<PAGE> 1
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
FLEXIINTERNATIONAL SOFTWARE, INC.
(Name of Registrant as Specified In Its Charter)
-------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE> 2
FLEXIINTERNATIONAL SOFTWARE, INC.
TWO ENTERPRISE DRIVE
SHELTON, CONNECTICUT 06484
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON THURSDAY, APRIL 29, 1999
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
FlexiInternational Software, Inc. (the "Company") will be held on Thursday,
April 29, 1999, at the offices of Hale and Dorr LLP, 60 State Street, Boston,
Massachusetts 02109, at 10:00 a.m., local time, to consider and act upon the
following matters:
1. To elect two Class II Directors to serve for the ensuing three years.
2. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Stockholders of record at the close of business on March 15, 1999 will be
entitled to notice of and to vote at the meeting or any adjournment thereof. A
list of the Company's stockholders is open for examination by any stockholder at
the principal offices of the Company, Two Enterprise Drive, Shelton, Connecticut
06484 and will be available at the meeting.
A copy of the Company's Annual Report to Stockholders for the year ended
December 31, 1998, which contains financial statements and other information of
interest to stockholders, accompanies this Notice and the enclosed Proxy
Statement.
All stockholders are cordially invited to attend the meeting.
By Order of the Board of Directors,
JOHN K.P. STONE III, ESQ.
Assistant Secretary
Shelton, Connecticut
April 12, 1999
- -------------------------------------------------------------------------------
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE,
DATE AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE
IN ORDER TO ENSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED IF
THE PROXY IS MAILED IN THE UNITED STATES.
- -------------------------------------------------------------------------------
<PAGE> 3
FLEXIINTERNATIONAL SOFTWARE, INC.
TWO ENTERPRISE DRIVE
SHELTON, CONNECTICUT 06484
PROXY STATEMENT FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON APRIL 29,
1999
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of FlexiInternational Software, Inc. (the
"Company") for use at the Annual Meeting of Stockholders to be held on April 29,
1999 and at any adjournments of that meeting (the "Annual Meeting"). All proxies
will be voted in accordance with the stockholders' instructions, and if no
choice is specified, the proxies will be voted in favor of the matters set forth
in the accompanying Notice of Meeting. Any proxy may be revoked by a stockholder
at any time before its exercise by delivery of a written revocation or a
subsequently dated proxy to the Secretary of the Company or by voting in person
at the Annual Meeting.
The Company's Annual Report to Stockholders for the year ended December 31,
1998 is being mailed to stockholders concurrently with this Proxy Statement.
THE NOTICE OF MEETING, THIS PROXY STATEMENT, THE ENCLOSED PROXY CARD AND
THE COMPANY'S ANNUAL REPORT TO STOCKHOLDERS FOR THE YEAR ENDED DECEMBER 31, 1998
ARE BEING MAILED TO STOCKHOLDERS ON OR ABOUT APRIL 12, 1999. THE COMPANY WILL,
UPON WRITTEN REQUEST OF ANY STOCKHOLDER, FURNISH WITHOUT CHARGE A COPY OF ITS
ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1998, AS FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION, WITHOUT EXHIBITS. PLEASE ADDRESS ALL
SUCH REQUESTS TO THE COMPANY, ATTENTION OF MR. DAVID P. SOMMERS, CHIEF FINANCIAL
OFFICER, FLEXIINTERNATIONAL SOFTWARE, INC., TWO ENTERPRISE DRIVE, SHELTON,
CONNECTICUT 06484. EXHIBITS WILL BE PROVIDED UPON WRITTEN REQUEST AND PAYMENT OF
AN APPROPRIATE PROCESSING FEE.
VOTING SECURITIES AND VOTES REQUIRED
At the close of business on March 15, 1999, the record date for the
determination of stockholders entitled to vote at the Annual Meeting, there were
outstanding and entitled to vote an aggregate of 17,293,622 shares of common
stock, $.01 par value per share, of the Company (the "Common Stock").
Stockholders are entitled to one vote per share.
Shares of Common Stock represented in person or by proxy (including shares
which abstain or do not vote for any reason with respect to one or more of the
matters presented for stockholder approval) will be counted for purposes of
determining whether a quorum is present at the Annual Meeting. The affirmative
vote of the holders of a plurality of the votes cast by the stockholders
entitled to vote at the Annual Meeting is required for election of directors.
Shares which abstain from voting as to a particular matter, and shares held
in "street name" by brokers or nominees who indicate on their proxies that they
do not have discretionary authority to vote such shares as to a particular
matter, will not be counted as votes in favor of such matter, and will also not
be counted as votes cast or shares voting on such matter. Accordingly,
abstentions and "broker non-votes" will have no effect on the voting on a matter
that requires the affirmative vote of a certain percentage of the votes cast or
shares voting on a matter.
<PAGE> 4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of January 31, 1999,
with respect to the beneficial ownership of the Company's Common Stock by (i)
each person known by the Company to own beneficially more than 5% of the
outstanding shares of Common Stock, (ii) each director of the Company, (iii)
each executive officer of the Company named in the Summary Compensation Table
set forth under the caption "Executive Compensation" below and (iv) all
directors and executive officers of the Company as a group. The address of
Stefan R. Bothe, Jennifer V. Cheng, James W. Schenck and Maureen M. Okerstrom is
c/o FlexiInternational Software, Inc., Two Enterprise Drive, Shelton, CT 06484.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY PERCENTAGE OF COMMON
BENEFICIAL OWNER OWNED (1) STOCK OUTSTANDING(2)
- ---------------- ---------------- --------------------
<S> <C> <C>
Furman Selz SBIC, L.P. and affiliates(3).................. 2,385,180 13.8%
55 East 52nd Street, 37th Floor
New York, NY 10055
Brian P. Friedman(3)...................................... 2,385,180 13.8%
Primus Capital Fund III Limited Partnership(4)............ 1,232,273 7.1%
One Cleveland Center Suite 2700
Cleveland, OH 44114
James W. Schenck(5)....................................... 1,212,499 7.0%
Thomas C. Theobald(6)..................................... 1,192,790 6.9%
William Blair Capital Partners V, L.P..................... 1,167,790 6.8%
227 West Monroe Street
Chicago, IL 60606
Stefan R. Bothe(7)........................................ 1,101,250 6.3%
Jennifer V. Cheng(8)...................................... 856,250 4.9%
John B. Landry(9)......................................... 58,500 *
A. David Tory(9).......................................... 11,400 *
Maureen M. Okerstrom(10).................................. 42,565 *
All directors and executive officers as a group (9
persons)(11)............................................ 6,860,434 38.9%
</TABLE>
- ---------------
* Less than 1%
(1) The number of shares beneficially owned by each stockholder is determined
under rules promulgated by the Securities and Exchange Commission, and the
information is not necessarily indicative of beneficial ownership for any
other purpose. Under such rules, beneficial ownership includes any shares
as to which the individual or entity has sole or shared voting power or
investment power and any shares as to which the individual or entity has
the right to acquire beneficial ownership within 60 days after January 31,
1999 through the exercise of any stock option, warrant or other right (and
any reference in these footnotes to shares subject to stock options refers
only to such options.) The inclusion herein of such shares, however, does
not constitute an admission that the named stockholder is a direct or
indirect beneficial owner of such shares.
(2) As of January 31, 1999, on which date there were a total of 17,293,622
shares of Common Stock outstanding.
(3) Beneficial ownership of Furman Selz SBIC, L.P. and its affiliates as
reported in an amendment of a report on Schedule 13D filed with the
Commission in February 1999. Consists of 1,907,680 shares held by Furman
Selz SBIC, L.P., 52,000 shares held by Fairway Capital Partners L.P., 1,500
shares held by Sangatuck International Ltd., 23,000 shares held by ING
Baring Furman Selz LLC, 100,000 shares held by James L. Luikart, 101,000
shares held by Edmund Hajim and 200,000 shares held by Brian P. Friedman.
Mr. Friedman, a director of the Company, is the president of Furman Selz
SBIC Investments LLC, the sole general partner of Furman Selz SBIC, L.P.
Mr. Friedman disclaims beneficial ownership of all such shares, except for
the 200,000 shares held directly by him.
2
<PAGE> 5
(4) Beneficial ownership as reported in a report on Schedule 13G filed with the
Commission in February 1999.
(5) Includes 75,000 shares subject to options held by Mr. Schenck which are
exercisable within 60 days after January 31, 1999.
(6) Includes 1,167,790 shares held by William Blair Capital Partners V, L.P.
Mr. Theobald, a director of the Company, is a managing director of the
managing general partner of William Blair Capital Partners.
(7) Includes 187,500 shares subject to options held by Mr. Bothe which are
exercisable within 60 days after January 31, 1999. Excludes 813,750 shares
held by Ms. Cheng, Mr. Bothe's wife, as to which shares Mr. Bothe disclaims
beneficial ownership.
(8) Includes 37,500 shares subject to options held by Ms. Cheng and 5,000
shares held by Cheng Associates, L.P., with respect to which Ms. Cheng
shares voting and investment power. Excludes 913,750 shares held by Mr.
Bothe, Ms. Cheng's husband, as to which shares Ms. Cheng disclaims
beneficial ownership.
(9) Includes 7,500 shares subject to options held by each of Messrs. Landry and
Mr. Tory which are exercisable within 60 days after January 31, 1999.
(10) Includes 30,200 shares subject to options held by Ms. Okerstrom.
(11) Includes an aggregate of 345,200 shares subject to options which are
exercisable within 60 days after January 31, 1999, 2,385,180 shares held by
affiliates of Furman Selz SBIC, L.P., 1,167,790 shares held by William
Blair Capital Partners V, L.P. and 5,000 shares held by Cheng Associates,
L.P.
3
<PAGE> 6
ELECTION OF DIRECTORS
The Company has a classified Board of Directors consisting of three
classes, with members of each class holding office for overlapping three-year
terms. The persons named in the enclosed proxy will vote to elect Jennifer V.
Cheng and Brian P. Friedman as Class II Directors, unless authority to vote for
the election of either or both of the nominees is withheld by marking the proxy
to that effect. Both of the nominees have indicated their willingness to serve,
if elected, but if either or both of the nominees should be unable or unwilling
to serve, proxies may be voted for substitute nominee(s) designated by the Board
of Directors.
Set forth below are each director's name, age, positions with the Company,
principal occupation, business experience during at least the past five years,
the names of other publicly held corporations of which such person is a director
and the year during which each such person first became a director of the
Company.
NOMINEES
Class II Director (Terms expire at 2002 Annual Meeting)
JENNIFER V. CHENG, age 49, has served as a director of the Company since
the Company's inception in 1990. She was also the Company's President from its
inception through February 1999. Since 1984, Ms. Cheng has been a General
Partner and owner of Cheng Management Company, an investment partnership
specializing in investments in emerging growth companies, including many
technology companies. Prior to forming Cheng Management Company, Ms. Cheng
served with several major financial organizations, including Morgan Stanley &
Co., Inc., as an emerging growth stock analyst, Mutual Life Insurance Company of
New York, as Director of Equity Investments, and Donaldson, Lufkin & Jenrette
Securities Corporation, as Research Analyst.
BRIAN P. FRIEDMAN, age 43, was appointed to the Company's Board of
Directors in January 1999. Since March 1994, Mr. Friedman has been President of
ING Furman Selz Investments, an investment management firm. Previously, from
1984 to March 1994, Mr. Friedman was an Executive Vice President of Furman Selz
LLC.
CONTINUING MEMBERS OF THE BOARD OF DIRECTORS
Class I Directors (Terms expire at 2001 Annual Meeting)
STEFAN R. BOTHE, age 50, has served as Chairman of the Board and Chief
Executive Officer of the Company since March 1993. From November 1991 to
February 1993, Mr. Bothe was President and Chief Executive Officer of DSI Group
N.V., a Dutch-based international software company. From 1989 to 1991, Mr. Bothe
was President and Chief Executive Officer of GEAC Computer Corporation Limited
("GEAC"), a software company. Prior to joining GEAC, Mr. Bothe was President of
the Application Products Division of Computer Associates International, Inc.
("Computer Associates"), one of the largest software companies in the industry.
While at Computer Associates, Mr. Bothe held numerous senior management
positions, including President of the International Division, President of the
Micro Products Division and Senior Vice President of Marketing.
THOMAS C. THEOBALD, age 61, was appointed to the Company's Board of
Directors in January 1999. Since 1994, Mr. Theobald has been a managing Director
of William Blair Capital Partners, L.L.C. From 1987 to 1994, Mr. Theobald was
Chairman of the Board and Chief Executive Officer of Continental Bank
Corporation. Mr. Theobald also holds directorships with Xerox Corporation, The
MONY Group, Anixter International, Stein Roe Funds and LaSalle Partners.
Class III Directors (Terms expire at 2000 Annual Meeting)
JOHN B. LANDRY, age 51, has served on the Board of Directors of the Company
since October 1995. Since June 1995, Mr. Landry has been Strategic Technology
Consultant to senior management of IBM Corporation. In addition, since October
1995, he was Chairman of the Board of Narrative Communications Corporation, the
leader in Internet-based interactive advertising. In January 1999, Narrative was
acquired by At Home Networks and Mr. Landry has no further affiliation with the
Company. From 1990 to 1995, Mr. Landry was
4
<PAGE> 7
Senior Vice President and Chief Technology Officer of Lotus Development
Corporation, a provider of software products and services. Mr. Landry is also a
director of Skycache, Inc., MCK Communications Corp., and AnyDay.COM.
A. DAVID TORY, age 56, has served on the Board of Directors of the Company
since September 1997. Since September 1995, Mr. Tory has been an independent
consultant. From November 1988 to September 1995, he was President and Chief
Executive Officer of The Open Software Foundation, a non-profit consortium of
major computer hardware and software companies and user organizations. Mr. Tory
is also a director of ASI Solutions Incorporated.
BOARD AND COMMITTEE MEETINGS
The Board of Directors has established a Compensation Committee, consisting
from January 1998 to September 1998 of Mr. Landry and a former director of the
Company, Thomas H. Bredt, and thereafter consisting solely of Mr. Landry. On
January 21, 1999, Mr. Tory replaced Mr. Landry on the Compensation Committee and
Mr. Friedman joined the Compensation Committee. The Compensation Committee makes
recommendations concerning salaries and incentive compensation for employees of
and consultants to the Company and administers and grants stock options pursuant
to the Company's stock option plans. The Company has also established an Audit
Committee, consisting during 1998 of Messrs. Landry and Tory. In January 1999,
Mr. Theobald replaced Mr. Tory on the Audit Committee. The Audit Committee
reviews the results and scope of the audit and other services provided by the
Company's independent public accountants. The Compensation Committee and the
Audit Committee each met two times during 1998. The Board of Directors met nine
times during 1998. Each of the Company's current directors was present for at
least 75% of such meetings.
DIRECTORS' COMPENSATION
Pursuant to the Company's 1997 Director Stock Option Plan (the "Director
Plan"), on the date of the Company's 1998 annual meeting of stockholders,
Messrs. Landry and Tory each received an option to purchase 5,250 shares of
Common Stock at $12.625 per share, becoming exercisable in full one year after
grant. Under the Director Plan, each nonemployee director receives an option to
purchase 7,500 shares of Common Stock when initially elected to the Board of
Directors, and each continuing nonemployee director receives an option to
purchase 5,250 shares of Common Stock on the date of each annual meeting of
stockholders after his or her election. The exercise price of all options
granted under the Director Plan is the closing price of the Common Stock on the
Nasdaq National Market on the date of grant. The Director Plan provides that all
options vest one year from the date of grant so long as the optionee remains a
director of the Company. To avoid a charge to earnings based on anticipated
changes in the rules applicable to accounting for options to nonemployee
directors, the Board of Directors amended the Director Plan in February 1999 to
provide that all options granted under the Director Plan after such amendment
are exercisable in full on grant. The Company also reimburses nonemployee
directors for their out-of-pocket expenses in connection with their attendance
at Board of Directors and committee meetings.
5
<PAGE> 8
EXECUTIVE COMPENSATION
The following table sets forth the total compensation paid or accrued for
the three fiscal years ended December 31, 1998, 1997 and 1996 for the Company's
Chief Executive Officer and its four other most highly compensated executive
officers in 1998 who were serving as executive officers on December 31, 1998
(the Chief Executive Officer and such other executive officers are hereinafter
referred to as the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
---------------------
ANNUAL COMPENSATION AWARDS
------------------------------------- ---------------------
NAME AND OTHER ANNUAL SECURITIES UNDERLYING
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) OPTIONS(2)
- ------------------ ---- ------ ----- --------------- ---------------------
<S> <C> <C> <C> <C> <C>
Stefan R. Bothe..................... 1998 $200,000 $275,065 -- --
Chairman of the Board and 1997 $200,000 $ 40,000 -- --
Chief Executive Officer 1996 $165,000 $ 57,750 -- 150,000
Jennifer V. Cheng................... 1998 $185,000 $234,745 -- 60,000(3)
President 1997 $150,000 $ 40,000 -- --
1996 $115,000 $ 28,750 -- --
Maureen M. Okerstrom(4)............. 1998 $140,000 $204,825(5) -- 102,000(6)
Vice President, Sales 1997 $109,167 $253,384 -- 76,125
James W. Schenck.................... 1998 $165,000 $ 19,809 -- --
Executive Vice President, 1997 $165,000 -- -- --
Software Engineering 1996 $150,000 -- $40,000 75,000
Mark J. Berlingeri(7)............... 1998 $113,525 $ 31,118 -- --
Vice President, Client Services 1997 $119,359 $ 44,882 $36,222 26,250
Richard P. Horner(8)................ 1998 $109,939 $ 23,331 -- --
Vice President, Finance 1997 $105,609 -- -- --
</TABLE>
- ---------------
(1) Consists of reimbursement of expenses related to relocation and, for Mr.
Berlingeri, a car allowance of $3,500.
(2) Represents the number of shares covered by options to purchase shares of the
Company's Common Stock granted during the fiscal year listed. The Company
has never granted any stock appreciation rights.
(3) Shares issued under the Company's option exchange program. Excludes an
aggregate of 75,000 shares covered by options granted in 1998 that were
canceled under the exchange program. See "Repricing of Options."
(4) Ms. Okerstrom became Vice President, Sales in August 1997.
(5) Includes $141,047 in sales commissions.
(6) Shares issued under the Company's option exchange program. Excludes an
aggregate of 112,500 shares covered by options granted in 1998 that were
canceled under the exchange program.
(7) Mr. Berlingeri joined the Company in February 1997, and ceased serving as an
executive officer of the Company in July 1998.
(8) Mr. Horner joined the Company in February 1997, and ceased serving as an
executive officer of the Company in November 1998.
6
<PAGE> 9
OPTION GRANTS, EXERCISES AND YEAR-END VALUES
The following table sets forth certain information regarding options
granted to the Named Executive Officers during the fiscal year ended December
31, 1998:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
AT ASSUMED
ANNUAL RATES
INDIVIDUAL GRANTS OF STOCK PRICE
------------------------------------------------------------------ APPRECIATION
PERCENT OF TOTAL EXERCISE FOR OPTION
NUMBER OF SECURITIES OPTIONS GRANTED PRICE TERM(1)
UNDERLYING OPTIONS TO EMPLOYEES IN PER EXPIRATION --------------------
NAME GRANTED FISCAL YEAR SHARE DATE 5% 10%
---- -------------------- ---------------- -------- ---------- -- ---
<S> <C> <C> <C> <C> <C> <C>
Stefan R. Bothe......... -- -- -- -- -- --
Jennifer V. Cheng....... 40,000(2) 2.6% $2.44 01/01/08 $61,317 $155,390
20,000(2) 1.3% $2.44 07/21/08 $30,659 $ 77,695
Maureen M. Okerstrom.... 900(2) 0.1% $2.44 01/01/07 $ 1,380 $ 3,496
60,000(2) 4.0% $2.44 01/01/08 $91,976 $233,085
30,000(2) 2.0% $2.44 01/01/08 $45,988 $116,542
12,000(2) 0.8% $2.44 07/21/08 $18,395 $ 46,617
5,000 0.3% $1.19 10/22/08 $ 3,734 $ 9,463
James W. Schenck........ -- -- -- -- -- --
Mark J. Berlingeri...... -- -- -- -- -- --
Richard P. Horner....... 5,000 0.3% $1.19 10/22/08 $ 3,734 $ 9,463
</TABLE>
- ---------------
(1) Amounts reported in these columns represent amounts that may be realized
upon exercise of the options immediately prior to the expiration of their
term assuming the specified compound rates of appreciation (5% and 10%) on
the market value of the Common Stock on the date of option grant over the
term of the options. These numbers are calculated based on rules promulgated
by the Securities and Exchange Commission and do not reflect the Company's
estimate of future stock price growth. Actual gains, if any, on stock option
exercise 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 individuals.
(2) Options issued under option exchange program. Excludes shares covered by
options issued in 1998 and canceled under option exchange program. See
"Repricing of Options."
7
<PAGE> 10
The following table sets forth, for each of the Named Executive Officers,
the number of shares acquired on exercise of options during the fiscal year
ended December 31, 1998, the aggregate dollar value realized upon such exercise
and the number and value of unexercised options held by each such officer on
December 31, 1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT FISCAL IN-THE-MONEY OPTIONS AT
ACQUIRED VALUE YEAR-END FISCAL YEAR-END(2)
ON REALIZED -------------------------- -------------------------
NAME EXERCISE (1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- -------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Stefan R. Bothe..................... -- -- 187,500/ -- $ 443,303/ --
Jennifer V. Cheng................... 37,500 $44,531 37,500/ 60,000 $ 88,563/ --
Maureen M. Okerstrom................ 7,000 $18,667 22,475/103,935 $ 8,177/$12,031
James W. Schenck.................... -- -- 75,000/ -- $ 177,125/ --
Mark J. Berlingeri.................. -- -- -- / -- -- / --
Richard P. Horner................... -- -- -- / -- -- / --
</TABLE>
- ---------------
(1) Based on the fair market value of the Common Stock on the date of exercise,
less the option exercise price.
(2) Based on the fair market value of the Common Stock on December 31, 1998
($2.38 per share), less the option exercise price.
REPRICING OF OPTIONS
The following table sets forth information concerning all repricings of
options, since the Company became subject to the reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), held by any
person who served as an executive officer of the Company at any time during
1998. All such repricings were effected through the grant of replacement options
in exchange for existing options.
TEN-YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES MARKET PRICE LENGTH OF ORIGINAL
UNDERLYING OF STOCK AT EXERCISE PRICE OPTION TERM
OPTIONS TIME OF AT TIME OF NEW EXERCISE AT DATE OF
NAME DATE REPRICED(1) REPRICING REPRICING PRICE(2) REPRICING
- ---- -------- ----------- ------------ -------------- ------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
Jennifer V. Cheng.......... 11/18/98 40,000 $1.875 $16.50 $2.44 9 years, 2 months
20,000 $ 6.63 $2.44 9 years, 8 months
Maureen M. Okerstrom....... 11/18/98 900 $1.875 $ 4.00 $2.44 8 years, 2 months
11/18/98 60,000 $1.875 $ 8.66 $2.44 8 years, 8 months
11/18/98 30,000 $1.875 $16.50 $2.44 9 years, 2 months
11/18/98 12,000 $1.875 $ 6.63 $2.44 9 years, 8 months
</TABLE>
- ---------------
(1) Represents the number of shares covered by options granted in exchange for
options canceled in the exchange program. Each option granted covers a
number of shares that is 20 percent less than the number of shares under the
corresponding canceled option.
(2) The new exercise price equals 130% of the market price of the Company's
Common Stock at the time of the repricing.
8
<PAGE> 11
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on the
Company's Common Stock for the period from December 12, 1997, the date on which
the Company's stock began trading on the Nasdaq National Market, through
December 31, 1998, with the cumulative total return of (i) the Center for
Research in Security Prices ("CRSP") Total Return Index for the Nasdaq National
Market and (ii) a self-determined peer group index over the same period. The
self-determined Peer Group Index consists of the Company, Baan Company NV,
Computron Software, Inc., Great Plains Software, Inc., J.D. Edwards & Company,
Platinum Software Corporation, Clarus Corporation, Infinium Software, Inc.,
PeopleSoft Inc. and Walker Interactive Systems, Inc. This comparison assumes the
investment of $100 on December 12, 1997 in the Company's Common Stock, the
Nasdaq National Market Index and the Peer Group Index and assumes dividends, if
any, are reinvested.
<TABLE>
<CAPTION>
FLEXIINTERNATIONAL NASDAQ STOCK MARKET (US SELF-DETERMINED PEER
SOFTWARE, INC. COMPANIES) GROUP
------------------ ----------------------- --------------------
<S> <C> <C> <C>
'12/12/97' 100.00 100.00 100.00
'12/31/97' 140.90 102.30 115.00
'12/31/98' 21.60 144.20 61.20
</TABLE>
9
<PAGE> 12
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Overview and Philosophy
The Company established a Compensation Committee of the Board of Directors
in December 1997. During 1998, the Committee consisted of Mr. Landry and, until
he resigned from the Board in September 1998, Thomas Bredt. The Committee was
responsible for determining salaries and incentive compensation in 1998 for
employees of FlexiInternational, including its Chief Executive Officer and other
executive officers, and for granting options under and administering
FlexiInternational's stock plans.
FlexiInternational's compensation program is designed to achieve the
following objectives:
- Provide compensation that attracts, motivates and retains the best talent
and highest caliber people to serve the Company's customers and achieve
its strategic objectives;
- Recognize and reward individual performance and responsibility; and
- Align management's interest with the interests of the stockholders and
the success of the Company through long-term equity incentives.
COMPENSATION PROGRAM
General. FlexiInternational's executive compensation program consists of
base salary, annual incentive compensation, long-term equity incentives in the
form of stock options and certain benefits, such as life and medical insurance
and a 401(k) savings plan, which are generally available to all employees of the
Company. The Committee believes that its executive compensation program provides
an overall level of compensation that is competitive in the accounting software
industry and comparable to those of other companies of similar size and
complexity.
Base Salary. Base salary compensation is generally set within the range of
salaries of executive officers with comparable qualifications, experience and
responsibilities at other companies in the same or similar businesses and of
comparable size and success. Salary is determined within this range by
FlexiInternational's financial performance and the individual's performance
based on predetermined non-financial objectives. Non-financial objectives
include an individual's contribution to the Company as a whole, including his or
her ability to motivate others, develop the skills necessary to grow as the
Company matures, recognize and pursue new business opportunities and initiate
programs to enhance the Company's growth and success.
Cash Incentives. Cash incentive compensation is designed to tie
compensation to performance by the Company and by the individual. The Committee
considers a number of factors in determining whether incentive awards should be
paid, including achievement by the Company and/or specific business units of
approved budgets, new product introductions, progress in development of new
products and operating income and cash flow goals. The Committee also considers
the achievement by the executives of their assigned objectives. In considering
individual performance, as contrasted to Company performance, the Committee
relies more on subjective evaluations of performance than on quantitative data
or objective criteria.
Long-Term Incentive Compensation. During fiscal 1998, long-term incentives
were provided in the form of options under FlexiInternational's 1997 Stock
Incentive Plan and offerings under its 1997 Employee Stock Purchase Plan. The
objectives of these plans are to align executive and stockholder long-term
interests by creating a strong and direct link between executive compensation
and stockholder return, and to enable executives to develop and maintain a
significant, long-term stock ownership position in FlexiInternational's common
stock.
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1997 Stock Incentive Plan. Stock options are generally granted at an
option price equal to the fair market value of the common stock on the date of
grant. In selecting executives eligible to receive option grants and determining
the amount and frequency of such grants, the Committee evaluates a variety of
factors, including:
- the job level of the executive,
- option grants awarded by competitors to executives at a comparable job
levels,
- past, current and prospective service rendered by the executive and
- the current equity holding of the executive.
During fiscal 1998, the Committee approved option grants for an aggregate
of 267,900 shares of common stock to the Company's executive officers.
1997 Employee Stock Purchase Plan. The 1997 Employee Stock Purchase Plan
is available to virtually all employees, including executive officers, and
allows participants to purchase shares at a discount of 15 percent from the fair
market value at the beginning or end of the applicable purchase period. During
1998, one offering was made under this plan with a per-share purchase price of
$4.0375.
Compensation of Chief Executive Officer
The Committee determined the salary for fiscal 1998 for the Company's Chief
Executive Officer, Mr. Bothe, based primarily on subjective factors and the
Company's operating results for the year. Using these criteria, the Committee
continued Mr. Bothe's base salary for 1998 at its 1997 level of $200,000. In
January 1998, the committee established a growth-oriented formula-based cash
bonus plan for the Company's senior executives pursuant to which Mr. Bothe
received a bonus of $175,065. Also, in July 1998, the Committee awarded Mr.
Bothe a discretionary bonus of $100,000 for his role in accomplishing the
acquisition of The Dodge Group successfully and without the payment of
investment banking fees. The Committee believes that Mr. Bothe's total
compensation for fiscal 1998 was adequate and appropriate in light of the
Company's performance, a revenue increase of $8.6 million, The Dodge Group
acquisition and recognition of the Company as the fastest growing enterprise
software company for the period from 1992 through 1997 by Deloitte and Touche.
The Committee intends to assess Mr. Bothe's compensation from time to time to
assure that it remains competitive within the accounting software industry.
Compliance with Internal Revenue Code Section 162(m). Section 162(m) of
the Internal Revenue Code of 1986, as amended, generally disallows tax
deductions to publicly traded corporations for compensation over one million
dollars to the corporation's chief executive officer or any of its other four
most highly compensated executive officers. Qualifying performance-based
compensation is not subject to this disallowance if certain requirements are
met. Although the Committee is considering the limitations on the deductibility
of executive compensation imposed by Section 162(m) in designing the Company's
executive compensation, the Committee believes that it is unlikely that such
limitation will affect the deductibility of the compensation to be paid to the
Company's executive officers in the near term. The Committee will, however,
continue to monitor the impact of Section 162(m) on the Company.
John B. Landry
BOARD OF DIRECTORS REPORT ON OPTION EXCHANGE PROGRAM
Option Exchange Program. In October and November of 1998,
FlexiInternational's Board of Directors reviewed the stock options held by
FlexiInternational's employees and concluded that the recent decline in the
price of the Company's common stock had resulted in many of these options having
exercise prices well above the recent trading prices for the common stock. The
Board considers stock options to be a critical component of the compensation
FlexiInternational offers to promote long-term retention of key employees and
high levels of performance and to recognize employee contributions to the
Company's success. The Board concluded that a significant number of outstanding
stock options were no longer effective to encourage employee retention or
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to motivate high levels of performance. On November 3, 1998, the Board approved
an option exchange program to address these issues.
The option exchange program was available to all FlexiInternational's
employees, but participation by FlexiInternational's executive officers' was
subject to certain "give-backs," as described below. Employees who were not
executive officers could exchange their existing options for new options with a
lower exercise price but with a longer vesting schedule. The exercise price of
the new option was the closing price of FlexiInternational's common stock on
November 18, 1998, which was $1.88. However, unvested shares under the new
option would vest six months later than they would have under the old option.
FlexiInternational's executive officers could participate in the program on the
same terms, except that (1) they would forfeit 20 percent of any option they
chose to exchange and (2) the exercise price of their new options would be 30
percent above the November 18th closing price. Other terms of all new options
were the same as those of the options they replaced.
In adopting the exchange program the Board considered the following
factors:
- compensation packages appearing less attractive due to option exercise
prices well above the current market price;
- the Company's need to retain key personnel;
- intensity in competition for experienced talent in the software industry;
and
- similar adjustments to stock options by other companies in the high
technology industry.
The Board also considered alternatives to the exchange program. Permitting
employee's equity incentives to remain with little actual financial value was
considered unacceptable in light of the intensive recruiting of employees in the
high technology industry. The loss of key employees could have had a significant
adverse impact on FlexiInternational's performance. The Board also considered
but rejected any significant increases in employee's cash compensation to avoid
a negative impact on the Company's earnings and to maintain the Company's policy
of compensation based on performance. Approximately 100 of the Company's
employees participated in the option exchange program.
Stefan R. Bothe
Jennifer V. Cheng
John B. Landry
A. David Tory
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The adoption of the Option Exchange Program was approved by the Board of
Directors, including Mr. Bothe and Ms. Cheng. No executive officer of the
Company has served as a director or member of the Compensation Committee (or
other committee serving an equivalent function) of any other entity, whose
executive officers served as a director of or member of the Compensation
Committee of the Board of Directors.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on its review of copies of reports filed by persons required
to file reports ("Reporting Persons") with the Securities and Exchange
Commission under Section 16(a) of the Exchange Act, and written representations
from certain Reporting Persons, the Company believes that all but one filing
required to be made by Reporting Persons of the Company were timely filed. An
initial report regarding beneficial ownership on Form 3 by Mr. Sommers, who
joined the Company in November 1998, was filed in March 1999.
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OTHER MATTERS
Management does not know of any other matters which may come before the
Annual Meeting. However, if any other matters are properly presented at the
Annual Meeting, it is the intention of the persons named in the accompanying
proxy to vote, or otherwise act, in accordance with their judgment on such
matters.
All costs of solicitation of proxies will be borne by the Company. In
addition to solicitations by mail, the Company's directors, officers and regular
employees, without additional remuneration, may solicit proxies by telephone and
personal interviews. Brokers, custodians and fiduciaries will be requested to
forward proxy soliciting material to the owners of shares held in their names
and the Company will reimburse them for out-of-pocket expenses incurred on
behalf of the Company.
The Company has selected PricewaterhouseCoopers LLP, its independent
accountants for the Company's 1998 fiscal year, as its independent accountants
for the 1999 fiscal year. Representatives of PricewaterhouseCoopers LLP are
expected to be present at the Annual Meeting. They will have an opportunity to
make a statement if they desire to do so, and will also be available to respond
to appropriate questions from stockholders.
STOCKHOLDER PROPOSALS FOR THE 2000 ANNUAL MEETING OF STOCKHOLDERS
Proposals of stockholders intended to be presented at the 2000 Annual
Meeting of Stockholders must be received by the Secretary of the Company at its
principal office in Shelton, Connecticut not later than December 14, 1999 for
inclusion in the proxy statement for that meeting.
The Company's Bylaws require all stockholder proposals to be timely
submitted in advance to the Company at the above address (other than proposals
submitted for inclusion in the Company's proxy statement and form of proxy as
described above). To be timely, the Secretary must receive such notice not less
than 60 days nor more than 90 days prior to the 2000 Meeting; provided that, if
less than 70 days' notice or prior public disclosure of the date of the 2000
Meeting is given or made, the notice must be received not later than the close
of business on the 10th day following the date on which such notice of the date
of the meeting was mailed or such public disclosure was made, whichever occurs
first.
By Order of the Board of Directors,
JOHN K.P. STONE III, ESQ.
Assistant Secretary
April 12, 1999
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THE BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND THE ANNUAL
MEETING. WHETHER OR NOT STOCKHOLDERS PLAN TO ATTEND, STOCKHOLDERS ARE URGED TO
COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE.
STOCKHOLDERS WHO ATTEND THE ANNUAL MEETING MAY VOTE THEIR SHARES PERSONALLY EVEN
THOUGH THEY HAVE SENT IN THEIR PROXIES.
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PROXY FLEXIINTERNATIONAL SOFTWARE, INC. PROXY
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON APRIL 29, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned, revoking all prior proxies, hereby appoint(s) Stefan R.
Bothe and John K. P. Stone III, and each of them, with full power of
substitution, as proxies to represent and vote, as designated herein, all shares
of Common Stock of FlexiInternational Software, Inc. (the "Company") which the
undersigned would be entitled to vote if personally present at the Annual
Meeting of Stockholders of the Company to be held at the offices of Hale and
Dorr LLP, 60 State Street, Boston, Massachusetts 02109, on Thursday, April, 29
1999 at 10:00 a.m., local time, and at any adjournment thereof.
(CONTINUED AND TO BE SIGNED ON THE OTHER SIDE)
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[X] PLEASE MARK YOUR VOTE AS IN THE EXAMPLE TO THE LEFT.
To elect the persons listed below as Class II Directors:
(except as marked below):
FOR both WITHHOLD AUTHORITY
Jennifer V. Cheng nominees to vote for both nominees
Brian P. Friedman [ ] [ ]
FOR both nominees except the following:
(to withhold authority to vote for a
nominee, write that nominee's name below):
[ ]
--------------------------------------------
SIGNATURE DATE SIGNATURE
-------------------- ------- ---------------------------
DATE if held jointly
-------
NOTE: Please sign exactly as name appears hereon. When shares are held by joint
owners, both should sign. When signing as an attorney, executor, administrator,
trustee or guardian, please give title as such. If a corporation or a
partnership, please sign by authorized person.
