SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
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 Rule 14a-11(c) or Rule 14a-12
Object Design, Inc.
(Name of Registrant as Specified In Its Charter)
Not Applicable
(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:*
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
* Set forth the amount on which the filing fee is calculated and
state how it was determined.
[ ] 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>
OBJECT DESIGN, INC.
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 27, 1998
----------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Object
Design, Inc. (the "Company") will be held at the offices of the Company, 25
Mall Road, Burlington, Massachusetts, on Wednesday, May 27, 1998, beginning at
10:00 A.M., local time, for the following purposes:
1. To consider and vote upon the election of two Class II Directors;
2. To act upon a proposal to amend the Company's 1996 Incentive and
Nonqualified Stock Option Plan to increase the number of shares of Common
Stock available for grant thereunder by 1,000,000; and
3. To transact such further business as may properly come before the
Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on Wednesday, April
8, 1998 as the record date for the determination of the stockholders of the
Company entitled to notice of, and to vote at, the Meeting and any adjournment
thereof. Only stockholders of record on such date are entitled to notice of,
and to vote at, the Meeting or any adjournment thereof.
By Order of the Board of Directors,
JOHN D. PATTERSON, JR.
Secretary
Burlington, Massachusetts
April 22, 1998
YOUR VOTE IS IMPORTANT
Please sign and return the enclosed proxy, whether or not you
plan to attend the Meeting.
<PAGE>
OBJECT DESIGN, INC.
25 Mall Road
Burlington, Massachusetts 01803
(781) 674-5000
----------------
PROXY STATEMENT
----------------
ANNUAL MEETING OF STOCKHOLDERS
May 27, 1998
This Proxy Statement and the enclosed form of proxy are being mailed to
stockholders on or about April 22, 1998 in connection with the solicitation by
the Board of Directors of Object Design, Inc. (the "Company") of proxies to be
used at the Annual Meeting of Stockholders of the Company, to be held at the
offices of the Company, 25 Mall Road, Burlington, Massachusetts, at 10:00 A.M.
on Wednesday, May 27, 1998, and at any and all adjournments thereof (the
"Annual Meeting"). When proxies are returned properly executed, the shares
represented will be voted in accordance with the stockholders' directions.
Stockholders are encouraged to vote on the matters to be considered. If no
choice has been specified by a stockholder, however, the shares covered by any
executed proxy will be voted as recommended by management. Any stockholder may
revoke his proxy at any time before it has been exercised.
The Board of Directors of the Company has fixed the close of business on
Wednesday, April 8, 1998 as the record date for the determination of the
stockholders of the Company entitled to notice of, and to vote at, the Annual
Meeting and any adjournment thereof. Only stockholders of record on such date
are entitled to notice of, and to vote at, the Annual Meeting and any
adjournment thereof. At the close of business on the record date, there were
issued and outstanding 27,682,596 shares of the Company's Common Stock, $.001
par value (the "Common Stock"), entitled to cast 27,682,596 votes.
QUORUM AND TABULATION OF VOTES
The By-Laws of the Company provide that a quorum at the Annual Meeting
shall consist of a majority in interest of all stock issued and outstanding and
entitled to vote at the Annual Meeting. Shares of Common Stock represented by a
properly signed and returned proxy will be treated as present at the Annual
Meeting for purposes of determining a quorum. In general, votes withheld from
any nominee for election as Director, abstentions (if applicable) and broker
"non-votes" (if applicable) are counted as present or represented for purposes
of determining the presence or absence of a quorum for the Annual Meeting. A
"non-vote" occurs when a broker or nominee holding shares for a beneficial
owner votes on one proposal, but does not vote on another proposal because, in
respect of such other proposal, the broker or nominee does not have
discretionary voting power and has not received instructions from the
beneficial owner.
The affirmative vote of a plurality of the shares of Common Stock properly
cast at the Annual Meeting will be necessary to elect each Class II Director.
Abstentions, votes "withheld" from Director-nominees and broker "non-votes"
will not be included in calculating the number of votes cast on Proposal One.
The affirmative vote of a majority of the shares of Common Stock properly
cast at the Annual Meeting will be necessary to approve Proposal Two, the
proposal to amend the Company's 1996 Incentive and Nonqualified Stock Option
Plan. Abstentions and broker "non-votes" will not be included in calculating
the number of votes cast on Proposal Two.
<PAGE>
Votes will be tabulated by the Company's transfer agent, Boston EquiServe.
The vote on each matter submitted to stockholders will be tabulated separately.
PROPOSAL ONE
ELECTION OF DIRECTORS
The Board of Directors is divided into three classes, one of which is
elected each year at the Annual Meeting of Stockholders for a three-year term
of office. A Director holds office until the date of the third annual meeting
following his election and thereafter until his successor is elected and
qualified or until he sooner dies, resigns, is removed, or becomes
disqualified. The terms of the Company's Class II Directors (currently Arthur
J. Marks and Steven C. Walske) will expire immediately following the Annual
Meeting. Class III Directors (currently Robert N. Goldman and Kevin J. Burns)
will serve until 1999, and Class I Directors (currently Gerald B. Bay and David
A. Litwack) will serve until 2000.
The Board of Directors has nominated Arthur J. Marks and Steven C. Walske
for re-election as Class II Directors of the Company. If re-elected, Messrs.
Marks and Walske will serve until 2001. Messrs. Marks and Walske have agreed to
serve if elected, and the Company has no reason to believe that either will be
unable to serve. In the event that either Mr. Marks or Mr. Walske is unable or
declines to serve as a Director at the time of the Annual Meeting, proxies will
be voted for such other nominee as is then designated by the Board.
The Board of Directors recommends that you vote FOR the proposal to elect
Arthur J. Marks and Steven C. Walske as Class II Directors of the Company.
PROPOSAL TWO
AMENDMENT TO THE 1996 INCENTIVE AND NONQUALIFIED STOCK
OPTION PLAN TO INCREASE THE NUMBER OF SHARES OF
COMMON STOCK THAT MAY BE ISSUED UPON EXERCISE OF OPTIONS
GRANTED THEREUNDER
The Company's 1996 Incentive and Nonqualified Stock Option Plan (the "1996
Stock Option Plan") provides that the total number of shares of Common Stock
that may be issued pursuant to options granted under the 1996 Stock Option Plan
shall not exceed 2,700,000 (subject to adjustment upon certain changes in
capitalization of the Company). On April 2, 1998, the Board voted to adopt, and
to submit to the stockholders of the Company for their approval, an amendment
to the 1996 Stock Option Plan to increase by 1,000,000 shares the number of
shares of Common Stock that may be issued pursuant to options granted
thereunder. See "1996 Stock Option Plan" for a description of the material
features of the 1996 Stock Option Plan, as amended, the classes of persons
eligible to participate therein, the approximate number of persons in each such
class and the basis of such participation, and the reasons for the amendment.
The Board recommends that you vote FOR the proposal to approve the
amendment of the 1996 Stock Option Plan.
2
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
executive officers and Directors of the Company:
<TABLE>
<CAPTION>
Name Age Position
- -------------------------------- ----- -----------------------------------------------------
<S> <C> <C>
Robert N. Goldman .............. 48 President, Chief Executive Officer and Director
Justin J. Perreault ............ 35 Executive Vice President and Chief Operating Officer
Lacey P. Brandt ................ 40 Chief Financial Officer and Treasurer
Kirk Bowman .................... 32 Vice President, Worldwide Sales
Brian W. Otis .................. 39 Vice President, Professional Services
Gregory A. Baryza .............. 50 Vice President, Product Development
Gerald B. Bay(1)(2) ............ 58 Director
Kevin J. Burns(1) .............. 48 Director
David A. Litwack(2) ............ 51 Director
Arthur J. Marks(1)(2) .......... 53 Director
Steven C. Walske ............... 46 Director
</TABLE>
- ----------
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
Mr. Goldman was elected President and Chief Executive Officer of the
Company in November 1995. He has been a Director of the Company since August
1995. Prior to joining the Company, Mr. Goldman was Chairman of Trinzic
Corporation, a supplier of client/server development software, from 1992 to
1995. Trinzic was formed by a merger of AICorp and AION Corporation in 1992.
From 1986 to 1992, Mr. Goldman served as President and Chief Executive Officer
of AICorp, a supplier of artificial intelligence software. Mr. Goldman is a
member of the Board of Directors of Citrix Systems, Inc., INTERSOLV, Inc.,
Parametric Technology Corporation and Systemsoft Corporation.
Mr. Perreault joined the Company as Executive Vice President and Chief
Operating Officer in November 1995. From 1992 to 1995, Mr. Perreault was a Vice
President with the Harvard Private Capital Group, Inc., which manages the
direct investment portfolio of the Harvard University endowment fund and is a
wholly-owned subsidiary of the President and Fellows of Harvard College. From
May 1995 to December 1995, he served on the Board of
Directors of the Company as the representative of the Harvard Private Capital
Group, Inc. From 1990 to 1992, Mr. Perreault was a management consultant with
McKinsey & Co., Inc. Mr. Perreault is a member of the Board of Directors of
Kentek Information Systems, Inc.
Ms. Brandt joined the Company as Chief Financial Officer in April 1996.
From September 1995 to April 1996, Ms. Brandt served as Director of Finance,
Controller and Treasurer of International Integration Incorporated, a systems
integration company. From 1993 to September 1995, Ms. Brandt was Director of
Investor Relations at Proteon, Inc., a data networking company. From 1991 to
1992, Ms. Brandt was Finance Manager at AICorp.
Mr. Bowman joined the Company as Vice President, Worldwide Sales in April
1997. From January 1990 to April 1997, Mr. Bowman was employed in various
management and sales positions at Parametric Technology Corporation, a
mechanical design automation software firm. From June 1987 to December 1989,
Mr. Bowman was a sales representative at Computervision Corporation, a
mechanical design automation software firm.
Mr. Otis joined the Company as Consulting Manager, Eastern Region in 1993
and was promoted to Vice President, Professional Services in June 1995. From
1987 to 1993, Mr. Otis was a management consultant with Coopers & Lybrand
L.L.P.
3
<PAGE>
Mr. Baryza joined the Company as Director of Engineering Operations in
1993 and was promoted to Vice President, Product Development in August 1995.
From 1988 to 1993, Mr. Baryza was employed in various management and technical
positions at Stratus Computer, Inc., a computer manufacturer.
Mr. Bay has been a Director of the Company since 1988. Since 1980, Mr. Bay
has been a Managing Partner of The Vista Group, a venture capital firm. Mr. Bay
served as interim President of the Company from August to November 1995.
Mr. Burns has been a Director of the Company since October 1997. Since
1990, Mr. Burns has been Chairman of the Board of INTERSOLV, Inc., a developer
of application enablement software for client/server and Internet-based
information systems. Mr. Burns was the Chief Executive Officer of INTERSOLV,
Inc. from 1986 to 1996, respectively. Mr. Burns serves as a Director of FTP
Software, Inc.
Mr. Litwack has been a Director of the Company since December 1997. Since
May 1997, Mr. Litwack has been President and Chief Executive Officer of
SilverStream Software, Inc., a software development company. Mr. Litwack was
Vice President of Product Development of Powersoft Corporation, a software
company focusing on client/server development tools, from 1988 until 1992, and
then served as President of Powersoft from 1992 until the company's merger with
Sybase Inc., a provider of database management systems and related tools. From
the time of the merger until May 1997, Mr. Litwack was Executive Vice President
of Sybase Inc.
Mr. Marks has been a Director of the Company since 1990. Since 1984, Mr.
Marks has been a General Partner of New Enterprise Associates, a venture
capital firm. Mr. Marks is a Director of AMISYS Managed Care Systems, Inc.,
Platinum Software, Inc., NETRIX Corporation, and Progress Software Corporation.
Mr. Walske has been a Director of the Company since 1994. Since 1994, Mr.
Walske has been Chairman of the Board and Chief Executive Officer of Parametric
Technology Corporation, a mechanical design automation software firm. From 1986
to 1994, Mr. Walske was President and Chief Executive Officer of Parametric
Technology Corporation. Mr. Walske is a Director of Synopsys, Inc. and
VideoServer, Inc.
Executive officers of the Company are elected annually by the Board of
Directors and serve until the first meeting of the Directors following the next
annual meeting of stockholders and until their respective successors are duly
elected and qualified. There are no family relationships among the Directors
and executive officers of the Company.
Committees and Meetings of the Board
During the fiscal year ended December 31, 1997 ("fiscal 1997"), the Board
met five times and acted by unanimous written consent three times. No incumbent
Director attended fewer than 75% of the total number of meetings held by the
Board and Committees of the Board on which he served.
The Company has a Compensation Committee and an Audit Committee but does
not have a nominating committee or other committee performing similar
functions. The Compensation Committee makes recommendations concerning salaries
and incentive compensation for employees of and consultants to the Company and
administers the Company's stock option plans, its Employee Stock Purchase Plan
and the 401(k) Plan. The members of the Compensation Committee currently are
Messrs. Bay, Litwack and Marks. The Compensation Committee held four meetings
during fiscal 1997 and acted eight times by unanimous written consent during
the year. The Audit Committee reviews the results and scope of the audit and
other services provided by the Company's independent accountants. The members
of the Audit Committee currently are Messrs. Bay, Burns and Marks. The Audit
Committee met four times during fiscal 1997.
4
<PAGE>
REMUNERATION OF DIRECTORS AND EXECUTIVE OFFICERS
Directors' Compensation
Each non-employee Director of the Company receives $2,500 for each Board
of Directors meeting attended and $500 for each Committee meeting attended and
is reimbursed, upon request, for expenses incurred in attending such meetings.
Directors who are employees of the Company are not paid any separate fees for
serving as Directors.
Under the 1996 Stock Option Plan, non-employee Directors ("Outside
Directors") of the Company receive automatic formula grants of nonqualified
options. Each new Outside Director elected to the Board is automatically
granted, upon his or her initial election, a nonqualified option to purchase
25,000 shares of Common Stock of the Company, vesting in equal installments on
the first three anniversaries of the date of grant (provided that he then
remains a Director of the Company). During 1997, each of Messrs. Burns and
Litwack received such a nonqualified option to purchase 25,000 shares.
Immediately following each annual meeting of stockholders of the Company or
special meeting in lieu thereof, there is automatically granted to each Outside
Director re-elected at or remaining in office after such meeting a fully-vested
nonqualified option to purchase 5,000 shares of Common Stock, provided that no
such option will be granted to any Outside Director who at the time of the
meeting holds any outstanding unvested option granted pursuant to the formula
grant provisions of the 1996 Stock Option Plan, unless at least two annual
meetings of stockholders of the Company or special meetings in lieu thereof
have intervened between the closing of the Company's initial public offering in
July 1996 (or, if later, the date of the initial election of such Outside
Director) and the meeting following which such automatic grant would occur.
Each additional nonqualified option granted to an Outside Director pursuant to
this provision of the 1996 Stock Option Plan will expire on the tenth
anniversary of the date of grant. The exercise price of each such nonqualified
option will be equal to the fair market value of the Common Stock on the date
the nonqualified option is granted.
Executive Compensation
Summary Compensation Table. The following table provides certain summary
information concerning compensation earned by the Company's Chief Executive
Officer, by the Company's four other most highly compensated executive officers
who earned in excess of $100,000 during the fiscal year indicated and who were
serving as executive officers at the end of fiscal 1997 and by two additional
individuals who would have been included among the Company's four most highly
compensated executive officers but for the fact that the individuals were not
serving as executive officers of the Company at the end of fiscal 1997
(collectively, the "Named Executive Officers") for services rendered in all
capacities to the Company.
5
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
-------------------------------------------- -------------
Other Annual Securities All Other
Compen- Underlying Compen-
Name and Principal Position Year Salary ($) Bonus ($) sation ($)(1) Options (#) sation ($)(2)
- ----------------------------- ------ ------------ ----------- --------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Robert N. Goldman ........... 1997 $199,280 -- -- -- $1,033
President and Chief 1996 176,700 $131,650 -- -- 487
Executive Officer (3) 1995 47,726 -- -- 2,300,000 484
Justin J. Perreault ......... 1997 159,973 -- -- 50,000 291
Executive Vice President 1996 148,800 30,600 -- -- 410
and Chief Operating 1995 22,759 -- -- 460,000 421
Officer (4)
Kirk Bowman ................. 1997 177,138 -- -- 250,000 --
Vice President, Worldwide 1996 -- -- -- -- --
Sales 1995 -- -- -- -- --
Brian W. Otis ............... 1997 140,330 -- -- 25,000 263
Vice President, 1996 160,984 29,725 -- 100,000 344
Professional Services (5) 1995 164,508 -- -- 54,000 228
Gregory A. Baryza ........... 1997 114,157 -- -- 20,000 1,033
Vice President, Product 1996 107,470 19,044 -- 65,000 296
Development 1995 114,885 -- -- 65,000 284
John Parillo ................ 1997 150,574 -- -- 70,000 1,094
Vice President, Business 1996 -- -- -- -- --
Development and Indirect 1995 -- -- -- -- --
Channels (6)
Melissa Webster ............. 1997 122,524 -- -- -- 680
Vice President, 1996 82,343 -- -- -- 418
Marketing (7) 1995 -- -- -- -- --
</TABLE>
- ----------
(1) Other annual compensation in the form of perquisites and other personal
benefits has been omitted because in each case the aggregate amount of
such perquisites and other personal benefits was less than $50,000 and
constituted less than 10% of the executive's total annual salary and
bonus.
(2) Consists of premiums paid on behalf of the named executives for excess life
insurance coverage.
(3) Mr. Goldman's 1995 annual compensation includes $20,700 paid to him for his
services as a consultant to the Company prior to his becoming an employee
of the Company in November 1995. Mr. Goldman's 1995 salary was $176,700 on
an annualized basis.
(4) Mr. Perreault joined the Company as an employee in November 1995. Mr.
Perreault's 1995 salary was $148,800 on an annualized basis.
(5) Mr. Otis's salary in 1995 included a $6,000 automobile allowance. Amounts
shown as salary for 1995, 1996 and 1997 include $73,656, $35,185 and
$5,372 of sales-based commissions, respectively.
(6) Mr. Parillo resigned as Vice President, Business Development and Indirect
Channels, effective February 13, 1998. Amount shown as salary for 1997
includes $35,000 of sales-based commissions.
(7) Ms. Webster resigned as Vice President, Marketing, effective November 14,
1997.
6
<PAGE>
Option Grants in Last Fiscal Year. The following table sets forth for each
of the Named Executive Officers certain information concerning stock options
granted by the Company during fiscal 1997.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
---------------------------------------------------------------
Potential Realizable
Value at Assumed
Percent of Annual Rate of
Number of Total Options Stock Price
Securities Granted to Appreciation
Underlying Employees Exercise for Option Term (1)
Options in Fiscal Price Expiration -------------------------
Name Granted (#)(2) Year (3) ($/sh) (4) Date 5%($) 10%($)
- -------------------------- ---------------- -------------- ------------ ------------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Robert N. Goldman ........ -- -- -- -- -- --
Justin J. Perreault ...... 50,000 2.6% $ 9.00 October 27, 2007 $283,003 $ 717,184
Kirk Bowman .............. 250,000 13.0% 5.50 April 22, 2007 864,730 2,191,396
Brian W. Otis ............ 25,000 1.3% 6.75 July 17, 2007 106,126 268,944
Gregory A. Baryza ........ 20,000 1.0% 6.75 July 17, 2007 84,901 215,155
John Parillo ............. 50,000 2.6% 8.63 January 22, 2007 271,211 687,301
20,000 1.0% 5.50 April 22, 2007 69,178 175,312
Melissa Webster .......... -- -- -- -- -- --
</TABLE>
- ----------
(1) Amounts reported in this column represent hypothetical values that may be
realized upon exercise of the options immediately prior to the expiration
of their term, assuming the specified compounded rates of appreciation of
the price of the Common Stock over the term of the options. These numbers
are calculated based on rules promulgated by the Securities and Exchange
Commission and do not represent the Company's estimate of future stock
price growth. Actual gains, if any, on stock option exercises and Common
Stock holdings are dependent on the timing of such exercise and the future
performance of the Common Stock. There can be no assurance that the rates
of appreciation assumed in this table can be achieved or that the amounts
reflected will be received by the Named Executive Officers. This table
does not take into account any appreciation in the price of the Common
Stock from the date of grant to the current date. The values shown are net
of the option exercise price, but do not include deductions for taxes or
other expenses associated with the exercise.
(2) Represents shares of Common Stock issuable upon exercise of stock options
granted under the 1996 Stock Option Plan. Such options were granted during
fiscal 1997 and vest as follows: 25% of the total number of shares one
year after their date of grant and an additional 6.25% at the end of each
three-month period thereafter until the options are fully vested.
(3) The Company granted to employees options to purchase an aggregate of
1,923,500 shares of Common Stock in fiscal 1997 pursuant to the following
plans: 1,266,600 options pursuant to the 1996 Stock Option Plan and
656,900 options pursuant to the 1997 Nonqualified Stock Option Plan.
(4) All options were granted at fair market value as determined by the
Compensation Committee on the date of grant.
7
<PAGE>
Option Exercises and Fiscal Year-End Values. The following table sets
forth certain information concerning stock options exercised during fiscal 1997
and stock options held as of December 31, 1997 by each of the Named Executive
Officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised
Shares Options at
Acquired Fiscal Year-End
on Value -------------------------------------
Name Exercise (#) Realized ($)(1) Exercisable (#) Unexercisable (#)
- ------------------------- -------------- ----------------- ----------------- -------------------
<S> <C> <C> <C> <C>
Robert N. Goldman ....... -- -- -- --
Justin J. Perreault ..... -- -- -- 50,000
Kirk Bowman ............. -- -- -- 250,000
Brian W. Otis ........... 18,418 $117,507 57,415 103,167
Gregory A. Baryza ....... -- -- 65,479 84,521
John Parillo ............ -- -- -- 70,000
Melissa Webster ......... 15,000 105,900 22,500 62,500
<CAPTION>
Value of Unexercised
in-the-Money
Options at Fiscal
Year-End ($)(2)
------------------------------------
Name Exercisable ($) Unexercisable ($)
- ------------------------- ----------------- ------------------
<S> <C> <C>
Robert N. Goldman ....... -- --
Justin J. Perreault ..... -- --
Kirk Bowman ............. -- $720,000
Brian W. Otis ........... $390,725 578,211
Gregory A. Baryza ....... 478,218 493,532
John Parillo ............ -- 57,600
Melissa Webster ......... 143,550 398,750
</TABLE>
- ----------
(1) Value is based on the difference between the fair market value of the
Common Stock on the date of exercise of the applicable option and the
exercise price of such option. These values may never be realized. Actual
gains, if any, will depend on the value of the Common Stock on the date of
the sale of the shares.
(2) Value is based on the last sale price of the Common Stock ($8.375 per
share) on December 31, 1997 as reported by the Nasdaq National Market,
less the applicable option exercise price. These values have not been and
may never be realized. Actual gains, if any, on exercise will depend on
the value of the Common Stock on the date of the sale of the shares.
Employment Agreements
In November 1995, the Company executed employment agreements with Robert
N. Goldman and Justin J. Perreault. The Company agreed to employ Messrs.
Goldman and Perreault as President and Chief Executive Officer of the Company
and Executive Vice President and Chief Operating Officer of the Company, at
annual salaries of at least $190,000 and $160,000, respectively. In connection
with an expense reduction program implemented by the Company in late 1995, the
salaries of its executive officers, including Messrs. Goldman and Perreault,
were voluntarily reduced. Messrs. Goldman and Perreault received salaries at
the rate of $176,700 and $148,800 per year, respectively, during 1996. For
1997, Mr. Goldman's annual salary was increased to $200,000, and Mr.
Perreault's annual salary was restored to $160,000. If the employment of the
officer is terminated by the Company for any reason other than just cause,
death or permanent disability, the agreements require the Company to continue
to pay the officer's salary for a period of twelve months, in the case of Mr.
Goldman, or six months in the case of Mr. Perreault, after such termination,
offset by any amounts received by the officer from subsequent employment during
such period.
In connection with their employment, these officers and all other
executive officers of the Company have also executed the Company's standard
Non-Competition, Non-Disclosure and Developments Agreement (the "Non-
Competition Agreement"). This agreement contains covenants prohibiting the
improper disclosure of confidential information at any time, as well as
provisions assigning to the Company all inventions made or conceived by the
officer during his employment with the Company. Each officer agreed with the
Company that, with certain exceptions, until one year after the termination of
his employment with the Company, he would not participate in any capacity in
any business activities competitive with those of the Company. Each officer
further agreed not to participate in any capacity in soliciting the business of
any customers or the services of any employees of the Company during such
one-year period.
8
<PAGE>
Compensation Committee Interlocks and Insider Participation
The Compensation Committee established by the Board of Directors is
currently composed of three non-employee Directors. During fiscal 1997, the
Compensation Committee consisted of two non-employee Directors. Until the
resignation of Scott Sperling as a Director of the Company, the Compensation
Committee consisted of Arthur J. Marks and Scott Sperling. After Mr. Sperling's
resignation, the Committee consisted of Mr. Marks and Gerald B. Bay. In
February 1998, David A. Litwack was elected to the Committee. Except as set
forth below, no executive officer of the Company served during 1997 on the
Board of Directors or compensation committee of any entity, one of whose
executive officers also served on the Board of Directors or Compensation
Committee of the Company. During 1997, Mr. Goldman, the Company's Chairman of
the Board, President and Chief Executive Officer, served as a Director of
Parametric Technology Corporation, of which Steven C. Walske, a Director of the
Company, is Chairman of the Board and Chief Executive Officer. Mr. Goldman also
served as a member of the compensation committee of Parametric Technology
Corporation during 1997.
Compensation Committee Report on Executive Compensation
The Compensation Committee of the Board of Directors determines the
remuneration and benefits of the Company's executive officers and other senior
management, administers the Company's stock option plans and Employee Stock
Purchase Plan and makes determinations with respect to the granting of stock
options, and acts in an advisory capacity to the Board of Directors concerning
other compensation issues.
Compensation Policy
The Compensation Committee's policy with respect to compensation of the
Company's Chief Executive Officer and other executive officers includes several
elements: (i) the payment of competitive base salaries so as to attract and
retain highly qualified personnel, (ii) the use of incentive compensation in
the form of cash bonuses to reward the achievement of Company financial goals,
measured generally by earnings per share, and of individual performance goals,
including financial objectives such as achievement of budgeted expense and
profitability levels, as well as technical and market development goals, (iii)
in appropriate instances, the payment of sales-based commissions to reward
contributions to revenue growth, and (iv) the granting of stock options to
maintain competitive levels of total compensation to assist the Company in
recruiting and retaining personnel, as well as to align management's interests
with those of shareholders and to motivate executives to pursue the long-term
success of the Company. The Committee intends that the Company's executive
compensation policies be straightforward, easily communicated to and understood
by employees and shareholders, and structured so that the achievement of
Company and individual goals can readily be measured.
Base Salaries
Competitive base salaries are established through the use of published
industry surveys and targeted peer company surveys that examine the
compensation practices of other companies in the software industry as well as
of other high technology companies in the relevant geographic area that might
compete with the Company in hiring or retaining strong performers. The
Committee, utilizing the collected data and applying the members' collective
experience in recruiting and managing in a technical environment, seeks to
establish base salaries that take into account not only competitive factors but
also the breadth of experience and recent individual performance of the
executive. The Committee's objective is not to determine compensation levels,
in general or for specific positions, by seeking to achieve a specific
percentile rank in comparison to competitors or peers, but rather to fix
compensation levels on a case-by-case basis guided by management's
recommendations and the Committee members' experience and judgment.
Base salaries for the Company's President and Chief Executive Officer,
Robert N. Goldman, and its Executive Vice President and Chief Operating
Officer, Justin J. Perreault, were established at not less than $190,000 and
$160,000, respectively, under employment agreements entered into in November
1995 when Messrs. Goldman and Perreault were recruited to join the Company. In
connection with the expense reduction program implemented by the Company in
late 1995, the salaries of all its executive officers, including Messrs.
Goldman and Perreault, were
9
<PAGE>
voluntarily reduced. As a result, Messrs. Goldman and Perreault received base
salaries at the rate of $176,600 and $148,800 per year, respectively, during
1996. In 1997, Mr. Goldman's salary was increased to $200,000 and Mr.
Perreault's salary was restored to $160,000.
Incentive Compensation
In establishing executive bonus levels, the Compensation Committee begins
by reviewing management's annual strategic and financial plan, as approved by
the Board at the beginning of the year, including Company financial goals and
individual performance goals proposed by the Company's Chief Executive Officer.
The bonus for which an executive officer (other than the Chief Executive
Officer) is eligible is established at this time, and is a percentage,
generally ranging from 15% to 60%, of his annual base salary. The percentage of
this amount, if any, awarded as a bonus at the end of the year is determined by
reference to both the Company's and the executive's performance. The Chief
Executive Officer's bonus is determined based on the attainment of goals
jointly developed and agreed upon between the Chief Executive Officer and the
Committee, and is not fixed as a specific percentage of his base salary. At the
beginning of the year, the Chief Executive Officer presents to the Committee an
analysis of the performance of the individual executives against the overall
corporate financial goals and then personal goals, together with his
recommendations concerning specific management bonuses. After reviewing these
recommendations, the Committee determines whether, and in what amounts, to
award bonuses for the Chief Executive Officer and other executive officers. For
1997, neither Mr. Goldman nor any other executive officer received any cash
bonus, as a result of the Company's failure to achieve its targeted financial
results.
Stock Options
The Compensation Committee believes that stock option grants are an
important element of the Company's executive compensation program, not only to
enable the Company to compete effectively in recruiting and retaining employees
but also in order to align the interests of management with those of the
Company's stockholders. In granting options, the Committee considers, among
other factors, competitive conditions, the executive's experience,
responsibilities and performance, the sizes of other individual grants and the
total number of options outstanding. Option grants are awarded to all executive
officers at the time they are hired, and additional options may be granted
thereafter based upon specific individual or corporate achievements.
Policy Regarding Section 162(m) of the Internal Revenue Code
Section 162(m) of the Internal Revenue Code of 1986, as amended, limits
the deductibility of compensation in excess of $1.0 million paid to the Chief
Executive Officer and the four most highly compensated officers of the Company
(other than the Chief Executive Officer) in any fiscal year, unless the
compensation qualifies as "performance-based compensation." The Compensation
Committee's policy with respect to Section 162(m) is to make every reasonable
effort to cause compensation to be deductible by the Company while
simultaneously providing executive officers of the Company with appropriate
rewards for their performance. The base salaries and bonuses of the Company's
individual executive officers have not historically exceeded, and are not in
the foreseeable future expected to exceed, the $1.0 million limit, and options
received by executive officers under the Company's 1996 Stock Option Plan are
intended to qualify as performance-based compensation.
The Compensation Committee
Gerald B. Bay
David A. Litwack
Arthur J. Marks
10
<PAGE>
Performance Graph
The following Performance Graph compares the performance of the Company's
cumulative stockholder return with that of a broad market index, the Nasdaq
Stock Market Index for U.S. Companies, and a published industry index, the
Hambrecht & Quist Technology Index. The cumulative stockholder returns for
shares of the Company's Common Stock and for the securities included in the
market and industry indexes are calculated assuming $100 was invested at their
last sale prices on July 23, 1996, the date on which the Company's Common Stock
commenced trading on the Nasdaq National Market. The Company paid no cash
dividends during the periods shown. The performance of the market and industry
COMPARISON OF 17 MONTH CUMULATIVE TOTAL RETURN*
AMONG OBJECT DESIGN, INC., THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE HAMBRECHT & QUIST TECHNOLOGY INDEX
[LINE GRAPH]
7/23/96 9/96 12/96 3/97 6/97 9/97 12/97
OBJECT DESIGN, INC. 100 215 157 75 115 110 112
NASDAQ STOCK MARKET (U.S.) 100 117 123 116 138 161 151
HAMBRECHT & QUIST TECHNOLOGY 100 128 137 130 157 190 160
*$100 INVESTED ON 7/23/96 IN STOCK OR INDEX - INCLUDING REINVESTMENT OF
DIVIDENDS. FISCAL YEAR ENDING DECEMBER 31.
11
<PAGE>
1996 STOCK OPTION PLAN
In 1996 the Board adopted and the Company's stockholders approved the 1996
Stock Option Plan. The 1996 Stock Option Plan authorizes (i) the grant of
options to purchase Common Stock intended to qualify as "incentive stock
options" as defined in Section 422 of the Code, and (ii) the grant of options
that do not so qualify (nonqualified stock options). The purpose of the 1996
Stock Option Plan is to provide a performance incentive for officers and
employees of the Company or its subsidiaries and for certain other individuals
providing services to or acting as Directors of the Company or its subsidiaries
by enabling the persons to whom options are granted to acquire or increase a
proprietary interest in the Company and its success.
The 1996 Stock Option Plan, as initially adopted and approved by the
stockholders of the Company on May 23, 1996 (the "Adoption Date"), fixed the
maximum number of shares of Common Stock issuable pursuant to options granted
thereunder at 1,200,000, increasing automatically by 300,000 shares on each of
the first five anniversaries of the Adoption Date, with the result that on and
after May 23, 2001, the maximum number of shares issuable under the 1996 Stock
Plan would have been 2,700,000. On April 2, 1998, the maximum number of shares
of Common Stock issuable under the 1996 Stock Option Plan pursuant to this
formula was 1,500,000 shares, an aggregate of 1,469,706 shares of Common Stock
were reserved for issuance upon the exercise of options outstanding under the
1996 Stock Option Plan, and 15,982 shares had been issued pursuant to the
exercise of options thereunder. As a result, only 14,312 shares remained
available for the grant of options under the 1996 Stock Option Plan as of such
date.
On April 22, 1997, 1997, the Board of Directors adopted the 1997
Nonqualified Stock Option Plan of the Company (the "1997 Plan"). The 1997 Plan
provides for the grant to non-officer employees of the Company of nonqualified
stock options to purchase an aggregate of up to 1,500,000 shares of Common
Stock. Approval of the 1997 Plan by the stockholders of the Company was not
required. Since the adoption of the 1997 Plan, the policy of the Compensation
Committee of the Board has been to utilize the 1996 Stock Option Plan primarily
to grant incentive and nonqualified stock options to officers of the Company.
In addition, automatic formula grants of nonqualified stock options to Outside
Directors are made pursuant to the 1996 Stock Option Plan.
Amendment of the 1996 Stock Option Plan
On April 2, 1998, the Board of Directors voted to adopt, and to submit for
approval by the stockholders of the Company at the Annual Meeting, an amendment
to the 1996 Stock Option Plan, increasing by 1,000,000 the maximum number of
shares of Common Stock issuable pursuant to options issued thereunder. If
approved at the Annual Meeting, the additional 1,000,000 shares will be added
to the maximum number issuable on or after May 23, 1998 (the second anniversary
of the Adoption Date), such that the maximum number of shares issuable as of
the date of the Annual Meeting will be 2,800,000 rather than 1,800,000 as
originally provided in the 1996 Stock Option Plan. Thereafter, on each of the
third, fourth and fifth anniversaries of the Adoption Date, the maximum number
of shares of Common Stock issuable under the 1996 Stock Option Plan will
automatically be increased by 300,000 shares, as originally contemplated by the
1996 Stock Option Plan, to a maximum, on and after May 23, 2001, of 3,700,000
shares.
As stated above, long-term, equity-based compensation in the form of stock
options is a key element of the Company's executive compensation policy. In
addition, the Company believes that the availability of incentive stock options
is important to the Company's ability to recruit and retain qualified
executives. Currently, only 14,312 shares of Common Stock are available for the
grant of options to officers of the Company under the Company's stock option
plans. This number will increase to 229,312 on May 23, 1998 as a result of the
automatic annual increase provided for in the 1996 Stock Option Plan (after
giving effect to certain options already granted by the Compensation Committee,
effective as of such date) and, without the proposed amendment, would not
increase again until May 23, 1999. The Board of Directors believes that in the
current competitive environment for senior executives the amendment of the 1996
Stock Option Plan to increase the maximum number of shares issuable thereunder
by
12
<PAGE>
1,000,000 shares is necessary to enable the Company to provide appropriate
long-term incentives to members of its senior management and to recruit and
retain additional executives to support the growth of the Company's business.
The Board of Directors therefore recommends that stockholders vote FOR the
proposed amendment to the 1996 Stock Option Plan.
Description of the 1996 Stock Option Plan
The 1996 Stock Option Plan is administered by the Compensation Committee
or any other committee of the Board of Directors consisting of two or more
non-employee Directors (the "Plan Administrator"). Except for certain
non-discretionary option grants to Directors who are not employees, as
described in the Section entitled "Remuneration of Directors and Executive
Officers" above, the Plan Administrator selects the individuals to whom options
are granted and determines the option exercise price and other terms of each
award, subject to the provisions of the 1996 Stock Option Plan. Incentive
Options may be granted under the 1996 Stock Option Plan to employees of the
Company or its subsidiaries, including officers and Directors who are also
employees. As of April 2, 1998, approximately 298 employees of the Company and
its subsidiaries were eligible to participate in the 1996 Stock Option Plan.
Nonqualified Options may be granted under the 1996 Stock Option Plan to
employees, officers, Directors, whether or not they are employees of the
Company or a subsidiary, and consultants and other individuals providing
services to the Company or one of its subsidiaries. As described above, most of
the options under the 1996 Stock Option Plan will be granted to officers of the
Company.
No options may extend for more than ten years from the date of grant (five
years in the case of employees or officers holding 10% or more of the total
combined voting power of all classes of stock of the Company or any subsidiary
or parent ("greater-than-ten-percent-stockholder")). The exercise price for
incentive stock options may not be less than the fair market value of the
Common Stock on the date of grant (110% of fair market value in the case of a
greater-than-ten-percent-stockholder). The aggregate fair market value
(determined at the time of grant) of shares issuable pursuant to incentive
stock options which first become exercisable by an employee or officer in any
calendar year may not exceed $100,000.
Options are non-transferable except by will or by the laws of descent or
distribution. Options generally may not be exercised after (i) termination of
the optionee's employment with the Company, or performance of services for the
Company, by the Company for cause or voluntary termination by the optionee,
(ii) thirty days following termination of the optionee's employment with the
Company, or performance of services for the Company, upon retirement or by the
Company without cause, or (iii) one year following termination of the
optionee's employment with the Company, or performance of services for the
Company, as a result of disability or death.
Payment of the exercise price for shares subject to options may be made
with (i) cash, check, bank draft, or money order for an amount equal to the
option price for such shares, or (ii) shares of Common Stock (which in the case
of shares acquired from the Company upon exercise of an option, have been
outstanding for at least six months) having a fair market value equal to the
exercise price, or (iii) an unconditional and irrevocable undertaking by a
broker to deliver promptly to the Company sufficient funds to pay the exercise
price, or (iv) if so permitted by the instrument evidencing the option (or in
the case of a nonqualified stock option, by the Plan Administrator), a
promissory note of the optionee to the Company, payable on such terms as are
specified by the Plan Administrator, or (v) any combination of the permissible
forms of payment. In the event that payment of the option price is made under
(ii) above, the Plan Administrator may provide that the optionee be granted an
additional option covering the numbers of shares surrendered, at an exercise
price equal to the fair market value of a share of Common Stock on the date of
surrender.
Under the 1996 Stock Option Plan, the Plan Administrator may, in its
discretion, specify upon the granting of an option that as a condition of
exercise the optionee agrees that upon request of the Company or the
underwriters managing any underwritten offering of the Company's securities the
optionee will not, for up to 180 days from the effective date of any
registration of securities of the Company, sell or otherwise dispose of any
shares issued pursuant to the exercise of such option without the prior written
consent of the Company or such underwriters.
13
<PAGE>
At December 31, 1997, 1,147,780 shares were subject to outstanding options
granted under the 1996 Stock Option Plan, 15,795 had been purchased upon
exercise of options granted thereunder and 336,425 shares remained available
for future grants. As of December 31, 1997, option prices and expiration dates
for outstanding options granted under the 1996 Stock Option Plan ranged from
$5.38 to $16.50 per share and from June 7, 2006 to December 2, 2007,
respectively. The Company has filed a registration statement on Form S-8 under
the Securities Act of 1933 to register the 2,700,000 shares of the Company's
Common Stock that were originally reserved for issuance under the 1996 Stock
Option Plan. If the proposed amendment is approved by the stockholders, the
Company intends to file, as soon as practicable, a registration statement on
Form S-8 under the Securities Act of 1933 covering the additional shares of
Common Stock issuable under the 1996 Stock Option Plan, as amended. The Board
of Directors has not determined what action it will take in the event that the
stockholders do not approve the proposal.
Federal Income Tax Information with Respect to the 1996 Stock Option Plan
The grantee of a nonqualified stock option recognizes no income for
federal income tax purposes on the grant thereof. On the exercise of such an
option, the difference between the exercise price and the fair market value of
the shares purchased under the option at the time of such purchase will be
recognized by the option holder in the year of exercise as ordinary income, and
the fair market value of the shares on the date of exercise will be the tax
basis thereof for computing gain or loss on any subsequent sale. The Company
may reduce its taxable income by an amount equal to the amount recognized by
the option holder as ordinary income upon exercise of a nonqualified stock
option.
Generally, the grantee of an incentive stock option recognizes no income
for federal income tax purposes at the time of grant or exercise of the option.
Rather, the holder ordinarily will recognize taxable income upon subsequent
disposition of the shares purchased under the option. If no disposition of
shares acquired upon exercise of an incentive stock option is made by the
optionee within two years of the date of grant and within one year after
exercise of the option, any gain realized by the optionee on the subsequent
sale of such shares is treated, for federal income tax purposes, as mid-term
capital gain if the shares were held for more than twelve months but not more
than eighteen months and as long-term capital gain if the shares were held for
more than eighteen months. The price paid for the shares purchased upon the
exercise of the option will be the tax basis for computing any gain. If the
shares are sold prior to the expiration of such period (a "disqualifying
disposition"), the difference between the lesser of the value of the stock at
the date of exercise or the date of sale and the exercise price of the stock is
treated as compensation taxable to the grantee as ordinary income and the
excess gain, if any, is treated as capital gain (which will be mid-term capital
gain if the shares were held for more than twelve months but not more than
eighteen months and long-term capital gain if the shares were held for more
than eighteen months). The amount by which the fair market value of shares at
the time of exercise of the incentive stock option covering such shares exceeds
the option price for such shares is a tax preference item and is included in
"alternative minimum taxable income" for the purpose of computing the
"alternative minimum tax." The Company does not withhold any tax in connection
with the grant or exercise of an incentive stock option and, in the usual
circumstances, the Company is not entitled to any tax deduction in connection
with the grant or, except on the case of a disqualifying disposition, exercise
of an incentive stock option.
The 1996 Stock Option Plan is not subject to the provisions of the
Employee Retirement Income Security Act of 1974.
New Plan Benefits
The Company is unable to determine the dollar value and number of options
or shares of Common Stock that will be issued under the 1996 Stock Option Plan
if the amendment described herein is approved to (i) any of the executive
officers, (ii) the current executive officers as a group, (iii) the current
Directors who are not executive officers as a group, (iv) each nominee for the
election as a Director and (v) the employees who are not executive officers as
a group, because, except for non-discretionary option grants to non-employee
Directors described above,
14
<PAGE>
options are granted on a discretionary basis. The Company is unable to
determine the benefits or amounts which would have been received by or
allocated to any such persons or groups for fiscal 1997 if the amendment to the
1996 Stock Option Plan had been in effect throughout such year.
CERTAIN TRANSACTIONS
Relationship with International Business Machines Corporation
International Business Machines Corporation ("IBM") is the beneficial
owner of approximately 12% of the Company's outstanding Common Stock as of
April 2, 1998. In 1993, the Company entered into agreements with IBM providing
for certain joint development and marketing activities by the two companies,
which agreements were terminated in 1996. Revenues from products and services
provided by the Company to IBM during 1997 were $2,280,000 and constituted 4.8%
of the Company's total revenues for the year.
Loans to Executive Officers
In 1994, the Company loaned to Robert J. Potter, the Senior Vice
President, Sales, of the Company, an aggregate of $200,000 pursuant to two
$100,000 full recourse promissory notes dated April and November 1994 and
bearing interest at rates of 5.88% and 7.45% per annum. The notes were due in
April and November 1998, respectively, and were to bear interest at 18.0% per
annum or, if lower, the highest legal rate of interest, if not paid when due.
The notes were originally collateralized by the pledge to the Company of an
aggregate of 50,000 shares of Common Stock owned by Mr. Potter. On February 20,
1997, the Company released these shares from the pledge in exchange for an
agreement by Mr. Potter to pledge to the Company 50,000 shares of Common Stock
issuable upon the exercise of certain stock options granted to him on May 3,
1990. Mr. Potter exercised the latter stock options, sold the shares acquired
upon their exercise and on March 1, 1998 repaid to the Company an aggregate
amount of $247,487.67, representing the full amount of his indebtedness to the
Company.
In 1996, in connection with the exercise by Robert N. Goldman, the
President and Chief Executive Officer of the Company and by Justin J.
Perreault, the Executive Vice President and Chief Operating Officer of the
Company, of stock options granted to them under the Company's 1995 Nonqualified
Stock Option Plan, to purchase 2,300,000 and 460,000 shares of Common Stock,
respectively, the Company loaned to Mr. Goldman and to Mr. Perreault $572,700
and $114,540, respectively. The loan to each executive was at an interest rate
of 7.0% per annum and was pursuant to a full recourse promissory note due upon
the earlier of (i) April 1, 2001 and (ii) the date the executive's employment
with the Company terminates for any reason. Each loan was originally secured by
a pledge to the Company of all the shares of Common Stock acquired upon
exercise of the option. On January 29, 1997 the Company released 2,048,950 and
409,790 shares from Messrs. Goldman's and Perreault's pledges, respectively,
with 251,050 shares and 50,210 shares, respectively, remaining pledged to
secure the outstanding amount of principal and interest of the loans to Messrs.
Goldman and Perreault, respectively.
15
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of April 2, 1998 by (i)
each person or group known to the Company to be the beneficial owner of more
than five percent of the outstanding Common Stock; (ii) each of the Company's
Directors and Director nominees; (iii) the Named Executive Officers and (iv)
all Directors, Director nominees and executive officers of the Company as a
group. The information as to each person has been furnished by such person.
<TABLE>
<CAPTION>
Shares Beneficially
Owned (1)
------------------------
Name and Address of Beneficial Owners Number Percent
- ----------------------------------------------------------------- ----------- ----------
<S> <C> <C>
International Business Machines Corporation ..................... 3,238,746 11.7%
Old Orchard Road
Armonk, NY 10504
Vista III, L.P. (2) ............................................. 2,832,691 10.2
The Vista Group
c/o Palmeri Fund Administrators, Inc.
700 Godwin Avenue, Suite 110
Midland Park, NJ 07432
Aeneas Venture Corporation (3) .................................. 2,676,668 9.7
c/o Harvard Management Company
600 Atlantic Avenue, 26th Floor
Boston, MA 02210
New Enterprise Associates V, Limited Partnership (4) ............ 1,861,970 6.7
1119 St. Paul Street
Baltimore, MD 21202
Robert N. Goldman (5) ........................................... 2,300,000 8.3
Object Design, Inc.
25 Mall Road
Burlington, MA 01803
Justin J. Perreault (6) ......................................... 401,208 1.5
Kirk Bowman (7) ................................................. 62,500 *
Brian W. Otis (8) ............................................... 70,823 *
Gregory A. Baryza (9) ........................................... 76,984 *
John Parillo (10) ............................................... 20,625 *
Melissa Webster (11) ............................................ 25,000 *
Gerald B. Bay (12) .............................................. 3,041,348 10.9
Vista Management
27 Newport Street
Jamestown, RI 02385
Arthur J. Marks (13) ............................................ 1,870,303 6.8
Steven C. Walske (14) ........................................... 37,000 *
New Enterprise Associates
11911 Freedom Drive
One Fountain Square, Suite 580
Reston, VA 20190
Kevin J. Burns (15) ............................................. 0 0
David A. Litwack (16) ........................................... 0 0
All Directors and executive officers as a group (11 persons)..... 7,925,048 28.1
</TABLE>
- ----------
* Less than one percent.
16
<PAGE>
(1) Except as otherwise indicated, the persons named in this table have sole
voting and investment power with respect to all shares of Common Stock
shown as beneficially owned by them, subject to community property laws
where applicable and subject to the information contained in the footnotes
to this table. Amounts shown for each stockholder include shares subject
to stock options exercisable within 60 days of the date of this table.
Shares not outstanding but deemed beneficially owned by virtue of the
right of a person or group to acquire them within 60 days are treated as
outstanding only for purposes of determining the number of and percent
owned by such person or group. As of April 2, 1998, the date of this
table, there were 27,664,471 shares of Common Stock outstanding.
(2) Information based on a Schedule 13G/A filed on or about February 13, 1998
on behalf of Vista III, L.P. ("Vista III"), Vista III Partners, L.P.
("Vista III Partners"), Philips Venture Fund I, L.P. ("Philips Venture
Fund"), Vista Ventures Partners II, L.P. ("Vista Ventures Partners") and
Gerald B. Bay, Edwin Snape, John F. Tomlin and Robert P. Cummings
(collectively, the "Investing General Partners"). Includes 2,275,072
shares of Common Stock owned of record by Vista III (the "Vista Shares")
and 557,619 shares of Common Stock owned of record by Philips Venture Fund
(the "Philips Shares"). The sole general partner of Vista III is Vista III
Partners, the voting and investment decisions of which are controlled by
the Investing General Partners. As a result, Vista III Partners and the
Investing General Partners may be deemed to share beneficial ownership of
the Vista Shares. The sole general partner of Philips Venture Fund is
Vista Ventures Partners, the voting and investment decisions of which are
also controlled by the Investing General Partners. As a result, Vista
Ventures Partners and the Investing General Partners may be deemed to
share beneficial ownership of the Philips Shares. As a result of affiliate
relationships among Vista III, Vista III Partners, Philips Venture Fund,
Vista Ventures Partners and the Investing General Partners, each of them
may be deemed to own beneficially both the Vista Shares and the Philips
Shares. However, each of them (other than Vista III and Philips Venture
Fund) disclaims any beneficial ownership of the Company's Common Stock,
Vista III disclaims beneficial ownership of the Philips Shares and Philips
Ventures Fund disclaims beneficial ownership of the Vista Shares.
(3) Includes 2,484,842 shares of Common Stock owned of record by Aeneas
Venture Corporation ("Aeneas") and 144,340 and 47,486 shares of Common
Stock owned of record by Phemus Corporation and Harvard Private Capital
Holdings, Inc., affiliates of Aeneas, respectively.
(4) Information based on a Schedule 13G/A filed on or about February 17, 1998
on behalf of New Enterprise Associates V, Limited Partnership ("NEA V")
and the Silverado Fund I, Limited Partnership ("Silverado") (collectively,
the "Funds"); NEA Partners V, Limited Partnership ("NEA Partners V") and
NEA Silverado Partners I, Limited Partnership ("Silverado Partners")
(collectively, the "GPLPs"); and Frank A. Bonsal, Jr., Nancy L. Dorman, C.
Richard Kramlich, Arthur J. Marks, Thomas C. McConnell and Charles W.
Newhall III (collectively, the "General Partners"). The parties named in
the preceding sentence are referred to collectively as the "Reporting
Persons". Includes 1,806,356 shares of Common Stock owned of record by NEA
V (the "NEA V Shares") and 55,614 shares of Common Stock owned of record
by Silverado (the "Silverado Shares"). NEA Partners V is the sole general
partner of NEA V, Silverado Partners is the sole general partner of
Silverado, and the General Partners are individual general partners of NEA
Partners V. Messrs. Kramlich, Marks and Newhall are individual general
partners of Silverado Partners. As the sole general partner of NEA V, NEA
Partners V may be deemed to own beneficially the NEA V Shares. As the sole
general partner of Silverado, Silverado Partners may be deemed to own
beneficially the Silverado Shares. By virtue of their relationship as
affiliated limited partnerships, whose general partners have overlapping
individual general partners, each Fund may be deemed to share the power to
direct the disposition and vote of the NEA V Shares and the Silverado
Shares, for an aggregate of 1,861,970 shares (the "Record Shares"). As
general partners of the Funds, each GPLP may also be deemed to own
beneficially the Record Shares, and as general partners of the GPLPs,
which are general partners of the Funds, Messrs. Kramlich and Newhall may
also be deemed to own beneficially the Record Shares. As general partners
of NEA Partners V, Ms. Dorman and Mr. McConnell may be deemed to own
beneficially the NEA V Shares. Mr. Marks holds an option to purchase 8,333
shares, which
17
<PAGE>
is currently exercisable. As an individual general partner of the GPLPs,
which are general partners of the Funds, Marks may be deemed to own
beneficially the Record Shares and such 8,333 shares for a total of
1,870,303 shares. Each of the Reporting Persons disclaims beneficial
ownership of any shares of Common Stock other than shares held of record.
(5) Does not include 275,000 shares subject to stock options not exercisable
within 60 days of the date of this table.
(6) Does not include 100,000 shares subject to stock options not exercisable
within 60 days of the date of this table.
(7) Includes 62,500 shares subject to stock options exercisable within 60 days
of the date of this table. Does not include 227,500 shares subject to
stock options not exercisable within 60 days of the date of this table.
(8) Includes 68,500 shares subject to stock options exercisable within 60 days
of the date of this table. Does not include 112,082 shares subject to
stock options not exercisable within 60 days of the date of this table.
(9) Includes 75,459 shares subject to stock options exercisable within 60 days
of the date of this table. Does not include 94,541 shares subject to stock
options not exercisable within 60 days of the date of this table.
(10) Includes 20,625 shares subject to stock options exercisable within 60 days
of the date of this table. Does not include 49,375 shares subject to stock
options not exercisable within 60 days of the date of this table.
(11) Includes 25,000 shares subject to stock options exercisable within 60 days
of the date of this table. Does not include 50,000 shares subject to stock
options not exercisable within 60 days of the date of this table.
(12) Includes 25,324 shares of Common Stock owned of record by Mr. Bay, the
2,275,072 Vista Shares owned of record by Vista III and the 557,619
Philips Shares owned of record by Philips Venture Fund. However, Mr. Bay
disclaims beneficial ownership of the Vista Shares and the Philips Shares.
Also includes 183,333 shares subject to stock options held by Mr. Bay
exercisable within 60 days of the date of this table. Does not include
16,667 shares subject to stock options which are not exercisable within 60
days of the date of this table.
(13) Represents the 1,806,356 NEA V Shares owned of record by NEA V and the
55,614 Silverado Shares owned of record by Silverado. As a general partner
of Silverado Partners, which is the general partner of Silverado, Mr.
Marks may be deemed to share beneficial ownership of the Silverado Shares.
However, Mr. Marks disclaims beneficial ownership of both the NEA V Shares
and Silverado Shares. See Note (3). Also includes 8,333 shares subject to
stock options held by Mr. Marks exercisable within 60 days of the date of
this table. Does not include 16,667 shares subject to stock options which
are not exercisable within 60 days of the date of this table.
(14) Includes 37,000 shares subject to stock options exercisable within 60 days
of the date of this table. Does not include 25,000 shares subject to stock
options not exercisable within 60 days of the date of this table.
(15) Does not include 25,000 shares subject to stock options not exercisable
within 60 days of the date of this table.
(16) Does not include 25,000 shares subject to stock options not exercisable
within 60 days of the date of this table.
ACCOUNTANTS
The Company has appointed Coopers & Lybrand L.L.P. ("Coopers & Lybrand")
as independent accountants to audit the financial statements of the Company for
the fiscal year ending December 31, 1998. Representatives of Coopers & Lybrand
are expected to be present at the Annual Meeting, will have an opportunity to
make a statement if they desire to do so, and are expected to be available to
respond to appropriate questions from stockholders.
18
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and Directors, and persons who beneficially own more than
10% of a registered class of the Company's equity securities, to file reports
of ownership and changes in ownership with the Securities and Exchange
Commission (the "SEC"). Officers, Directors and greater-than-10% stockholders
are required by SEC regulations to furnish the Company with copies of all
Section 16(a) forms they file.
Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to the Company during fiscal 1997 and Forms 5 and amendments thereto
furnished to the Company with respect to fiscal 1997, or written
representations that Form 5 was not required, the Company believes that all
Section 16(a) filing requirements applicable to its officers, Directors and
greater-than-10% stockholders were fulfilled in a timely manner, except that
each of John Parillo, Kevin J. Burns and David A. Litwack inadvertently failed
to timely file a Notice on Form 4, in each case with respect to a single
transaction.
SOLICITATION
No compensation will be paid by any person in connection with the
solicitation of proxies. Brokers, banks and other nominees will be reimbursed
for their out-of-pocket expenses and other reasonable clerical expenses
incurred in obtaining instructions from beneficial owners of the Common Stock.
In addition to the solicitation by mail, special solicitation of proxies may,
in certain instances, be made personally or by telephone by Directors, officers
and certain employees of the Company. It is expected that the expense of such
special solicitation will be nominal. All expenses incurred in connection with
this solicitation will be borne by the Company.
STOCKHOLDER PROPOSALS
Stockholder proposals for inclusion in the proxy materials related to the
1999 Annual Meeting of Stockholders or special meeting in lieu thereof must be
received by the Company at its executive offices no later than Wednesday,
December 23, 1998. In addition, the Company's By-Laws provide that a
stockholder must give written notice to the Company not less than sixty days
prior to the scheduled annual meeting describing any proposal to be brought
before such Meeting, even if such item is not to be included in the Company's
proxy statement relating to such Meeting. Such notice requirements are set
forth in Section 3 of the Company's By-Laws. To bring an item of business
before the 1999 Annual Meeting, a stockholder must deliver the requisite notice
of such item to the Secretary of the Company no later than Friday, March 26,
1999.
MISCELLANEOUS
The Board does not intend to present to the Annual Meeting any business
other than the proposals listed herein, and the Board was not aware, a
reasonable time before mailing this Proxy Statement to stockholders, of any
other business which properly may be presented for action at the Annual
Meeting. If any other business should come before the Annual Meeting, the
persons present will have discretionary authority to vote the shares they own
or represent by proxy in accordance with their judgment.
AVAILABLE INFORMATION
Stockholders of record on April 8, 1998 will receive, in addition to this
Proxy Statement, the Company's Annual Report to Stockholders for the year ended
December 31, 1997, which contains detailed financial information concerning the
Company. The Company will mail, without charge, a copy of the Company's Annual
Report on Form 10-K (excluding exhibits) to any stockholder solicited hereby
who requests it in writing. Please submit any such written request to Ms. Lacey
P. Brandt, Chief Financial Officer, Object Design, Inc., 25 Mall Road,
Burlington, Massachusetts 01803.
19
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF OBJECT DESIGN, INC.
A STOCKHOLDER WISHING TO VOTE IN ACCORDANCE WITH
THE RECOMMENDATIONS OF THE BOARD OF DIRECTORS NEED ONLY
SIGN AND DATE THIS PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE.
Please complete and return the proxy card below.
DETACH HERE
OBJF
PROXY
OBJECT DESIGN, INC.
Proxy for Annual Meeting of Stockholders
to be held on May 27, 1998
The undersigned stockholder of Object Design, Inc. (the "Company"), revoking all
prior proxies, hereby appoints Robert N. Goldman, Justin J. Perreault and Lacey
P. Brandt, or any of them acting singly, proxies, with full power of
substitution, to vote all shares of capital stock of the Company which the
undersigned is entitled to vote at the Annual meeting of Stockholders to be held
at the offices of the Company, 25 Mall Road, Burlington, Massachusetts 01803, on
Wednesday, May 27, 1998, beginning at 10:00 a.m., local time, and at any
adjournments thereof, upon matters set forth in the Notice of Annual Meeting
dated April 22, 1998 and the related Proxy Statement, copies of which have been
received by the undersigned, and in their discretion upon any business that may
properly come before the Annual Meeting or any adjournments thereof. Attendance
of the undersigned at the Annual Meeting or any adjournment thereof will not be
deemed to revoke this proxy unless the undersigned shall affirmatively indicate
the intention of the undersigned to vote the shares represented hereby in person
prior to the exercise of this proxy.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO
DIRECTION IS GIVEN WITH RESPECT TO THE PROPOSALS SET FORTH ON THE REVERSE SIDE,
WILL BE VOTED FOR SUCH PROPOSALS OR OTHERWISE IN ACCORDANCE WITH THE
RECOMMENDATION OF THE BOARD OF DIRECTORS.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
20
<PAGE>
DETACH HERE
[x] Please mark
votes as in
this example.
<TABLE>
<S> <C>
1. Proposal to elect the following nominees as 2. Proposal to approve the FOR AGAINST ABSTAIN
Class II directors of the Company: amendment of the Company's 1996 [ ] [ ] [ ]
Incentive and Nonqualified Stock
Nominees: Arthur J. Marks and Steven C. Walske Option Plan to increase the
number of shares available for
FOR ALL WITHHOLD grant thereunder by 1,000,000.
NOMINEES
[ ] [ ]
FOR ALL
EXCEPT
[ ] _____________________________________________
INSTRUCTION: To withhold authority to vote for any
individual nominee, mark the "For All Except" box and
write in that nominee's name.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
Please promptly date and sign this proxy and mail it in the
enclosed envelope to assure representation of your shares. No
postage need be affixed if mailed in the United States.
Please sign exactly as name(s) appear(s) on stock certificate.
If shares are held by joint tenants, both should sign. If stockholder
is a corporation, please sign full corporate name by president or
other authorized officer and, if a partnership, please sign full
partnership name by an authorized partner or other authorized
person. If signing as attorney, executor, administrator, trustee or
guardian, please give full title as such.
Signature: ______________________________ Date: ________________ Signature: _____________________________ Date: ________________
</TABLE>
