<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
OneWave, Inc.
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
OneWave, Inc.
------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
________________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
________________________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
________________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
________________________________________________________________________
(5) Total fee paid:
________________________________________________________________________
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11 (a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
________________________________________________________________________
(2) Form, Schedule or Registration Statement No.:
________________________________________________________________________
(3) Filing Party:
________________________________________________________________________
(4) Date Filed:
________________________________________________________________________
<PAGE>
ONEWAVE, INC.
ONE ARSENAL MARKETPLACE
WATERTOWN, MA 02172
April 7, 1997
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
OneWave, Inc. (the "Annual Meeting") to be held May 7, 1997, at 9:00 a.m.
eastern time, at Exchange Place, 53 State Street, Boston, MA 02109.
The Annual Meeting has been called for the purpose of (i) electing one Class
I Director for a three-year term, (ii) ratifying the selection of independent
accountants for the current fiscal year, and (iii) considering and voting upon
such other business as may properly come before the Annual Meeting or any
adjournments or postponements thereof.
The Board of Directors has fixed the close of business on March 28, 1996 as
the record date for the determination of stockholders entitled to notice of,
and to vote at, the Annual Meeting and any adjournments or postponements
thereof.
The Board of Directors of the Company recommends that you vote "FOR" the
election of the nominee of the Board of Directors as a Director of the
Company, and "FOR" the ratification of the selection of independent
accountants for the current fiscal year.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE ANNUAL MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE REQUESTED TO
COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED
ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF YOU ARE
A STOCKHOLDER OF RECORD AND YOU ATTEND THE ANNUAL MEETING, YOU MAY VOTE IN
PERSON, EVEN IF YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
Sincerely,
Chairman, Chief Executive Officer
and President
<PAGE>
ONEWAVE, INC.
ONE ARSENAL MARKETPLACE
WATERTOWN, MA 02172
(617) 923-6500
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON WEDNESDAY, MAY 7, 1997
Notice Is Hereby Given that the Annual Meeting of Stockholders of OneWave,
Inc. (the "Company") will be held on May 7, 1997, 9:00 a.m. eastern daylight
savings time, at Exchange Place, 53 State Street, Boston, MA 02109 (the
"Annual Meeting") for the purpose of considering and voting upon:
1.The election of one Class I Director for a three-year term;
2.The ratification of the selection of independent accountants for the
current fiscal year; and
3. 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 March 28, 1997 as
the record date for the determination of stockholders entitled to notice of,
and to vote at, the Annual Meeting and any adjournments or postponements
thereof. Only holders of Common Stock of record at the close of business on
that date will be entitled to notice of, and to vote at, the Annual Meeting
and any adjournments or postponements thereof.
In the event there are not sufficient shares to be voted in favor of any of
the foregoing proposals at the time of the Annual Meeting, the Annual Meeting
may be adjourned in order to permit further solicitation of proxies.
By Order of the Board of Directors
General Counsel and Corporate
Secretary
Watertown, MA
April 7, 1997
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE ANNUAL MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, YOU ARE
REQUESTED TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE
ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF
YOU ARE A STOCKHOLDER OF RECORD AND YOU ATTEND THE ANNUAL MEETING, YOU MAY
VOTE IN PERSON, EVEN IF YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE>
ONEWAVE, INC.
ONE ARSENAL MARKETPLACE
WATERTOWN, MA 02172
(617) 923-6500
----------------
PROXY STATEMENT
----------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON WEDNESDAY, MAY 7, 1997
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of OneWave, Inc. (the "Company") for use at
the Annual Meeting of Stockholders of the Company to be held on May 7, 1997,
9:00 a.m. eastern standard time, at Exchange Place, 53 State Street, Boston,
MA 02109, and any adjournments or postponements thereof (the "Annual
Meeting").
At the Annual Meeting, the stockholders of the Company will be asked to
consider and vote upon the following matters:
1. The election of one Class I Director of the Company for a three-year
term, with such term to continue until the annual meeting of stockholders
to be held in the year 2000 (the "2000 Annual Meeting") and until such
Director's successor is duly elected and qualified; and
2. The ratification of the selection of independent accountants for the
current fiscal year; and
3. Such other business as may properly come before the meeting and any
adjournments or postponements thereof.
The Notice of Annual Meeting, Proxy Statement and Proxy Card are first being
mailed to stockholders of the Company on or about April 7, 1997 in connection
with the solicitation of proxies for the Annual Meeting. The Board of
Directors has fixed the close of business on March 28, 1997 as the record date
for the determination of stockholders entitled to notice of, and to vote at,
the Annual Meeting (the "Record Date"). Only holders of record of the
Company's Common Stock, $ .001 par value ("Common Stock") at the close of
business on the Record Date will be entitled to notice of, and to vote at, the
Annual Meeting. As of the Record Date, there were approximately 14,991,878
shares of Common Stock outstanding and entitled to vote at the Annual Meeting
and approximately 78 stockholders of record. Each holder of shares of Common
Stock outstanding as of the close of business on the Record Date will be
entitled to one vote for each share held of record with respect to each matter
submitted at the Annual Meeting.
The presence, in person or by proxy, of a majority of the total number of
outstanding shares of Common Stock is necessary to constitute a quorum for the
transaction of business at the Annual Meeting. A quorum being present, the
affirmative vote of a plurality of the votes cast is necessary to approve the
foregoing proposals.
Shares that reflect abstentions or "broker non-votes" (i.e., shares
represented at the meeting held by brokers or nominees as to which the
instructions have not been received from the beneficial owners or persons
entitled to vote such shares and with respect to which the broker or nominee
does not have discretionary voting power to vote such shares) will be counted
for purposes of determining whether a quorum is present for the transaction of
business at the meeting. Generally, abstentions will be treated as votes cast
against a particular proposal and broker non-votes will have no impact on the
outcome of the vote on a particular proposal submitted to the Annual Meeting.
With respect to the election of Directors, votes may be cast in favor of or
withheld from the nominee; votes that are withheld will be excluded entirely
from the vote and will have no effect. Broker non-votes will also have no
effect on the outcome of the election of the Director or the ratification of
the selection of independent accountants.
<PAGE>
STOCKHOLDERS OF THE COMPANY ARE REQUESTED TO COMPLETE, DATE, SIGN AND RETURN
THE ACCOMPANYING PROXY CARD IN THE ENCLOSED ENVELOPE. COMMON STOCK REPRESENTED
BY PROPERLY EXECUTED PROXIES RECEIVED BY THE COMPANY AND NOT REVOKED WILL BE
VOTED AT THE ANNUAL MEETING IN ACCORDANCE WITH THE INSTRUCTIONS CONTAINED
THEREIN. IF INSTRUCTIONS ARE NOT STATED THEREIN, PROPERLY EXECUTED PROXIES
WILL BE VOTED "FOR" THE ELECTION OF THE NOMINEE FOR DIRECTOR LISTED IN THIS
PROXY STATEMENT, AND "FOR" THE RATIFICATION OF THE SELECTION OF INDEPENDENT
ACCOUNTANTS. IT IS NOT ANTICIPATED THAT ANY MATTERS OTHER THAN THE ELECTION OF
A DIRECTOR AND THE RATIFICATION OF THE SELECTION OF INDEPENDENT ACCOUNTANTS
WILL BE PRESENTED AT THE ANNUAL MEETING. IF OTHER MATTERS ARE PRESENTED,
PROXIES WILL BE VOTED IN ACCORDANCE WITH THE DISCRETION OF THE PROXY HOLDERS.
Any properly completed proxy may be revoked by the stockholder of record
represented by such proxy at any time before it is voted on any matter
(without, however, affecting any vote taken prior to such revocation) by
giving written notice of such revocation to the Secretary of the Company, or
by signing and duly delivering a proxy bearing a later date, or by attending
the Annual Meeting and voting in person. Attendance at the Annual Meeting will
not, by itself, revoke a proxy.
The Annual Report of the Company, including financial statements for the
fiscal year ended December 31, 1996 (Fiscal 1996), is being mailed to
stockholders of the Company concurrently with this Proxy Statement. The Annual
Report, however, is not a part of the proxy solicitation material.
PROPOSAL 1
ELECTION OF DIRECTOR
The Board of Directors of the Company (the "Board") is divided into three
classes, with two Directors in each class. Sundar Subramaniam, currently a
Class I Director, will not be standing for re-election upon the expiration of
his term this year, and the Board will therefore be reduced to five members
upon the expiration of the current term, at which point there will be one
Director in Class I, and two Directors in each of Classes II and III.
Directors serve for three-year terms with one class of Directors being elected
by the Company's stockholders at each annual meeting.
At the Annual Meeting, one Class I Director will be elected to serve until
the 2000 Annual Meeting and until such Director's successor is duly elected
and qualified. The Board has nominated Ofer Nemirovsky for re-election as the
Class I Director. Unless otherwise specified in the proxy, it is the intention
of the persons named in the proxy to vote the shares represented by each
properly executed proxy for the re-election of Ofer Nemirovsky as Director.
The nominee has agreed to stand for election and to serve, if elected, as a
Director. However, if the nominee fails to stand for election or is unable to
accept election, proxies will be voted for the election of such other person
as the Board may recommend.
VOTE REQUIRED FOR APPROVAL
A quorum being present, the affirmative vote of a plurality of the votes
cast is necessary to elect the nominee as a Director of the Company.
THE BOARD RECOMMENDS A VOTE FOR THE ELECTION OF THE NOMINEE OF THE BOARD AS
A DIRECTOR OF THE COMPANY.
INFORMATION REGARDING DIRECTORS
The Board held three (3) meetings during Fiscal 1996. During Fiscal 1996,
each of the incumbent Directors attended at least 75% of the total number of
meetings of the Board and of the committees of which he was a member. The
Company's Board has established an Audit Committee and a Compensation
Committee.
The Audit Committee recommends the firm to be appointed as independent
accountants to audit financial statements and to perform services related to
the audit, reviews the scope and results of the audit with the
2
<PAGE>
independent accountants, reviews with management and the independent
accountants the Company's year-end operating results, considers the adequacy
of the internal accounting procedures and considers the effect of such
procedures on the accountants' independence. The Audit Committee consists of
Stephen R. Levy and Ofer Nemirovsky, and held two (2) meetings during Fiscal
1996.
The Compensation Committee reviews and recommends the compensation
arrangements for all Directors and officers, approves such arrangements for
other senior level employees and administers and takes such other action as
may be required in connection with certain compensation and incentive plans of
the Company. The Compensation Committee also determines the options or stock
to be issued to eligible persons under the OneWave, Inc. 1995 Stock Plan (the
"1995 Plan"), the OneWave, Inc. 1996 Stock Plan (the "1996 Plan"), construes
and interprets the 1995 Plan and the 1996 Plan (collectively, the "Stock
Plans"), and prescribes the terms and conditions of such options or stock. The
Compensation Committee also administers the OneWave, Inc. Employee Stock
Purchase Plan. In addition, the Compensation Committee establishes, amends and
revokes rules and regulations for the administration of all such plans. The
Compensation Committee consists of Albert Carnesale and Sundar Subramaniam,
and held two (2) meetings during Fiscal 1996. The membership of the
Compensation Committee for the period following the Annual Meeting will be
determined by the Board at the Board meeting to be held after the Annual
Meeting.
Directors who are officers or employees of the Company receive no
compensation for service as Directors. Directors who are not officers or
employees of the Company receive such compensation for their services as the
Board may from time to time determine. Each of Albert Carnesale, Manuel Diaz,
Stephen Levy and Ofer Nemirovsky (with Sundar Subramaniam, the "Non-Employee
Directors") received a fee of $2,500 for meetings attended during Fiscal 1996.
In addition, each of the Non-Employee Directors other than Sundar Subramaniam
has been granted an option to purchase 7,000 shares of Common Stock at an
exercise price of $12.00 per share. Each Non-Employee Director also
automatically receives on January 1 of each year an option to purchase 1,700
shares of Common Stock at an exercise price per share equal to the fair market
value of the underlying Common Stock as determined under the 1996 Plan. Each
of these options vests annually in equal installments over a four-year period
and expires ten years from the date of grant. All Directors are reimbursed for
expenses incurred in connection with attendance at meetings.
Set forth below is certain information regarding the continuing Directors of
the Company, including the Class I Director who has been nominated for the
election at the Annual Meeting, based on information furnished by them to the
Company.
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE SINCE
---- --- -------------
<S> <C> <C>
CLASS I--TERM EXPIRES 1997
Ofer Nemirovsky *.......................................... 38 March 1996
CLASS II--TERM EXPIRES 1998
Albert Carnesale........................................... 60 April 1996
Stephen R. Levy............................................ 56 May 1996
CLASS III--TERM EXPIRES 1999
Klaus P. Besier............................................ 44 February 1996
Manuel Diaz................................................ 62 May 1996
</TABLE>
- - --------
* Nominee for re-election
The principal occupation and business experience for at least the last five
years of each continuing Director of the Company is set forth below.
Klaus P. Besier has served as Chairman, President and Chief Executive
Officer of the Company since February 1996. Mr. Besier has more than 20 years
of experience in international management and computer services. From 1994 to
1996, Mr. Besier was the Chief Executive Officer of SAP America, Inc., a
business application software vendor. From 1992 to 1993, Mr. Besier served as
the President of SAP America, Inc. From
3
<PAGE>
1991 to 1992, Mr. Besier was Vice President of Sales of SAP America, Inc. From
1977 to 1990, Mr. Besier held various senior management positions, including
General Manager and Corporate Vice resident, with various affiliates of
Hoechst Celanese in Germany, Italy and the U.S.
Albert Carnesale has served as a Director of the Company since April 1996.
Dr. Carnesale is the Lucius N. Littauer Professor of Public Policy and
Administration at Harvard University. Since July 1994, Dr. Carnesale has been
Provost of Harvard University. From July 1991 through December 1995, Dr.
Carnesale served as the Dean of the John F. Kennedy School of Government at
Harvard University. From 1981 to 1991, Dr. Carnesale served as the Academic
Dean of the John F. Kennedy School of Government of Harvard University. Dr.
Carnesale has held positions with Martin Marietta Corporation from 1957 to
1962 and the United States Arms Control and Disarmament Agency from 1969 to
1972. He is also a member of the Council on Foreign Relations and of the
International Institute for Strategic Studies. Dr. Carnesale also serves as a
director of Open Environment Corporation and Teradyne, Inc.
Manuel Diaz has served as a Director of the Company since May 1996. Since
1993, Mr. Diaz has been a Vice President for Hewlett-Packard Company and
general manager of worldwide sales, marketing and services for its Computer
Systems Organization ("CSO"). Mr. Diaz joined HP Mexicana in Mexico City as
its general manager in 1982, and was promoted to managing director of HP Latin
America in 1986. In 1991, Mr. Diaz was named sales and marketing manager of
CSO for the US, Canada and Latin America, and in 1993 named to his current
position. Prior to joining HP, Mr. Diaz was director general of Infodinamica
S.A. de C.V. in Mexico City, executive vice president of Bancomer, S.A. and
general manager of IBM Corporation's Northern Latin America Region.
Stephen R. Levy has served as a Director of the Company since May 1996.
Since 1995, Mr. Levy has been a private investor and consultant. Mr. Levy is
presently a director of BBN Corporation (formerly Bolt Beranek and Newman
Inc.) and previously served BBN as President and Chief Executive Officer from
1976 to 1983, as Chairman of the Board and Chief Executive Officer from 1983
to 1993, as Chairman of the Board, President and Chief Executive Officer in
1993, and as Chairman of the Board from 1994 to 1995. Mr. Levy also serves as
a director of ThermoOptek Corporation.
Ofer Nemirovsky has served as a Director of the Company since March 1996.
Mr. Nemirovsky is a Managing Director of HVP Partners, LLC, f/k/a Hancock
Venture Partners, Inc. ("HVP"). Prior to joining HVP in 1986, Mr. Nemirovsky
held various computer sales and marketing positions at Hewlett-Packard. He is
currently a director of several privately held companies.
EXECUTIVE OFFICERS
Set forth below is certain information regarding the executive officers of
the Company as of December 31, 1996.
EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Klaus P. Besier......... 44 Chairman of the Board, President and Chief Executive Officer
John S. Coviello........ 51 Vice President of Engineering
Mark J. Gallagher....... 42 Chief Financial Officer and Treasurer
Craig Newfield.......... 37 General Counsel and Secretary
</TABLE>
The principal occupation and business experience for the last five years of
the Company's executive officers, other than such officers who also served as
Directors, is set forth below.
John S. Coviello has served as Vice President of Engineering since June
1996. From 1994 to 1996, Mr. Coviello served as Vice President of Technology,
Planning & Architecture for SABRE of AMR Corporation, the parent corporation
of American Airlines. From 1992 to 1994, Mr. Coviello served as Director of
Open Systems Marketing of Amdahl Corporation. Prior to 1992, Mr. Coviello
served as Amdahl's Director of Open Systems Development.
4
<PAGE>
Mark J. Gallagher has served as Chief Financial Officer since June 1996, and
Treasurer since September 1996. From December 1995 to June 1996, Mr. Gallagher
served as Vice President and Chief Financial Officer of Gel Sciences, Inc.
From 1988 to 1995, Mr. Gallagher served as a Senior Vice President of Finance
& Administration, Treasurer and Chief Financial Officer of Parametric
Technology Corporation.
Craig Newfield has served as General Counsel to the Company since April 1996
and as Secretary of the Company since May 1996. From February 1993 to April
1996, Mr. Newfield served as in-house counsel for Marcam Corporation, a
business application software vendor. From 1990 to 1993, Mr. Newfield was
employed as an associate at the law firm of Jager, Smith, Stetler & Arata,
P.C. From 1987 to 1990, Mr. Newfield was employed as an associate at the law
firm of Brown, Rudnick, Freed & Gesmer.
Each of the officers holds his respective office until the regular annual
meeting of the Board of Directors following the annual meeting of stockholders
and until his successor is elected and qualified or until his earlier
resignation or removal.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION
Summary Compensation. The following summary compensation table sets forth
for the last two fiscal years information concerning compensation for services
rendered in all capacities awarded to, earned by or paid to the Company's
Chief Executive Officer and the four other most highly compensated executive
officers serving as executive officers at December 31, 1996, and certain other
persons who served as executive officers during fiscal 1996 (the "named
executive officers") who earned in excess of $100,000 during fiscal 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------------- ------------
SECURITIES
UNDERLYING ALL OTHER(2)
NAME AND PRINCIPAL POSITION YEAR(1) SALARY($) BONUS($) OPTIONS(#) COMPENSATION($)
- - --------------------------- ------- --------- -------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Klaus P. Besier, Chief
Executive Officer...... 1996 188,654 0 330,000 18,064
John Burke, former Vice
President of Sales(3).. 1996 104,615 0 403,330 35,627
John S. Coviello, Vice
President of Engineer-
ing.................... 1996 104,330 64,800 250,000 46,756
Mark J. Gallagher, Chief
Financial Officer...... 1996 100,769 0 400,000 1,500
Joseph Gruttadauria,
former Vice President
of Professional
Services(3)............ 1996 97,503 80,000 76,666 14,987
James G. Nondorf, former
Vice President of
Strategic
Alliances(3)(4)........ 1996 110,000 94,129(5) 0 2,440
1995 39,086 0 266,666 0
Eric Sockol, former
Chief Financial Offi-
cer(3)................. 1996 87,500 20,000 16,666 13,688(6)
1995 13,654 0 50,000 0
</TABLE>
- - --------
(1) Messrs. Besier, Burke, Coviello, Gallagher and Gruttadauria were not
employed by the Company during fiscal year 1995.
(2) Includes taxable relocation expense reimbursement and Company
contributions to the Company's 401(k) plan on behalf of the executives.
(3) Messrs. Burke, Gruttadauria, Nondorf and Sockol have resigned from the
Company.
(4) Mr. Nondorf served as Chief Executive Officer of the Company until
February 1996.
(5) Includes a bonus of $25,000, and commissions of $69,129.
(6) Includes a payment of $12,500 in severance.
5
<PAGE>
Option Grants. The following table sets forth certain information concerning
the individual grant of options to purchase Common Stock of the Company to
certain named executive officers of the Company who received such grants
during Fiscal 1996.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------------
POTENTIAL REALIZABLE
NUMBER OF PERCENT VALUE AT ASSUMED ANNUAL
SECURITIES OF TOTAL OF STOCK PRICE
UNDERLYING OPTIONS APPRECIATION FOR
OPTIONS GRANTED EXERCISE RATES OPTION TERM(1)
GRANTED TO EMPLOYEES OR BASE EXPIRATION ------------------------
NAME (#) IN FISCAL YEAR PRICE ($/SH) DATE 5%($) 10%($)
---- ---------- -------------- -------------- ----------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Klaus P. Besier......... 330,000(2) 13.6% 7.50 March 14, 2006 1,556,500 3,944,500
John Burke(3)........... 403,330 16.6% 7.50 January 14, 1997 1,902,373 4,821,016
John S. Coviello(4)..... 250,000(4) 10.3% 12.00 June 23, 2006 1,886,700 4,781,200
Mark J. Gallagher(5).... 400,000(5) 16.5% 12.00 June 23, 2006 3,018,700 7,650,000
Joseph Gruttadauria(3).. 46,666 1.9% 7.50 June 19, 1997 220,100 557,800
30,000 1.2% 13.75 June 19, 1997 259,400 657,400
Eric Sockol(3).......... 16,666 .7% 7.50 February 12, 1997 78,608 199,209
</TABLE>
(1) This column shows the hypothetical gain or option spreads of the options
granted based on assumed annual compound stock appreciation rates of 5%
and 10% for the exercise price of such options over the full 10-year term
of the options. The 5% and 10% assumed rates of appreciation are mandated
by the rules of the Securities and Exchange Commission and do not
represent the Company's estimate or projection of future Common Stock
prices.
(2) Represents (i) an option to purchase 180,000 shares vesting equally over
three years, and (ii) an option to purchase 150,000 shares vesting equally
over six years, in each case subject to accelerated vesting upon the
occurrence of certain events.
(3) In connection with the termination of employment of each of Messrs. Burke,
Gruttadauria and Sockol: (i) Mr. Burke's vested options to purchase 59,350
shares expired on January 14, 1997, and his unvested options to purchase
343,980 shares were canceled immediately upon termination of employment on
October 16, 1996; (ii) Mr. Gruttadauria's vested options to purchase
13,333 shares will expire on June 15, 1997, and his unvested options to
purchase 63,333 shares were canceled immediately upon termination of
employment on March 21, 1997; and (iii) Mr. Sockol's vested and
unexercised options to purchase 2,633 shares expired on February 12, 1997,
and his unvested options to purchase 8,333 shares were canceled
immediately upon termination of employment on November 14, 1996.
(4) Represents: (i) an option to purchase 50,000 shares vesting six months
from the date of hire, and (ii) an option to purchase 200,000 shares
vesting equally over four years from the date of hire.
(5) Represents: (i) an option to purchase 75,000 shares vesting six months
from date of hire, (ii) an option to purchase 125,000 shares vesting 24
months from the date of hire, (iii) an option to purchase 100,000 shares
vesting 30 months from the date of hire subject to accelerated vesting
upon the occurrence of certain events, and (iv) an option to purchase
100,000 shares vesting 42 months from the date of hire subject to
accelerated vesting upon the occurrence of certain events.
6
<PAGE>
Option Exercises and Option Values. The following table sets forth
information concerning the number of shares acquired upon exercise and the
value realized on exercise by certain named executive officers, and the value
of unexercised options to purchase Common Stock of the Company held by the
named executive officers as of December 31, 1996.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT DECEMBER 31, 1996 AT DECEMBER 31, 1996 ($)(1)
-------------------------------- ------------------------------
SHARES ACQUIRED VALUE
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- ------------- -------------- --------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Klaus P. Besier......... 0 -- 0 330,000 0 103,125
John Burke.............. 0 -- 59,350 0 18,547 0
John S. Coviello........ 0 -- 50,000 200,000 0 0
Mark J. Gallagher....... 0 -- 75,000 325,000 0 0
Joseph Gruttadauria..... 0 -- 13,333 63,333 4,167 10,417
James G. Nondorf........ 66,666 400,000 200,000 0 662,500 0
Eric Sockol............. 5,700 32,650 33,883 0 104,339 0
</TABLE>
- - --------
(1) Based on the last reported sale price on the Nasdaq National Market on
December 31, 1996 ($7.813) less the option exercise price.
EMPLOYMENT AGREEMENTS WITH EXECUTIVE OFFICERS
The Company has entered into letter agreements with each of its executive
officers, providing for base salary, bonus, incentive compensation and
relocation expense reimbursement, as applicable. Each executive is an employee
at will. Under the Company's standard Employee Agreement, each of the
executives is subject to provisions concerning the ownership, use and
disclosure of the Company's confidential information and intellectual
property, and a one-year restriction on competition with the Company following
termination of employment for any reason.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION
The Compensation Committee of the Board of Directors of the Company
currently consists of Albert Carnesale and Sundar Subramaniam. The composition
of the Compensation Committee for the period following the Annual Meeting will
be determined at the Board meeting to be held after the Annual Meeting.
Compensation Policies for Executive Officers. The Compensation Committee's
executive compensation philosophy is: (i) to provide competitive levels of
compensation that integrate pay with the individual executive's performance
and the Company's annual and long-term performance goals; (ii) to motivate key
executives to achieve strategic business goals and reward them for their
achievement; (iii) to provide compensation opportunities and benefits that are
comparable to those offered by other companies in the software industry,
thereby allowing the Company to compete for and retain talented executives who
are critical to the Company's long-term success; and (iv) to align the
interests of key executives with the long-term interests of stockholders and
the enhancement of stockholder value through the granting of stock options.
The compensation of the Company's Chief Executive Officer and other
executive officers is currently comprised of annual base salary, annual
performance incentives in the form of cash bonuses, and long-term performance
incentives in the form of stock option grants under the Option Plan.
The Compensation Committee has determined that base salaries of executive
officers should be set at levels that are competitive with those in the
software industry. In addition, the Compensation Committee believes that it is
appropriate to reward outstanding performance through a combination of cash
bonuses and stock option
7
<PAGE>
grants and, through stock option grants, to provide a competitive compensation
package that will enable the Company to attract and retain the executives
needed to achieve such performance. The Compensation Committee also has
determined that any stock option or other equity-based compensation should
involve long-term vesting to encourage long-term tenure and enhancement of
stockholder value over the long-term.
Base Salary and Bonuses. Base salaries for executive officers are targeted
according to the salaries of employees holding similar offices and having
similar responsibilities within the software industry. Annual salary
adjustments for executive officers are determined by evaluating the
competitive marketplace, the performance of the Company, the performance of
the executive officer and any change in the responsibilities assumed by the
executive officers. Salary adjustments are normally determined and made on an
annual basis.
The base salary, bonuses and incentive compensation for each of the
Company's executive officers were established pursuant to agreements as
described above, under "Employment Agreements With Executive Officers" and
below, under "Compensation of the Chief Executive Officer." These base
salaries and other compensation were determined with reference to the
compensation of executives of similar companies in the software industry.
Stock Option Grants. Stock options are designed to attract and retain
executives who can make significant contributions to the Company's success;
reward executives for such significant contributions; and give executives a
long-term incentive to increase shareholder value. In determining whether to
grant stock options to executive officers, the Compensation Committee
evaluates each officer's performance, and awards reflect individual
performance reviews. The Compensation Committee also may grant stock options
for executive retention purposes, taking into account, among other things,
general industry practices. Stock options typically vest over four years in
order to encourage outstanding performance over the long-term. Stock options
generally have been granted with a ten-year term and an exercise price equal
to 100% of the fair market value of the Common Stock on the grant date.
Compensation of Chief Executive Officer. Klaus P. Besier, the Company's
Chairman, Chief Executive Officer and President, receives competitive
compensation, and is eligible for such benefits as are in effect for all
Company employees. In Fiscal 1996, Mr. Besier's base salary was $200,000, and
Mr. Besier received no cash bonus. Mr. Besier received options to purchase an
aggregate of 330,000 shares of Common Stock at an exercise price equal to the
fair market value of the Common Stock on the date of grant.
Submitted by the Compensation Committee:
ALBERT CARNESALE SUNDAR SUBRAMANIAM
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Since May 10, 1996 all executive officer compensation decisions have been
made by the Compensation Committee. The Compensation Committee reviews and
makes recommendations regarding the compensation for top management and key
employees of the Company, including salaries and bonuses. No member of the
Compensation Committee is an officer of the Company. The current members of
the Compensation Committee are Albert Carnesale and Sundar Subramaniam. Prior
to May 10, 1996 and the creation of the Compensation Committee, all Directors
participated in deliberations of the Company's Board of Directors concerning
executive compensation. Mr. Subramaniam has an interest in certain related
parties; see "Certain Relationships and Related Transactions".
SHAREHOLDER RETURN PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total shareholder return on the Company's Common Stock, based
on the market price of the Company's Common Stock with the total return of
companies included within the Nasdaq Stock Market Index and a peer group of
companies included within the Nasdaq Computer & Data Processing Industry Stock
Index, for the period commencing July 3, 1996 and ending December 31, 1996.
The calculation of total cumulative return assumes a $100 investment in the
Company's Common Stock, the Nasdaq Stock Market Index and the Nasdaq Computer
& Data Processing Industry Stock Index on July 3, 1996, the date of the
Company's initial public offering, and the reinvestment of all dividends.
8
<PAGE>
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
NASDAQ
COMPUTER
NASDAQ AND DATA
Measurement period STOCK PROCESSING
(Fiscal Year Covered) ONEWAVE, INC. MARKET STOCKS
- - --------------------- ------------- ------ ------
<S> <C> <C> <C>
Measurement PT -
07/31/96 $ 100 $ 100 $ 100
Jul-96 $ 83 $ 91 $ 90
Aug-96 $ 83 $ 96 $ 92
Sep-96 $ 84 $ 104 $ 102
Oct-96 $ 78 $ 102 $ 100
Nov-96 $ 61 $ 109 $ 107
Dec-96 $ 43 $ 109 $ 106
</TABLE>
SUMMARY OF STOCK OPTION PLANS
The 1995 Plan was adopted by the Board and approved by the Company's
stockholders on March 1995. The 1996 Plan was adopted by the Board and approved
by the Company's stockholders in May 1996, and amended by the Board with the
requisite approved of the stockholders in June 1996 and further amended by the
Board in October 1996. The issuance of shares of Common Stock pursuant to the
Stock Plans has been registered under the Securities Act of 1933, as amended,
on a registration statement on Form S-8 which was filed with the Securities and
Exchange Commission on July 30, 1996. The Stock Plans are designed and intended
as a performance incentive for officers, Directors, employees consultants and
other key persons performing services for the Company ("Eligible Persons").
Although no action by the stockholders with respect to the Stock Plans is
proposed to be taken, a description of the material features of the Stock Plans
is being provided herein in order to qualify for exemption under Section 16 of
the Securities Exchange Act of 1934, as amended (the "Exchange Act") certain
grants of awards made under the Stock Plans prior to August 15, 1996, the
effective date of recent amendments to Rule 16b-3 under the Exchange Act.
The Company has reserved an aggregate of 4,150,000 shares of Common Stock for
issuance under the Stock Plans, of which 2,404,133 shares may be issued under
the 1995 Plan, and 1,745,867 shares may be issued under the 1996 Plan. The
total number of shares available under the Stock Plans will be subject to
adjustment upon the occurrence of a stock dividend, stock split or other change
affecting the Common Stock. In order to satisfy the performance-based
compensation exception to the $1 million cap on the Company's tax deduction
imposed by Section 162(m) of the Code, the 1996 Plan provides that stock
options with respect to no more than 333,333 shares of Common Stock may be
granted to any one individual in any one calendar year after the Company
becomes subject to Section 162(m) of the Code. The shares of Common Stock
issued by the Company under the Stock Plans may be authorized but unissued
shares, or shares reacquired by the Company. To the extent that awards under
the Stock Plans do not vest or otherwise revert to the Company, the shares of
Common Stock represented by such awards may be the subject of subsequent
awards.
Plan Administration; Eligibility. The Stock Plans are administered by the
Board or by a committee appointed by the Board in accordance with the rules and
regulations promulgated under the Exchange Act. All members of such committee
must be "non-employee directors" as that term is defined under the rules
promulgated by the Securities and Exchange Commission (the "Commission") and
"outside directors" as defined in Section 162(m) of the Code and the
regulations promulgated thereunder. The Board or authorized committee will
interpret and make any determination under the Stock Plans and any grants
granted thereunder.
9
<PAGE>
The Stock Plans are currently administered by the Compensation Committee. The
Compensation Committee has full power to select from among the Eligible
Persons the individuals to whom awards will be granted, to make any
combination of awards to such individuals, and to determine the specific terms
and conditions of each award, subject to the provisions of the Stock Plans.
Under the 1996 Plan, the Compensation Committee, in its discretion, may
delegate to the Chief Executive Officer of the Company, all or part of the
Compensation Committee's authority and duties with respect to the granting of
awards under the 1996 Plan to individuals who are not subject to Section 16 of
the Exchange Act or are "covered employees" within the meaning of Section
162(m) of the Code.
Awards. The Stock Plans permit the grant of (i) options to purchase Common
Stock intended to qualify as incentive stock options ("Incentive Options")
under Section 422 of the Code, (ii) options that do not so qualify ("Non-
Qualified Options") and (iii) shares of Common Stock. Under the 1996 Plan,
each non-employee Director first joining the Board will receive an automatic
option grant to purchase 7,000 shares of Common Stock when such Director is
first elected or appointed to the Board. In addition, each non-employee
Director will receive an automatic option grant to purchase 1,700 shares under
the 1996 Plan on each January 1 that such Director is a member of the Board.
The exercise price of all option shares granted to non-employee Directors
under the 1996 Plan will be at the fair market value of the Common Stock at
the time of the grant, and all such options will vest in equal annual
installments over a four-year period. The option exercise price of Incentive
Options may not be less than 100% of the fair market value of the Common Stock
on the date of grant. The exercise price for Non-Qualified Options and the
purchase price for Common Stock awards is determined at the discretion of the
Compensation Committee. To qualify as Incentive Options, options must meet
additional Federal tax requirements, including limits on the value of shares
subject to Incentive Options which first become exercisable in any one
calendar year, and a shorter term and higher minimum exercise price in the
case of certain large stockholders.
The term of each option will be fixed by the Compensation Committee and may
not exceed ten years from date of grant in the case of an Incentive Option.
The Compensation Committee will determine at what time or times each option
may be exercised and, subject to the provisions of the respective Stock Plans,
the period of time, if any, after retirement, death, disability or termination
of employment during which options may be exercised. Options may be made
exercisable in installments, and the exercisability of options may be
accelerated by the Compensation Committee.
Upon exercise, the option exercise price must be paid in full either in cash
or check or, if the Compensation Committee so permits, by delivery of shares
of Common Stock already owned by the optionee or optionee's personal recourse
note. Under the 1996 Plan, the option exercise price may also be delivered to
the Company by a broker pursuant to irrevocable instructions to the broker
from the optionee or by delivery of a promissory note if such loan of funds is
authorized by the Board.
Amendments and Termination. The Board may at any time amend or discontinue
the Stock Plans. However, amendments to the 1996 Stock Plan may be subject to
approval by the Company's stockholders if and to the extent required by the
Code to preserve the qualified status of Incentive Options. No action may be
taken which adversely affects any rights under outstanding options without the
holder's consent.
Change of Control Provisions. In the event of a change of control of the
Company effected by a merger or sale of substantially all of the Company's
assets, the 1996 Plan provides that options granted under such plan will
terminate unless an assumption or substitution of such options is provided
therefor, and the 1995 Plan provides that options granted under such plan will
be substituted or terminated in exchange for cash consideration.
TAX ASPECTS UNDER THE U.S. INTERNAL REVENUE CODE
The following is a summary of the principal Federal income tax consequences
of option grants under the Stock Plans. It does not describe all Federal tax
consequences under the Stock Plans, nor does it describe state or local tax
consequences.
10
<PAGE>
Incentive Options. Under the Code, an employee will generally not realize
taxable income by reason of the grant or the exercise of an Incentive Option.
If an employee exercises an Incentive Option and does not dispose of the
shares until the later of (a) two years from the date the option was granted
or (b) one year from the date the shares were transferred to the employee, the
entire gain, if any, realized upon disposition of such shares will be taxable
to the employee as long-term capital gain, and the Company will not be
entitled to any deduction. If an employee disposes of the shares within such
one-year or two-year period in a manner so as to violate the holding period
requirements (a "disqualifying disposition"), the employee generally will
realize ordinary income in the year of disposition and, provided the Company
complies with applicable withholding or reporting requirements, the Company
will generally receive a corresponding deduction, in an amount equal to the
excess of (1) the lesser of (x) the amount, if any, realized on the
disposition and (y) the fair market value of the shares on the date the option
was exercised minus (2) the exercise price. Any additional gain realized on
the disposition of the shares acquired upon exercise of the option will be
long-term or short-term capital gain and any loss will be long-term or short-
term capital loss depending upon the holding period for such shares. A
disqualifying disposition generally includes any sale, exchange, gift or
transfer of legal title (other than by pledge) of shares during either of the
holding periods described above. Special rules apply in certain cases,
including transfer to the employee's spouse, transfer to the employee's former
spouse incident to a divorce, and transfer on death. Special rules also apply
if an employee surrenders shares of Common Stock in payment of the exercise
price of his Incentive Option. An Incentive Option that is exercised by an
employee more than three months after an employee's employment terminates will
be treated as a Non-Qualified Option for Federal income tax purposes; provided
that in the case of termination by reason of disability, the three-month
period is extended to one year, and in the case of death occuring during
employment or within three months after termination, the three month
limitation does not apply.
Non-Qualified Options. There are no Federal income tax consequences to
either the optionee, or the Company on the grant of a Non-Qualified Option. On
the exercise of a Non-Qualified Option, the optionee (except generally as
described below) has taxable ordinary income equal to the excess of the fair
market value of the Common Stock received on the exercise date over the option
price of the shares. The optionee's tax basis for the shares acquired upon
exercise of a Non-Qualified Option is increased by the amount of such taxable
income. The Company generally will be entitled to a Federal income tax
deduction in an amount equal to such excess. Upon the sale of the shares
acquired by exercise of a Non-Qualified Option, the optionee will realize
long-term or short-term capital gain or loss depending upon his or her holding
period for such shares. Special rules apply if an optionee surrenders shares
of Common Stock in payment of the exercise price of a Non-Qualified Option.
Limitation on Company's Deductions. As a result of Section 162(m) of the
Code, the Company's deduction for certain awards under the Plan may be limited
to the extent that the Chief Executive Officer or other named executive
officer whose compensation is required to be reported in the Summary
Compensation Table receives compensation (other than performance-based
compensation) in excess of $1 million a year.
11
<PAGE>
NEW PLAN BENEFITS
The number of awards to be granted under the Stock Plans is undeterminable
at this time as future grants of awards under the Stock Plans are subject to
the discretion of the Compensation Committee. As of the Record Date,
approximately 165 persons were eligible to participate in the Stock Plans. The
table below shows the aggregate number of shares of Common Stock underlying
awards that were granted under the Stock Plans in Fiscal 1996.
<TABLE>
<CAPTION>
NUMBER OF
RANGE OF SHARES
EXERCISE UNDERLYING
NAME OF GROUP PRICES ($) (1) STOCK OPTIONS (2)
- - ------------- -------------- -----------------
<S> <C> <C>
Klaus P. Besier, Chief Executive Officer..... 7.50 330,000
John Burke, former V.P. of Sales............. 7.50 403,330
John S. Coviello, Vice President of Engineer-
ing......................................... 12.00 250,000
Mark J. Gallagher, Chief Financial Officer... 12.00 400,000
Joseph Gruttadauria, former Vice President of
Professional Services....................... 7.50-13.75 76,666
Craig Newfield, General Counsel and Secre-
tary........................................ 7.50 33,333
James G. Nondorf, former Vice President of
Strategic Alliances......................... -- 0
Eric Sockol, former Chief Financial Officer.. 7.50 16,666
Executive Group.............................. 7.50-13.75 1,509,995
Non-Executive Director Group................. 16.00 28,000
Non-Executive Employee Group................. 7.50-16.00 919,653
</TABLE>
- - --------
(1) Represents range of exercise prices for options outstanding at December
31, 1996.
(2) Represent aggregate number shares of Common Stock underlying the options
granted during 1996 under the 1995 Plan and 1996 Plan.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain of the Company's principal stockholders are affiliated with each
other through family and other relationships. Sundar Subramaniam, a director
of the Company, and John J. Donovan, Sr., are limited partners, and Mr.
Donovan, Sr. is the sole stockholder and president of the corporate general
partner, of J&S Limited Partnership ("J&S"). Mr. Donovan Sr.'s adult children
are the ultimate beneficial owners of the shares of Common Stock held by
Harrington Trust Limited, as Trustee of the Appleby Trust ("Appleby"), and
Legacy Investment Partnership ("Legacy") and one of his sons, John J. Donovan,
Jr., was the President of the Company from its inception through June 1995 and
a director of the Company from its inception through March 1996.
On May 3, 1995, the Company issued 6% 5-year convertible subordinated notes
to each of J&S (in the original principal amount of $250,000) and Appleby (in
the original principal amount of $750,000). On November 30, 1995, Appleby
converted the promissory note held by it into 1,136,363 shares of Common
Stock. In March 1996, the Company repaid in full the promissory note held by
J&S. On December 29, 1995, Appleby loaned the Company the principal sum of
$750,000 under a 9% 5-year subordinated note. The Company repaid this note, in
full, in March 1996.
During 1995 and the first two months of 1996, the Company shared office
space with Cambridge Technology Group, Inc. ("CTGroup"), a company under the
control of a significant stockholder of the Company. CTGroup charged the
Company for a portion of certain common costs incurred in addition to any
specific items paid by CTGroup on the Company's behalf. These costs were
allocated based on head count or actual cost incurred. During the period from
inception (January 19, 1994) to December 31, 1994 and for the years ended
December 31, 1995 and 1996, CTGroup charged the Company $956,844, $1,013,142
and $117,442, respectively, for these costs.
12
<PAGE>
In connection with the establishment by the Company of credit facilities in
the aggregate amount of $5,000,000 with State Street Bank and Trust Company
("State Street") on February 16, 1996, John J. Donovan, Sr., John J. Donovan,
Jr. and J&S each gave an unlimited guaranty of all of the Company's
obligations to State Street. The guaranty of J&S was secured by a pledge of
certain shares of common stock of Open Environment Corporation ("OEC"). This
loan was repaid in July 1996, and the guarantees have been terminated.
In connection with the Company's offer of employment to Klaus P. Besier as
President and Chief Executive Officer, J&S made a $1,000,000 payment to Mr.
Besier. The Company incurred no liability for such payment. As a former
employee of SAP America, Mr. Besier continued during 1996 to be a participant
in the SAP Phantom Convertible Debenture Appreciation Right 1994/2004 Program
(the "SAP Plan") pursuant to which he held a phantom stock appreciation right
evidencing the right to receive the appreciation in value of a specified
number of shares of SAP Preferred Stock. In connection with the Company's
offer of employment and as an inducement to Mr. Besier, J&S also agreed to pay
Mr. Besier an amount equal to the amount, if any, by which the value of his
stock appreciation right decreased between the date of such offer and
September 30, 1996. The Company had no liability or responsibility to make any
payment to Mr. Besier in connection with the SAP Plan. In addition, Appleby
sold 960,000 shares of Common Stock to Mr. Besier for a purchase price of
$1.50 per share, for an aggregate purchase price of $1,440,000. At the time of
such purchase, the Common Stock had a fair market value of $7.50 per share. As
an inducement to Mr. Besier to accept the Company's employment offer, the
Company agreed to lend Mr. Besier up to $2,560,000 to fund the amount of
income tax liability incurred by Mr. Besier in connection with this stock
purchase based upon the difference between the purchase price for the shares
and the fair market value of the shares at the time of such purchase.
The Company and OEC are parties to a Software, Education, Services
Distribution Agreement dated June 21, 1995 (as amended, the "Distribution
Agreement"), pursuant to which the Company is authorized to distribute, on a
non-exclusive basis, worldwide (except Japan) OEC's software products and
services. The Distribution Agreement expires on June 21, 1997, subject to
annual renewals by mutual consent. Under the Distribution Agreement, the
Company purchased, for $260,000, a master copy of OEC's software products and
received the right to make 25 copies of such software for resale during the
term of the Distribution Agreement. The Company is entitled to purchase for
resale additional copies of OEC software products at a discount of 50% below
OEC's list price, and to resell OEC services and education products at a
discount of 25% below OEC's list price. Under the Distribution Agreement, the
Company is prohibited from marketing, reselling or advocating products or
services competitive with the products or services of OEC. At the time the
Company entered into the Distribution Agreement, John J. Donovan, Jr. was
President and a director of the Company and a director of OEC and John J.
Donovan, Sr. was the Chairman of the Board of OEC. Sundar Subramaniam is a
former officer and director of OEC. James G. Nondorf, formerly President and a
director of the Company, is a former director of OEC. Appleby, Legacy, J&S and
Mr. Subramaniam were principal stockholders of OEC. A number of the Company's
employees are former employees of OEC.
The Company and OEC are also parties to an OEM Source Code License Agreement
dated as of December 29, 1995 (the "OEM Agreement"), pursuant to which the
Company purchased a perpetual, non-exclusive license to incorporate certain
OEC software products into, or bundle such products with, the Company's
software products and has received the source code for such OEC products. The
Company paid a license fee of $2,200,000 to OEC under the OEM Agreement. The
Company has allocated the cost of the source code to research and development
expenses in 1995.
On October 31, 1995, the Company sold to OEC the source code for certain
software technology relating to the customization and enhancement of SAP
software products. OEC paid the Company an initial software license fee of
$500,000 under the agreement by which the source code was transferred, and
agreed to pay the Company a royalty in an amount equal to 20% of the first
$1,000,000 of sales revenue recognized by OEC related to products
incorporating components of the transferred source code and 10% of such sales
revenues in excess of $1,000,000. OEC's royalty obligations expire on the
earlier of October 1, 1997 or the date on which OEC's aggregate sales revenues
related to products incorporating components of the transferred source code
exceed $3,000,000.
13
<PAGE>
In November 1996, the Company obtained third party software licenses from
CTGroup in exchange for certain source code rights previously purchased from
Open Environment Corporation under the OEM Agreement. The software licenses
received and the source code rights given were deemed to be of equal value.
In November 1996, OEC was acquired by Borland International, Inc. To the
best of the Company's knowledge as a result of the acquisition, no stockholder
of the Company holds a significant ownership interest in the combined entity.
Accordingly, effective November 1996, OEC is not a related party.
During April 1996, the Company repurchased an aggregate of 800,000 shares of
Common Stock from four stockholders, at a price of $7.50 per share. Of these
shares, 66,667 shares were repurchased from James G. Nondorf, a former
President and director of the Company and the then-current Vice President of
Strategic Alliances, for an aggregate price of $500,000; 233,333 shares were
repurchased from J&S, for an aggregate price of $1,750,000; and 233,333 shares
were repurchased from Appleby, for an aggregate price of $1,750,000. The
remaining 266,667 shares were repurchased from Len Hafetz for an aggregate
price of $2,000,000, pursuant to a Stock Purchase Agreement between Mr. Hafetz
and John Donovan, Sr., who assigned his rights and obligations under such
agreement to the Company.
Since February 29, 1996, the Company has sold 1,332,127 shares of Series B
Preferred Stock at a purchase price per share of $5.54 and 1,200,000 shares of
Series C Preferred Stock at a purchase price per share of $5.00. Such shares
of Preferred Stock were converted into shares of Common Stock upon the
Company's initial public offering in July 1996.
In connection with the purchase of Series B Preferred Stock, certain
purchasers of such stock and certain common stockholders agreed that such
stockholders would vote their shares to elect one director to the Board of
Directors designated by the holders of the Series B Preferred Stock. Pursuant
to such agreement, Ofer Nemirovsky, a general partner of the general partners
of certain investment funds which participated in such offering, was nominated
and elected to the Board of Directors. This Agreement terminated upon
consummation of the Company's initial public offering offering in July 1996.
In connection with its purchase of Series B Preferred Stock, Hewlett-Packard
Company was granted a right of first refusal, for as long as it owns at least
36,603 shares of Common Stock, with respect to securities of the Company which
the Company proposes to sell in private placements to designated computer
hardware manufacturers and other companies that derive a majority of their
revenues from the sale of computer hardware.
Included in revenues generated from alliance partners during 1996 were
$2,920,000 of software license and $514,450 of consulting services revenues
associated with the development of vertical applications in conjunction with
Internet Business Solutions, Inc. (IBS). IBS, a related party, provided up to
100% of the funding of the purchase of software licenses and consulting
services in return for certain rights in the developed applications.
CONFLICTS OF INTEREST
Conflicts of interest may arise in the course of business transactions
between the Company, its officers, directors and principal stockholders, and
their affiliates. The Company believes that the transactions described above
were at terms no less favorable than the Company would have obtained from
unaffiliated third parties. In connection with the Company's initial public
offering, the Company adopted a policy that all future transactions between
the Company and its officers, directors or other affiliates (other than
compensation and employment matters) be reviewed by the Board of Directors on
an on-going basis and submitted to the Audit Committee or other comparable
body for review where appropriate.
14
<PAGE>
PRINCIPAL AND MANAGEMENT STOCKHOLDERS
The following table sets forth, to the best knowledge and belief of the
Company, certain information regarding the beneficial ownership of the
Company's Common Stock as of the date indicated by (i) each person known by
the Company to be the beneficial owner of more than 5% of the outstanding
Common Stock as of December 31, 1996, (ii) each of the Company's Directors as
of the Record Date, (iii) each of the named executive officers in the Summary
Compensation Table as of the Record Date, and (iv) all of the Company's
executive officers and Directors as a group as of the Record Date.
<TABLE>
<CAPTION>
DIRECTORS, OFFICERS AND 5% STOCKHOLDERS (1) NUMBER (1) PERCENTAGE (2) (3)
------------------------------------------- ---------- ------------------
<S> <C> <C>
Sundar Subramaniam (4)........................ 2,742,137 18.3
219 Vassar Street
Cambridge, MA 02139
Harrington Trust Limited, as Trustee of the
Appleby Trust ............................... 2,722,123 18.2
Cedar House, 41 Cedar Avenue
Hamilton, Bermuda HM 12
Legacy Investment Partnership (5)............. 1,333,333 8.9
219 Vassar Street
Cambridge, MA 02139
Putnam Investments, Inc. (6).................. 1,215,305 8.1
One Post Office Square
Boston, MA 02109
J&S Limited Partnership (7)................... 981,978 6.6
219 Vassar Street
Cambridge, MA 02139
NAMED EXECUTIVE OFFICERS & DIRECTORS:
NAMED EXECUTIVE OFFICERS:
Klaus P. Besier............................... 1,111,667(8) 7.4
John Burke.................................... 0 *
John S. Coviello.............................. 50,000(8) *
Mark J. Gallagher............................. 76,493(8) *
Joseph Gruttadauria........................... 13,333(8) *
James G. Nondorf.............................. 200,000 1.3
Eric Sockol................................... 0 *
DIRECTORS:
Albert Carnesale.............................. 0 *
Manuel Diaz................................... 0 *
Stephen R. Levy............................... 33,333 *
Ofer Nemirovsky (9)........................... 481,347 3.2
All directors and named executive officers as
a group (13 persons) (10).................... 4,722,464 30.6
</TABLE>
- - --------
* Represents less than 1% of the outstanding shares.
(1) Beneficial ownership is determined in accordance with rules of the
Securities and Exchange Commission and includes general voting power
and/or investment power with respect to securities. Shares of Common
Stock subject to options currently exercisable or exercisable within 60
days after the Record Date ("Currently Exercisable Options") are deemed
outstanding for computing the percentage of a person holding such options
but are not deemed outstanding for computing the percentage of any other
person. For purposes of this table, stock options subject to acceleration
upon the occurrence of events other than the passage of time are not
deemed to be Currently Exercisable Options.
(2) Information with respect to beneficial owners of more than 5% of the
outstanding shares of Common Stock is based solely on information
provided to the Company and reported to the Commission on Schedules 13G
filed as of February 14, 1997.
15
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(3) All percentages have been determined as of the Record Date in accordance
with Rule 13d-3 under the Exchange Act. As of the Record Date, a total of
approximately 14,991,878 shares of Common Stock were issued and
outstanding and a total of 740,002 shares of Common Stock were subject to
Currently Exercisable Options.
(4) Does not include 981,978 shares held by J&S Limited Partnership in which
Mr. Subramaniam holds a 50% beneficial interest but over which Mr.
Subramaniam exercises no voting or investment power.
(5) John J. Donovan, Jr. is the managing partner of Legacy Investment
Partnership and has exclusive voting and investment power over these
shares, and, as such, may be deemed the beneficial owner of these shares.
(6) Represents 1,070,205 shares held by Putnam Investment Management, Inc.,
and 145,100 shares held by The Putnam Advisory Company, Inc., each a
wholly owned subsidiary of Putnam Investments, Inc., which is a wholly
owned subsidiary of Marsh & McLennan Companies, Inc., 1166 Avenue of the
Americas, New York, NY 10036.
(7) John J. Donovan, Sr. is the president and sole stockholder of Controller
Corp., Inc., the general partner of J&S Limited Partnership, and, as
such, may be deemed the beneficial owner of these shares.
(8) Includes the following number of shares subject to Currently Exercisable
Options: (i) for Mr. Besier, 85,000 shares; (ii) for Mr. Coviello, 50,000
shares, (iii) for Mr. Gallagher, 75,000 shares; and (iv) for Mr.
Gruttadauria, 13,333 shares. For all of the foregoing stock options, the
exercise price is greater than fair market value of the underlying shares
as of the Record Date.
(9) Includes (i) 457,280 shares of Common Stock held by Hancock Venture
Partners IV-Direct Fund L.P. and (ii) 24,067 shares of Common Stock held
by Falcon Ventures II, L.P., of which partnerships Mr. Nemirovsky is a
general partner of the respective general partners, but as to which Mr.
Nemirovsky disclaims beneficial ownership.
(10) Includes 436,666 shares subject to Currently Exercisable Options
(including 13,333 options held by Craig Newfield, General Counsel and
Secretary) and 821 shares held by Mr. Newfield.
MARKET VALUE
On December 31, 1996, the closing price of a share of the Company's Common
Stock on the Nasdaq National Market was $7.813.
EXPENSES OF SOLICITATION
The Company will pay the entire expense of soliciting proxies for the Annual
Meeting. In addition to solicitations by mail, certain Directors, officers and
regular employees of the Company (who will receive no compensation for their
services other than their regular compensation) may solicit proxies by
telephone, telegram or personal interview. Banks, brokerage houses,
custodians, nominees and other fiduciaries have been requested to forward
proxy materials to the beneficial owners of shares held of record by them and
such custodians will be reimbursed for their expenses.
SUBMISSION OF STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Stockholder proposals intended to be presented at the Company's 1998 annual
meeting of stockholders must be received by the Company on or before December
8, 1997 in order to be considered for inclusion in the Company's proxy
statement and form of proxy for that meeting. The Company's By-laws provide
that any stockholder of record wishing to have a stockholder proposal
considered at an annual meeting must provide written notice of such proposal
and appropriate supporting documentation, as set forth in the By-laws, to the
Company at its principal executive office not less than 75 days or more than
120 days prior to the first anniversary of the date of the preceding year's
annual meeting. In the event, however, that the annual meeting is scheduled to
be held more than 30 days before such anniversary date or more than 60 days
after such anniversary
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date, notice must be so delivered not later than (i) the 15th day after the
date of public disclosure of the date of such meeting or (ii) the 75th day
prior to the scheduled date of such meeting. Any such proposal should be
mailed to: Secretary, OneWave, Inc., One Arsenal Marketplace, 2nd Floor,
Watertown, MA 02172.
PROPOSAL 2
RATIFICATION OF INDEPENDENT ACCOUNTANTS
Although Delaware law does not require that the selection by the Board of
Directors of the Company's independent accountants be approved each year by
the stockholders, the Board of Directors believes it is appropriate to submit
the selection of independent accountants to the stockholders for their
approval and to abide by the result of the stockholders' vote. The Board of
Directors recommends that the stockholders ratify the selection of Arthur
Andersen & Co. LLP as the Company's independent accountants for fiscal 1997.
The Company expects that a representative of Arthur Andersen & Co. LLP will
attend the annual meeting, and will be given the opportunity to make a
statement if he or she wishes to do so. This representative is also expected
to be available to respond to questions from stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
SELECTION OF ARTHUR ANDERSEN & CO. LLP AS INDEPENDENT ACCOUNTANTS.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and Directors, and persons who own more than 10% of the Company's
outstanding shares of Common Stock (collectively, "Section 16 Persons"), to
file initial reports of ownership and reports of changes in ownership with the
Commission and Nasdaq. Section 16 Persons are required by Commission
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 by it, or
written representations from certain Section 16 Persons that no Section 16(a)
reports were required for such persons, the Company believes that during
Fiscal 1996, the Section 16 Persons complied with all Section 16(a) filing
requirements applicable to them.
OTHER MATTERS
The Board of Directors does not know of any matters other than those
described in this Proxy Statement which will be presented for action at the
Annual Meeting. If other matters are duly presented, proxies will be voted in
accordance with the best judgment of the proxy holders.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, YOU ARE
REQUESTED TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE
ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
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OneWave, Inc.
One Arsenal Marketplace
Watertown, Massachusetts, 02172
Annual Meeting of Shareholders - May 7, 1997
Proxy Solicited on Behalf of the Board of Directors
The undersigned, revoking all prior proxies, hereby appoints Klaus P. Besler,
Mark J. Gallagher and Craig Newfeld as proxies, with full power of substitution
to each, to vote for and on behalf of the undersigned at the 1997 Annual Meeting
of Shareholders of OneWave, Inc. to be held at Exchange Place, 53 State Street,
Boston, Massachusetts 02109, on Wednesday, May 7, 1997, at 9:00 a.m., and at any
adjournment or adjustments thereof. The undersigned hereby directs the said
proxies to vote in accordance with their judgment on any matters which may
properly come before the Annual Meeting, all as indicated in the Notice of
Annual Meeting, receipt of which is hereby acknowledged, and to act on the
following matters set forth in such notice as specified by the undersigned.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED HEREIN BY THE
UNDERSIGNED SHAREHOLDER(S), IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED
"FOR" PROPOSALS 1 AND 2.
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PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
- - --- ENVELOPE. --
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Please sign exactly as your name(s) appear(s) on the books of the Company.
Joint owners should each sign personally. Trustees, custodians, and other
fiduciaries should indicate the capacity in which they sign, and where more
than one name appears, a majority must sign. If the shareholder is a
corporation, the signature should be that of an authorized officer who should
indicate his or her title.
- - --------------------------------------------------------------------------------
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
- - ---------------------------- ---------------------------------
- - ---------------------------- ---------------------------------
- - ---------------------------- ---------------------------------
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[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
============================================================================
ONEWAVE, INC.
============================================================================
RECORD DATE SHARES:
----------------------------
Please be sure to sign and date this Proxy. Date
- - --------------------------------------------------------------------------------
Shareholders sign here Co-owner sign here
------------------ ------------------
1. Election of Director.
With-
For hold
Ofer Nemirovsky [_] [_]
Note: If you do not make any box, your shares will be withheld from this
vote.
For Against Abstain
2. Ratification of the appointment of Arthur [_] [_] [_]
Andersen LLP as independent auditors of
the Company.
3. In their discretion, the proxies are authorized to vote upon any other
business that may properly come before the meeting or at any adjournment(s)
thereof.
Mark box at right if an address change or comment has been noted on [_]
the reverse side of this card.
DETACH CARD DETACH CARD
ONEWAVE, INC.
Dear Shareholder,
Please take note of the important information with the Proxy Ballot. There are
a number of issues related to the management and operation of your Corporation
that require your immediate attention and approval. These are discussed in
detail in the enclosed proxy materials.
Your vote counts, and you are strongly encouraged to exercise your right to vote
your shares.
Please mark boxes on this proxy card to indicate how your shares are voted.
Then sign the card, detach it and return your proxy vote in the enclosed postage
paid envelope.
Your vote must be received prior to the Annual Meeting of Shareholders,
May 7, 1997.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
ONEWAVE, INC.
