marketing
Bernard B. Markey.............. 34 Director -- Class III
Raymond Ambrose................ 52 Director -- Class II
Edward A. Moses................ 50 Director -- Class I
</TABLE>
Mr. Dennis J. Harward founded the Company in 1981 and has served as its
President and Chief Executive Officer, Chairman of the Board and a director
since inception of the Company. From 1978 to 1980, he was employed by
Southeastern Academy, a private educational institution, where he was
responsible for developing its initial management information systems
environment and implementing "mid-range" relational database systems. From 1980
through 1981, he was employed as a consultant at an oil and gas company where he
was responsible for coordinating large-scale conversion of applications to a
relational database environment. Dennis J. Harward is the son of Jack L.
Harward.
Mr. Jack L. Harward joined the Company in 1983 and since that time has
served as an Executive Vice President and a director of the Company. During
November 1997, he was also appointed Assistant Secretary and Assistant
Treasurer. Mr. Harward also serves as the Chief Operating Officer of
HTE-Bellamy, Ltd., a wholly-owned subsidiary of the Company. From 1978 to 1983,
Mr. Harward was employed by Seminole County, Florida, where he served as
Information Systems Director. From 1974 to 1978, Mr. Harward was responsible for
systems development-information technology management at Pepsi-Cola, Inc., a
food and beverage company. Jack L. Harward is the father of Dennis J. Harward.
4
<PAGE> 8
Mr. O. F. Ramos joined the Company in June 1998 and was appointed to the
Board of Directors in August 1998. He currently serves as Executive Vice
President of the Company and President of HTE-UCS, Inc., a wholly-owned
subsidiary of the Company. From 1986 to 1998, Mr. Ramos served as the President
and Chief Executive Officer of UCS, Inc. As the co-founder of UCS, Inc., he was
responsible for the corporate direction and financial development of that
company and for overseeing operations. Prior to 1986, Mr. Ramos served in
various engineering and management capacities at Motorola, Inc., where he was
responsible for the development of diverse software and hardware projects for
several platforms.
Mr. L. A. Gornto, Jr. joined the Company in January 1997 and serves as
Executive Vice President, Secretary and General Counsel. From January 1997 until
November 1997, he served as the Company's Chief Financial Officer. Since 1988,
Mr. Gornto has been engaged in the private practice of law in central Florida
and provides legal services to the Company as General Counsel. From 1985 to
1987, Mr. Gornto served as Senior Vice President -- Finance and Chief Financial
Officer of Jerrico, Inc., formerly a publicly-traded company and holding company
of Long John Silvers, a seafood restaurant chain. From 1977 to 1985, he was
engaged in the private practice of law and also served as a management
consultant. From 1968 to 1977, he served as Executive Vice President and Chief
Financial Officer and a director of Red Lobster Restaurants, a seafood
restaurant chain and formerly a subsidiary of General Mills, Inc. Mr. Gornto is
an attorney-at-law and certified public accountant licensed in the states of
Florida and Georgia and holds an L.L.M. degree from Emory University School of
Law.
Ms. Susan D. Falotico joined the Company in 1995 and serves as Vice
President, Treasurer and in November 1997 was also appointed Chief Financial
Officer. From 1995 to November 1997, Ms. Falotico served as the Company's Vice
President -- Controller and Chief Accounting Officer. From 1988 to 1995, Mrs.
Falotico served as Controller of the Newtrend Division of EDS, Inc., a systems
integration company, where she headed the Financial Accounting and Corporate
Planning Department. From 1986 to 1988, Ms. Falotico was a Financial Analyst for
ISI, a division of Mars, Inc., a food company, where she was responsible for
monthly financial reporting and for coordinating a $70 million budget.
Mr. Gilbert O. Santos joined the Company in September 1998 as its Vice
President -- Customer Services, responsible for various functional areas
including customer support and training, documentation and media, software
quality assurance and testing, service management and project management and
implementation. Mr. Santos held various marketing and engineering management
positions with the Land Mobile Products Sector of Motorola, Inc. from 1983 to
September 1998, most recently as Director of Operations.
Mr. Brian B. Heafy joined the Company in August 1994 and currently serves
as Vice President -- Human Resources & Organizational Development. From 1994 to
1998, Mr. Heafy served as the Company's Director of Public Safety and Justice
Systems division, where he was responsible for consolidating three operating
groups into one and for improving customer satisfaction, revenue growth and
profit. From 1990 to 1994, Mr. Heafy served as Manager of Information Services
for the City of Coral Springs, Florida. His major responsibilities included the
successful implementation of a multi-million dollar information technology
project. From 1987 to 1990, Mr. Heafy served as Program Manager for CACI, Inc.,
Federal division. Prior to 1987, Mr. Heafy served in various technical
management and staff capacities with the United States Marine Corps.
Mr. Robert E. Gosselin joined the Company in May 1998 as its Vice
President -- Brand Market Development, and currently serves as the Company's
Vice President -- Marketing. Prior to that, from 1989 to May 1998, Mr. Gosselin
served as a Marketing Account Manager with the Walt Disney Corporation, where he
was responsible for television productions, park and attractions grand openings,
and national promotional tours. From 1979 to 1989, Mr. Gosselin served as a
producer and on-air announcer with television stations throughout Florida.
Mr. Bernard B. Markey has been a director of the Company since 1995. Mr.
Markey has been employed since 1988 with Meridian Venture Partners, a
privately-held venture capital fund, and has been a General Partner of the fund
since 1995. Mr. Markey also serves on the Board of Directors for several
privately-held companies.
5
<PAGE> 9
Mr. Raymond Ambrose has been a director of the Company since November 1997.
Since 1984, Mr. Ambrose has been the President of Air Orlando, Inc., Orlando,
Florida, an aviation company with aircraft charter, maintenance, sales and
flying school divisions. From 1981 until 1987, Mr. Ambrose served as the Mayor
of the City of Altamonte Springs. From 1971 until 1981, Mr. Ambrose was employed
by the Altamonte Springs Police Department as a Rank Lieutenant.
Mr. Edward A. Moses was appointed as a member of the Company's Board of
Directors in December 1998. Mr. Moses has served as dean of the Roy E. Crummer
Graduate School of Business at Rollins College since 1994, and as a professor
and NationsBank professor of finance since 1989. From 1985 to 1989 he served as
dean and professor of finance at the University of North Florida. He has also
served in academic and administrative positions at the University of Tulsa,
Georgia State University and the University of Central Florida, and currently
serves as a faculty member in the Graduate School of Banking of the South. Mr.
Moses also serves as a director of CNL Health Care Properties, Inc., a
publicly-held real estate holding company. Mr. Moses received a B.S. in
Accounting from the Wharton School at the University of Pennsylvania and a
Masters of Business Administration and Ph.D. in finance from the University of
Georgia in 1971.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors and greater than ten percent shareholders
(collectively, "Reporting Persons") to file reports of ownership and changes in
ownership with the Securities and Exchange Commission ("SEC") and NASDAQ.
Reporting Persons are required by SEC regulations to furnish the Company with
copies of all Section 16(a) forms they file. Based solely on its review of the
copies of such forms received or written representations from Reporting Persons,
the Company believes that with respect to the fiscal year ended December 31,
1998, all the Reporting Persons complied with all applicable filing
requirements.
MEETINGS AND COMMITTEES OF THE BOARD
The Board of Directors of the Company held four meetings during its fiscal
year ended December 31, 1998 and took action 32 times by written consent. The
Board has an Audit Committee and a Compensation Committee, each of which met
four times during the fiscal year ended December 31, 1998. The Company does not
have a nominating committee. All directors attended 75% or more of the aggregate
number of Board meetings and meetings of committees of which they are members.
The Audit Committee reviews the scope and results of the annual audit of
the Company's consolidated financial statements conducted by the Company's
independent accountants, the scope of other services provided by the Company's
independent accountants, proposed changes in the Company's financial and
accounting standards and principles, and the Company's policies and procedures
with respect to its internal accounting, auditing and financial controls. The
Audit Committee also examines and considers other matters relating to the
financial affairs and accounting methods of the Company, including selection and
retention of the Company's independent accountants. The Audit Committee is
currently comprised of Bernard B. Markey, Raymond Ambrose and Edward A. Moses.
The Compensation Committee administers the Company's compensation programs
and performs such other duties as may from time to time be determined by the
Board of Directors. The Compensation Committee is currently comprised of Bernard
B. Markey, Raymond Ambrose and Edward A. Moses.
COMPENSATION OF DIRECTORS
The Company reimburses all directors for the expenses incurred in attending
meetings of the Board of Directors. Directors who are officers of the Company
receive no additional compensation for service as directors. Non-employee
directors receive $1,000 per day for attending Board and committee meetings and
are eligible for option grants under the Company's 1997 Executive Incentive
Compensation Plan. During fiscal year 1998, the Company granted to Mr. Ambrose
an option to acquire 10,000 shares of the Company's common stock. The option has
an exercise price of $14.88 per share and vests over a three-year period.
Additionally, in 1998, the Company granted to Mr. Moses an option to acquire
10,000 shares of the
6
<PAGE> 10
Company's common stock. The option has an exercise price of $8.38 per share and
vests over a three-year period. The options were granted under the Company's
1997 Executive Incentive Compensation Plan.
INFORMATION REGARDING EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid by the Company for
services performed on the Company's behalf during the fiscal years ended
December 31, 1998, 1997 and 1996 with respect to the Company's Chief Executive
Officer and the Company's four most highly compensated executive officers, other
than the Chief Executive Officer, who served as such on December 31, 1998, and
whose total annual salary and bonus for the fiscal year ended December 31, 1998
exceeded $100,000 (the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION(1) AWARDS
------------------------------------- ------------
SECURITIES
FISCAL OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(2) COMPENSATION(3) OPTIONS(#) COMPENSATION
- --------------------------- -------- -------- -------- --------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Dennis J. Harward......... 12/31/98 $351,618 $237,500 $ 6,999 -- $ 7,813(4)
Chairman, President and 12/31/97 260,417 140,000 35,883 -- 7,813(4)
Chief Executive Officer 12/31/96 200,000 62,157 25,830 -- 3,190(4)
Jack L. Harward........... 12/31/98 154,163 71,250 6,999 -- 4,453(4)
Executive Vice President 12/31/97 148,438 68,476 35,883 -- 4,453(4)
12/31/96 142,000 38,487 25,830 -- 5,820(4)
O.F. Ramos................ 12/31/98 155,833 84,685 -- -- 48,886(5)
Executive Vice President 12/31/97 150,000 10,394 -- -- 4,750(4)
12/31/96 150,000 -- -- -- 13,213(4)
Charlotte B. Hill(6)...... 12/31/98 160,000 80,000 -- -- 1,301(4)
Vice President -- 12/31/97 123,125 -- -- -- 55,420(7)
Research and -- -- --
Development
Daniel E. Catan(8)........ 12/31/98 150,000 75,000 -- -- 317,122(10)
Vice President -- Chief 12/31/97 156,250 75,000 -- -- 198,678(11)
Marketing Officer 12/31/96 68,750 22,240 -- 106,000(9) 81,826(12)
</TABLE>
- ---------------
(1) The amounts reflected in the above table do not include any amounts for
perquisites and other personal benefits extended to the Named Executive
Officers. The aggregate amount of such compensation for each Named
Executive Officer is less than 10% of the total annual salary and bonus.
(2) The Company has had a policy of granting discretionary annual bonuses to
its executive officers and employees based primarily on certain performance
criteria. The Board of Directors intends to continue this policy in the
future. See "Annual Incentive Compensation Bonuses."
(3) Represents special compensation paid pursuant to an agreement dated
November 9, 1994, which provided for approximately $2,333 per month for
each of Messrs. D. Harward and J. Harward until March 31, 1998.
(4) Represents matching contributions to the accounts of the Named Executive
Officers under the Company's 401(k) savings plan.
(5) Represents $44,136 of deferred salary from 1993 and $4,750 in matching
contributions to Mr. Ramos' account under the Company's 401(k) savings
plan.
(6) Ms. Hill was employed with the Company from February 17, 1997 to March 12,
1999.
(7) Represents relocation moving expenses.
(8) Mr. Catan was employed with the Company from July 1, 1996 to March 5, 1999.
7
<PAGE> 11
(9) Represents an option granted in 1996 that is exercisable at $0.91 per share
until October 5, 1999. In fiscal 1998, Mr. Catan exercised the option with
respect to 20,000 shares.
(10) Includes $312,434 in sales commissions and $4,688 in matching contributions
to Mr. Catan's account under the Company's 401(k) savings plan.
(11) Includes $193,991 in sales commissions and $4,687 in matching contributions
to Mr. Catan's account under the Company's 401(k) savings plan.
(12) Represents $52,526 for relocation moving expenses and $29,300 for
commissions.
STOCK OPTIONS GRANTED IN FISCAL 1998
The following table sets forth certain information concerning grants of
options made during fiscal 1998 to the Named Executive Officers.
<TABLE>
<CAPTION>
POTENTIAL REALIZED
NUMBER OF PERCENT VALUE AT ASSUMED
SECURITIES OF TOTAL ANNUAL RATES OF STOCK
UNDERLYING OPTIONS/SARS PRICE APPRECIATION FOR
OPTIONS/ GRANTED TO EXERCISE OPTION TERM(1)
SARS EMPLOYEES OR BASE EXPIRATION -----------------------
NAME GRANTED(#) IN 1998 PRICE($/SH)(2) DATE 5%($) 10%($)
- ---- ---------- ------------ --------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Daniel E. Catan........ 30,000 5% $14.88 4/30/2008(3) $280,739 $711,447
Dennis J. Harward...... 40,000 7 14.88 4/30/2008 374,318 948,596
</TABLE>
- ---------------
(1) The dollar amounts set forth in these columns are the result of calculations
at the five percent and ten percent rates set by the SEC, and therefore are
not intended to forecast possible future appreciation, if any, of the market
price of the common stock.
(2) Fair market value as of the date of grant.
(3) Exercise date accelerated to August 5, 1999 in connection with termination
of employment.
AGGREGATE STOCK OPTION EXERCISES AND YEAR-END OPTION VALUE TABLE
The following table sets forth certain information concerning option
exercises in fiscal 1998, the number of stock options held by the Named
Executive Officers as of December 31, 1998 and the value (based on the fair
market value of a share of stock at fiscal year-end) of in-the-money options
outstanding as of such date.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN-
OPTIONS/SARS HELD AT THE-MONEY OPTIONS/SARS
NUMBER OF FISCAL YEAR END(#) AT FISCAL YEAR END(1)
SHARES ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Daniel E. Catan.......... 30,000 $237,250 101,200 130,800 $355,362 $24,168
Dennis J. Harward........ -- -- -- 40,000 -- --
Charlotte B. Hill........ -- -- 21,200 84,800 $ 6,042 $24,168
</TABLE>
- ---------------
(1) The closing sale price for the Company's common stock as reported by the
NASDAQ National Market System on December 31, 1998 was $5.00 per share.
Value is calculated by multiplying (a) the difference between $5.00 and the
option exercise price by (b) the number of shares of common stock underlying
the option.
EMPLOYMENT AGREEMENTS AND CHANGE IN CONTROL AGREEMENTS
Effective February 1997, the Company entered into employment agreements
with Dennis J. Harward, the Company's President, Chief Executive Officer and
Chairman of the Board and Jack L. Harward, the Company's Executive Vice
President, and in May 1998, the Company amended Dennis Harward's agreement. The
agreements with Dennis Harward and Jack Harward provide for initial base
salaries of $350,000 and $160,000, respectively, which are subject to increase
and review annually by the Board of Directors. In addition, Dennis Harward's
agreement, as amended, provides for bonuses aggregating approximately $250,000
for the 1999 fiscal year if certain performance goals are met. Jack Harward's
agreement provides for a bonus aggregating up to a maximum of 50% of his annual
base salary if certain performance goals are met. Each of
8
<PAGE> 12
the agreements is for a term of three years, which automatically renews for
successive one-year periods. The agreements also provide that, upon the
termination of the executive's employment or death, mental or physical
incapacity, illness or disability, the Company will pay to the executive any
unpaid base salary, any accrued but unpaid incentive compensation through the
date of termination and a pro rata portion of the incentive compensation for
such period. The Company has the right to terminate the agreements for "Cause"
(as defined), and shall be obligated to pay to the executive base salary to the
date of termination. In the event either executive is terminated without Cause,
the Company must pay to such executive any unpaid base salary, any accrued but
unpaid incentive compensation through the date of termination and the
executive's base salary for a period of 12 months as well as continue to provide
the executive with incentive compensation and the other benefits under the
agreement for the same period. Additionally, upon termination without Cause the
Company must pay to each executive a single lump sum payment equal to the value
of the portion of his benefits under any savings, pension, profit sharing or
deferred compensation plans. These agreements also provide that Dennis Harward
and Jack Harward may receive stock options pursuant to the Company's Executive
Incentive Compensation Plan. Each of the employment agreements contain
confidentiality provisions and also prohibit the executives from competing with
the Company during the term of the agreement, and for two years thereafter. At
any time, the executives have the right to resign and terminate the agreement
upon 60 days' notice. Upon such resignation, the Company must pay to such
executive any unpaid base salary and any accrued but unpaid incentive
compensation through the date of resignation.
Effective February 1997, the Company also entered into severance agreements
with Dennis J. Harward and Jack L. Harward. The severance agreements will become
effective on, and provide for continued employment or retention following, a
"Change in Control" (as defined in the agreement) of the Company. Such
agreements generally provide that upon (i) termination by the Company of the
executive's employment for any reason other than death, mental or physical
incapacity, illness or disability or "Cause" (as defined), (ii) termination by
the executive for "Good Reason" (generally defined as the diminution of the
executive's duties or other breach by the Company of the agreement) or (iii)
termination by the executive during a 30-day period commencing one year after
the Change in Control, he will receive, in addition to base salary, bonus and
other compensation accrued through the date of termination, a lump sum cash
payment equal to 2.5 times his then-existing base salary and incentive
compensation provided however that, in the event of a Change in Control, such
severance provision shall not apply to an executive who votes any shares in
favor of any such Change in Control.
On June 1, 1998, the Company entered into an employment agreement with O.
F. Ramos, Executive Vice President. The agreement provides for a base salary and
incentive compensation payments based on performance. Mr. Ramos' current base
salary is $160,000. The agreement provides for a three year initial term with
successive one-year renewals thereafter. The agreement also provides that, upon
the termination of the executive's employment or death, the Company will pay to
the executive's estate any unpaid base salary and any accrued but unpaid
incentive compensation through the date of termination. In the event an
executive is terminated without Cause (as defined), the Company will pay to such
executive any unpaid base salary, any accrued but unpaid incentive compensation
through the date of termination, and in certain cases, additional payment of
salary, incentive compensation and benefits for up to twelve months after the
date of termination. The agreement also provides that the executive may receive
stock options pursuant to the Executive Incentive Compensation Plan. The
agreement contains confidentiality provisions and also prohibits the executive
from competing with the Company during the term of the agreement and for two
years thereafter. Upon resignation, the Company shall pay to the executive any
unpaid base salary and any accrued but unpaid incentive compensation through the
date of resignation.
Employment agreements were entered into with Daniel E. Catan and Charlotte
B. Hill, former executive officers of the Company. Pursuant to the termination
provisions in those agreements, Mr. Catan and Ms. Hill will receive severance
payments in fiscal 1999 not exceeding $180,000 in the aggregate. Their
agreements also contain confidentiality provisions and prohibitions on competing
with the Company for a period of one year after termination of employment.
9
<PAGE> 13
ANNUAL INCENTIVE COMPENSATION BONUSES
The Company has an incentive compensation bonus program for its executive
officers pursuant to which distributions may be made annually based on the
Company's earnings and on each participating officer's contributions to the
Company's profits and other corporate goals. Distributions are made from a pool,
the amount of which is established by the Company's Board of Directors.
Individual distributions from the pool are determined by the Company's
Compensation Committee and are generally based on a percentage of the
participating officer's base salary.
1997 EMPLOYEE STOCK PURCHASE PLAN
The 1997 Employee Stock Purchase Plan was approved by the Board of
Directors in July 1997 and was ratified by shareholders at the 1998 annual
meeting. For a summary of the Plan, please refer to the description under "II.
PROPOSAL TO INCREASE THE NUMBER OF SHARES OF THE COMPANY'S COMMON STOCK RESERVED
FOR ISSUANCE UNDER THE 1997 EMPLOYEE STOCK PURCHASE PLAN FROM 400,000 SHARES TO
600,000 SHARES."
1997 EXECUTIVE INCENTIVE COMPENSATION PLAN
The 1997 Executive Incentive Compensation Plan was established by the
Company in January 1997. For a summary of the Plan, please refer to the
description under "III. PROPOSAL TO INCREASE THE NUMBER OF SHARES OF THE
COMPANY'S COMMON STOCK RESERVED FOR ISSUANCE UNDER THE 1997 EXECUTIVE INCENTIVE
COMPENSATION PLAN FROM 1,908,000 SHARES TO 2,908,000 SHARES."
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
10
<PAGE> 14
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON
EXECUTIVE COMPENSATION
GENERAL
The Compensation Committee of the Board of Directors during fiscal year
1998 consisted of Bernard B. Markey and Raymond Ambrose. Edward A. Moses became
the third member of the Compensation Committee in January 1999. Each
Compensation Committee member is a non-employee director of the Company. The
Compensation Committee administers the Company's executive compensation program,
monitors corporate performance and its relationship to compensation for
executive officers, and makes appropriate recommendations concerning matters of
executive compensation.
COMPENSATION PHILOSOPHY
The Company has developed and implemented a compensation program that is
designed to attract, motivate, reward and retain the broad-based management
talent required to achieve the Company's business objectives and increase
shareholder value. There are two major components of the Company's compensation
program: base salary and incentives, each of which is intended to serve the
overall compensation philosophy.
BASE SALARY
The Company's salary levels for executive officers, including its Chief
Executive Officer, are intended to be consistent with competitive pay practices
of similarly sized companies within the industry. In determining executive
officers' salaries, the Compensation Committee considers level of
responsibility, competitive trends, the financial performance and resources of
the Company, general economic conditions, as well as factors relating to the
particular individual, including overall job performance, level of experience
and prior service, ability, and knowledge of the job. Base salaries were
increased for certain executive officers in fiscal 1998 to maintain an
externally competitive rate of pay.
INCENTIVES
Incentives consist of stock options and cash bonus awards. The Compensation
Committee strongly believes that the compensation program should provide
employees with an opportunity to increase their ownership and potential for
financial gain from increases in the Company's stock price. This approach
closely aligns the best interests of shareholders and executives and employees.
Therefore, executives and other employees are eligible to receive stock options,
giving them the right to purchase shares of the Company's common stock at a
specified price in the future. Stock option grants are determined by the
Company's Board of Directors. The grant of options is based primarily on a key
employee's potential contribution to the Company's growth and profitability, as
measured by the market value of the Company's common stock. The Company has an
incentive compensation bonus program for its executive officers pursuant to
which distributions may be made annually based on the Company's earnings and on
each participating officer's contributions to the Company's profits and other
corporate goals. Distributions are made from a pool, the amount of which is
established by the Company's Board of Directors. Individual distributions from
the pool are determined by the Company's Compensation Committee and are
generally based on a percentage of the participating officer's base salary.
Respectfully submitted,
THE COMPENSATION COMMITTEE
Bernard B. Markey
Raymond Ambrose
Edward A. Moses
11
<PAGE> 15
STOCK PERFORMANCE GRAPH
The graph below compares the cumulative total shareholder return on the
Company's common stock (Company Index) with the cumulative total return of the
NASDAQ Stock Market (Market Index) and the NASDAQ Computer and Data Processing
Stocks (Peer Index) for the period commencing June 11, 1997 (the date on which
trading in the Company's common stock commenced) through December 31, 1998,
assuming an investment of $100 and the reinvestment of any dividends. The base
price for the Company's stock is the initial public offering price of $5.50 per
share. The comparisons in the graph below are based upon historical data and are
not indicative of, nor intended to forecast, future performance of the Company's
common stock.
<TABLE>
<CAPTION>
Measurement Period Company
(Fiscal Year Covered) Index Market Index Peer Index
<S> <C> <C> <C>
06/11/97 100 100 100
06/30/97 101.176 102.551 101.539
07/31/97 121.176 113.377 112.091
08/31/97 145.882 113.204 109.102
09/30/97 142.35 119.9 111.048
10/31/97 158.823 113.67 108.745
11/30/97 171.765 114.232 111.503
12/31/97 195.294 112.443 104.794
01/30/98 182.353 115.84 112.695
02/27/98 197.647 126.741 127.965
03/31/98 212.941 131.395 138.447
04/30/98 263.529 133.599 139.634
05/29/98 282.353 126.199 129.929
06/30/98 254.117 135.045 153.645
07/31/98 265.882 133.473 148.739
08/31/98 160 107.296 121.246
09/30/98 230.588 122.272 144.883
10/30/98 190.588 127.501 140.72
11/30/98 169.412 140.182 162.632
12/31/98 94.118 158.21 187.822
</TABLE>
CERTAIN TRANSACTIONS INVOLVING MANAGEMENT
L.A. Gornto, Jr., the Company's Executive Vice President, General Counsel
and Secretary, has performed certain legal services for the Company through his
law firm, L. A. Gornto, Jr., P.A., for which the Company paid approximately
$211,831 during fiscal 1998, and from which office rent, secretarial and certain
other expenses incurred by Mr. Gornto in providing such services were paid.
On June 1, 1998, the Company, through its wholly-owned subsidiary HTE-UCS,
Inc., purchased privately-held UCS, Inc. in exchange for 1,120,000 shares of the
Company's common stock. O. F. Ramos received 546,422 of those shares in the
acquisition. Mr. Ramos is an Executive Vice President and a director of the
Company.
During 1998, the Company paid $151,484 to Air Orlando, Inc. for charter of
an aircraft used by Company personnel for road shows in connection with a
pending secondary offering. The secondary offering was terminated in October
1998. Mr. Raymond Ambrose, a director of the Company, is a shareholder, officer
and director of Air Orlando, Inc.
In June 1997, the Company completed an initial public offering of its
common stock for a purchase price of $5.50 per share. Certain related parties
sold an aggregate of 1,100,000 shares of common stock for total gross proceeds
of $6,050,000, before deducting underwriting commissions of 7%. The selling
shareholders and the number of shares sold were: Dennis J. Harward, Chairman,
President and Chief Executive Officer,
12
<PAGE> 16
220,000 shares; Jack L. Harward, Executive Vice President, Director, 220,000
shares; BancBoston Ventures, Inc., 440,000 shares; and Meridian Venture
Partners, 220,000 shares. Bernard B. Markey, a director of the Company, is a
general partner of Meridian Venture Partners.
II. PROPOSAL TO INCREASE THE NUMBER OF SHARES OF THE COMPANY'S COMMON STOCK
RESERVED FOR ISSUANCE UNDER THE 1997 EMPLOYEE STOCK PURCHASE PLAN FROM 400,000
SHARES TO 600,000 SHARES.
The Company's 1997 Employee Stock Purchase Plan (the "ESPP") was adopted
and became effective in 1998, and is designed to qualify as an employee stock
purchase plan under Section 423 of the Internal Revenue Code of 1986, as amended
(the "Code"). Currently, 400,000 shares of the Company's common stock have been
reserved for issuance over the term of the ESPP, subject to periodic adjustment
for changes in the outstanding common stock occasioned by stock splits, stock
dividends, recapitalizations or other similar changes. The purpose of the ESPP
is to encourage stock ownership in the Company by employees of the Company and
those subsidiaries of the Company designated by the Company's Board of Directors
as eligible to participate, thereby enhancing employee interest in the continued
success and progress of the Company.
As of December 31, 1998, 150,798 shares remain available for issuance under
the ESPP.
AMENDMENT TO THE PLAN
On March 3, 1999, the Board unanimously approved, subject to approval of
the Company's shareholders, an amendment to the ESPP to increase the number of
shares reserved for issuance under the ESPP from 400,000 to 600,000. As noted
above, only 150,798 shares currently remain eligible for grant under the ESPP. A
copy of the entire text of the ESPP, as proposed to be amended, is attached as
Exhibit A. The summary, set forth below, is qualified in its entirety by
reference to the attached full text of the proposed revised ESPP. Shareholders
are encouraged to read the actual text of the ESPP in its entirety.
The purpose of increasing the number of shares available for issuance is to
ensure that the Company will continue to be able to grant options as incentives
to its eligible employees upon whose efforts the Company relies for its
continued success and development.
SUMMARY
The ESPP is currently administered by the Board of Directors (the "Board").
The ESPP gives broad powers to the Board or a Board-appointed committee to
administer and interpret the ESPP.
The ESPP permits employees to purchase stock of the Company at a favorable
price and possibly with favorable tax consequences to the participants. All
employees (including officers, other than Dennis J. Harward and Jack L. Harward)
of the Company or of those subsidiaries designated by the Board who are
regularly scheduled to work at least 20 hours per week and more than five months
per year are eligible to participate in any of the purchase periods of the ESPP
after completing 90 days of continuous employment. However, any participant who
would own (as determined under the Code), immediately after the grant of an
option, stock possessing 5% or more of the total combined voting power or value
of all classes of the stock of the Company will not be granted an option under
the ESPP. As of the Record Date, there were approximately 546 persons eligible
to participate in the ESPP, of which there were approximately 442 actual
participants, excluding executive officers.
Under the ESPP, eligible employees may elect to participate in the ESPP on
January 1 or July 1 of each year (except in 1997, when the election date was
September 1, 1997). On the date he becomes a participant, and on the first
business day in January and July thereafter, subject to certain limitations
determined in accordance with calculations set forth in the ESPP, an eligible
employee is granted a right to purchase shares of common stock (up to a maximum
of 500 shares) on the last business day on or before each June 30 and December
31 during which he is a participant. Upon enrollment in the ESPP, the
participant authorizes a payroll deduction, on an after-tax basis, in an amount
of not less than 1% and not more than 25% of the participant's compensation on
each payroll date. Unless the participant withdraws from the ESPP, the
13
<PAGE> 17
participant's option for the purchase of shares will be exercised automatically
on each exercise date, and the maximum number of full shares subject to such
option shall be purchased for the participant at the applicable exercise price
with the accumulated ESPP contributions then credited to the participant's
account under the ESPP. The option exercise price per share may not be less than
85% of the lower of the market price on the first day of the offering period or
the market price on the exercise date, unless the participant's entry date is
not the first day of the offering period, in which case the exercise price may
not be lower than 85% of the market price of the common stock on the entry date.
As required by tax law, no participant may receive an option under the ESPP
for shares which have a fair market value in excess of $25,000 for any calendar
year, determined at the time such option is granted. Any funds not used to
purchase shares will remain credited to the participant's bookkeeping account
and applied to the purchase of shares of common stock in the next succeeding
purchase period. No interest is paid by the Company on funds withheld, and such
funds are used by the Company for general operating purposes.
No plan contributions or options granted under the ESPP are assignable or
transferable, other than by will or by the laws of descent and distribution or
as provided under the ESPP. During the lifetime of a participant, an option is
exercisable only by such participant. The expiration date of the ESPP will be
determined by the Board and may be made any time following the close of any
six-month exercise period, but may not be longer than ten years from the date of
the grant. Under circumstances of dissolution or liquidation, the offering
period will terminate immediately prior to the consummation of such proposed
action, unless otherwise provided by the Board. In the event of merger or a sale
of all or substantially all of the Company's assets, each option under the ESPP
shall be assumed or an equivalent option substituted by the successor
corporation, unless the Board, in its sole discretion, accelerates the date on
which the options may be exercised. No option may be granted under the ESPP
after September 1, 2007. The unexercised portion of any option granted to an
employee under the ESPP shall be automatically terminated immediately upon the
termination of the employee's employment for any reason, including retirement or
death.
The ESPP provides for adjustment of the number of shares for which options
may be granted, the number of shares subject to outstanding options and the
exercise price of outstanding options in the event of any increase or decrease
in the number of issued and outstanding shares as a result of one or more
reorganizations, restructurings, recapitalizations, reclassifications, stock
splits, reverse stock splits, or stock dividends.
The Board or the committee may amend, suspend or terminate the ESPP at any
time, provided that such amendment may not change any option which adversely
affects the rights of the holder of the option and the ESPP may not be amended
if such amendment would in any way cause rights issued under the ESPP to fail to
meet the requirements for employee stock purchase plans as defined in Section
423 of the Code, or would cause the ESPP to fail to comply with Rule 16b-3 of
the Exchange Act of 1934, as amended.
As of December 31, 1998, 249,202 shares of common stock had been purchased
under the ESPP. The Company's shareholders will not have any preemptive rights
to purchase or subscribe for the shares reserved for issuance under the ESPP. If
any option granted under the ESPP expires or terminates for any reason other
than having been exercised in full, the unpurchased shares subject to that
option will again be available for purposes of the ESPP.
SECURITIES ACT REGISTRATION
The Company registered the shares of common stock currently available for
issuance under the ESPP pursuant to a Registration Statement on Form S-8 filed
with the SEC. The Company intends to register on Form S-8 the additional shares
of common stock that will be available for issuance under the ESPP, after
approval of the proposed amendment thereto.
FEDERAL INCOME TAX EFFECTS
Options granted under the ESPP are intended to qualify for favorable tax
treatment to the employees under Sections 421 and 423 of the Code. Employee
contributions are made on an after-tax basis. A capital
14
<PAGE> 18
gain or capital loss on common stock purchased under the ESPP would not be
realized until the participant sells the shares of common stock. If a
participant disposes of shares two years or more after the date of the beginning
of the purchase period when the shares were acquired, and more than one year
after the shares are purchased, the participant would recognize as ordinary
income the lesser of: (i) the excess of the fair market value of the shares on
the date of sale over the price paid or (ii) the discount (currently 15%) of the
fair market value of the shares at the beginning of the purchase period(s).
Additionally, the participant would recognize a long-term capital gain or loss
(within the meaning of the Code) equal to the difference between the amount
realized from the sale of the shares and the basis (the basis would be the
purchase price plus any amount taxed as ordinary compensation income). If a
participant disposes of shares within two years of the date of the beginning of
the purchase period when the shares were acquired, or within one year after the
shares are purchased, the participant would recognize ordinary compensation
income equal to the excess of the fair market value of the shares on the
purchase date(s) over the price paid for the shares. Additionally, the
participant would recognize a capital gain or loss (within the meaning of the
Code) equal to the difference between the amount realized from the sale of the
shares and the basis (the basis would be the purchase price plus the amount
taxed as ordinary compensation income). If the participant held the shares for
more than one year, the capital gain or loss would be a long-term gain or loss.
The Company would not receive an income tax deduction upon either the grant or
exercise of the option by the participant, but generally would receive a
deduction equal to the ordinary compensation income required to be recognized by
the participant as a result of the disposition of the shares if the shares are
disposed of by the participant within two years of the date of the beginning of
the purchase period when the shares were acquired, or within one year after the
shares are purchased.
IMPORTANCE OF CONSULTING TAX ADVISOR
The information set forth above is a summary only and does not purport to
be complete. In addition, the information is based upon current federal income
tax rules and therefore is subject to change when those rules change. Moreover,
because the tax consequences to any participant in the ESPP may depend on his or
her particular situation, each participant should consult his or her tax adviser
as to the federal, state, local and other tax consequences of the acquisition or
disposition of common stock under the ESPP.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
15
<PAGE> 19
SHARES PURCHASED UNDER THE 1997 EMPLOYEE STOCK PURCHASE PLAN
The following table sets forth certain information as of December 31, 1998
regarding shares purchased during fiscal 1998 under the ESPP by the persons and
groups indicated.
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE AGGREGATE
NUMBER PURCHASE DOLLAR
OF SHARES PRICE PAID TO VALUES AT
NAME AND POSITION OR GROUP(1) PURCHASED THE COMPANY PURCHASE DATES(2)
- ----------------------------- --------- ------------- -----------------
<S> <C> <C> <C>
Daniel E. Catan.......................................... 654 $ 4,152 $ 1,671
Vice President -- Chief Marketing Officer
Charlotte B. Hill........................................ 1,907 12,250 4,996
Vice President -- Research and Development
O. F. Ramos.............................................. 228 2,007 1,062
Executive Vice President
All current directors who are not executive officers as a
group (3 persons)...................................... -- -- --
All current executive officers as a group (12 persons)... 3,684 26,293 11,914
All employees as a group, other than executive officers
(546 persons).......................................... 205,397 1,121,882 368,169
</TABLE>
- ---------------
(1) Messrs. Dennis J. Harward and Jack L. Harward are Named Executive Officers
but are not eligible to purchase shares under the ESPP.
(2) Aggregate Dollar Values at purchase dates represents the aggregate market
value of the shares acquired on the purchase dates in 1998, less the
aggregate purchase price paid for such shares under the ESPP. Purchase dates
during 1998 occurred on June 30 and December 30, 1998.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board believes that shares granted under the ESPP have been and will be
awarded to all employees presently meeting the existing eligibility
requirements, except no participant may be granted an aggregate number of shares
with a fair market value exceeding $25,000 in any calendar year as determined at
the beginning of each Purchase Period (as defined under the ESPP).
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE PROPOSAL TO
INCREASE THE NUMBER OF SHARES OF THE COMPANY'S COMMON STOCK RESERVED FOR
ISSUANCE UNDER THE 1997 EMPLOYEE STOCK PURCHASE PLAN FROM 400,000 SHARES TO
600,000 SHARES.
III. PROPOSAL TO INCREASE THE NUMBER OF SHARES OF THE COMPANY'S COMMON STOCK
RESERVED FOR ISSUANCE UNDER THE 1997 EXECUTIVE INCENTIVE
COMPENSATION PLAN FROM 1,908,000 SHARES TO 2,908,000 SHARES.
In January 1997, the Company established the 1997 Executive Incentive
Compensation Plan (the "Plan"). The terms of the Plan provide for grants of
stock options (incentive and non-statutory), stock appreciation rights ("SARs")
and restricted stock to employees and consultants of the Company capable of
contributing to the Company's performance.
As of December 31, 1998, 458,459 shares remain available for issuance under
the Plan.
AMENDMENT TO THE PLAN
On March 3, 1999, the Board unanimously approved, subject to approval of
the Company's shareholders, an amendment to the Plan to increase the number of
shares reserved for issuance under the Plan from 1,908,000 to 2,908,000. As
noted above, only 458,459 shares currently remain eligible for grant under the
Plan.
16
<PAGE> 20
A copy of the entire text of the Plan, as proposed to be amended, is attached as
Exhibit B. The summary, set forth below, is qualified in its entirety by
reference to the attached full text of the proposed revised Plan. Shareholders
are encouraged to read the actual text of the Plan in its entirety.
The purpose of increasing the number of shares available for issuance is to
ensure that the Company will continue to be able to attract and retain key
employees and consultants, to provide an incentive for them to achieve
long-range performance goals, and to enable them to participate in the long-term
growth of the Company.
SUMMARY
Shares Available for Awards; Annual Per-Person Limitations. Under the
Plan, the total number of shares of common stock that may be subject to the
granting of awards under the Plan at any time during the term of the Plan shall
be equal to 2,908,000 shares, plus the number of shares with respect to which
awards previously granted under the Plan terminate without being exercised, and
the number of shares that are surrendered in payment of any awards or any tax
withholding requirements. The Plan limits the number of shares which may be
issued pursuant to incentive stock options to 2,908,000 shares.
In addition, the Plan imposes individual limitations on the amount of
certain awards in part to comply with Code Section 162(m). Under these
limitations, during any fiscal year the number of options, SARs and restricted
shares of common stock (collectively, "Awards") granted to any one participant
may not exceed 265,000 shares for each type of such Award, subject to adjustment
in certain circumstances. The maximum amount that may be paid out as an annual
incentive Award or other cash Award in any fiscal year to any one participant is
$1,000,000, and the maximum amount that may be earned as a performance Award or
other cash Award in respect of a performance period by any one participant is
$2,000,000.
The committee or the Board is authorized to adjust the limitations
described in the two preceding paragraphs and is authorized to adjust
outstanding Awards (including adjustments to exercise prices of options and
other affected terms of Awards) in the event that a dividend or other
distribution (whether in cash, shares of common stock or other property),
recapitalization, forward or reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase, share exchange or other
similar corporate transaction or event affects the common stock so that an
adjustment is appropriate in order to prevent dilution or enlargement of the
rights of participants. The committee or the Board is also authorized to adjust
performance conditions and other terms of Awards in response to these kinds of
events or in response to changes in applicable laws, regulations or accounting
principles.
Eligibility. The persons eligible to receive Awards under the Plan are the
officers, directors, employees and independent contractors of the Company and
its subsidiaries. An employee on leave of absence may be considered as still in
the employ of the Company or a subsidiary for purposes of eligibility for
participation in the Plan. As of December 31, 1998, approximately 546 persons
were eligible to participate in the Plan, of which approximately 333 persons
held options under the Plan, excluding executive officers.
Administration. The Plan is administered by the Board. However, the Board
may appoint a committee composed of at least two Board members to administer the
Plan. Subject to the terms of the Plan, the committee or the Board is authorized
to select eligible persons to receive Awards, determine the type and number of
Awards to be granted and the number of shares of common stock to which Awards
will relate, specify times at which Awards will be exercisable or settleable
(including performance conditions that may be required as a condition thereof),
set other terms and conditions of Awards, prescribe forms of Award agreements,
interpret and specify rules and regulations relating to the Plan, and make all
other determinations that may be necessary or advisable for the administration
of the Plan.
Stock Options and SARs. The committee or the Board is authorized to grant
stock options, including incentive stock options ("ISOs"), which can result in
potentially favorable tax treatment to the participant, non-qualified stock
options, and SARs entitling the participant to receive the amount by which the
fair market value of a share of common stock on the date of exercise (or defined
"change in control price" following a change in control) exceeds the grant price
of the SAR. The exercise price per share subject to an option and
17
<PAGE> 21
the grant price of an SAR are determined by the committee or the Board, but in
the case of an ISO must not be less than the fair market value of a share of
common stock on the date of grant. For purposes of the Plan, the term "fair
market value" means the fair market value of common stock, Awards or other
property as determined by the committee or the Board or under procedures
established by the committee or the Board. Unless otherwise determined by the
committee or the Board, the fair market value of common stock as of any given
date shall be the closing sales price per share of common stock as reported on
the principal stock exchange or market on which common stock is traded on the
date as of which such value is being determined or, if there is no sale on that
date, then on the last previous day on which a sale was reported. The maximum
term of each option or SAR, the times at which each option or SAR will be
exercisable, and provisions requiring forfeiture of unexercised options or SARs
at or following termination of employment generally are fixed by the committee
or the Board, except that no option or SAR may have a term exceeding ten years.
Options may be exercised by payment of the exercise price in cash, shares that
have been held for at least six months, outstanding Awards or other property
having a fair market value equal to the exercise price, as the committee or the
Board may determine from time to time. Methods of exercise and settlement and
other terms of the SARs are determined by the committee or the Board. SARs
granted under the Plan may include "limited SARs" exercisable for a stated
period of time following a change in control of the Company, as discussed below.
Restricted Stock. The committee or the Board is authorized to grant
restricted stock and deferred stock. Restricted stock is a grant of shares of
common stock which may not be sold or disposed of, and which may be forfeited in
the event of certain terminations of employment, prior to the end of a
restricted period specified by the committee or the Board. A participant granted
restricted stock generally has all of the rights of a shareholder of the
Company, unless otherwise determined by the committee or the Board.
Other Terms of Awards. Awards may be settled in the form of cash, shares
of common stock, other Awards or other property, in the discretion of the
committee or the Board. The committee or the Board may require or permit
participants to defer the settlement of all or part of an Award in accordance
with such terms and conditions as the committee or the Board may establish,
including payment or crediting of interest or dividend equivalents on deferred
amounts, and the crediting of earnings, gains and losses based on deemed
investment of deferred amounts in specified investment vehicles. The committee
or the Board is authorized to place cash, shares of common stock or other
property in trusts or make other arrangements to provide for payment of the
Company's obligations under the Plan. The committee or the Board may condition
any payment relating to an Award on the withholding of taxes and may provide
that a portion of any shares of common stock or other property to be distributed
will be withheld (or previously acquired shares of common stock or other
property be surrendered by the participant) to satisfy withholding and other tax
obligations. Awards granted under the Plan generally may not be pledged or
otherwise encumbered and are not transferable except by will or by the laws of
descent and distribution, or to a designated beneficiary upon the participant's
death, except that the committee or the Board may, in its discretion, permit
transfers for estate planning or other purposes subject to any applicable
restrictions under Rule 16b-3.
Awards under the Plan are generally granted without a requirement that the
participant pay consideration in the form of cash or property for the grant (as
distinguished from the exercise), except to the extent required by law. The
committee or the Board may, however, grant Awards in exchange for other Awards
under the Plan, awards under other Company plans, or other rights to payment
from the Company, and may grant Awards in addition to and in tandem with such
other Awards, rights or other awards.
Acceleration of Vesting; Change in Control. The committee or the Board
may, in its discretion, accelerate the exercisability, the lapsing of
restrictions or the expiration of deferral or vesting periods of any Award, and
such accelerated exercisability, lapse, expiration and, if so provided in the
Award agreement, vesting, shall occur automatically in the case of a "change in
control" of the Company, as defined in the Plan (including the cash settlement
of SARs and "limited SARs" which may be exercisable in the event of a "change in
control"). In addition, the committee or the Board may provide in an Award
agreement that the performance goals relating to any performance based Award
will be deemed to have been met upon the occurrence of any "change in control."
Upon the occurrence of a change in control, if so provided in the Award
agreement, stock options and limited SARs (and other SARs which so provide) may
be cashed out
18
<PAGE> 22
based on a defined "change in control price," which will be the higher of (i)
the cash and fair market value of property that is the highest price per share
paid (including extraordinary dividends) in any reorganization, merger,
consolidation, liquidation, dissolution or sale of substantially all assets of
the Company, or (ii) the highest fair market value per share (generally based on
market prices) at any time during the 60 days before and 60 days after a "change
in control". For purposes of the Plan, the term "change in control" generally
means (a) approval by shareholders of any reorganization, merger or
consolidation or other transaction or series of transactions if persons who were
shareholders immediately prior to such reorganization, merger or consolidation
or other transaction do not, immediately thereafter, own more than 50% of the
combined voting power of the reorganized, merged or consolidated company's then
outstanding, voting securities, or a liquidation or dissolution of the Company
or the sale of all or substantially all of the assets of the Company (unless the
reorganization, merger, consolidation or other corporate transaction,
liquidation, dissolution or sale is subsequently abandoned), or (b) a change in
the composition of the Board such that the persons constituting the Board on the
date the Award is granted (the "Incumbent Board"), and subsequent directors
approved by the Incumbent Board (or approved by such subsequent directors),
cease to constitute at least a majority of the Board, or (c) the acquisition by
any person, entity or "group", within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act, of more than 30% of either the then
outstanding shares of the Company's common stock or the combined voting power of
the Company's then outstanding voting securities entitled to vote generally in
the election of directors (hereinafter referred to as the ownership of a
"Controlling Interest") excluding, for this purpose, any acquisitions by (1) the
Company or its Subsidiaries, (2) any person, entity or "group" that as of the
date on which the Award is granted owns beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Securities Exchange Act) of a Controlling
Interest or (3) any employee benefit plan of the Company or its Subsidiaries.
Amendment and Termination. The Board of Directors may amend, alter,
suspend, discontinue or terminate the Plan or the committee's authority to grant
Awards without further shareholder approval, except shareholder approval must be
obtained for any amendment or alteration if such approval is required by law or
regulation or under the rules of any stock exchange or quotation system on which
shares of common stock are then listed or quoted. Thus, shareholder approval may
not necessarily be required for every amendment to the Plan which might increase
the cost of the Plan or alter the eligibility of persons to receive Awards.
Shareholder approval will not be deemed to be required under laws or
regulations, such as those relating to ISOs, that condition favorable treatment
of participants on such approval, although the Board may, in its discretion,
seek shareholder approval in any circumstance in which it deems such approval
advisable. Unless earlier terminated by the Board, the Plan will terminate at
such time as no shares of common stock remain available for issuance under the
Plan and the Company has no further rights or obligations with respect to
outstanding Awards under the Plan.
SECURITIES ACT REGISTRATION
The Company registered the shares of common stock currently available for
Awards under the Plan pursuant to a Registration Statement on Form S-8 filed
with the SEC. The Company intends to register on Form S-8 the additional shares
of common stock that will be available for Awards under the Plan, after approval
of the proposed amendment thereto.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief description of the federal income tax consequences
generally arising with respect to Awards of options under the Plan.
The grant of an option will create no tax consequences for the participant
or the Company. A participant will not have taxable income upon exercising an
ISO (except that the alternative minimum tax may apply). Upon exercising an
option other than an ISO, the participant must generally recognize ordinary
income equal to the difference between the exercise price and the fair market
value of the freely transferable and non-forfeitable shares of common stock
acquired on the date of exercise.
19
<PAGE> 23
Upon a disposition of shares of common stock acquired upon exercise of an
ISO before the end of the applicable ISO holding periods, the participant must
generally recognize ordinary income equal to the lesser of (i) the fair market
value of the shares of common stock at the date of exercise of the ISO minus the
exercise price, or (ii) the amount realized upon the disposition of the ISO
shares of common stock minus the exercise price. Otherwise, a participant's
disposition of shares of common stock acquired upon the exercise of an option
(including an ISO for which the ISO holding periods are met) generally will
result in short-term or long-term capital gain or loss measured by the
difference between the sale price and the participant's tax basis in such shares
of common stock (the tax basis generally being the exercise price plus any
amount previously recognized as ordinary income in connection with the exercise
of the option).
The Company generally will be entitled to a tax deduction equal to the
amount recognized as ordinary income by the participant in connection with an
option. The Company generally is not entitled to a tax deduction relating to
amounts that represent a capital gain to a participant. Accordingly, the Company
will not be entitled to any tax deduction with respect to an ISO if the
participant holds the shares of common stock for the ISO holding periods prior
to disposition of the shares.
The Omnibus Budget Reconciliation Act of 1993 added Section 162(m) to the
Code, which generally disallows a public company's tax deduction for
compensation to covered employees in excess of $1 million in any tax year
beginning on or after January 1, 1994. Compensation that qualifies as
"performance-based compensation" is excluded from the $1 million deductibility
cap, and therefore remains fully deductible by the company that pays it. As
discussed above, the Company intends that options and certain other Awards
granted to employees whom the committee or Board expects to be covered employees
at the time a deduction arises in connection with such Awards, qualify as such
"performance-based compensation," so that such Awards will not be subject to the
Section 162(m) deductibility cap of $1 million. Future changes in Section 162(m)
or the regulations thereunder may adversely affect the ability of the Company to
ensure that options or other Awards under the Plan will qualify as
"performance-based compensation" that is fully deductible by the Company under
Section 162(m).
The foregoing discussion, which is general in nature and is not intended to
be a complete description of the federal income tax consequences of the Plan, is
intended for the information of shareholders considering how to vote at the
Annual Meeting and not as tax guidance to participants in the Plan. This
discussion does not address the effects of other federal taxes or taxes imposed
under state, local or foreign tax laws. Participants in the Plan should consult
a tax advisor as to the tax consequences of participation.
20
<PAGE> 24
PLAN BENEFITS
The following table sets forth certain information as of December 31, 1998
regarding options granted during fiscal 1998 under the Plan to the persons and
groups indicated.
<TABLE>
<CAPTION>
NAME AND POSITION OR GROUP OPTIONS GRANTED(#) DOLLAR VALUE($)(1)
- -------------------------- ------------------ ------------------
<S> <C> <C>
Dennis J. Harward........................................... 40,000 --
Chairman, President and Chief Executive Officer
Jack L. Harward............................................. -- --
Executive Vice President, Assistant Secretary and
Assistant Treasurer
Daniel E. Catan............................................. 30,000 --
Vice President -- Chief Marketing Officer
Charlotte B. Hill........................................... -- --
Vice President -- Research and Development
O. F. Ramos................................................. -- --
Executive Vice President
All current directors who are not executive officers, as a
group (3 persons)......................................... 20,000 --
All current executive officers as a group (12 persons)...... 105,000 --
All employees as a group, other than executive officers
(546 persons)............................................. 488,241 --
</TABLE>
- ---------------
(1) The dollar value is calculated by multiplying (a) the difference between
$5.00 (the closing sale price of the Company's common stock as reported by
the NASDAQ National Market System on December 31, 1998) and the option
exercise by (b) the number of shares of common stock underlying the option.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Company believes that Awards granted under the Plan will be granted
primarily to those persons who possess a capacity to contribute significantly to
the successful performance of the Company. Because persons to whom Awards may be
made are to be determined from time to time by the Board in its discretion, it
is impossible at this time to indicate the precise number, name or positions of
persons who will hereafter receive Awards or the nature and terms of such
Awards.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE PROPOSAL TO
INCREASE THE NUMBER OF SHARES OF THE COMPANY'S COMMON STOCK RESERVED FOR
ISSUANCE UNDER THE 1997 EXECUTIVE INCENTIVE COMPENSATION PLAN FROM 1,908,000
SHARES TO 2,908,000 SHARES.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The Company's independent public accountants for year ended December 31,
1998 were, and for 1999 will be, the firm of Arthur Andersen LLP.
Representatives of such firm will attend the Annual Meeting, have an opportunity
to make a statement if they desire to do so, and be available to respond to
appropriate questions.
OTHER BUSINESS
The Board of Directors is not aware of any matters to be presented at the
meeting other than the matters described herein and does not intend to bring any
other matters before the meeting. However, if any other matters should come
before the meeting, or any adjournment thereof, the persons named in the
enclosed proxy will have discretionary authority to vote all proxies in
accordance with their best judgment.
21
<PAGE> 25
SHAREHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Pursuant to the Company's Articles of Incorporation, any shareholder
proposals for inclusion in the Company's Proxy Statement and form of proxy
relating to the Company's 2000 Annual Meeting of Shareholders must be received
by the Company by December 13, 1999. In submitting proposals, shareholders must
comply with the Company's advance notice provision contained in its Articles of
Incorporation and the rules and regulations promulgated by the SEC relating to
shareholder proposals. The Company will provide a copy of the advance notice
provision from its Articles of Incorporation without charge upon written
request. Shareholder proposals and requests for copies of the advance notice
provision should be addressed to L. A. Gornto, Jr., Executive Vice President,
Secretary & General Counsel, H.T.E. Inc., 1000 Business Center Drive, Lake Mary,
Florida 32746.
ANNUAL REPORT ON FORM 10-K
THE COMPANY WILL PROVIDE TO THE RECIPIENTS OF THIS PROXY STATEMENT, UPON
WRITTEN REQUEST AND WITHOUT CHARGE, A COPY OF ITS ANNUAL REPORT ON FORM 10-K
RELATED TO THE YEAR ENDED DECEMBER 31, 1998. Written requests for the Company's
Form 10-K should be addressed to: H.T.E., Inc., Investor Relations Department,
1000 Business Center Drive, Lake Mary, Florida 32746.
Kindly date, sign and return the enclosed proxy card.
By Order of the Board of Directors,
--------------------------------------
L. A. Gornto, Jr.
Executive Vice President, Secretary &
General Counsel
ALL SHAREHOLDERS ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE ACCOMPANYING
PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE. THANK YOU FOR YOUR PROMPT
ATTENTION TO THIS MATTER.
22
<PAGE> 26
EXHIBIT A
H.T.E., INC.
1997 EMPLOYEE STOCK PURCHASE PLAN
<PAGE> 27
H.T.E., INC.
1997 EMPLOYEE STOCK PURCHASE PLAN
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
1. Purpose..................................................... A-2
2. Definitions................................................. A-2
3. Eligibility................................................. A-3
4. Offering Periods............................................ A-3
5. Election to Participate..................................... A-4
6. Participant Contributions................................... A-4
7. Grant of Option............................................. A-5
8. Exercise Price.............................................. A-5
9. Exercise of Options......................................... A-6
10. Delivery.................................................... A-6
11. Withdrawal; Termination of Employment....................... A-6
12. Stock....................................................... A-6
13. Administration.............................................. A-6
14. Designation of Beneficiary.................................. A-7
15. Transferability............................................. A-7
16. Participant Accounts........................................ A-7
17. Adjustments Upon Changes in Capitalization; Corporate A-7
Transactions................................................
18. Amendment of the Plan....................................... A-8
19. Termination of the Plan..................................... A-8
20. Notices..................................................... A-8
21. Effective Date.............................................. A-8
22. Conditions Upon Issuance of Shares.......................... A-9
23. Expenses of the Plan........................................ A-9
24. No Employment Rights........................................ A-9
25. Applicable Law.............................................. A-9
26. Additional Restrictions of Rule 16b-3....................... A-9
</TABLE>
A-1
<PAGE> 28
H.T.E., INC.
1997 EMPLOYEE STOCK PURCHASE PLAN
1. Purpose. The purpose of the Plan is to provide incentive for present
and future employees of the Company and any Designated Subsidiary to acquire a
proprietary interest (or increase an existing proprietary interest) in the
Company through the purchase of Common Stock. It is the Company's intention that
the Plan qualify as an "employee stock purchase plan" under Section 423 of the
Code. Accordingly, the provisions of the Plan shall be administered, interpreted
and construed in a manner consistent with the requirements of that section of
the Code.
2. Definitions.
(a) "Applicable Percentage" means the percentage specified in Section
8, subject to adjustment by the Committee as provided in Section 8.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended, and
any successor thereto.
(d) "Committee" means the committee appointed by the Board to
administer the Plan as described in Section 13 of the Plan or, if no such
Committee is appointed, the Board.
(e) "Common Stock" means the Company's Common Stock, par value $.01
per share.
(f) "Company" means H.T.E., INC., a Florida corporation.
(g) "Compensation" means, with respect to each Participant for each
pay period, the full base salary, overtime and other wages paid to such
Participant by the Company or a Designated Subsidiary. Except as otherwise
determined by the Committee, "Compensation" does not include: (i)
commissions or bonuses; (ii) any amounts contributed by the Company or a
Designated Subsidiary to any pension plan; (iii) any automobile or
relocation allowances (or reimbursement for any such expenses); (iv) any
amounts paid as a starting bonus or finder's fee; (v) any amounts realized
from the exercise of any stock options or incentive awards; (vi) any
amounts paid by the Company or a Designated Subsidiary for other fringe
benefits, such as health and welfare, hospitalization and group life
insurance benefits, or perquisites, or paid in lieu of such benefits, or;
(vii) other similar forms of extraordinary compensation.
(h) "Continuous Status as an Employee" means the absence of any
interruption or termination of service as an Employee. Continuous Status as
an Employee shall not be considered interrupted in the case of a leave of
absence agreed to in writing by the Company or the Designated Subsidiary
that employs the Employee, provided that such leave is for a period of not
more than 90 days or reemployment upon the expiration of such leave is
guaranteed by contract or statute.
(i) "Designated Subsidiaries" means the Subsidiaries that have been
designated by the Board from time to time in its sole discretion as
eligible to participate in the Plan.
(j) "Employee" means any person, including an Officer, whose customary
employment with the Company or one of its Designated Subsidiaries is at
least twenty (20) hours per week and more than five (5) months in any
calendar year.
(k) "Entry Date" means the first day of each Exercise Period.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(m) "Exercise Date" means the last business day ending on or before
December 31, 1997, and the last business day ending on or before each June
30 and December 31 thereafter.
(n) "Exercise Period" means, for any Offering Period, each period
commencing on the Offering Date and on the day after each Exercise Date,
and terminating on the immediately following Exercise Date.
A-2
<PAGE> 29
(o) "Exercise Price" means the price per share of Common Stock offered
in a given Offering Period determined as provided in Section 8.
(p) "Fair Market Value" means, with respect to a share of Common
Stock, the Fair Market Value as determined under Section 7(b).
(q) "First Offering Date" means September 1, 1997.
(r) "Offering Date" means the first business day of each Offering
Period; provided, that in the case of an individual who becomes eligible to
become a Participant under Section 3 after the first business day of an
Offering Period, the term "Offering Date" shall mean the first business day
of the Exercise Period coinciding with or next succeeding the day on which
that individual becomes eligible to become a Participant. Options granted
after the first day of an Offering Period will be subject to the same terms
as the options granted on the first business day of such Offering Period
except that they will have a different grant date (thus, potentially, a
different exercise price) and, because they expire at the same time as the
options granted on the first business day of such Offering Period, a
shorter term.
(s) "Offering Period" means (i) with respect to the first Offering
Period, the period beginning on the First Offering Date and ending on
December 31, 1997, and (ii) with respect to each Offering Period
thereafter, and subject to adjustment as provided in Section 4, the period
beginning on the first business day in January and ending on the last
business day in June, and the period beginning on the first business day in
July and ending on the last business day of December.
(t) "Officer" means a person who is an officer of the Company within
the meaning of Section 16 under the Exchange Act and the rules and
regulations promulgated thereunder.
(u) "Participant" means an Employee who has elected to participate in
the Plan by filing an enrollment agreement with the Company as provided in
Section 5 of the Plan.
(v) "Plan" shall mean this 1997 Employee Stock Purchase Plan.
(w) "Plan Contributions" means, with respect to each Participant, the
payroll deductions withheld from the Compensation of the Participant and
contributed to the Plan for the Participant as provided in Section 6 of the
Plan and any other amounts contributed to the Plan for the Participant in
accordance with the terms of the Plan.
(x) "Subsidiary" shall mean any corporation, domestic or foreign, of
which the Company owns, directly or indirectly, 50% or more of the total
combined voting power of all classes of stock, and that otherwise qualifies
as a "subsidiary corporation" within the meaning of Section 424(f) of the
Code.
3. Eligibility.
(a) Any Employee shall be eligible to become a Participant as of any
Entry Date coinciding with or following the date on which he becomes an
Employee, subject to the requirements of Section 5(a) and the limitations
imposed by Section 423(b) of the Code.
(b) Notwithstanding any provision of the Plan to the contrary, no
Participant shall be granted an option under the Plan (i) if, immediately
after the grant, such Participant (or any other person whose stock would be
attributed to such Participant pursuant to Section 424(d) of the Code)
would own stock and/or hold outstanding options to purchase stock
possessing 5% or more of the total combined voting power or value of all
classes of stock of the Company or of any Subsidiary of the Company, or
(ii) which permits such Participant's rights to purchase stock under all
employee stock purchase plans of the Company and its Subsidiaries intended
to qualify under Section 423 of the Code to accrue at a rate which exceeds
$25,000 of fair market value of stock (determined at the time such option
is granted) for each calendar year in which such option is outstanding at
any time.
4. Offering Periods. The Plan shall be implemented by a series of
consecutive Offering Periods. The first Offering Period shall commence on the
First Offering Date, the second Offering Period shall commence on the first
business day in 1998, and succeeding Offering Periods shall commence on the
first business day of
A-3
<PAGE> 30
January and the first business day of July in each succeeding calendar year (or
at such other time or times as may be determined by the Committee). The
Committee shall have the power to change the duration and/or the frequency of
Offering Periods with respect to future offerings without stockholder approval
if such change is announced at least fifteen (15) days prior to the scheduled
beginning of the first Offering Period to be affected.
5. Election to Participate.
(a) An eligible Employee may elect to participate in the Plan
commencing on any Entry Date by completing an enrollment agreement on the
form provided by the Company and filing the enrollment agreement with the
Company on or prior to such Entry Date, unless a later time for filing the
enrollment agreement is set by the Committee for all eligible Employees
with respect to a given offering. The enrollment agreement shall set forth
the percentage of the Participant's Compensation that is to be withheld by
payroll deduction pursuant to the Plan.
(b) Except as otherwise determined by the Committee under rules
applicable to all Participants, payroll deductions for a Participant shall
commence on the first payroll following the Entry Date on which the
Participant elects to participate in accordance with Section 5(a) and shall
end on the last payroll in the Offering Period, unless sooner terminated by
the Participant as provided in Section 11.
(c) Unless a Participant elects otherwise prior to the last Exercise
Date of an Offering Period, such Participant shall be deemed (i) to have
elected to participate in the immediately succeeding Offering Period (and,
for purposes of such Offering Period such Participant's "Entry Date" shall
be deemed to be the first day of such Offering Period) and (ii) to have
authorized the same payroll deduction for such immediately succeeding
Offering Period as was in effect for such Participant immediately prior to
the commencement of such succeeding Offering Period.
6. Participant Contributions.
(a) Except as otherwise authorized by the Committee pursuant to
Section 6(d) below, all Participant contributions to the Plan shall be made
only by payroll deductions. At the time a Participant files the enrollment
agreement with respect to an Offering Period, the Participant may authorize
payroll deductions to be made on each payroll date during the portion of
the Offering Period that he or she is a Participant in an amount not less
than 1% and not more than 25% of the Participant's Compensation on each
payroll date during the portion of the Offering Period that he or she is a
Participant (or subsequent Offering Periods as provided in Section 5(c)).
The amount of payroll deductions shall be a whole percentage (i.e., 1%, 2%,
3%, etc.) of the Participant's Compensation.
(b) A Participant may discontinue his or her participation in the Plan
as provided in Section 11, or may decrease or increase the rate or amount
of his or her payroll deductions during such Offering Period (within the
limitations of Section 6(a) above) by completing and filing with the
Company a new enrollment agreement authorizing a change in the rate or
amount of payroll deductions; PROVIDED, that a Participant may not change
the rate or amount of his or her payroll deductions more than once in any
Exercise Period. The change in rate or amount shall be effective with the
first full payroll period following ten (10) business days after the
Company's receipt of the new enrollment agreement.
(c) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3(b) hereof, a Participant's
payroll deductions may be decreased to 0% at such time during any Exercise
Period which is scheduled to end during the current calendar year that the
aggregate of all payroll deductions accumulated with respect to such
Exercise Period and any other Exercise Period ending within the same
calendar year are equal to the product of $25,000 multiplied by the
Applicable Percentage for the calendar year. Payroll deductions shall
recommence at the rate provided in the Participant's enrollment agreement
at the beginning of the following Exercise Period which is scheduled to end
in the following calendar year, unless terminated by the Participant as
provided in Section 11.
A-4
<PAGE> 31
(d) Notwithstanding anything to the contrary in the foregoing, but
subject to the limitations set forth in Section 3(b), the Committee may
permit Participants to make additional contributions to the Plan subject to
such terms and conditions as the Committee may in its discretion determine.
All such additional contributions shall be made in a manner consistent with
the provisions of Section 423 of the Code or any successor thereto, and
shall be held in Participants' accounts and applied to the purchase of
shares of Common Stock pursuant to options granted under this Plan in the
same manner as payroll deductions contributed to the Plan as provided
above.
(e) All Plan Contributions made for a Participant shall be deposited
in the Company's general corporate account and shall be credited the
Participant's account under the Plan. No interest shall accrue or be
credited with respect to a Participant's Plan Contributions. All Plan
Contributions received or held by the Company may be used by the Company
for any corporate purpose, and the Company shall not be obligated to
segregate or otherwise set apart such Plan Contributions from any other
corporate funds.
7. Grant of Option.
(a) On a Participant's Entry Date, subject to the limitations set
forth in Sections 3(b) and 12(a), the Participant shall be granted an
option to purchase on each subsequent Exercise Date during the Offering
Period in which such Entry Date occurs (at the Exercise Price determined as
provided in Section 8 below) a number of shares of Common Stock determined
by dividing such Participant's Plan Contributions accumulated prior to such
Exercise Date and retained in the Participant's account as of such Exercise
Date by the lower of (i) the Applicable Percentage of the greater of (A)
the Fair Market Value of a share of Common Stock on the Offering Date or
(B) the Fair Market Value of a share of Common Stock on the Entry Date on
which the Employee elects to become a Participant within the Offering
Period, or (ii) the Applicable Percentage of the Fair Market Value of a
share of Common Stock on such Exercise Date; PROVIDED, that the maximum
number of shares an Employee may purchase during any Exercise Period shall
be Five Hundred (500) shares. The Fair Market Value of a share of Common
Stock shall be determined as provided in Section 7(b).
(b) The Fair Market Value of a share of Common Stock on a given date
shall be determined by the Committee in its discretion; PROVIDED, that if
there is a public market for the Common Stock, the Fair Market Value per
share shall be either (i) the closing price of the Common Stock on such
date (or, in the event that the Common Stock is not traded on such date, on
the immediately preceding trading date), as reported by the National
Association of Securities Dealers Automated Quotation (Nasdaq) National
Market System, (ii) if such price is not reported, the average of the bid
and asked prices for the Common Stock on such date (or, in the event that
the Common Stock is not traded on such date, on the immediately preceding
trading date), as reported by Nasdaq, (iii) in the event the Common Stock
is listed on a stock exchange, the closing price of the Common Stock on
such exchange on such date (or, in the event that the Common Stock is not
traded on such date, on the immediately preceding trading date), as
reported in The Wall Street Journal, or (iv) if no such quotations are
available for a date within a reasonable time prior to the valuation date,
the value of the Common Stock as determined by the Committee using any
reasonable means. For purposes of the First Offering Date, the Fair Market
Value of a share of Common Stock shall be the Price to Public as set forth
in the final prospectus filed by the Company with the Securities and
Exchange Commission pursuant to Rule 424 under the Securities Act of 1933,
as amended.
8. Exercise Price. The Exercise Price per share of Common Stock offered to
each Participant in a given Offering Period shall be the lower of: (i) the
Applicable Percentage of the greater of (A) the Fair Market Value of a share of
Common Stock on the Offering Date or (B) the Fair Market Value of a share of
Common Stock on the Entry Date on which the Employee elects to become a
Participant within the Offering Period or (ii) the Applicable Percentage of the
Fair Market Value of a share of Common Stock on the Exercise Date. The
Applicable Percentage with respect to each Offering Period shall be 85%, unless
and until such Applicable Percentage is increased by the Committee, in its sole
discretion, provided that any such increase in the Applicable Percentage with
respect to a given Offering Period must be established not less than fifteen
(15) days prior to the Offering Date thereof.
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<PAGE> 32
9. Exercise of Options. Unless the Participant withdraws from the Plan as
provided in Section 11, the Participant's option for the purchase of shares will
be exercised automatically on each Exercise Date, and the maximum number of full
shares subject to such option shall be purchased for the Participant at the
applicable Exercise Price with the accumulated Plan Contributions then credited
the Participant's account under the Plan. During a Participant's lifetime, a
Participant's option to purchase shares hereunder is exercisable only by the
Participant.
10. Delivery. As promptly as practicable after each Exercise Date, the
Company shall arrange for the delivery to each Participant (or the Participant's
beneficiary), as appropriate, or to a custodial account for the benefit of each
Participant (or the Participant's beneficiary) as appropriate, of a certificate
representing the shares purchased upon exercise of such Participant's option.
Any amount remaining to the credit of a Participant's account after the purchase
of shares by such Participant on an Exercise Date, or which is insufficient to
purchase a full share of Common Stock, shall be carried over to the next
Exercise Period if the Participant continues to participate in the Plan or, if
the Participant does not continue to participate, shall be returned to the
Participant.
11. Withdrawal; Termination of Employment.
(a) A Participant may withdraw from the Plan at any time by giving
written notice to the Company. All of the Plan Contributions credited to
the Participant's account and not yet invested in Common Stock will be paid
to the Participant as soon as administratively practicable after receipt of
the Participant's notice of withdrawal, the Participant's option to
purchase shares pursuant to the Plan automatically will be terminated, and
no further payroll deductions for the purchase of shares will be made for
the Participant's account. Payroll deductions will not resume on behalf of
a Participant who has withdrawn from the Plan (a "Former Participant")
unless the Former Participant enrolls in a subsequent Offering Period in
accordance with Section 5(a).
(b) Upon termination of the Participant's Continuous Status as an
Employee prior to any Exercise Date for any reason, including retirement or
death, the Plan Contributions credited to the Participant's account and not
yet invested in Common Stock will be returned to the Participant or, in the
case of death, to the Participant's beneficiary as determined pursuant to
Section 14, and the Participant's option to purchase shares under the Plan
will automatically terminate.
(c) A Participant's withdrawal from an Offering Period will not have
any effect upon the Participant's eligibility to participate in succeeding
Offering Periods or in any similar plan which may hereafter be adopted by
the Company.
12. Stock.
(a) The maximum number of shares of the Company's Common Stock that
shall be made available for sale under the Plan shall be Six Hundred
Thousand (600,000) shares, subject to adjustment as provided in Section 17.
Shares of Common Stock subject to the Plan may be newly issued shares or
shares reacquired in private transactions or open market purchases. If and
to the extent that any right to purchase reserved shares shall not be
exercised by any Participant for any reason or if such right to purchase
shall terminate as provided herein, shares that have not been so purchased
hereunder shall again become available for the purpose of the Plan unless
the Plan shall have been terminated, but all shares sold under the Plan,
regardless of source, shall be counted against the limitation set forth
above.
(b) A Participant will have no interest or voting right in shares
covered by his option until such option has been exercised.
(c) Shares to be delivered to a Participant under the Plan will be
registered in the name of the Participant or in the name of the Participant
and his or her spouse, as requested by the Participant.
13. Administration.
(a) The Plan shall be administered by the Committee. The Committee
shall have the authority to interpret the Plan, to prescribe, amend and
rescind rules and regulations relating to the Plan, and to make
A-6
<PAGE> 33
all other determinations necessary or advisable for the administration of
the Plan. The administration, interpretation, or application of the Plan by
the Committee shall be final, conclusive and binding upon all persons.
(b) Notwithstanding the provisions of Subsection (a) of this Section
13, in the event that Rule 16b-3 promulgated under the Exchange Act or any
successor provision thereto ("Rule 16b-3") provides specific requirements
for the administrators of plans of this type, the Plan shall only be
administered by such body and in such a manner as shall comply with the
applicable requirements of Rule 16b-3. Unless permitted by Rule 16b-3, no
discretion concerning decisions regarding the Plan shall be afforded to any
person that is not "disinterested" as that term is used in Rule 16b-3.
14. Designation of Beneficiary.
(a) A Participant may file a written designation of a beneficiary who
is to receive any shares and cash, if any, from the Participant's account
under the Plan in the event of the Participant's death subsequent to an
Exercise Date on which the Participant's option hereunder is exercised but
prior to delivery to the Participant of such shares and cash. In addition,
a Participant may file a written designation of a beneficiary who is to
receive any cash from the Participant's account under the Plan in the event
of the Participant's death prior to the exercise of the option.
(b) A Participant's beneficiary designation may be changed by the
Participant at any time by written notice. In the event of the death of a
Participant and in the absence of a beneficiary validly designated under
the Plan who is living at the time of such Participant's death, the Company
shall deliver such shares and/or cash to the executor or administrator of
the estate of the Participant, or if no such executor or administrator has
been appointed (to the knowledge of the Company), the Company, in its
discretion, may deliver such shares and/or cash to the spouse or to any one
or more dependents or relatives of the Participant, or if no spouse,
dependent or relative is known to the Company, then to such other person as
the Company may designate.
15. Transferability. Neither Plan Contributions credited to a
Participant's account nor any rights to exercise any option or receive shares of
Common Stock under the Plan may be assigned, transferred, pledged or otherwise
disposed of in any way (other than by will or the laws of descent and
distribution, or as provided in Section 14). Any attempted assignment, transfer,
pledge or other distribution shall be without effect, except that the Company
may treat such act as an election to withdraw funds in accordance with Section
11.
16. Participant Accounts. Individual accounts will be maintained for each
Participant in the Plan to account for the balance of his Plan Contributions and
options issued and shares purchased under the Plan. Statements of account will
be given to Participants semi-annually in due course following each Exercise
Date, which statements will set forth the amounts of payroll deductions, the per
share purchase price, the number of shares purchased and the remaining cash
balance, if any.
17. Adjustments Upon Changes in Capitalization; Corporate Transactions.
(a) If the outstanding shares of Common Stock are increased or
decreased, or are changed into or are exchanged for a different number or
kind of shares, as a result of one or more reorganizations, restructurings,
recapitalizations, reclassifications, stock splits, reverse stock splits,
stock dividends or the like, upon authorization of the Committee,
appropriate adjustments shall be made in the number and/or kind of shares,
and the per-share option price thereof, which may be issued in the
aggregate and to any Participant upon exercise of options granted under the
Plan.
(b) In the event of the proposed dissolution or liquidation of the
Company, the Offering Period will terminate immediately prior to the
consummation of such proposed action, unless otherwise provided by the
Committee. In the event of a proposed sale of all or substantially all of
the Company's assets, or the merger of the Company with or into another
corporation (each, a "Sale Transaction"), each option under the Plan shall
be assumed or an equivalent option shall be substituted by such successor
corporation or a parent or subsidiary of such successor corporation, unless
the Committee determines, in the exercise of its sole discretion and in
lieu of such assumption or substitution, to shorten the Exercise Period
then in
A-7
<PAGE> 34
progress by setting a new Exercise Date (the "New Exercise Date"). If the
Committee shortens the Exercise Period then in progress in lieu of
assumption or substitution in the event of a Sale Transaction, the
Committee shall notify each Participant in writing, at least ten (10) days
prior to the New Exercise Date, that the exercise date for such
Participant's option has been changed to the New Exercise Date and that
such Participant's option will be exercised automatically on the New
Exercise Date, unless prior to such date the Participant has withdrawn from
the Plan as provided in Section 11. For purposes of this Section 17(b), an
option granted under the Plan shall be deemed to have been assumed if,
following the Sale Transaction, the option confers the right to purchase,
for each share of option stock subject to the option immediately prior to
the Sale Transaction, the consideration (whether stock, cash or other
securities or property) received in the Sale Transaction by holders of
Common Stock for each share of Common Stock held on the effective date of
the Sale Transaction (and if such holders were offered a choice of
consideration, the type of consideration chosen by the holders of a
majority of the outstanding shares of Common Stock); PROVIDED, that if the
consideration received in the Sale Transaction was not solely common stock
of the successor corporation or its parent (as defined in Section 424(e) of
the Code), the Committee may, with the consent of the successor corporation
and the Participant, provide for the consideration to be received upon
exercise of the option to be solely common stock of the successor
corporation or its parent equal in fair market value to the per share
consideration received by the holders of Common Stock in the Sale
Transaction.
(c) In all cases, the Committee shall have sole discretion to exercise
any of the powers and authority provided under this Section 17, and the
Committee's actions hereunder shall be final and binding on all
Participants. No fractional shares of stock shall be issued under the Plan
pursuant to any adjustment authorized under the provisions of this Section
17.
18. Amendment of the Plan. The Board or the Committee may at any time, or
from time to time, amend the Plan in any respect; PROVIDED, that (i) no such
amendment may make any change in any option theretofore granted which adversely
affects the rights of any Participant and (ii) the Plan may not be amended in
any way that will cause rights issued under the Plan to fail to meet the
requirements for employee stock purchase plans as defined in Section 423 of the
Code or any successor thereto. To the extent necessary to comply with Rule 16b-3
under the Exchange Act, Section 423 of the Code, or any other applicable law or
regulation), the Company shall obtain shareholder approval of any such
amendment.
19. Termination of the Plan.
The Plan and all rights of Employees hereunder shall terminate on the
earliest of:
(a) the Exercise Date that Participants become entitled to purchase a
number of shares greater than the number of reserved shares remaining
available for purchase under the Plan;
(b) such date as is determined by the Board in its discretion; or
(c) the last Exercise Date immediately preceding the tenth (10th)
anniversary of the Plan's effective date.
In the event that the Plan terminates under circumstances described in
Section 19(a) above, reserved shares remaining as of the termination date shall
be sold to Participants on a PRO RATA basis.
20. Notices. All notices or other communications by a Participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
21. Effective Date. Subject to adoption of the Plan by the Board, the Plan
shall become effective on the First Exercise Date. The Board shall submit the
Plan to the shareholders of the Company for approval within twelve months after
the date the Plan is adopted by the Board. If such shareholder approval is not
obtained, the Plan and all rights of Participants under the Plan shall be null
and void and shall have no effect.
A-8
<PAGE> 35
22. Conditions Upon Issuance of Shares.
(a) The Plan, the grant and exercise of options to purchase shares
under the Plan, and the Company's obligation to sell and deliver shares
upon the exercise of options to purchase shares shall be subject to
compliance with all applicable federal, state and foreign laws, rules and
regulations and the requirements of any stock exchange on which the shares
may then be listed.
(b) The Company may make such provisions as it deems appropriate for
withholding by the Company pursuant to federal or state tax laws of such
amounts as the Company determines it is required to withhold in connection
with the purchase or sale by a Participant of any Common Stock acquired
pursuant to the Plan. The Company may require a Participant to satisfy any
relevant tax requirements before authorizing any issuance of Common Stock
to such Participant.
23. Expenses of the Plan. All costs and expenses incurred in administering
the Plan shall be paid by the Company, except that any stamp duties or transfer
taxes applicable to participation in the Plan may be charged to the account of
such Participant by the Company.
24. No Employment Rights. The Plan does not, directly or indirectly,
create any right for the benefit of any employee or class of employees to
purchase any shares under the Plan, or create in any employee or class of
employees any right with respect to continuation of employment by the Company,
and it shall not be deemed to interfere in any way with the Company's right to
terminate, or otherwise modify, an employee's employment at any time.
25. Applicable Law. The laws of the State of Florida shall govern all
matter relating to this Plan except to the extent (if any) superseded by the
laws of the United States.
26. Additional Restrictions of Rule 16B-3. The terms and conditions of
options granted hereunder to, and the purchase of shares by, persons subject to
Section 16 of the Exchange Act shall comply with the applicable provisions of
Rule 16b-3. This Plan shall be deemed to contain, and such options shall
contain, and the shares issued upon exercise thereof shall be subject to, such
additional conditions and restrictions as may be required by Rule 16b-3 to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
A-9
<PAGE> 36
EXHIBIT B
H.T.E., INC.
1997 EXECUTIVE INCENTIVE COMPENSATION PLAN
<PAGE> 37
H.T.E., INC.
1997 EXECUTIVE INCENTIVE COMPENSATION PLAN
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
1. Purpose..................................................... B-2
2. Definitions................................................. B-2
3. Administration.............................................. B-4
(a) Authority of the Committee.............................. B-4
(b) Manner of Exercise of Committee Authority............... B-4
(c) Limitation of Liability................................. B-4
4. Stock Subject to Plan....................................... B-5
(a) Limitation on Overall Number of Shares Subject to
Awards...................................................... B-5
(b) Application of Limitations.............................. B-5
5. Eligibility; Per-Person Award Limitations................... B-5
6. Specific Terms of Awards.................................... B-5
(a) General................................................. B-5
(b) Options................................................. B-5
(c) Stock Appreciation Rights............................... B-6
(d) Restricted Stock........................................ B-7
(e) Deferred Stock.......................................... B-7
(f) Bonus Stock and Awards in Lieu of Obligations........... B-8
(g) Dividend Equivalents.................................... B-8
(h) Other Stock-Based Awards................................ B-8
7. Certain Provisions Applicable to Awards..................... B-9
(a) Stand-Alone, Additional, Tandem, and Substitute
Awards...................................................... B-9
(b) Term of Awards.......................................... B-9
(c) Form and Timing of Payment Under Awards; Deferrals...... B-9
(d) Exemptions from Section 16(b) Liability................. B-9
8. Performance and Annual Incentive Awards..................... B-9
(a) Performance Conditions.................................. B-9
(b) Performance Awards Granted to Designated Covered
Employees................................................... B-10
(c) Annual Incentive Awards Granted to Designated Covered
Employees................................................... B-11
(d) Written Determinations.................................. B-11
(e) Status of Section 8(b) and Section 8(c) Awards Under
Code Section 162(m)......................................... B-11
9. Change in Control........................................... B-12
(a) Effect of "Change in Control"........................... B-12
(b) Definition of "Change in Control"....................... B-12
(c) Definition of "Change in Control Price"................. B-13
10. General Provisions.......................................... B-14
(a) Compliance With Legal and Other Requirements............ B-14
(b) Limits on Transferability; Beneficiaries................ B-14
(c) Adjustments............................................. B-14
(d) Taxes................................................... B-15
(e) Changes to the Plan and Awards.......................... B-15
(f) Limitation on Rights Conferred Under Plan............... B-15
(g) Unfunded Status of Awards; Creation of Trusts........... B-16
(h) Nonexclusivity of the Plan.............................. B-16
(i) Payments in the Event of Forfeitures; Fractional
Shares...................................................... B-16
(j) Governing Law........................................... B-16
(k) Plan Effective Date and Stockholder Approval;
Termination of Plan......................................... B-16
</TABLE>
B-1
<PAGE> 38
H.T.E., INC.
1997 EXECUTIVE INCENTIVE COMPENSATION PLAN
1. Purpose. The purpose of this 1997 Executive Incentive Compensation Plan
(the "Plan") is to assist H.T.E., Inc. (the "Company") and its subsidiaries in
attracting, motivating, retaining and rewarding high-quality executives and
other employees, officers, Directors and independent contractors enabling such
persons to acquire or increase a proprietary interest in the Company in order to
strengthen the mutuality of interests between such persons and the Company's
stockholders, and providing such persons with annual and long term performance
incentives to expend their maximum efforts in the creation of shareholder value.
The Plan is also intended to qualify certain compensation awarded under the Plan
for tax deductibility under Section 162(m) of the Code (as hereafter defined) to
the extent deemed appropriate by the Committee (or any successor committee) of
the Board of Directors of the Company.
2. Definitions. For purposes of the Plan, the following terms shall be
defined as set forth below, in addition to such terms defined in Section 1
hereof.
(a) "Annual Incentive Award" means a conditional right granted to a
Participant under Section 8(c) hereof to receive a cash payment, Stock or
other Award, unless otherwise determined by the Committee, after the end of
a specified fiscal year.
(b) "Award" means any Option, SAR (including Limited SAR), Restricted
Stock, Deferred Stock, Stock granted as a bonus or in lieu of another
award, Dividend Equivalent, Other Stock-Based Award, Performance Award or
Annual Incentive Award, together with any other right or interest granted
to a Participant under the Plan.
(c) "Beneficiary" means the person, persons, trust or trusts which
have been designated by a Participant in his or her most recent written
beneficiary designation filed with the Committee to receive the benefits
specified under the Plan upon such Participant's death or to which Awards
or other rights are transferred if and to the extent permitted under
Section 10(b) hereof. If, upon a Participant's death, there is no
designated Beneficiary or surviving designated Beneficiary, then the term
Beneficiary means the person, persons, trust or trusts entitled by will or
the laws of descent and distribution to receive such benefits.
(d) "Beneficial Owner", "Beneficially Owning" and "Beneficial
Ownership" shall have the meanings ascribed to such terms in Rule 13d-3
under the Exchange Act and any successor to such Rule.
(e) "Board" means the Company's Board of Directors.
(f) "Change in Control" means Change in Control as defined with
related terms in Section 9 of the Plan.
(g) "Change in Control Price" means the amount calculated in
accordance with Section 9(c) of the Plan.
(h) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, including regulations thereunder and successor provisions and
regulations thereto.
(i) "Committee" means a committee designated by the Board to
administer the Plan; provided, however, that the Committee shall consist
solely of at least two directors, each of whom shall be (i) a "non-employee
director" within the meaning of Rule 16b-3 under the Exchange Act, unless
administration of the Plan by "non-employee directors" is not then required
in order for exemptions under Rule 16b-3 to apply to transactions under the
Plan, and (ii) an "outside director" as defined under Section 162(m) of the
Code, unless administration of the Plan by "outside directors" is not then
required in order to qualify for tax deductibility under Section 162(m) of
the Code.
(j) "Corporate Transaction" means a transaction as defined in Section
9(b) of the Plan.
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<PAGE> 39
(k) "Covered Employee" means an Eligible Person who is a Covered
Employee as specified in Section 8(e) of the Plan.
(l) "Deferred Stock" means a right, granted to a Participant under
Section 6(e) hereof, to receive Stock, cash or a combination thereof at the
end of a specified deferral period.
(m) "Director" means a member of the Board.
(n) "Disability" means a permanent and total disability (within the
meaning of Section 22(e) of the Code), as determined by a medical doctor
satisfactory to the Committee.
(o) "Dividend Equivalent" means a right, granted to a Participant
under Section 6(g) hereof, to receive cash, Stock, other Awards or other
property equal in value to dividends paid with respect to a specified
number of shares of Stock, or other periodic payments.
(p) "Effective Date" means the effective date of the Plan, which shall
be January 29, 1997.
(q) "Eligible Person" means each executive officer of the Company (as
defined under the Exchange Act) and other officers, Directors and employees
of the Company or of any subsidiary, and independent contractors with the
Company or any subsidiary. The foregoing notwithstanding, no independent
contractor shall be an Eligible Person for purposes of receiving any Awards
other than Options under Section 6(b) of the Plan. An employee on leave of
absence may be considered as still in the employ of the Company or a
subsidiary for purposes of eligibility for participation in the Plan.
(r) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, including rules thereunder and successor
provisions and rules thereto.
(s) "Executive Officer" means an executive officer of the Company as
defined under the Exchange Act.
(t) "Fair Market Value" means the fair market value of Stock, Awards
or other property as determined by the Committee or under procedures
established by the Committee. Unless otherwise determined by the Committee,
the Fair Market Value of Stock as of any given date shall be the closing
sale price per share reported on a consolidated basis for stock listed on
the principal stock exchange or market on which Stock is traded on the date
as of which such value is being determined or, if there is no sale on that
date, then on the last previous day on which a sale was reported.
(u) "Incentive Stock Option" or "ISO" means any Option intended to be
designated as an incentive stock option within the meaning of Section 422
of the Code or any successor provision thereto.
(v) "Incumbent Board" means the Board as defined in Section 9(b) of
the Plan.
(w) "Limited SAR" means a right granted to a Participant under Section
6(c) hereof.
(x) "Option" means a right granted to a Participant under Section 6(b)
hereof, to purchase Stock or other Awards at a specified price during
specified time periods.
(y) "Other Stock-Based Awards" means Awards granted to a Participant
under Section 6(h) hereof.
(z) "Parent Corporation" means any corporation (other than the
Company) in an unbroken chain of corporations ending with the Company, if
each of the corporations in the chain (other than the Company) owns stock
possessing 50% or more of the combined voting power of all classes of stock
in one of the other corporations in the chain.
(aa) "Participant" means a person who has been granted an Award under
the Plan which remains outstanding, including a person who is no longer an
Eligible Person.
(bb) "Performance Award" means a right, granted to an Eligible Person
under Section 8 hereof, to receive Awards based upon performance criteria
specified by the Committee.
B-3
<PAGE> 40
(cc) "Person" shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof,
and shall include a "group" as defined in Section 13(d) thereof.
(dd) "Restricted Stock" means Stock granted to a Participant under
Section 6(d) hereof, that is subject to certain restrictions and to a risk
of forfeiture.
(ee) "Rule 16b-3" and "Rule 16a-1(c)(3)" means Rule 16b-3 and Rule
16a-1(c)(3), as from time to time in effect and applicable to the Plan and
Participants, promulgated by the Securities and Exchange Commission under
Section 16 of the Exchange Act.
(ff) "Stock" means the Company's Common Stock, and such other
securities as may be substituted (or resubstituted) for Stock pursuant to
Section 10(c) hereof.
(gg) "Stock Appreciation Rights" or "SAR" means a right granted to a
Participant under Section 6(c) hereof.
(hh) "Subsidiary" means any corporation or other entity in which the
Company has a direct or indirect ownership interest of 50% or more of the
total combined voting power of the then outstanding securities or interests
of such corporation or other entity entitled to vote generally in the
election of directors or in which the Company has the right to receive 50%
or more of the distribution of profits or 50% or more of the assets on
liquidation or dissolution.
3. Administration.
(a) Authority of the Committee. The Plan shall be administered by the
Committee. The Committee shall have full and final authority, in each case
subject to and consistent with the provisions of the Plan, to select
Eligible Persons to become Participants, grant Awards, determine the type,
number and other terms and conditions of, and all other matters relating
to, Awards, prescribe Award agreements (which need not be identical for
each Participant) and rules and regulations for the administration of the
Plan, construe and interpret the Plan and Award agreements and correct
defects, supply omissions or reconcile inconsistencies therein, and to make
all other decisions and determinations as the Committee may deem necessary
or advisable for the administration of the Plan. In exercising any
discretion granted to the Committee under the Plan or pursuant to any
Award, the Committee shall not be required to follow past practices, act in
a manner consistent with past practices, or treat any Eligible Person in a
manner consistent with the treatment of other Eligible Persons.
(b) Manner of Exercise of Committee Authority. The Committee shall
exercise sole and exclusive discretion on any matter relating to a
Participant then subject to Section 16 of the Exchange Act with respect to
the Company to the extent necessary in order that transactions by such
Participant shall be exempt under Rule 16b-3 under the Exchange Act. Any
action of the Committee shall be final, conclusive and binding on all
persons, including the Company, its subsidiaries, Participants,
Beneficiaries, transferees under Section 10(b) hereof or other persons
claiming rights from or through a Participant, and stockholders. The
express grant of any specific power to the Committee, and the taking of any
action by the Committee, shall not be construed as limiting any power or
authority of the Committee. The Committee may delegate to officers or
managers of the Company or any subsidiary, or committees thereof, the
authority, subject to such terms as the Committee shall determine, (i) to
perform administrative functions, (ii) with respect to Participants not
subject to Section 16 of the Exchange Act, to perform such other functions
as the Committee may determine, and (iii) with respect to Participants
subject to Section 16, to perform such other functions of the Committee as
the Committee may determine to the extent performance of such functions
will not result in the loss of an exemption under Rule 16b-3 otherwise
available for transactions by such persons, in each case to the extent
permitted under applicable law and subject to the requirements set forth in
Section 8(d). The Committee may appoint agents to assist it in
administering the Plan.
(c) Limitation of Liability. The Committee and each member thereof
shall be entitled to, in good faith, rely or act upon any report or other
information furnished to him or her by any executive officer,
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other officer or employee of the Company or a subsidiary, the Company's
independent auditors, consultants or any other agents assisting in the
administration of the Plan. Members of the Committee and any officer or
employee of the Company or a subsidiary acting at the direction or on
behalf of the Committee shall not be personally liable for any action or
determination taken or made in good faith with respect to the Plan, and
shall, to the extent permitted by law, be fully indemnified and protected
by the Company with respect to any such action or determination.
4. Stock Subject to Plan.
(a) Limitation on Overall Number of Shares Subject to Awards. Subject
to adjustment as provided in Section 10(c) hereof, the total number of
shares of Stock reserved and available for delivery in connection with
Awards under the Plan shall be the sum of (i) 2,908,000, plus (ii) the
number of shares with respect to Awards previously granted under the Plan
that terminate without being exercised, expire, are forfeited or canceled,
and the number of shares of Stock that are surrendered in payment of any
Awards or any tax withholding with regard thereto. Any shares of Stock
delivered under the Plan may consist, in whole or in part, of authorized
and unissued shares or treasury shares. Subject to adjustment as provided
in Section 10(c) hereof, in no event shall the aggregate number of shares
of Stock which may be issued pursuant to ISOs exceed 2,908,000 shares.
(b) Application of Limitations. The limitation contained in Section
4(a) shall apply not only to Awards that are settleable by the delivery of
shares of Stock but also to Awards relating to shares of Stock but
settleable only in cash (such as cash-only SARs). The Committee may adopt
reasonable counting procedures to ensure appropriate counting, avoid double
counting (as, for example, in the case of tandem or substitute awards) and
make adjustments if the number of shares of Stock actually delivered
differs from the number of shares previously counted in connection with an
Award.
5. Eligibility; Per-Person Award Limitations. Awards may be granted under
the Plan only to Eligible Persons. In each fiscal year during any part of which
the Plan is in effect, an Eligible Person may not be granted Awards relating to
more than 265,000 shares of Stock, subject to adjustment as provided in Section
10(c), under each of Sections 6(b), 6(c), 6(d), 6(e), 6(f), 6(g), 6(h), 8(b) and
8(c). In addition, the maximum amount that may be earned as an Annual Incentive
Award or other cash Award in any fiscal year by any one Participant shall be
$1,000,000, and the maximum amount that may be earned as a Performance Award or
other cash Award in respect of a performance period by any one Participant shall
be $2,000,000.
6. Specific Terms of Awards.
(a) General. Awards may be granted on the terms and conditions set
forth in this Section 6. In addition, the Committee may impose on any Award
or the exercise thereof, at the date of grant or thereafter (subject to
Section 10(e)), such additional terms and conditions, not inconsistent with
the provisions of the Plan, as the Committee shall determine, including
terms requiring forfeiture of Awards in the event of termination of
employment by the Participant and terms permitting a Participant to make
elections relating to his or her Award. The Committee shall retain full
power and discretion to accelerate, waive or modify, at any time, any term
or condition of an Award that is not mandatory under the Plan. Except in
cases in which the Committee is authorized to require other forms of
consideration under the Plan, or to the extent other forms of consideration
must be paid to satisfy the requirements of Florida law, no consideration
other than services may be required for the grant (but not the exercise) of
any Award.
(b) Options. The Committee is authorized to grant Options to
Participants on the following terms and conditions:
(i) Exercise Price. The exercise price per share of Stock
purchasable under an Option shall be determined by the Committee,
provided that such exercise price shall not, in the case of Incentive
Stock Options, be less than 100% of the Fair Market Value of the Stock
on the date of grant of the Option and shall not, in any event, be less
than the par value of a share of Stock on the date of grant of such
Option. If an employee owns or is deemed to own (by reason of the
attribution rules applicable under Section 424(d) of the Code) more than
10% of the combined voting power of all
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classes of stock of the Company or any Parent Corporation and an
Incentive Stock Option is granted to such employee, the option price of
such Incentive Stock Option (to the extent required by the Code at the
time of grant) shall be no less than 110% of the Fair Market Value of
the Stock on the date such Incentive Stock Option is granted.
(ii) Time and Method of Exercise. The Committee shall determine
the time or times at which or the circumstances under which an Option
may be exercised in whole or in part (including based on achievement of
performance goals and/or future service requirements), the time or times
at which Options shall cease to be or become exercisable following
termination of employment or upon other conditions, the methods by which
such exercise price may be paid or deemed to be paid (including in the
discretion of the Committee a cashless exercise procedure), the form of
such payment, including, without limitation, cash, Stock, other Awards
or awards granted under other plans of the Company or any subsidiary, or
other property (including notes or other contractual obligations of
Participants to make payment on a deferred basis), and the methods by or
forms in which Stock will be delivered or deemed to be delivered to
Participants.
(iii) ISOs. The terms of any ISO granted under the Plan shall
comply in all respects with the provisions of Section 422 of the Code.
Anything in the Plan to the contrary notwithstanding, no term of the
Plan relating to ISOs (including any SAR in tandem therewith) shall be
interpreted, amended or altered, nor shall any discretion or authority
granted under the Plan be exercised, so as to disqualify either the Plan
or any ISO under Section 422 of the Code, unless the Participant has
first requested the change that will result in such disqualification.
Thus, if and to the extent required to comply with Section 422 of the
Code, Options granted as Incentive Stock Options shall be subject to the
following special terms and conditions:
(A) the Option shall not be exercisable more than ten years
after the date such Incentive Stock Option is granted; provided,
however, that if a Participant owns or is deemed to own (by reason of
the attribution rules of Section 424(d) of the Code) more than 10% of
the combined voting power of all classes of stock of the Company or
any Parent Corporation and the Incentive Stock Option is granted to
such Participant, the term of the Incentive Stock Option shall be for
no more than five years from the date of grant; and
(B) The aggregate Fair Market Value (determined as of the date
the Incentive Stock Option is granted) of the shares of stock with
respect to which Incentive Stock Options granted under the Plan and
all other option plans of the Company or its Parent Corporation
during any calendar year exercisable for the first time by the
Participant during any calendar year shall not exceed $100,000.
(c) Stock Appreciation Rights. The Committee is authorized to grant
SARs to Participants on the following terms and conditions:
(i) Right to Payment. A SAR shall confer on the Participant to
whom it is granted a right to receive, upon exercise thereof, the excess
of (A) the Fair Market Value of one share of stock on the date of
exercise (or, in the case of a "Limited SAR", the Fair Market Value
determined by reference to the Change in Control Price, as defined under
Section 9(c) hereof), over (B) the grant price of the SAR as determined
by the Committee. The grant price of an SAR shall not be less than the
Fair Market Value of a share of Stock on the date of grant except as
provided under Section 7(a) hereof.
(ii) Other Terms. The Committee shall determine at the date of
grant or thereafter, the time or times at which and the circumstances
under which a SAR may be exercised in whole or in part (including based
on achievement of performance goals and/or future service requirements),
the time or times at which SARs shall cease to be or become exercisable
following termination of employment or upon other conditions, the method
of exercise, method of settlement, form of consideration payable in
settlement, method by or forms in which Stock will be delivered or
deemed to be delivered to Participants, whether or not a SAR shall be in
tandem or in combination with any
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other Award, and any other terms and conditions of any SAR. Limited SARs
that may only be exercised in connection with a Change in Control or
other event as specified by the Committee may be granted on such terms,
not inconsistent with this Section 6(c), as the Committee may determine.
SARs and Limited SARs may be either freestanding or in tandem with other
Awards.
(d) Restricted Stock. The Committee is authorized to grant Restricted
Stock to Participants on the following terms and conditions:
(i) Grant and Restrictions. Restricted Stock shall be subject to
such restrictions on transferability, risk of forfeiture and other
restrictions, if any, as the Committee may impose, which restrictions
may lapse separately or in combination at such times, under such
circumstances (including based on achievement of performance goals
and/or future service requirements), in such installments or otherwise,
as the Committee may determine at the date of grant or thereafter.
Except to the extent restricted under the terms of the Plan and any
Award agreement relating to the Restricted Stock, a Participant granted
Restricted Stock shall have all of the rights of a stockholder,
including the right to vote the Restricted Stock and the right to
receive dividends thereon (subject to any mandatory reinvestment or
other requirement imposed by the Committee). During the restricted
period applicable to the Restricted Stock, subject to Section 10(b)
below, the Restricted Stock may not be sold, transferred, pledged,
hypothecated, margined or otherwise encumbered by the Participant.
(ii) Forfeiture. Except as otherwise determined by the Committee
at the time of the Award, upon termination of a Participant's employment
during the applicable restriction period, the Participant's Restricted
Stock that is at that time subject to restrictions shall be forfeited
and reacquired by the Company; provided that the Committee may provide,
by rule or regulation or in any Award agreement, or may determine in any
individual case, that restrictions or forfeiture conditions relating to
Restricted Stock shall be waived in whole or in part in the event of
terminations resulting from specified causes, and the Committee may in
other cases waive in whole or in part the forfeiture of Restricted
Stock, and the Committee may in other cases waive in whole or in part
the forfeiture of Restricted Stock.
(iii) Certificates for Stock. Restricted Stock granted under the
Plan may be evidenced in such manner as the Committee shall determine.
If certificates representing Restricted Stock are registered in the name
of the Participant, the Committee may require that such certificates
bear an appropriate legend referring to the terms, conditions and
restrictions applicable to such Restricted Stock, that the Company
retain physical possession of the certificates, and that the Participant
deliver a stock power to the Company, endorsed in blank, relating to the
Restricted Stock.
(iv) Dividends and Splits. As a condition to the grant of an Award
of Restricted Stock, the Committee may require that any cash dividends
paid on a share of Restricted Stock be automatically reinvested in
additional shares of Restricted Stock or applied to the purchase of
additional Awards under the Plan. Unless otherwise determined by the
Committee, Stock distributed in connection with a Stock split or Stock
dividend, and other property distributed as a dividend, shall be subject
to restrictions and a risk of forfeiture to the same extent as the
Restricted Stock with respect to which such Stock or other property has
been distributed.
(e) Deferred Stock. The Committee is authorized to grant Deferred
Stock to Participants, which are rights to receive Stock, cash, or a
combination thereof at the end of a specified deferral period, subject to
the following terms and conditions:
(i) Award and Restrictions. Satisfaction of an Award of Deferred
Stock shall occur upon expiration of the deferral period specified for
such Deferred Stock by the Committee (or, if permitted by the Committee,
as elected by the Participant). In addition, Deferred Stock shall be
subject to such restrictions (which may include a risk of forfeiture) as
the Committee may impose, if any, which restrictions may lapse at the
expiration of the deferral period or at earlier specified times
(including based on achievement of performance goals and/or future
service requirements),
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separately or in combination, in installments or otherwise, as the
Committee may determine. Deferred Stock may be satisfied by delivery of
Stock, cash equal to the Fair Market Value of the specified number of
shares of Stock covered by the Deferred Stock, or a combination thereof,
as determined by the Committee at the date of grant or thereafter. Prior
to satisfaction of an Award of Deferred Stock, an Award of Deferred
Stock carries no voting or dividend or other rights associated with
share ownership.
(ii) Forfeiture. Except as otherwise determined by the Committee,
upon termination of a Participant's employment during the applicable
deferral period thereof to which forfeiture conditions apply (as
provided in the Award agreement evidencing the Deferred Stock), the
Participant's Deferred Stock that is at that time subject to deferral
(other than a deferral at the election of the Participant) shall be
forfeited; provided that the Committee may provide, by rule or
regulation or in any Award agreement, or may determine in any individual
case, that restrictions or forfeiture conditions relating to Deferred
Stock shall be waived in whole or in part in the event of terminations
resulting from specified causes, and the Committee may in other cases
waive in whole or in part the forfeiture of Deferred Stock.
(iii) Dividend Equivalents. Unless otherwise determined by the
Committee at date of grant, Dividend Equivalents on the specified number
of shares of Stock covered by an Award of Deferred Stock shall be either
(A) paid with respect to such Deferred Stock at the dividend payment
date in cash or in shares of unrestricted Stock having a Fair Market
Value equal to the amount of such dividends, or (B) deferred with
respect to such Deferred Stock and the amount or value thereof
automatically deemed reinvested in additional Deferred Stock, other
Awards or other investment vehicles, as the Committee shall determine or
permit the Participant to elect.
(f) Bonus Stock and Awards in Lieu of Obligations. The Committee is
authorized to grant Stock as a bonus, or to grant Stock or other Awards in
lieu of Company obligations to pay cash or deliver other property under the
Plan or under other plans or compensatory arrangements, provided that, in
the case of Participants subject to Section 16 of the Exchange Act, the
amount of such grants remains within the discretion of the Committee to the
extent necessary to ensure that acquisitions of Stock or other Awards are
exempt from liability under Section 16(b) of the Exchange Act. Stock or
Awards granted hereunder shall be subject to such other terms as shall be
determined by the Committee.
(g) Dividend Equivalents. The Committee is authorized to grant
Dividend Equivalents to a Participant entitling the Participant to receive
cash, Stock, other Awards, or other property equal in value to dividends
paid with respect to a specified number of shares of Stock, or other
periodic payments. Dividend Equivalents may be awarded on a free-standing
basis or in connection with another Award. The Committee may provide that
Dividend Equivalents shall be paid or distributed when accrued or shall be
deemed to have been reinvested in additional Stock, Awards, or other
investment vehicles, and subject to such restrictions on transferability
and risks of forfeiture, as the Committee may specify.
(h) Other Stock-Based Awards. The Committee is authorized, subject to
limitations under applicable law, to grant to Participants such other
Awards that may be denominated or payable in, valued in whole or in part by
reference to, or otherwise based on, or related to, Stock, as deemed by the
Committee to be consistent with the purposes of the Plan, including,
without limitation, convertible or exchangeable debt securities, other
rights convertible or exchangeable into Stock, purchase rights for Stock,
Awards with value and payment contingent upon performance of the Company or
any other factors designated by the Committee, and Awards valued by
reference to the book value of Stock or the value of securities of or the
performance of specified subsidiaries or business units. The Committee
shall determine the terms and conditions of such Awards. Stock delivered
pursuant to an Award in the nature of a purchase right granted under this
Section 6(h) shall be purchased for such consideration, paid for at such
times, by such methods, and in such forms, including, without limitation,
cash, Stock, other Awards or other property, as the Committee shall
determine. Cash awards, as an element of or supplement to any other Award
under the Plan, may also be granted pursuant to this Section 6(h).
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7. Certain Provisions Applicable to Awards.
(a) Stand-Alone, Additional, Tandem, and Substitute Awards. Awards
granted under the Plan may, in the discretion of the Committee, be granted
either alone or in addition to, in tandem with, or in substitution or
exchange for, any other Award or any award granted under another plan of
the Company, any subsidiary, or any business entity to be acquired by the
Company or a subsidiary, or any other right of a Participant to receive
payment from the Company or any subsidiary. Such additional, tandem, and
substitute or exchange Awards may be granted at any time. If an Award is
granted in substitution or exchange for another Award or award, the
Committee shall require the surrender of such other Award or award in
consideration for the grant of the new Award. In addition, Awards may be
granted in lieu of cash compensation, including in lieu of cash amounts
payable under other plans of the Company or any subsidiary, in which the
value of Stock subject to the Award is equivalent in value to the cash
compensation (for example, Deferred Stock or Restricted Stock), or in which
the exercise price, grant price or purchase price of the Award in the
nature of a right that may be exercised is equal to the Fair Market Value
of the underlying Stock minus the value of the cash compensation
surrendered (for example, Options granted with an exercise price
"discounted" by the amount of the cash compensation surrendered).
(b) Term of Awards. The term of each Award shall be for such period
as may be determined by the Committee; provided that in no event shall the
term of any Option or SAR exceed a period of ten years (or such shorter
term as may be required in respect of an ISO under Section 422 of the
Code).
(c) Form and Timing of Payment Under Awards; Deferrals. Subject to
the terms of the Plan and any applicable Award agreement, payments to be
made by the Company or a subsidiary upon the exercise of an Option or other
Award or settlement of an Award may be made in such forms as the Committee
shall determine, including, without limitation, cash, Stock, other Awards
or other property, and may be made in a single payment or transfer, in
installments, or on a deferred basis. The settlement of any Award may be
accelerated, and cash paid in lieu of Stock in connection with such
settlement, in the discretion of the Committee or upon occurrence of one or
more specified events (in addition to a Change in Control). Installment or
deferred payments may be required by the Committee (subject to Section
10(e) of the Plan) or permitted at the election of the Participant on terms
and conditions established by the Committee. Payments may include, without
limitation, provisions for the payment or crediting of a reasonable
interest rate on installment or deferred payments or the grant or crediting
of Dividend Equivalents or other amounts in respect of installment or
deferred payments denominated in Stock.
(d) Exemptions from Section 16(b) Liability. It is the intent of the
Company that this Plan comply in all respects with applicable provisions of
Rule 16b-3 or Rule 16a-1(c)(3) to the extent necessary to ensure that
neither the grant of any Awards to nor other transaction by a Participant
who is subject to Section 16 of the Exchange Act is subject to liability
under Section 16(b) thereof (except for transactions acknowledged in
writing to be non-exempt by such Participant). Accordingly, if any
provision of this Plan or any Award agreement does not comply with the
requirements of Rule 16b-3 or Rule 16a-1(c)(3) as then applicable to any
such transaction, such provision will be construed or deemed amended to the
extent necessary to conform to the applicable requirements of Rule 16b-3 or
Rule 16a-1(c)(3) so that such Participant shall avoid liability under
Section 16(b). In addition, the purchase price of any Award conferring a
right to purchase Stock shall be not less than any specified percentage of
the Fair Market Value of Stock at the date of grant of the Award then
required in order to comply with Rule 16b-3.
8. Performance and Annual Incentive Awards.
(a) Performance Conditions. The right of a Participant to exercise or
receive a grant or settlement of any Award, and the timing thereof, may be
subject to such performance conditions as may be specified by the
Committee. The Committee may use such business criteria and other measures
of performance as it may deem appropriate in establishing any performance
conditions, and may exercise its discretion to reduce the amounts payable
under any Award subject to performance conditions, except as limited under
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Sections 8(b) and 8(c) hereof in the case of a Performance Award or Annual
Incentive Award intended to qualify under Code Section 162(m).
(b) Performance Awards Granted to Designated Covered Employees. If
and to the extent that the Committee determines that a Performance Award to
be granted to an Eligible Person who is designated by the Committee as
likely to be a Covered Employee should qualify as "performance-based
compensation" for purposes of Code Section 162(m), the grant, exercise
and/or settlement of such Performance Award shall be contingent upon
achievement of pre-established performance goals and other terms set forth
in this Section 8(b).
(i) Performance Goals Generally. The performance goals for such
Performance Awards shall consist of one or more business criteria and a
targeted level or levels of performance with respect to each of such
criteria, as specified by the Committee consistent with this Section
8(b). Performance goals shall be objective and shall otherwise meet the
requirements of Code Section 162(m) and regulations thereunder including
the requirement that the level or levels of performance targeted by the
Committee result in the achievement of performance goals being
"substantially uncertain." The Committee may determine that such
Performance Awards shall be granted, exercised and/or settled upon
achievement of any one performance goal or that two or more of the
performance goals must be achieved as a condition to grant, exercise
and/or settlement of such Performance Awards. Performance goals may
differ for Performance Awards granted to any one Participant or to
different Participants.
(ii) Business Criteria. One or more of the following business
criteria for the Company, on a consolidated basis, and/or specified
subsidiaries or business units of the Company (except with respect to
the total stockholder return and earnings per share criteria), shall be
used exclusively by the Committee in establishing performance goals for
such Performance Awards: (1) total stockholder return; (2) such total
stockholder return as compared to total return (on a comparable basis)
of a publicly available index such as, but not limited to, the Standard
& Poor's 500 Stock Index or the S&P Specialty Retailer Index; (3) net
income; (4) pretax earnings; (5) earnings before interest expense,
taxes, depreciation and amortization; (6) pretax operating earnings
after interest expense and before bonuses, service fees, and
extraordinary or special items; (7) operating margin; (8) earnings per
share; (9) return on equity; (10) return on capital; (11) return on
investment; (12) operating earnings; (13) working capital or inventory;
and (14) ratio of debt to stockholders' equity. One or more of the
foregoing business criteria shall also be exclusively used in
establishing performance goals for Annual Incentive Awards granted to a
Covered Employee under Section 8(c) hereof.
(iii) Performance Period; Timing for Establishing Performance
Goals. Achievement of performance goals in respect of such Performance
Awards shall be measured over a performance period of up to ten years,
as specified by the Committee. Performance goals shall be established
not later than 90 days after the beginning of any performance period
applicable to such Performance Awards, or at such other date as may be
required or permitted for "performance-based compensation" under Code
Section 162(m).
(iv) Performance Award Pool. The Committee may establish a
Performance Award pool, which shall be an unfunded pool, for purposes of
measuring Company performance in connection with Performance Awards. The
amount of such Performance Award pool shall be based upon the
achievement of a performance goal or goals based on one or more of the
business criteria set forth in Section 8(b)(ii) hereof during the given
performance period, as specified by the Committee in accordance with
Section 8(b)(iii) hereof. The Committee may specify the amount of the
Performance Award pool as a percentage of any of such business criteria,
a percentage thereof in excess of a threshold amount, or as another
amount which need not bear a strictly mathematical relationship to such
business criteria.
(v) Settlement of Performance Awards; Other Terms. Settlement of
such Performance Awards shall be in cash, Stock, other Awards or other
property, in the discretion of the Committee.
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The Committee may, in its discretion, reduce the amount of a settlement
otherwise to be made in connection with such Performance Awards. The
Committee shall specify the circumstances in which such Performance
Awards shall be paid or forfeited in the event of termination of
employment by the Participant prior to the end of a performance period
or settlement of Performance Awards.
(c) Annual Incentive Awards Granted to Designated Covered
Employees. If and to the extent that the Committee determines that an
Annual Incentive Award to be granted to an Eligible Person who is
designated by the Committee as likely to be a Covered Employee should
qualify as "performance-based compensation" for purposes of Code Section
162(m), the grant, exercise and/or settlement of such Annual Incentive
Award shall be contingent upon achievement of pre-established performance
goals and other terms set forth in this Section 8(c).
(i) Annual Incentive Award Pool. The Committee may establish an
Annual Incentive Award pool, which shall be an unfunded pool, for
purposes of measuring Company performance in connection with Annual
Incentive Awards. The amount of such Annual Incentive Award pool shall
be based upon the achievement of a performance goal or goals based on
one or more of the business criteria set forth in Section 8(b)(ii)
hereof during the given performance period, as specified by the
Committee in accordance with Section 8(b)(iii) hereof. The Committee may
specify the amount of the Annual Incentive Award pool as a percentage of
any such business criteria, a percentage thereof in excess of a
threshold amount, or as another amount which need not bear a strictly
mathematical relationship to such business criteria.
(ii) Potential Annual Incentive Awards. Not later than the end of
the 90th day of each fiscal year, or at such other date as may be
required or permitted in the case of Awards intended to be
"performance-based compensation" under Code Section 162(m), the
Committee shall determine the Eligible Persons who will potentially
receive Annual Incentive Awards, and the amounts potentially payable
thereunder, for that fiscal year, either out of an Annual Incentive
Award pool established by such date under Section 8(c)(i) hereof or as
individual Annual Incentive Awards. In the case of individual Annual
Incentive Awards intended to qualify under Code Section 162(m), the
amount potentially payable shall be based upon the achievement of a
performance goal or goals based on one or more of the business criteria
set forth in Section 8(b)(ii) hereof in the given performance year, as
specified by the Committee; in other cases, such amount shall be based
on such criteria as shall be established by the Committee. In all cases,
the maximum Annual Incentive Award of any Participant shall be subject
to the limitation set forth in Section 5 hereof.
(iii) Payout of Annual Incentive Awards. After the end of each
fiscal year, the Committee shall determine the amount, if any, of (A)
the Annual Incentive Award pool, and the maximum amount of potential
Annual Incentive Award payable to each Participant in the Annual
Incentive Award pool, or (B) the amount of potential Annual Incentive
Award otherwise payable to each Participant. The Committee may, in its
discretion, determine that the amount payable to any Participant as a
final Annual Incentive Award shall be reduced from the amount of his or
her potential Annual Incentive Award, including a determination to make
no final Award whatsoever. The Committee shall specify the circumstances
in which an Annual Incentive Award shall be paid or forfeited in the
event of termination of employment by the Participant prior to the end
of a fiscal year or settlement of such Annual Incentive Award.
(d) Written Determinations. All determinations by the Committee as to
the establishment of performance goals, the amount of any Performance Award
pool or potential individual Performance Awards and as to the achievement
of performance goals relating to Performance Awards under Section 8(b), and
the amount of any Annual Incentive Award pool or potential individual
Annual Incentive Awards and the amount of final Annual Incentive Awards
under Section 8(c), shall be made in writing in the case of any Award
intended to qualify under Code Section 162(m). The Committee may not
delegate any responsibility relating to such Performance Awards or Annual
Incentive Awards.
(e) Status of Section 8(b) and Section 8(c) Awards under Code Section
162(m). It is the intent of the Company that Performance Awards and Annual
Incentive Awards under Section 8(b) and 8(c)
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hereof granted to persons who are designated by the Committee as likely to
be Covered Employees within the meaning of Code Section 162(m) and
regulations thereunder shall, if so designated by the Committee, constitute
"qualified performance-based compensation" within the meaning of Code
Section 162(m) and regulations thereunder. Accordingly, the terms of
Sections 8(b), (c), (d) and (e), including the definitions of Covered
Employee and other terms used therein, shall be interpreted in a manner
consistent with Code Section 162(m) and regulations thereunder. The
foregoing notwithstanding, because the Committee cannot determine with
certainty whether a given Participant will be a Covered Employee with
respect to a fiscal year that has not yet been completed, the term Covered
Employee as used herein shall mean only a person designated by the
Committee, at the time of grant of Performance Awards or an Annual
Incentive Award, as likely to be a Covered Employee with respect to that
fiscal year. If any provision of the Plan or any agreement relating to such
Performance Awards or Annual Incentive Awards does not comply or is
inconsistent with the requirements of Code Section 162(m) or regulations
thereunder, such provision shall be construed or deemed amended to the
extent necessary to conform to such requirements.
9. Change in Control.
(a) Effect of "Change in Control." (a) If and to the extent provided
in the Award, in the event of a "Change in Control," as defined in Section
9(b), the following provisions shall apply:
(i) Any Award carrying a right to exercise that was not previously
exercisable and vested shall become fully exercisable and vested as of
the time of the Change in Control, subject only to applicable
restrictions set forth in Section 10(a) hereof;
(ii) Limited SARs (and other SARs if so provided by their terms)
shall become exercisable for amounts, in cash, determined by reference
to the Change in Control Price.
(iii) The restrictions, deferral of settlement, and forfeiture
conditions applicable to any other Award granted under the Plan shall
lapse and such Awards shall be deemed fully vested as of the time of the
Change in Control, except to the extent of any waiver by the Participant
and subject to applicable restrictions set forth in Section 10(a)
hereof; and
(iv) With respect to any such outstanding Award subject to
achievement of performance goals and conditions under the Plan, such
performance goals and other conditions will be deemed to be met if and
to the extent so provided by the Committee in the Award agreement
relating to such Award.
(b) Definition of "Change in Control." A "Change in Control" shall be
deemed to have occurred upon:
(i) An acquisition by any Person of Beneficial Ownership of the
shares of Common Stock of the Company then outstanding (the "Company
Common Stock Outstanding") or the voting securities of the Company then
outstanding entitled to vote generally in the election of directors (the
"Company Voting Securities Outstanding") if such acquisition of
Beneficial Ownership results in the Person's Beneficially Owning 30% or
more of the Company Common Stock Outstanding or 30% or more of the
combined voting power of the Company Voting Securities Outstanding;
PROVIDED, HOWEVER, that the event described in this paragraph (i) shall
not be deemed to be a Change in Control by virtue of any of the
following acquisitions: (A) by the Company or any Parent Corporation or
any Subsidiary, (B) by any employee benefit plan sponsored or maintained
by the Company or any Parent Corporation or any Subsidiary, (C) by any
underwriter temporarily holding securities pursuant to an offering of
such securities, (D) pursuant to a Non-Qualifying Transaction (as
defined in paragraph below), (E) pursuant to any acquisition by one or
more Participants (or any entity controlled by one or more
Participants); or (F) a transaction (other than one described in (ii)
below) in which Company Voting Securities Outstanding are acquired from
the Company or any other person, if a majority of the Incumbent Board
(as defined in (iii) below) approve a resolution providing expressly
that the acquisition pursuant to this clause (F) does not constitute a
Change in Control under this paragraph (i); or
B-12
<PAGE> 49
(ii) The approval by the stockholders of the Company of a
reorganization, merger, consolidation, complete liquidation or
dissolution of the Company, sale or disposition of all or substantially
all of the assets of the Company, or similar corporate transaction (in
each case referred to in this Section 9(b) as a "Corporate Transaction")
or, if consummation of such Corporate Transaction is subject, at the
time of such approval by stockholders, to the consent of any government
or governmental agency, the obtaining of such consent (either explicitly
or implicitly); provided, however, that any merger, consolidation, sale,
disposition or other similar transaction to or with one or more
Participants or entities controlled by one or more Participants shall
not constitute a Corporate Transaction in respect of such
Participant(s); or
(iii) A change in the composition of the Board such that the
individuals who, as of the Effective Date, constitute the Board (such
Board shall be hereinafter referred to as the "Incumbent Board") cease
for any reason to constitute at least a majority of the Board; provided,
however, for purposes of this Section 9(b), that any individual who
becomes a member of the Board subsequent to the Effective Date whose
election, or nomination for election by the Company's stockholders, was
approved by a vote (either by specific vote or by approval of the proxy
statement of the Company in which such person is named as a nominee for
director, without objection to such nomination) of at least a majority
of those individuals who are members of the Board and who were also
members of the Incumbent Board (or deemed to be such pursuant to this
proviso) shall be considered as though such individual were a member of
the Incumbent Board; and, provided, further, that any such individual
whose initial assumption of office occurs as a result of either an
actual or threatened election contest subject to Rule 14a-11 of
Regulation 14A under the Exchange Act, including any successor to such
Rule, or other actual or threatened solicitation of proxies or consents
by or on behalf of a Person other than the Board shall in no event be
considered as a member of the Incumbent Board.
Notwithstanding the provisions set forth in subparagraphs (i) and (ii) of
this Section 9(b), the following transactions ("Non-Qualifying Transactions")
shall not constitute a Change in Control for purposes of the Plan: (1) any
acquisition by, or consummation of a Corporate Transaction with, any entity that
was a Parent Corporation or a Subsidiary of the Company immediately prior to the
transaction or an employee benefit plan (or related trust) sponsored or
maintained by the Company or an entity that was a Parent Corporation or a
Subsidiary of the Company immediately prior to the transaction if, immediately
after such transaction (including consummation of all related transactions), the
surviving entity is controlled by no Person other than such Parent Corporation
or Subsidiary, employee benefit plan (or related trust) and/or other Persons who
controlled the Company immediately prior to such transaction; (2) any
acquisition or consummation of a Corporate Transaction following which more than
50% of, respectively, the shares then outstanding of common stock of the
corporation resulting from such acquisition or Corporate Transaction and the
combined voting power of the voting securities then outstanding of such
corporation entitled to vote generally in the election of directors is then
Beneficially Owned, directly or indirectly, by all or substantially all of the
individuals and entities who were Beneficial Owners, respectively, of the
Company Common Stock Outstanding and Company Voting Securities Outstanding
immediately prior to such acquisition or Corporate Transaction in substantially
the same proportions as their ownership, immediately prior to such acquisition
or Corporate Transaction, of the Company Common Stock Outstanding and Company
Voting Securities Outstanding, as the case may be; or (3) any person acquires
Beneficial Ownership of 30% or more of the Company Common Stock Outstanding or
30% or more of the Company Voting Securities Outstanding as a result of the
acquisition by the Company of Company Common Stock Outstanding or Company Voting
Securities Outstanding which reduces the number of Company Common Stock
Outstanding or Company Voting Securities Outstanding.
(c) Definition of "Change in Control Price." The "Change in Control
Price" means an amount in cash equal to the higher of (i) the amount of
cash and fair market value of property that is the highest price per share
paid (including extraordinary dividends) in any Corporate Transaction
triggering the Change in Control under Section 9(b)(ii) hereof or any
liquidation of shares following a sale of
B-13
<PAGE> 50
substantially all assets of the Company, or (ii) the highest Fair Market
Value per share at any time during the 60-day period preceding and 60-day
period following the Change in Control.
10. General Provisions.
(a) Compliance with Legal and Other Requirements. The Company may, to
the extent deemed necessary or advisable by the Committee, postpone the
issuance or delivery of Stock or payment of other benefits under any Award
until completion of such registration or qualification of such Stock or
other required action under any federal or state law, rule or regulation,
listing or other required action with respect to any stock exchange or
automated quotation system upon which the Stock or other Company securities
are listed or quoted, or compliance with any other obligation of the
Company, as the Committee may consider appropriate, and may require any
Participant to make such representations, furnish such information and
comply with or be subject to such other conditions as it may consider
appropriate in connection with the issuance or delivery of Stock or payment
of other benefits in compliance with applicable laws, rules, and
regulations, listing requirements, or other obligations. The foregoing
notwithstanding, in connection with a Change in Control, the Company shall
take or cause to be taken no action, and shall undertake or permit to arise
no legal or contractual obligation, that results or would result in any
postponement of the issuance or delivery of Stock or payment of benefits
under any Award or the imposition of any other conditions on such issuance,
delivery or payment, to the extent that such postponement or other
condition would represent a greater burden on a Participant than existed on
the 90th day preceding the Change in Control.
(b) Limits on Transferability; Beneficiaries. No Award or other right
or interest of a Participant under the Plan, including any Award or right
which constitutes a derivative security as generally defined in Rule
16a-1(c) under the Exchange Act, shall be pledged, hypothecated or
otherwise encumbered or subject to any lien, obligation or liability of
such Participant to any party (other than the Company or a subsidiary), or
assigned or transferred by such Participant otherwise than by will or the
laws of descent and distribution or to a Beneficiary upon the death of a
Participant, and such Awards or rights that may be exercisable shall be
exercised during the lifetime of the Participant only by the Participant or
his or her guardian or legal representative, except that Awards and other
rights (other than ISOs and SARs in tandem therewith) may be transferred to
one or more Beneficiaries or other transferees during the lifetime of the
Participant, and may be exercised by such transferees in accordance with
the terms of such Award, but only if and to the extent such transfers and
exercises are permitted by the Committee pursuant to the express terms of
an Award agreement (subject to any terms and conditions which the Committee
may impose thereon, and further subject to any prohibitions or restrictions
on such transfers pursuant to Rule 16b-3). A Beneficiary, transferee, or
other person claiming any rights under the Plan from or through any
Participant shall be subject to all terms and conditions of the Plan and
any Award agreement applicable to such Participant, except as otherwise
determined by the Committee, and to any additional terms and conditions
deemed necessary or appropriate by the Committee.
(c) Adjustments. In the event that any dividend or other distribution
(whether in the form of cash, Stock, or other property), recapitalization,
forward or reverse split, reorganization, merger, consolidation, spin-off,
combination, repurchase, share exchange, liquidation, dissolution or other
similar corporate transaction or event affects the Stock such that a
substitution or adjustment is determined by the Committee to be appropriate
in order to prevent dilution or enlargement of the rights of Participants
under the Plan, then the Committee shall, in such manner as it may deem
equitable, substitute or adjust any or all of (i) the number and kind of
shares of Stock which may be delivered in connection with Awards granted
thereafter, (ii) the number and kind of shares of Stock by which annual
per-person Award limitations are measured under Section 5 hereof, (iii) the
number and kind of shares of Stock subject to or deliverable in respect of
outstanding Awards and (iv) the exercise price, grant price or purchase
price relating to any Award and/or make provision for payment of cash or
other property in respect of any outstanding Award. In addition, the
Committee is authorized to make adjustments in the terms and conditions of,
and the criteria included in, Awards (including Performance Awards and
performance goals, and Annual Incentive Awards and any Annual Incentive
Award pool or performance goals relating thereto) in recognition of unusual
or nonrecurring events (including, without limitation,
B-14
<PAGE> 51
events described in the preceding sentence, as well as acquisitions and
dispositions of businesses and assets) affecting the Company, any
subsidiary or any business unit, or the financial statements of the Company
or any subsidiary, or in response to changes in applicable laws,
regulations, accounting principles, tax rates and regulations or business
conditions or in view of the Committee's assessment of the business
strategy of the Company, any subsidiary or business unit thereof,
performance of comparable organizations, economic and business conditions,
personal performance of a Participant, and any other circumstances deemed
relevant; provided that no such adjustment shall be authorized or made if
and to the extent that such authority or the making of such adjustment
would cause Options, SARs, Performance Awards granted under Section 8(b)
hereof or Annual Incentive Awards granted under Section 8(c) hereof to
Participants designated by the Committee as Covered Employees and intended
to qualify as "performance-based compensation" under Code Section 162(m)
and the regulations thereunder to otherwise fail to qualify as
"performance-based compensation" under Code Section 162(m) and regulations
thereunder.
(d) Taxes. The Company and any subsidiary is authorized to withhold
from any Award granted, any payment relating to an Award under the Plan,
including from a distribution of Stock, or any payroll or other payment to
a Participant, amounts of withholding and other taxes due or potentially
payable in connection with any transaction involving an Award, and to take
such other action as the Committee may deem advisable to enable the Company
and Participants to satisfy obligations for the payment of withholding
taxes and other tax obligations relating to any Award. This authority shall
include authority to withhold or receive Stock or other property and to
make cash payments in respect thereof in satisfaction of a Participant's
tax obligations, either on a mandatory or elective basis in the discretion
of the Committee.
(e) Changes to the Plan and Awards. The Board may amend, alter,
suspend, discontinue or terminate the Plan or the Committee's authority to
grant Awards under the Plan without the consent of stockholders or
Participants, except that any amendment or alteration to the Plan shall be
subject to the approval of the Company's stockholders not later than the
annual meeting next following such Board action if such stockholder
approval is required by any federal or state law or regulation (including,
without limitation, Rule 16b-3 or Code Section 162(m)) or the rules of any
stock exchange or automated quotation system on which the Stock may then be
listed or quoted, and the Board may otherwise, in its discretion, determine
to submit other such changes to the Plan to stockholders for approval;
provided that, without the consent of an affected Participant, no such
Board action may materially and adversely affect the rights of such
Participant under any previously granted and outstanding Award. The
Committee may waive any conditions or rights under, or amend, alter,
suspend, discontinue or terminate any Award theretofore granted and any
Award agreement relating thereto, except as otherwise provided in the Plan;
provided that, without the consent of an affected Participant, no such
Committee action may materially and adversely affect the rights of such
Participant under such Award. Notwithstanding anything in the Plan to the
contrary, if any right under this Plan would cause a transaction to be
ineligible for pooling of interest accounting that would, but for the right
hereunder, be eligible for such accounting treatment, the Committee may
modify or adjust the right so that pooling of interest accounting shall be
available, including the substitution of Stock having a Fair Market Value
equal to the cash otherwise payable hereunder for the right which caused
the transaction to be ineligible for pooling of interest accounting.
(f) Limitation on Rights Conferred Under Plan. Neither the Plan nor
any action taken hereunder shall be construed as (i) giving any Eligible
Person or Participant the right to continue as an Eligible Person or
Participant or in the employ of the Company or a subsidiary; (ii)
interfering in any way with the right of the Company or a subsidiary to
terminate any Eligible Person's or Participant's employment at any time,
(iii) giving an Eligible Person or Participant any claim to be granted any
Award under the Plan or to be treated uniformly with other Participants and
employees, or (iv) conferring on a Participant any of the rights of a
stockholder of the Company unless and until the Participant is duly issued
or transferred shares of Stock in accordance with the terms of an Award.
B-15
<PAGE> 52
(g) Unfunded Status of Awards; Creation of Trusts. The Plan is
intended to constitute an "unfunded" plan for incentive and deferred
compensation. With respect to any payments not yet made to a Participant or
obligation to deliver Stock pursuant to an Award, nothing contained in the
Plan or any Award shall give any such Participant any rights that are
greater than those of a general creditor of the Company; provided that the
Committee may authorize the creation of trusts and deposit therein cash,
Stock, other Awards or other property, or make other arrangements to meet
the Company's obligations under the Plan. Such trusts or other arrangements
shall be consistent with the "unfunded" status of the Plan unless the
Committee otherwise determines with the consent of each affected
Participant. The trustee of such trusts may be authorized to dispose of
trust assets and reinvest the proceeds in alternative investments, subject
to such terms and conditions as the Committee may specify and in accordance
with applicable law.
(h) Nonexclusivity of the Plan. Neither the adoption of the Plan by
the Board nor its submission to the stockholders of the Company for
approval shall be construed as creating any limitations on the power of the
Board or a committee thereof to adopt such other incentive arrangements as
it may deem desirable including incentive arrangements and awards which do
not qualify under Code Section 162(m).
(i) Payments in the Event of Forfeitures; Fractional Shares. Unless
otherwise determined by the Committee, in the event of a forfeiture of an
Award with respect to which a Participant paid cash or other consideration,
the Participant shall be repaid the amount of such cash or other
consideration. No fractional shares of Stock shall be issued or delivered
pursuant to the Plan or any Award. The Committee shall determine whether
cash, other Awards or other property shall be issued or paid in lieu of
such fractional shares or whether such fractional shares or any rights
thereto shall be forfeited or otherwise eliminated.
(j) Governing Law. The validity, construction and effect of the Plan,
any rules and regulations under the Plan, and any Award agreement shall be
determined in accordance with the laws of the State of Florida without
giving effect to principles of conflicts of laws, and applicable federal
law.
(k) Plan Effective Date and Stockholder Approval; Termination of
Plan. The Plan shall become effective on the Effective Date, subject to
subsequent approval within 12 months of its adoption by the Board by
stockholders of the Company eligible to vote in the election of directors,
by a vote sufficient to meet the requirements of Code Section 162(m) and
422, Rule 16b-3 under the Exchange Act, applicable NASDAQ requirements, and
other laws, regulations, and obligations of the Company applicable to the
Plan. Awards may be granted subject to stockholder approval, but may not be
exercised or otherwise settled in the event stockholder approval is not
obtained. The Plan shall terminate at such time as no shares of Common
Stock remain available for issuance under the Plan and the Company has no
further rights or obligations with respect to outstanding Awards under the
Plan.
B-16
<PAGE> 53
H.T.E., INC.
PROXY FOR 1999 ANNUAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Dennis J. Harward and Jack L. Harward, or
either of them, each with the power of substitution, as proxies to represent the
undersigned at the Annual Meeting of Shareholders of H.T.E., INC., to be held on
Wednesday, May 12, 1999, at 11:00 a.m., at The Peabody Orlando located at 9801
International Drive, Orlando, Florida, and any adjournment or postponement
thereof, and to vote the number of shares the undersigned would be entitled to
vote if personally present on the following matters:
1. ELECTION OF Dennis J. Harward and Bernard B. Markey as directors to serve
until the Annual Meeting of Shareholders in 2002 or until their successors
are duly elected and qualified;
<TABLE>
<S> <C> <C> <C>
[ ] FOR all nominees listed above [ ] WITHHOLD AUTHORITY to vote
(except as marked to the contrary below)
</TABLE>
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided below.)
---------------------------------------------------------------------------
2. PROPOSAL TO increase the number of shares of the Company's common stock
reserved for issuance under the 1997 Employee Stock Purchase Plan from
400,000 shares to 600,000 shares;
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. PROPOSAL TO increase the number of shares of the Company's common stock
reserved for issuance under the 1997 Executive Incentive Compensation Plan
from 1,908,000 shares to 2,908,000 shares;
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. OTHER BUSINESS: The proxies are authorized to vote in their discretion upon
such other business as may properly come before the Annual Meeting or any
adjournment or postponement thereof;
(SEE REVERSE SIDE)
(CONTINUED FROM OTHER SIDE)
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED "FOR" ITEMS 1, 2 AND 3.
The undersigned hereby acknowledges receipt of (i) the company's 1998 Annual
Report to Shareholders, (ii) the Proxy Statement and (iii) the Notice of Annual
Meeting of shareholders to be held on May 12, 1999.
Dated: , 1999
----------------------
------------------------------
------------------------------
Please sign exactly as your
name appears hereon. If stock
is registered in more than one
name, each holder should sign.
When signing as an attorney,
administrator, executor,
guardian or trustee, please
add your title as such. If
executed by a corporation or
partnership, the proxy should
be signed in full corporate or
partnership name by a duly
authorized officer or partner,
as applicable.
SHAREHOLDERS ARE URGED TO DATE, MARK, SIGN AND RETURN THIS PROXY IN THE ENVELOPE
PROVIDED, WHICH REQUIRES NO POSTAGE IF MAILED WITHIN THE UNITED STATES.
