<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
- --------------------------------------------------------------------------------
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 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)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act
Rule 0-11 (Set forth the amount on which the filing fee is calculated and
state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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<PAGE> 2
FLEXIINTERNATIONAL SOFTWARE, INC.
TWO ENTERPRISE DRIVE
SHELTON, CONNECTICUT 06484
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MONDAY,
APRIL 24, 2000
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
FlexiInternational Software, Inc. (the "Company") will be held on Monday, April
24, 2000, at the offices 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 one Class III Director to serve for the ensuing three years.
2. To ratify the selection of Deloitte & Touche LLP as the Company's
independent accountants for the current fiscal year.
3. 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 13, 2000 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, 1999, 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
March 24, 2000
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
24, 2000
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 24,
2000 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,
1999 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, 1999
ARE BEING MAILED TO STOCKHOLDERS ON OR ABOUT MARCH 24, 2000. 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, 1999 AS FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION, WITHOUT EXHIBITS. PLEASE ADDRESS ALL
SUCH REQUESTS TO THE COMPANY, ATTENTION OF STEFAN BOTHE, PRESIDENT,
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 13, 2000, 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 17,664,008 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, 2000,
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. Unless otherwise
specified below, the address each of the below parties 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 13.5%
55 East 52nd Street, 37th Floor
New York, NY 10055
James W. Schenck (4)....................................... 1,212,499 6.9%
William Blair Capital Partners V, L.P.(5).................. 1,167,790 6.6%
227 West Monroe Street
Chicago, IL 60606
WR Hambrecht & Co., LLC and affiliate(6)................... 1,166,964 6.6%
550 15th Street
San Francisco, CA 94103
Stefan R. Bothe (7)........................................ 1,204,028 6.8%
Jennifer V. Cheng (7)...................................... 642,313 3.6%
Robert A. Degan............................................ 0 *
A. David Tory (9).......................................... 84,900 *
Frank T. Grywalski (10).................................... 10,000 *
Matthew M. Roy (11)........................................ 117,500 *
David P. Sommers (12)...................................... 20,000 *
S. Nicholas Deacon (13).................................... 7,113 *
All directors and executive officers as a group (8 persons)
(14)..................................................... 2,085,854 11.7%
</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 (the
"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, 2000 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, 2000, on which date there were a total of 17,664,008
shares of Common Stock outstanding.
(3) Beneficial ownership of Furman Selz SBIC, L.P. and its affiliates as
reported on Schedule 13G 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.
(4) Beneficial ownership as reported on Schedule 13G filed with the Commission
in February 1998.
2
<PAGE> 5
(5) Beneficial ownership as reported on Schedule 13G filed with the Commission
in February 1998.
(6) Beneficial ownership as reported on Schedule 13G filed with the Commission
in February 2000. Consists of 550,000 shares and 616,964 shares with
respect to which WR Hambrecht & Co., LLC and William R. Hambrecht, a member
of WR Hambrecht & Co., LLC, respectively, share voting power.
(7) Excludes 611,250 shares held by Ms. Cheng, Mr. Bothe's wife, as to which
shares Mr. Bothe disclaims beneficial ownership.
(8) Includes 31,063 shares subject to options held by Ms. Cheng and 5,000
shares held by Cheng Management Company, with respect to which Ms. Cheng
shares voting and investment power. Excludes 1,204,028 shares held by Mr.
Bothe, Ms. Cheng's husband, as to which shares Ms. Cheng disclaims
beneficial ownership.
(9) Includes 41,000 shares subject to options.
(10) Mr. Grywalski became an executive officer of the Company in May 1999.
(11) Includes 17,500 shares subject to options. Mr. Roy became an executive
officer of the Company in January 1999 and ceased serving with the Company
in February 2000.
(12) Consists of shares subject to options. Mr. Sommers became an executive
officer of the Company in November 1998 and ceased serving with the Company
in December 1999.
(13) Includes 1,446 shares subject to options. Mr. Deacon became an executive
officer of the Company in January 1999 and ceased serving with the Company
in January 2000.
(14) Includes an aggregate of 111,009 shares subject to options.
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. At the end of 1999, Thomas C. Theobald and Brian P. Friedman resigned as
a Class I and Class II directors, respectively. In March 2000, the Board of
Directors elected Robert A. Degan to succeed Mr. Friedman as a Class II
director. The Company is currently engaged in a search for Mr. Theobald's
successor.
The persons named in the enclosed proxy will vote to elect Stefan R. Bothe
as a Class III Director, unless authority to vote for Mr. Bothe is withheld by
marking the proxy to that effect. Mr. Bothe has indicated his willingness to
serve, if elected, but Mr. Bothe 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.
NOMINEE
Class III Director (Term expires at 2000 Annual Meeting)
A. DAVID TORY, age 57 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.
CONTINUING MEMBERS OF THE BOARD OF DIRECTORS
Class I Director (Term expires at 2001 Annual Meeting)
STEFAN R. BOTHE, age 51, 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.
Class II Directors (Terms expire at 2002 Annual Meeting)
JENNIFER V. CHENG, age 50, 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 June 1999, Ms. Cheng has been President
of International Boutiques.com LLC, a start-up Internet retail company. In
addition, 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.
ROBERT A. DEGAN, age 61, has served as a director of the Company since
March 2000. Mr. Degan has been a private investor since January 2000. From
November 1998 to December 1999, Mr. Degan served as General Manager of the
Enhanced Services & Migration Unit (formerly, Summa Four, Inc.) of Cisco
Systems, Inc., a worldwide network solutions provider. From January 1997 to
October 1998, Mr. Degan was Chairman, President and Chief Executive Officer of
Summa Four, Inc., a developer of open platforms for
4
<PAGE> 7
telecommunications providers. From August 1996 to December 1996, Mr. Degan was
President, Chief Executive Officer and a director of Tylink Corporation, a
supplier of digital access products to users of high speed digital networks. Mr.
Degan is also a director of Gensym Corporation and Overland Data, Inc.
BOARD AND COMMITTEE MEETINGS
The Board of Directors has established a Compensation Committee, which
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. From January 1, 1999 to
January 20, 1999, the Compensation Committee consisted solely of John Landry. On
January 21, 1999, in connection with Mr. Landry's resignation as a director, Mr.
Tory and Brian P. Friedman joined the Compensation Committee. At the end of
1999, Mr. Friedman resigned from the Board of Directors and the Compensation
Committee has thereafter consisted solely of Mr. Tory. The Company has also
established an Audit Committee, which reviews the results and scope of the audit
and other services provided by the Company's independent public accountants.
From January 1, 1999 to January 20, 1999, the Audit Committee consisted of
Messrs. Landry and Tory. On January 21, 1999, Thomas Theobald replaced Mr.
Landry on the Audit Committee. At the end of 1999, Mr. Theobald resigned from
the Board of Directors and the Audit Committee has thereafter consisted solely
of Mr. Tory. The Compensation Committee met one time and the Audit Committee met
seven times during 1999. The Board of Directors met 13 times and acted on one
occasion by unanimous written consent during 1999. 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 1999 annual meeting of stockholders, Ms.
Cheng, Mr. Friedman, Mr. Tory and Mr. Theobald each received an option to
purchase 5,250 shares of Common Stock at $1.44 per share fully vested on the
date of 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
OTC Bulletin Board Service on the date of grant. The Director Plan provides that
all options are fully vested on the date of 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, 1999, 1998 and 1997 for the Company's
Chief Executive Officer and such other executive officers as determined under
the rules of the Commission (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(1) COMPENSATION OPTIONS(2)
------------------ ---- -------- -------- ------------ ---------------------
<S> <C> <C> <C> <C> <C>
Stefan R. Bothe........................ 1999 $200,000 $175,000 -- --
Chairman of the Board and 1998 $200,000 $275,065 -- --
Chief Executive Officer 1997 $200,000 $ 40,000 -- --
Frank T. Grywalski(3).................. 1999 $118,141 $ 56,667 -- 375,000
Executive Vice President and
Chief Operating Officer
Matthew M. Roy(4)...................... 1999 $101,875 $ 90,902 -- 55,594
Former Vice President, Sales
and Support
David P. Sommers(5).................... 1999 $165,000 $ 15,000 $35,000(6) 25,000
Former Chief Financial Officer 1998 $ 20,625 -- -- 100,000
S. Nicholas Deacon(7).................. 1999 $121,733 $ 27,005 $15,600(8)
Former President and Managing
Director, FlexiInternational Ltd.
(UK)
</TABLE>
- ---------------
(1) In the case of Mr. Roy, includes $36,957 in commissions earned. In the case
of Mr. Deacon, consists entirely of commissions earned.
(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) Mr. Grywalski joined the Company in May 1999.
(4) Mr. Roy became an executive officer of the Company in January 1999 and
ceased serving as an executive officer of the Company in February 2000.
(5) Mr. Sommers joined the Company in November 1998 and ceased serving as an
executive officer of the Company in December 1999.
(6) Consists of moving expenses.
(7) Mr. Deacon became an executive officer of the Company in January 1999 and
ceased serving as an executive officer of the Company January 2000.
(8) Consists of auto lease expenses.
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, 1999.
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
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...... -- -- -- -- -- --
Frank T. Grywalski... 200,000 14.6% $1.19 05/17/09 $149,362 $378,514
175,000 12.8% $0.38 10/25/09 $ 41,271 $104,589
Matthew M. Roy....... 10,000 0.7% $1.97 02/01/09 $ 12,383 $ 31,381
10,000 0.7% $1.44 04/29/09 $ 9,040 $ 22,910
1,000 0.1% $2.38 01/18/09 $ 1,494 $ 3,785
34,594 2.5% $0.38 10/25/09 $ 8,159 $ 20,675
David P. Sommers..... 25,000 1.8% $.038 10/25/09 $ 5,896 $ 14,941
S. Nicholas Deacon... -- -- -- -- -- --
</TABLE>
Amounts reported in the last two 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
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.
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, 1999, the aggregate dollar value realized upon such exercise
and the number and value of unexercised options held by each such officer on
December 31, 1999.
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 YEAR-END FISCAL YEAR-END(2)
ON VALUE ------------------------- -------------------------
NAME EXERCISE REALIZED(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- -------- ----------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Stefan R. Bothe.............. 187,500 $68,303 0/ 0 -- / --
Frank T. Grywalski........... -- -- 0/375,000 -- /$57,418
Matthew M. Roy............... -- -- 13,800/ 59,169 -- /$11,350
David P. Sommers............. -- -- 20,000/105,000 -- /$ 8,203
S. Nicholas Deacon........... 5,667 $ 6,673 1,446/ 11,012 -- / --
</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, 1999
($.70 per share), less the option exercise price.
7
<PAGE> 10
SEVERANCE AGREEMENTS
In February 1999, the Company entered into a severance agreement with Ms.
Cheng in connection with her ceasing to serve as an executive officer of the
Company. Under the agreement, the Company makes 12 monthly payments to Ms. Cheng
totaling $319,652 in the first year after Ms. Cheng's termination of employment.
The Company will continue to pay Ms. Cheng up to 12 such additional monthly
payments in the second year following termination, until she secures other
employment.
In February 1999, the Company entered into a severance agreement with Mr.
Schenck in connection with his ceasing to serve as an executive officer of the
Company. Under the agreement, the Company makes 12 monthly payments to Mr.
Schenck totaling $189,000 in the first year after Mr. Schenck's termination of
employment. The Company will continue to pay Mr. Schenck up to 12 such
additional monthly payments in the second year following termination, until he
secures other employment. In July 1999, Mr. Schenck secured other employment,
and all payments ceased under the agreement in February 2000.
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, 1999, 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>
12/31/1997 140.90 102.30 115.00
12/31/1998 21.60 144.10 61.20
12/31/1999 4.50 262.00 74.30
</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. From January 1, 1999 to January 20, 1999, the Compensation
Committee consisted solely of John Landry, a former member of the Board of
Directors. On January 21, 1999, in connection with Mr. Landry's resignation as a
director, Mr. Tory and Brian P. Friedman joined the Compensation Committee. At
the end of 1999, Mr. Friedman resigned from the Board of Directors and the
Compensation Committee has thereafter consisted solely of Mr. Tory. The
Committee was responsible for determining salaries and incentive compensation in
1999 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 1999, long-term incentives
were provided in the form of options under FlexiInternational's 1997 Stock
Incentive Plan and an offering 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. 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
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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 1999, the Committee approved option grants for an aggregate
of 474,657 shares of Common Stock to the Named 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 1999,
one offering was made under this plan with a per-share purchase price of $1.22.
Compensation of Chief Executive Officer
The Committee determined the salary for fiscal 1999 for the Company's Chief
Executive Officer, Mr. Bothe, based on subjective and objective factors,
including the Company's operating results for the year. Using these criteria,
the Committee continued Mr. Bothe's base salary for 1999 at its 1998 level of
$200,000. The Committee also awarded Mr. Bothe a bonus for fiscal 1999 of
$175,000. The Committee believes that Mr. Bothe's total compensation for fiscal
1999 was appropriate in light of the Company's performance and circumstances in
its market place, including particularly the Y2K-related slowdown in enterprise
software system purchasing. 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.
A. David Tory
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
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 Commission under Section 16(a) of
the Exchange Act, and written representations from certain Reporting Persons,
the Company believes that, except as follows, all filings required to be made by
Reporting Persons of the Company were timely filed. On March 23, 2000, Mr. Bothe
filed a report on Form 5 that was due to be filed on February 14, 2000.
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RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
In December 1999, with the approval of the Audit Committee and the
concurrence of the Board of Directors, the Company engaged Deloitte & Touche LLP
as its independent auditors and dismissed its former independent auditors,
PricewaterhouseCoopers LLP, effective as of that date. Prior to the engagement
of Deloitte & Touche LLP, PricewaterhouseCoopers LLP had served as the
independent auditors of the Company since 1994. Prior to the engagement there
were no consultations between Deloitte & Touche LLP and the Company regarding
the treatment of accounting, auditing or financial reporting issues.
PricewaterhouseCoopers LLP performed audits of the Company's financial
statements for the years ended December 31, 1997 and 1998, and issued audit
reports dated January 26, 1998 and February 3, 1998, for fiscal year 1997, and
dated January 26, 1999, February 26, 1999, and August 11, 1999, for fiscal year
1998, which contained no adverse opinion or disclaimer of opinion and were not
qualified or modified as to uncertainty, audit scope or accounting principles,
except that the report as reissued on August 11, 1999 for the year ended
December 31, 1998 included modifications relating to (i) a restatement with
respect to the revenue recognition of certain contracts, and (ii) the existence
of substantial doubt about the Company's ability to continue as a going concern.
There have been no disagreements between the Company and PricewaterhouseCoopers
LLP in connection with the audit of the Company's financial statements for the
fiscal years ended December 31, 1997 and 1998, and in the subsequent interim
period through December 13, 1999, on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of PricewaterhouseCoopers
LLP, would have caused PricewaterhouseCoopers LLP to make reference to the
subject matter of the disagreements in its report on the Company's financial
statements for any such periods. PricewaterhouseCoopers LLP has furnished the
Company with a letter addressed to the SEC stating that it agrees with the above
statements.
Although stockholder ratification of the Board of Directors' selection of
Deloitte & Touche LLP is not required by law, the Board of Directors believes
that it is advisable to give stockholders the opportunity to ratify this
selection. If this proposal is not approved at the Annual Meeting, the Board of
Directors will reconsider its selection of Deloitte & Touche LLP.
Representatives of Deloitte & Touche LLP are expected to be present at the
Annual Meeting. They will have the opportunity to make a statement if they
desire to do so and will also be available to respond to appropriate questions
from stockholders. Representatives of the Company's former independent auditors,
PricewaterhouseCoopers LLP, are not expected to be present at the Annual
Meeting.
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 to 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.
STOCKHOLDER PROPOSALS FOR THE 2001 ANNUAL MEETING OF STOCKHOLDERS
Proposals of stockholders intended to be presented at the 2001 Annual
Meeting of Stockholders must be received by the Secretary of the Company at its
principal office in Shelton, Connecticut not later than November 17, 2000, in
order to be included in the proxy statement for that meeting.
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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
March 24, 2000
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 24, 2000
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 Monday, April, 24
2000 at 10:00 a.m., local time, and at any adjournment thereof.
(CONTINUED AND TO BE SIGNED ON THE OTHER SIDE)
- --------------------------------------------------------------------------------
[X] PLEASE MARK YOUR VOTE AS IN THIS EXAMPLE.
1. To elect the person listed below as a
Class III Director:
FOR the WITHHOLD AUTHORITY
nominee to vote for the nominee
A. David Tory [ ] [ ]
2. To ratify the selection of Deloitte FOR AGAINST ABSTAIN
& Touche LLP as the Company's [ ] [ ] [ ]
independent accountants for the
current fiscal year.
SIGNATURE ______________ DATE _______ SIGNATURE _________________ DATE ________
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.
