<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
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
GeoTel Communications Corporation
(Name of Registrant as Specified In Its Charter)
GeoTel Communications Corporation
(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)(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:
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<PAGE> 2
GEOTEL COMMUNICATIONS CORPORATION
1997 ANNUAL MEETING OF STOCKHOLDERS
To Our Stockholders:
The 1997 Annual Meeting of the Stockholders of GeoTel Communications
Corporation will be held on Thursday, May 29, 1997 at 10:00 a.m. EDT at Cross
Point at 900 Chelmsford Street, Lowell, Massachusetts in the Lowell conference
room of Tower 3 on the first floor for the following purposes:
1. To elect two directors, to serve for a term of three years as more
fully described in the accompanying Proxy Statement.
2. To consider and act upon a proposal to ratify, confirm and approve
the selection of Coopers & Lybrand L.L.P. as the independent certified
public accountants of the Company for fiscal year 1997.
3. To consider and act upon any other business which may properly come
before the meeting.
The Board of Directors has fixed the close of business on April 21, 1997,
as the record date for the meeting. All stockholders of record on that date are
entitled to notice of and to vote at the meeting.
PLEASE COMPLETE AND RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED
WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE MEETING IN PERSON.
By order of the Board of Directors
/s/ Timothy J. Allen
TIMOTHY J. ALLEN
Vice President of Finance,
Chief Financial Officer,
Treasurer and Assistant Secretary
Littleton, Massachusetts
April 29, 1997
<PAGE> 3
GEOTEL COMMUNICATIONS CORPORATION
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of GeoTel Communications Corporation (the
"Company") for use at the 1997 Annual Meeting of Stockholders to be held on
Thursday, May 29, 1997, at the time and place set forth in the notice of the
meeting, and at any adjournments thereof. The approximate date on which this
Proxy Statement and form of proxy are first being sent to stockholders is April
29, 1997.
If the enclosed proxy is properly executed and returned, it will be voted
in the manner directed by the stockholder. If no instructions are specified with
respect to any particular matter to be acted upon, proxies will be voted in
favor thereof. Any person signing the enclosed form of proxy has the power to
revoke it by voting in person at the meeting, or by giving written notice of
revocation to the Secretary of the Company at any time before the proxy is
exercised.
The holders of a majority in interest of all Common Stock issued,
outstanding and entitled to vote are required to be present in person or be
represented by proxy at the meeting in order to constitute a quorum for the
transaction of business. The election of the nominees for director will be
decided by majority vote. The affirmative vote of the holders of at least a
majority of the shares of Common Stock voting in person or by proxy at the
meeting are required to approve all other matters listed in the notice of the
meeting.
The Company will bear the cost of the solicitation. It is expected that the
solicitation will be made primarily by mail, but regular employees or
representatives of the Company (none of whom will receive any extra compensation
for their activities) may also solicit proxies by telephone, telecopier and in
person and arrange for brokerage houses and other custodians, nominees and
fiduciaries to send proxies and proxy materials to their principals at the
expense of the Company.
The Company's current principal executive office is located at 25 Porter
Road, Littleton, Massachusetts 01460 (508) 486-1100. In May 1997, the Company
will be moving to a new executive office at Cross Point at 900 Chelmsford
Street, Lowell, Massachusetts 01851 (508) 275-5100.
RECORD DATE AND VOTING SECURITIES
Only stockholders of record at the close of business on April 21, 1997 are
entitled to notice of and to vote at the meeting. On that date, the Company had
outstanding and entitled to vote 13,095,111 shares of Common Stock, par value
$.01 per share ("Company's Common Stock" or "Common Stock"). Each outstanding
share of the Company's Common Stock entitles the record holder to one vote.
ELECTION OF DIRECTORS
The Board of Directors is divided into three equal classes. One class is
elected each year for a term of three years. It is proposed that the nominees
listed below, whose terms expire at this meeting, be elected to serve a term of
three years and until his successor is duly elected and qualified or until he
sooner dies, resigns or is removed. The Company presently has a Board of
Directors of six members.
The persons named in the accompanying proxy will vote, unless authority is
withheld, for the election of the nominees named below. If such nominees should
become unavailable for election, which is not
<PAGE> 4
anticipated, the persons named in the accompanying proxy will vote for such
substitutes as the Board of Directors may recommend. The nominees are not
related to any other executive officer of the Company.
<TABLE>
<CAPTION>
YEAR FIRST
ELECTED A POSITION WITH THE COMPANY OR PRINCIPAL
NAME OF DIRECTOR AGE DIRECTOR OCCUPATION DURING THE PAST FIVE YEARS
- ---------------------------- ---- ---------- ----------------------------------------------
<S> <C> <C> <C>
NOMINATED FOR A TERM ENDING
IN 2000:
Gary Bowen.................. 50 1997 Gary Bowen has been a Director of the Company
since February 1997. Mr. Bowen has served as
the Chairman of New Oak Communications, a
privately held data communications company,
since 1996. From 1990 to 1996, Mr. Bowen was
Executive Vice President of Marketing and
Worldwide Field Operations for Bay Networks,
Inc. Prior to Bay Networks, Inc., Mr. Bowen
held various management positions up to Senior
Vice President of Marketing, Sales and
Services at Masscomp from 1981 to 1989. Mr.
Bowen is a Director of Xircom Corporation, a
publicly traded company. He also serves on the
boards of several privately held companies.
G. Wayne Andrews............ 46 1993 G. Wayne Andrews, a co-founder of the Company,
has served as a Director of the Company since
June 1993 and as Vice President and Chief
Technology Officer of the Company since
January 1994 and served as President of the
Company from June 1993 to December 1993. From
October 1989 to December 1992, Mr. Andrews was
co-founder and Vice President of Teloquent
Communications Corporation. At Teloquent, Mr.
Andrews held positions as Vice President
Product Management, Vice President Engi-
neering and Vice President Customer Support.
Prior to co-founding Teloquent, Mr. Andrews
was Director, International Development
Center, and Director, Advanced Switching
Systems at Teknekron Infoswitch Corp.
SERVING TERM ENDING IN 1999:
W. Michael Humphreys........ 45 1993 W. Michael Humphreys has been a Director of
the Company since October 1993. Mr. Humphreys
has been a partner of Matrix Partners, a
private venture capital firm since 1982. Prior
to his association with Matrix, he was a
general partner of Hellman, Ferri Investment
Associates. Mr. Humphreys is a director of
several privately-held companies.
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
YEAR FIRST
ELECTED A POSITION WITH THE COMPANY OR PRINCIPAL
NAME OF DIRECTOR AGE DIRECTOR OCCUPATION DURING THE PAST FIVE YEARS
- ---------------------------- ---- ---------- ----------------------------------------------
<S> <C> <C> <C>
John C. Thibault............ 43 1994 John C. Thibault has served as President,
Chief Executive Officer and Director of the
Company since January 1994. From April 1991 to
October 1993, Mr. Thibault served as
President, Chief Executive Officer and
Director of Coral Network Corporation. From
April 1988 to April 1991, Mr. Thibault served
as an officer of Motorola, Inc. and Senior
Vice President and General Manager of
Motorola's Codex product division. From May
1986 to April 1988, Mr. Thibault was President
and Chief Executive Officer of PBX
manufacturer Intecom, Inc., a subsidiary of
Wang Laboratories. Prior to his position at
Intecom, he held several senior management
positions over an 11-year period with Wang.
SERVING A TERM ENDING IN
1998:
Alexander V. d'Arbeloff..... 69 1994 Alexander V. d'Arbeloff has been a Director of
the d'Arbeloff Company since July 1994. Mr.
d'Arbeloff is Chairman, Chief Executive
Officer and a Director of Teradyne, Inc. He
co-founded Teradyne in 1960 and became
President and Chief Executive Officer in 1971.
Mr. d'Arbeloff is a life member of the MIT
Corporation, Chairman of Semi/Sematech, a
trustee of Partners Health Care System, a
trustee of Massachusetts General Hospital and
a trustee of the New England Conservatory. He
is a Director of the Massachusetts High
Technology Council and the Center for Quality
Management. He is a Director of Stratus
Computer, Inc., PRI Automation, Inc. and BTU
International Corporation, each of which is a
publicly traded company. He also serves on the
boards of several privately-held companies.
Gardner C. Hendrie.......... 65 1993 Gardner C. Hendrie has been a Director of the
Company since October 1993. Since 1988, Mr.
Hendrie has been a general partner of Sigma
Partners, a private venture capital firm. Mr.
Hendrie is a Director of Stratus Computer,
Inc., which is a publicly-traded company. He
also serves on the boards of several
privately-held companies.
</TABLE>
INFORMATION CONCERNING THE BOARD OF DIRECTORS
During fiscal 1996, there were six meetings of the Board of Directors of
the Company. All of the directors, attended at least 75% of the aggregate of (i)
the total number of meetings of the Board of Directors during which they served
as director and (ii) the total number of meetings held by committees of the
Board of Directors on which they served. The Board of Directors does not have a
Nominating Committee. During fiscal 1996, none of the directors received
compensation for serving as directors of the Company, except Mr. Thibault and
Mr. Andrews received compensation as employees of the Company. See "Compensation
Committee Interlocks and Insider Participation -- Certain Relationships and
Related Transactions -- Em-
3
<PAGE> 6
ployee Agreements and Change of Control Agreements." In February 1997 the Board
of Directors of the Company adopted the 1997 Non-Employee Director Option Policy
to provide for the granting of options to purchase Common Stock of the Company
pursuant to the Company's 1995 Stock Option Plan. See "Stock Plans -- 1997
Non-Employee Director Option Policy."
The Board of Directors has a Compensation Committee whose present members
are Messrs. Humphreys, d'Arbeloff, and Hendrie. The Compensation Committee
determines the compensation to be paid to key officers of the Company and
administers the Company's stock option plans. During 1996, there were eight
meetings of the Compensation Committee.
The Company also has an Audit Committee whose present members are Messrs.
Humphreys and d'Arbeloff. The Audit Committee responsibilities, amongst others,
are to review with the Company's independent auditors the scope of the audit,
the results of the audit when completed and the independent auditors' fee for
services performed. The Audit Committee also recommends independent auditors to
the Board of Directors and reviews with management various matters related to
its internal accounting controls. During 1996, there was one meeting of the
Audit Committee.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of April 18, 1997 (i) by each person
who is known by the Company to own beneficially more than five percent (5%) of
the Company's Common Stock, (ii) by each of the Company's directors, (iii) by
each of the Named Executive Officers (as defined elsewhere herein) and (iv) by
all directors and executive officers who served as directors or executive
officers at December 31, 1996 as a group. For purposes of this Proxy Statement,
beneficial ownership is defined in accordance with Rule 13d-3 under the
Securities Exchange Act of 1934, as amended, and means generally the power to
vote or dispose of the securities, regardless of any economic interest therein.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS
- ----------------------------------------------------------- -------------------- ----------------
<S> <C> <C>
Matrix Partners III, L.P................................... 1,811,277 13.8%
1000 Winter Street
Suite 4500
Waltham, MA 02154
Sigma Partners II, L.P.
Sigma Associates II, L.P.(1)............................. 1,680,277 12.8%
2884 Sand Hill Road
Suite 121
Menlo Park, CA 94025
Atlas Venture Fund II, L.P................................. 1,325,928 10.1%
222 Berkeley Street
Suite 1950
Boston, MA 02116
New Enterprise Associates VI, Limited Partnership.......... 1,168,053 8.9%
1119 St. Paul Street
Baltimore, MD 21202
Fidelity Investors Limited Partnership..................... 1,150,884 8.8%
82 Devonshire Street
Boston, MA 02109
</TABLE>
4
<PAGE> 7
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS
- ------------------------------------ -------------------- ----------------
<S> <C> <C>
DIRECTORS
Alexander V. d'Arbeloff(2)................................. 275,331 2.1%
c/o Teradyne, Inc.
521 Harrison Avenue
Boston, MA 02118
Gary Bowen................................................. 0 *
7 Hearthstone Road
Westford, MA 01886
Gardner C. Hendrie(3)...................................... 1,688,872 12.9%
c/o Sigma Partners
2884 Sand Hill Road
Suite 121
Menlo Park, CA 94025
W. Michael Humphreys(4).................................... 1,818,082 13.9%
c/o Matrix Partners
1000 Winter Street
Suite 4500
Waltham, MA 02154
EXECUTIVE OFFICERS
G. Wayne Andrews(5)........................................ 439,613 3.4%
John C. Thibault(6)........................................ 424,974 3.2%
Steven H. Webber(7)........................................ 391,822 3.0%
Louis J. Volpe(8).......................................... 220,627 1.7%
Timothy J. Allen(9)........................................ 86,879 *
All Executive Officers and Directors
as a group (9 persons)(3)(4)............................. 5,346,200 40.8%
--------- ----
</TABLE>
- ---------------
* Less than 1%
(1) Consists of 1,562,284 shares of Common Stock held by Sigma Partners II, L.P.
and 117,993 shares of Common Stock held by Sigma Associates II, L.P. Sigma
Management II, L.P. serves as a general partner for the aforementioned
entities, and as such exercises sole investment and voting power.
(2) Includes 23,333 shares of restricted Common Stock which remain subject to
vesting and the Company's right to repurchase at cost.
(3) Includes 1,680,277 shares held by Sigma Partners II, L.P., Sigma Associates
II, L.P. and 8,595 held by Mr. Hendrie. Mr. Hendrie is a general partner of
Sigma Management II, L.P. which is the general partner of each of Sigma
Partners II, L.P. and Sigma Associates II, L.P. and as such may be deemed to
beneficially own all of such shares. Mr. Hendrie disclaims beneficial
ownership of the 1,680,277 shares, except to the extent of his proportionate
pecuniary interest therein.
(4) Includes 1,811,277 shares held by Matrix Partners III, L.P. and 6,805 held
by Mr. Humphreys. Mr. Humphreys is a general partner of Matrix III
Management Company, the general partner of Matrix Partners III, L.P. and as
such may be deemed to beneficially own all of such shares. Mr. Humphreys
disclaims beneficial ownership of the 1,811,277 shares, except to the extent
of his proportionate pecuniary interest therein.
5
<PAGE> 8
(5) Includes 8,200 shares of Common Stock held by Mr. Andrews' children under
the Massachusetts Uniform Transfer to Minors Act and 3,000 shares issuable
pursuant to currently exercisable stock options.
(6) Includes 22,844 shares of Common Stock held by Mr. Thibault's children under
the Massachusetts Uniform Transfer to Minors Act and 25,750 shares of Common
Stock issuable pursuant to currently exercisable stock options.
(7) Includes 13,000 shares of Common Stock issuable pursuant to currently
exercisable stock options.
(8) Includes 93,778 shares of restricted Common Stock which remain subject to
vesting and the Company's right to repurchase at cost and 38,867 shares of
Common Stock issuable pursuant to currently exercisable stock options.
(9) Includes (i) 39,667 shares of restricted Common Stock which remain subject
to vesting and the Company's right to repurchase at cost; (ii) 7,000 shares
of Common Stock held by Mr. Allen's children under the Massachusetts Uniform
Transfer to Minor Act; and (iii) 3,782 shares of Common Stock held jointly
by Mr. Allen and his wife; and (iv) 5,000 shares of Common Stock issuable
pursuant to currently exercisable stock options.
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Compensation Committee (the "Committee") of the Board of Directors has
furnished the following report on executive compensation.
The Company's executive compensation program is administered by the
Committee. The Committee, which is composed of three independent directors,
establishes and administers the Company's executive compensation policies and
plans and administers the Company's stock option and other equity-related
employee compensation plans. The Committee considers internal and external
information in determining officers' compensation, including outside survey
data.
Compensation Philosophy
The Company's compensation policies for executive officers are based on the
belief that the interests of executives should be closely aligned with those of
the Company's shareholders. The compensation policies are designed to achieve
the following objectives:
- Offer compensation opportunities that attract highly qualified
executives, reward outstanding initiative and achievement, and retain the
leadership and skills necessary to build long-term shareholder value.
- Maintain a significant portion of executives' total compensation at risk,
tied to both the annual and long-term financial performance of the
Company and the creation of shareholder value.
- Further the Company's short and long-term strategic goals and values by
aligning compensation with business objectives and individual
performance.
Compensation Program
The Company's executive compensation program has three major integrated
components, base salary, annual incentive awards, and long term incentives.
6
<PAGE> 9
Base Salary. Base salary levels for executive officers are determined
annually by reviewing the competitive pay practices of software companies of
similar size and market capitalization, the skills, performance level, and
contribution to the business of individual executives, and the needs of the
Company. Overall, the Company believes that base salaries for its executive
officers are approximately competitive with median base salary levels for
similar positions in these software companies.
Annual Incentive Awards. Under the Company's 1996 Executive Incentive
Program, the Company's executive officers are eligible to receive annual cash
and stock bonus awards designed to motivate executives to attain short-term and
longer-term corporate and individual management goals. The Committee establishes
the annual incentive opportunity for each executive officer in relation to his
or her base salary. Awards under this program are based on the attainment of
specific Company performance measures established by the Committee early in the
fiscal year, and by the achievement of specified individual objectives and the
degree to which each executive officer contributes to the overall success of the
Company and the management team. For 1996, the formula for these bonuses was
determined as a function of sales growth and other individual objectives, thus
establishing a direct link between executive pay and the Company's growth. In
1996, the Executive Incentive Program also provided that options to purchase an
aggregate of 48,617 shares previously granted to the executive participants,
which would otherwise vest on the fifth anniversary of the date of grant, would
be fully vested on the first anniversary of the date of grant, subject to the
achievement of the Executive Incentive Plans performance criteria. The Company's
performance in 1996 exceeded the objectives set by the Committee.
Long-Term Incentives. The Committee believes that stock options are an
excellent vehicle for compensating its officers and employees. The Company
provides long-term incentives through its 1995 Stock Option Plan, the purpose of
which is to create a direct link between executive compensation and increases in
shareholder value. Stock options are generally granted at fair market value and
vest in installments, over four to five years. When determining option awards
for an executive officer, the Committee considers the executive's current
contribution to Company performance, the anticipated contribution to meeting the
Company's long-term strategic performance goals, and industry practices and
norms. Long-term incentives granted in prior years and existing levels of stock
ownership are also taken into consideration. Because the receipt of value by an
executive officer under a stock option is dependent upon an increase in the
price of the Company's Common Stock, this portion of the executive's
compensation is directly aligned with an increase in shareholder value.
Chief Executive Officer Compensation
Mr. Thibault's base salary, annual incentive award and long-term incentive
compensation are determined by the Committee based upon the same factors as
those employed by the Committee for executive officers generally. Mr. Thibault's
current annual base salary is $165,000 subject to annual review and increase by
the Board of Directors of the Company. Mr. Thibault was paid a cash bonus of
$49,500 under the 1996 Executive Incentive Program. During fiscal 1996, Mr.
Thibault was granted options to purchase 27,844, 13,750, 60,000 and 25,000
shares of Common Stock. The 27,844 options were granted pursuant to the
achievement of certain financial and strategic goals under the 1995 Executive
Incentive Program and were immediately vested and exercisable. The 13,750
options, which would otherwise vest on the fifth anniversary of the date of
grant were fully vested on the first anniversary of the date of grant due to the
achievement of certain financial and strategic initiatives in the 1996 fiscal
year and job performance evaluations. The 60,000 options and 25,000 options vest
in installments over a five year period. In fiscal 1996, the Company forgave a
promissory note and paid the related tax consequences valued at approximately
$68,200 for Mr. Thibault.
7
<PAGE> 10
Section 162(m) Limitation
Section 162(m) of the Internal Revenue Code limits the tax deduction to $1
million for compensation paid to certain executives of public companies. Having
considered the requirements of Section 162(m), the Committee believes that
grants made pursuant to the Company's 1995 Stock Option Plan meet the
requirement that such grants be "performance based" and are, therefore, exempt
from the limitations on deductibility. Historically, the combined salary and
bonus of each executive officer has been well below the $1 million limit. The
Committee's present intention is to comply with Section 162(m) unless the
Committee feels that such compliance would not be in the best interest of the
Company or its shareholders.
COMPENSATION COMMITTEE
Alexander V. d'Arbeloff
Gardner C. Hendrie
W. Michael Humphreys
8
<PAGE> 11
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
GENERAL
Messrs. d'Arbeloff, Hendrie and Humphreys served as members of the
Compensation Committee during 1996. Neither Messrs. d'Arbeloff, Hendrie or
Humphreys was an officer or employee of the Company or any of its subsidiaries
during fiscal 1996.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Stock Transactions. On September 30, 1993, the Company issued an aggregate
of 3,300,000 shares of Series A Convertible Participating Preferred Stock for
aggregate consideration of $3,300,000 in a private venture capital financing, at
a price of $1.00 per share. The following 5% or greater stockholders and
affiliated entities were purchasers of the Series A Convertible Participating
Preferred Stock in the amounts indicated: Matrix Partners III, L.P. (1,160,000
shares); Sigma Partners II, L.P. (985,400 shares); Sigma Associates II, L.P.
(74,600 shares); and Atlas Venture Fund II, L.P. (750,000 shares).
On January 5, 1994, the Company issued 410,250 shares of restricted Common
Stock to John C. Thibault, President and Chief Executive Officer, at a price per
share of $0.10. The Company loaned Mr. Thibault $36,922 in order to fund a
portion of the purchase of such shares. The loan bore interest at 5.25% per year
and was required to be repaid on the first anniversary of the closing of the
Company's initial public offering. The Company forgave the loan in December
1996.
On July 29, 1994, the Company entered into a Stock Purchase Agreement with
Alexander d'Arbeloff pursuant to which the Company issued to Mr. d'Arbeloff
100,000 shares of Series A Convertible Participating Preferred Stock at a price
per share of $1.00. On such date, Mr. d'Arbeloff also purchased 50,000 shares of
Common Stock at a price per share of $0.10 pursuant to the 1993 Restricted Stock
Purchase Plan.
On July 29, 1994, the Company issued an aggregate of 2,604,286 shares of
Series B Convertible Participating Preferred Stock for an aggregate
consideration of $4,557,500 in a private venture capital financing, at a price
of $1.75 per share. The following 5% or greater stockholders, affiliated
entities, executive officers and directors were purchasers of the Series B
Convertible Participating Preferred Stock in the amounts indicated: New
Enterprise Associates VI, Limited Partnership (971,429 shares); Matrix Partners
III, L.P. (542,857 shares); Sigma Partners II, L.P. (462,343 shares); Sigma
Associates II, L.P. (34,800 shares); Atlas Venture Fund II, L.P. (351,429
shares); Alexander d'Arbeloff (90,000 shares); G. Wayne Andrews (5,714 shares);
John C. Thibault (5,714 shares); and Steven H. Webber (5,714 shares).
On August 9, 1995, the Company issued an aggregate of 1,712,329 shares of
its Series C Convertible Participating Preferred Stock for an aggregate
consideration of $4,000,000 in a private venture capital financing, at a price
of $2.336 per share. The following 5% or greater stockholders, affiliated
entities, executive officers and directors were purchasers of the Series C
Convertible Participating Preferred Stock in the amounts indicated: Fidelity
Ventures Limited (1,048,801 shares); Matrix Partners III, L.P. (200,946 shares);
Sigma Partners II, L.P. (170,888 shares); Sigma Associates II, L.P. (12,863
shares); Atlas Venture Fund II, L.P. (129,974 shares); New Enterprise Associates
VI, Limited Partnership (114,634 shares); and Alexander d'Arbeloff (22,421
shares).
On January 24, 1996, the Company issued an aggregate of 70,000 shares of
Series C Convertible Participating Preferred Stock to certain executive officers
and other employees at a purchase price of $2.336
9
<PAGE> 12
for an aggregate consideration of $163,520. The following executive officers
were purchasers of the Series C Convertible Participating Preferred Stock in the
following amounts: Timothy J. Allen (1,000 shares); G. Wayne Andrews (4,000
shares); and Louis J. Volpe (5,000 shares).
The terms of the Convertible Preferred Stock provided that each share of
Convertible Preferred Stock would automatically convert into one share of Common
Stock immediately prior to the initial public offering of the Company's Common
Stock and, upon conversion, each holder of Convertible Preferred Stock would be
entitled to receive a cash payment equal to the original purchase price of the
Convertible Preferred Stock. On September 26, 1996, the Board of Directors and
stockholders of the Company approved an amendment to the Company's Certificate
of Incorporation to provide that, in lieu of any cash payment in connection with
the automatic conversion of the Convertible Preferred Stock in an initial public
offering, the Convertible Preferred Stock would be converted into an additional
number of shares of Common Stock determined by dividing fifty percent of the
original purchase price of the Convertible Preferred Stock by the initial public
offering price. Accordingly, at the initial public offering price of $12.00 per
share, the total number of shares of Series A Convertible Participating
Preferred Stock, Series B Convertible Participating Preferred Stock and Series C
Convertible Participating Preferred Stock automatically converted into
3,543,747, 2,794,176 and 1,955,793 shares of Common Stock, respectively,
immediately prior to the closing of the Company's initial public offering.
Registration Rights Agreements. The investors who purchased shares of
Series A, Series B and Series C Convertible Participating Preferred Stock, which
were converted into Common Stock as described above, and certain executive
officers have certain registration rights with respect to the shares of Common
Stock. Those stockholders (the "Rightsholders") are entitled to require the
Company to register under the Securities Act of 1933, as amended (the
"Securities Act") shares of Common Stock (the "Registrable Shares") held by them
under terms of agreements among the Company and the Rightsholders (the
"Registration Agreements"). The Registration Agreements provide that in the
event the Company proposes to register any of its securities under the
Securities Act at any time or times, the Rightsholders, subject to certain
exceptions, shall be entitled to include Registrable Shares in such
registration. However, the managing underwriter of any such offering may exclude
for marketing reasons some or all of such Registrable Shares from such
registration. Certain Rightsholders have, subject to certain conditions and
limitations, additional rights to require the Company to prepare and file a
registration statement under the Securities Act with respect to their
Registrable Shares if Rightsholders holding at least a majority of the
Registrable Shares held by all such Rightsholders so request. The Company is
generally required to bear the expenses of all such registrations, except
underwriting discounts and commissions.
Employment Agreements and Change of Control Agreements. Messrs. Thibault,
Allen, Andrews, Volpe and Webber are parties to change of control agreements
with the Company which provide for salary continuation and other benefits upon
the occurrence of certain events following a change of control. These events
will occur if such person is terminated without cause or constructively
terminated following a change of control. Upon the occurrence of such events,
the Company is required to continue to pay such person his base salary for a
period of twelve months after termination and provide medical benefits to such
person for such period.
Other Relationships. W. Michael Humphreys, a director of the Company is a
general partner of Matrix III Management Company, a general partner of Matrix
Partners III, L.P., a greater than 5% stockholder of the Company. Gardner C.
Hendrie, a director of the Company, is a general partner of Sigma Management II,
L.P., the general partner of Sigma Partners II, L.P., a greater than 5%
stockholder of the Company.
10
<PAGE> 13
Fidelity Investors Limited Partnership, a greater than 5% stockholder of
the Company, is an affiliate of Fidelity Investments ("Fidelity"), one of the
Company's customers. The Company recognized approximately $1,276,000 in revenue
from Fidelity during the year ended December 31, 1996, representing
approximately 14.1% of the Company's total revenues for such period. The Company
negotiated this transaction with Fidelity on an arms' length basis.
The Company has adopted a policy pursuant to which all future transactions
between the Company and its officers, directors and affiliates will be on terms
no less favorable to the Company than could be obtained from unrelated third
parties and will be approved by a majority of the disinterested members of the
Company's Board of Directors.
11
<PAGE> 14
PERFORMANCE GRAPH
The graph set forth below compares the change in the Company's cumulative
total stockholder return on its Common Stock (as measured by dividing (i) the
sum of (A) the cumulative amount of dividends for the period indicated, assuming
dividend reinvestment, and (B) the difference between the Company's share price
at the end of the period and November 20, 1996, the date the Company's Common
Stock commenced trading on The Nasdaq National Market; by (ii) the share price
at November 20, 1996) with the cumulative total return of The Nasdaq Stock
Market (U.S.) Index and the Hambrecht & Quist Computer Software Index (assuming
the investment of $100 in the Company's Common Stock, the Nasdaq Stock Market
(U.S.) Index and the Hambrecht & Quist Computer Software Index on November 20,
1996, and reinvestment of all dividends). During fiscal year 1996, the Company
paid no dividends.
[PEFORMANCE GRAPH OMITTED]
<TABLE>
<CAPTION>
GeoTel
Measurement Period Communications Nasdaq Stock Hambrecht & Quist
(Fiscal Year Covered) Corporation Market - US Computer Software
<S> <C> <C> <C>
11/20/96 - IPO price 100 100 100
12/31/96 108.33 102.06 98.23
</TABLE>
- ---------------
* $100 invested on November 20, 1996 in Common Stock or the appropriate Index,
including reinvestment of dividends, through fiscal year ending December 31,
1996.
(1) Prior to November 20, 1996 the Company's Common Stock was not publicly
traded. Comparative data is provided only for the period since that date.
This chart is not "soliciting material", is not deemed filed with the
Securities and Exchange Commission and is not to be incorporated by
reference in any filings of the Corporation under the Securities Act of
1933, as amended or the Securities Exchange Act of 1934, as amended, whether
made before or after the date thereof and irrespective of any general
incorporation language in any such filing.
(2) The stock price performance shown on the graph is not necessarily indicative
of future price performance. Information used on this graph was obtained
from the Nasdaq Stock Market and the Nasdaq Stock Market -- US Index was
prepared by Nasdaq by the Center for Research in Security Prices at the
University of Chicago and the Hambrecht & Quist Computer Software Computer
Index was prepared by Research, an independent company, such sources
believed to be reliable, although the Company is not responsible for any
errors or omissions in such information.
12
<PAGE> 15
EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded to, earned by or
paid to the Company's Chief Executive Officer and each of the Company's four
most highly compensated executive officers (other than the Chief Executive
Officer) whose total annual salary and bonus exceeded $100,000 for all services
rendered in all capacities to the Company and its subsidiaries for the Company's
fiscal year ended December 31, 1996 (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL ------------
COMPENSATION SECURITIES
-------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS(1) OPTIONS# COMPENSATION
- --------------------------- ----- --------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
John C. Thibault............................ 1996 $165,000 $49,500 126,594 $68,249(2)
President, Chief Executive Officer 1995 164,583 26,915 224(3)
and Director 1994 146,853 25,000
Steven H. Webber............................ 1996 125,625 18,200 73,782 5,432(4)
Vice President of 1995 115,000 10,571 302(3)
Engineering 1994 99,167
Louis J. Volpe.............................. 1996 124,283 15,600 174,649 269(3)
Senior Vice President of 1995 103,960 10,571 --
Worldwide Sales and Marketing(5)
Timothy J. Allen............................ 1996 117,156 18,000 40,782 235(3)
Vice President of Finance, Chief Financial 1995 100,625 14,071 116(3)
Officer, Treasurer and Assistant Secretary
G. Wayne Andrews............................ 1996 115,000 22,000 38,782 226(3)
Vice President, Chief 1995 115,000 10,571 122(3)
Technology Officer and Director 1994 99,167
</TABLE>
- ---------------
(1) Salary and bonus amounts are presented in the year earned, however, the
payment of such amounts may have occurred in other years.
(2) Represents $68,014 in forgiveness of a promissory note and related income
taxes to Mr. Thibault and $235 in insurance premiums.
(3) Consists of premiums paid on behalf of Named Executives Officers for excess
life insurance coverage.
(4) Represents $5,000 in paid vacation time and $432 in premiums paid on behalf
of the Named Executive Officer for excess life insurance coverage.
(5) Mr. Volpe's annual compensation was paid in 1995 and 1996 for his services
as a consultant to the Company prior to his becoming an employee of the
Company in April 1996.
On December 31, 1996, the number of remaining shares of Common Stock and
options to purchase Common Stock held by the Named Executive Officers that had
not vested and the value of such stock at that date was as follows: Mr.
Thibault -- 98,750 shares (at the market price on 12/31/96 of $13.00, valued at
$1,061,625); Mr. Volpe -- 163,867 (valued at $1,888,611); Mr. Allen -- 30,000
(valued at $188,500); Mr. Andrews -- 28,000 (valued at $163,100); and Mr.
Webber -- 63,000 (valued at $415,100). The foregoing amounts represent the
difference between the fair market value of the Common Stock underlying
13
<PAGE> 16
options at December 31, 1996 ($13.00 per share) and the exercise price of the
options, multiplied by the applicable number of shares of Common Stock
underlying the options.
GRANTS OF STOCK OPTIONS
The following table sets forth certain information with respect to
individual grants of stock options to the Named Executive Officers during the
fiscal year ended December 31, 1996. In fiscal 1996 the Company granted an
aggregate of 982,018 stock options to its employees.
1996 OPTION GRANTS(1)
<TABLE>
<CAPTION>
POTENTIAL REALIZATION
VALUE
INDIVIDUAL GRANTS AT ASSUMED ANNUAL RATES
------------------------------------------------------- OF STOCK PRICE
% OF TOTAL APPRECIATION
OPTIONS GRANTED FOR OPTION TERM
OPTION TO EMPLOYEES IN EXERCISE EXPIRATION ------------------------
NAME GRANTS(4) 1996 PRICE DATE 5% 10%
- ---- ---------- ---------------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Timothy J. Allen................ 10,782(2) 1.2% $0.30 15-Jan-06 $ 223,047 $ 355,165
Vice President of Finance, 5,000(3) 0.5 0.30 11-Apr-06 103,435 164,703
Chief Financial Officer, 25,000 2.5 8.00 26-Sep-06 203,612 324,218
Treasurer and Assistant ------- ---- ---------- ----------
Secretary
40,782 4.2% $ 530,094 $ 844,086
======= ==== ========== ==========
G. Wayne Andrews................ 10,782(2) 1.1% $0.30 15-Jan-06 $ 233,047 $ 355,165
Vice President and Chief 3,000(3) 0.3 0.30 11-Apr-06 62,061 98,822
Technology Officer 25,000 2.5 8.00 26-Sep-06 203,612 324,218
------- ---- ---------- ----------
38,782 3.9% $ 488,720 $ 778,205
======= ==== ========== ==========
John C. Thibault................ 27,844(2) 2.9% $0.30 15-Jan-06 $ 576,008 $ 917,196
President and 13,750(3) 1.4 0.30 11-Apr-06 284,446 452,932
Chief Executive Officer 60,000 6.1 0.30 31-May-06 1,241,218 1,976,432
25,000 2.5 8.00 26-Sep-06 203,612 324,218
------- ---- ---------- ----------
126,594 12.9% $2,305,284 $3,670,778
======= ==== ========== ==========
Louis J. Volpe.................. 10,782(2) 1.1% $0.30 15-Jan-06 $ 223,047 $ 355,165
Senior Vice President of 13,867(3) 1.4 0.30 11-Apr-06 286,866 456,786
Worldwide Sales and Marketing 125,000 12.8 0.30 01-May-96 2,585,870 4,117,566
25,000 2.5 8.00 26-Sep-06 203,612 324,218
------- ---- ---------- ----------
174,649 17.8% $3,299,395 $5,253,735
======= ==== ========== ==========
Steven H. Webber................ 10,782(2) 1.1% $0.30 15-Jan-06 $ 223,047 $ 355,165
Vice President 13,000(3) 1.3 0.30 11-Apr-06 268,931 428,227
of Engineering 50,000 5.1 8.00 26 Sep-06 407,224 648,436
------- ---- ---------- ----------
73,782 7.5% $ 899,202 $1,431,828
======= ==== ========== ==========
</TABLE>
- ---------------
(1) Potential gains are net of exercise price, but before taxes associated with
exercise. These amounts represent certain assumed rates of appreciation
only, based on the Securities and Exchange Commission rules. Actual gains,
if any, on stock option exercises are dependent on the future performance of
the Common Stock, the timing of such exercises and the option holder's
continued employment through the vesting period. The amounts reflected in
this table may not accurately reflect or predict the actual value of the
stock options.
14
<PAGE> 17
(2) The Company granted options to acquire 70,972 shares of Common Stock to
certain Executive Officers pursuant to the Company's 1995 Executive
Incentive Plan. These options were immediately vested and exercisable due to
the achievement of certain financial and strategic initiatives in fiscal
1995.
(3) The Company granted options to acquire 48,617 shares of Common Stock to
certain Executive Officers pursuant to the Company's 1996 Executive
Incentive Plan. The options were subject to vesting on the fifth anniversary
date of the grant date but subject to vest fully on the first anniversary of
the date of grant if certain financial and strategic initiatives were
achieved. The options were accelerated in full on April 11, 1997 due to the
achievement of such financial and strategic initiatives in 1996.
(4) In 1996, the Company issued options to the Executive Officers to purchase an
aggregate of 335,000 shares of Common Stock at exercise prices below fair
market value of the Common Stock. The Company recorded approximately
$615,000 in unearned compensation relating to these stock options grants.
STOCK OPTION EXERCISES AND DECEMBER 31, 1996 STOCK OPTION VALUE
Set forth in the table below is information concerning the value of stock
options held at December 31, 1996 by the Named Executive Officers of the
Company.
AGGREGATE OPTION EXERCISES IN LAST FISCAL
YEAR AND OPTION VALUES AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT DECEMBER 31, IN-THE-MONEY OPTIONS AT
1996 DECEMBER 31, 1996(1)
SHARES ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED(2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Timothy J. Allen......... 10,782 $0 $0 30,000 $0 $ 188,500
Vice President of
Finance,
Chief Financial
Officer,
Treasurer and Assistant
Secretary
G. Wayne Andrews......... 10,782 $0 $0 28,000 $0 $ 163,100
Vice President and
Chief
Technology Officer
John C. Thibault......... 27,844 $0 $0 98,750 $0 $1,061,625
President and Chief
Executive Officer
Louis J. Volpe........... 10,782 $0 $0 163,867 $0 $1,888,611
Senior Vice President
of Worldwide Sales
and Marketing
Steven H. Webber......... 10,782 $0 $0 63,000 $0 $ 415,100
Vice President
of Engineering
</TABLE>
- ---------------
(1) The amounts set forth represent the difference between the fair market value
of the Common Stock underlying the options at December 31, 1996 ($13.00 per
share) and the exercise price of the options, multiplied by the applicable
number of shares of Common Stock underlying the options.
(2) No gain was realized as the exercise price was equal to the fair market
value on the day of exercise.
15
<PAGE> 18
STOCK PLANS
1993 Restricted Stock Purchase Plan. The 1993 Restricted Stock Purchase
Plan (the "1993 Plan") was adopted by the Board of Directors in October 1993 and
approved by the stockholders of the Company in December 1993. A maximum of
1,324,063 shares of Common Stock may be issued and sold pursuant to the 1993
Plan. Under the 1993 Plan, shares of Common Stock may be sold to directors,
officers, consultants and other key personnel of the Company (collectively
"Participants") at a purchase price determined by the Compensation Committee of
the Board of Directors. All shares sold pursuant to the 1993 Plan are subject to
repurchase by the Company at the original purchase price for up to a period of
five years from the date of purchase, unless the shares become "vested" under
the terms of the 1993 Plan. None of the shares become vested until the first
anniversary of the date of purchase by the Participant. A Participant vests in
twenty percent of the shares on the first anniversary of the date of purchase
and, thereafter, the remaining shares become vested on a monthly basis through
the fifth anniversary of the date of purchase. In the event of a change in
control, if the Participant has been employed by the Company for at least six
months, an additional twenty percent of the shares held by the Participant
pursuant to the 1993 Plan will become vested shares, unless such change in
control has not been approved by the Board of Directors, in which event all
shares held by the Participant pursuant to the 1993 Plan will become vested
shares.
As of December 31, 1996, 986,143 shares of Common Stock were outstanding
under the 1993 Plan.
1995 Stock Option Plan. The 1995 Stock Option Plan (the "1995 Plan") was
adopted by the Board of Directors in September 1995 and approved by the
stockholders of the Company in January 1996. A maximum of 2,009,057 shares of
Common Stock may currently be issued pursuant to the 1995 Plan upon exercise of
options. The number of shares of Common Stock available for grants under the
1995 Plan will be increased by the number of shares repurchased by the Company
from time to time under the 1993 Plan. The maximum number of shares will
increase, effective January 1, 1997 and each January 1 thereafter during the
term of the 1995 Option Plan, by an amount equal to four percent of the total
number of shares of Common Stock issued and outstanding as of the close of
business on December 31 of the preceding year. No more than an aggregate of
6,000,000 shares of Common Stock may be issued pursuant to the exercise of
options granted under the 1995 Plan. Under the 1995 Plan, incentive stock
options may be granted to employees and officers of the Company and
non-qualified stock options may be granted to consultants, employees and
officers of the Company.
The 1995 Plan is administered by the Compensation Committee of the Board of
Directors, subject to the supervision and control of the entire Board. Subject
to the provisions of the 1995 Plan, the Compensation Committee has the authority
to select optionees and determine the terms of the options granted, including
(i) the number of shares subject to each option, (ii) when the option becomes
exercisable, (iii) the exercise price of the option (which in the case of an
incentive stock option cannot be less than the fair market value of the Common
Stock on the date of grant, or less than 110% of fair market value in the case
of employees or officers holding 10% or more of the voting stock of the
Company), (iv) the duration of the option, and (v) the time, manner and form of
payment upon exercise of an option.
Options granted under the 1995 Plan for fiscal 1996 generally vest and
become exercisable starting one year after the date of grant, with twenty
percent of the shares subject to an option becoming exercisable at that time and
1/60th of the shares subject to the option becoming exercisable each month
thereafter. The Option Agreements governing options granted under the 1995 Plan
provide that in the event of a change in control, if the optionee has been
employed by the Company for at least six months, an additional twenty percent of
the options held by the optionee will vest and become immediately exercisable,
unless such change in control has
16
<PAGE> 19
not been approved by the Board of Directors, in which event all options will
vest and become immediately exercisable.
An option is not transferrable by the optionee except by will, by the laws
of descent and distribution or pursuant to a qualified domestic relations order.
Options are exercisable only while the optionee remains in the employ of the
Company or for a short period of time thereafter. If an optionee becomes
permanently disabled or dies while in the employ of the Company, the option is
exercisable prior to the last day of the sixth or twelfth month, respectively,
following the date of termination of employment. If the optionee leaves the
employ of the Company for any other reason, the option is exercisable for only
thirty days following the date of termination of employment, which time period
may be extended by the Compensation Committee. Options which are exercisable
following termination of employment are exercisable only to the extent that the
optionee was entitled to exercise such options on the date of such termination.
As of December 31, 1996, options to purchase 907,796 shares of Common Stock
were outstanding under the 1995 Plan.
1996 Employee Stock Purchase Plan. The 1996 Employee Stock Purchase Plan
(the "1996 Purchase Plan") for employees of the Company was adopted by the Board
of Directors and approved by the stockholders of the Company in September 1996.
The 1996 Purchase Plan authorizes the issuance of a maximum of 250,000 shares of
Common Stock pursuant to the exercise of nontransferable options granted to
participating employees.
The 1996 Purchase Plan is administered by the Compensation Committee of the
Board of Directors. All employees of the Company whose customary employment is
20 hours or more per week and have been employed by the Company for at least six
months are eligible to participate in the 1996 Purchase Plan. Employees who own
5% or more of the Company's stock and directors who are not employees of the
Company may not participate in the 1996 Purchase Plan. To participate in the
1996 Purchase Plan, an employee must authorize the Company in writing to deduct
an amount (not less than 1% nor more than 10% of a participant's base
compensation) from his or her pay commencing on January 1 and July 1 of each
year (each a "Purchase Period"). On the first day of each Purchase Period, the
Company grants to each participating employee an option to purchase up to 1,000
shares of Common Stock. The exercise price for the option for each Purchase
Period is the lesser of 85% of the fair market value of the Common Stock on the
first or last business day of the Purchase Period. The fair market value will be
the closing selling price of the Common Stock as quoted on the Nasdaq National
Market. If an employee is not a participant on the last day of the Purchase
Period, such employee is not entitled to exercise his or her option, and the
amount of his or her accumulated payroll deduction will be refunded to the
employee. An employee's rights under the 1996 Purchase Plan terminate upon his
or her voluntary withdrawal from the Plan at any time or upon termination of
employment.
Common Stock for the 1996 Purchase Plan will be made available either from
authorized but unissued shares of Common Stock or from shares of Common Stock
reacquired by the Company, including shares repurchased in the open market.
As of December 31, 1996, there were no options to purchase shares of Common
Stock outstanding under the 1996 Purchase Plan.
1997 Non-Employee Director Stock Option Policy. The 1997 Non-Employee
Director Stock Option Policy (the "Director Option Policy"), which was approved
by the Board of Directors in February 1997, provides for the grant of options to
purchase Common Stock of the Company to non-employee Directors of the Company
under the 1995 Plan. Subject to the availability of shares of Common Stock under
the 1995
17
<PAGE> 20
Plan, the Director Option Policy authorizes the issuance of a maximum of 100,000
shares of Common Stock in accordance with the terms of the 1995 Plan. All terms
and conditions regarding the grant of options to non-employee Directors of the
Company under the Director Option Policy are governed by the 1995 Plan.
Under the Director Option Policy, each non-employee Director of the Company
who was serving as a director as of the date of adoption of the Policy (a
"Continuing Director") was granted initially an option to acquire five thousand
(5,000) shares of Common Stock under the 1995 Plan. Additionally, beginning on
the date of the Company's 1998 Annual Meeting of the Stockholders and on the
date of each subsequent Annual Meeting of the Stockholders held thereafter, each
Continuing Director, for so long as he is a director of the Company and not
otherwise employed by the Company or any subsidiary, shall be granted an option
to acquire five thousand (5,000) shares of Common Stock under the 1995 Plan (the
"Existing Director Options"). Furthermore, under the Director Option Policy,
each non-employee Director who is first elected as a member of the Board of
Directors of the Company after the adoption of the Policy and during the term of
the 1995 Plan will receive an option to purchase 20,000 shares of Common Stock
(the "New Director Options"). The exercise price for all options granted under
the Director Option Policy will be equal to the fair market value of the Common
Stock as of the date of grant. The Existing Director Options vest in full on the
first anniversary of the date of grant. The New Director Options vest in four
equal installments beginning on the first anniversary of the date of grant. All
other terms of the options are governed by the provisions of the 1995 Plan.
As of December 31, 1996, there were no options to purchase shares of Common
Stock outstanding under the 1997 Director Option Policy.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed Coopers & Lybrand L.L.P. as
independent certified public accountants to audit the consolidated financial
statements of the Company for the fiscal year ending December 31, 1997. Coopers
& Lybrand L.L.P. has served as independent accountants since September 1995.
Prior to September 1995, the Company's financial statements were audited by
Arthur Andersen LLP. The Company retained Coopers & Lybrand L.L.P. as its
independent accountants in September 1995, after the Company's management, in
consultation with the Board of Directors of the Company, decided to dismiss
Arthur Andersen LLP. The audit reports of Arthur Andersen LLP for the period
from inception (June 4, 1993) through December 31, 1993 and for the year ended
December 31, 1994 did not contain an adverse opinion or a disclaimer of opinion,
and were not qualified or modified as to uncertainty, audit scope or accounting
principles. During the period from inception (June 4, 1993) through December 31,
1994 and through the date of dismissal, there were no disagreements with Arthur
Andersen LLP on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure.
A representative of Coopers & Lybrand L.L.P. is expected to be present at
the Annual Meeting and will have the opportunity to make a statement if he or
she so desires and to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPOINTMENT OF COOPERS &
LYBRAND L.L.P.
18
<PAGE> 21
COMPLIANCE WITH SECTION 16(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors and persons owning more than 10% of the outstanding
Common Stock of the Company to file reports of ownership and changes in
ownership with the Securities and Exchange Commission. Officers, directors and
greater than 10% holders of Common Stock of the Company are required by
Securities and Exchange Commission regulations to furnish the Company with
copies of all Section 16(a) forms they file.
Sigma Partners II, L.P., a greater than 10% stockholder of the Company did
not file a Form 4 reporting the purchase of shares of Common Stock by certain of
its affiliated partners within the time period required under Section 16(a) of
the Exchange Act. The transactions were subsequently reported on Form 4.
Except as set forth above and based solely on copies of such forms
furnished as provided above, management believes that through the date hereof
all other Section 16(a) filing requirements applicable to its officers,
directors and owners of greater than 10% of its Common Stock were complied with.
TIME FOR SUBMISSION OF STOCKHOLDER PROPOSALS
Under regulations adopted by the Securities and Exchange Commission, any
proposal submitted for inclusion in the Company's Proxy Statement relating to
the Annual Meeting of Stockholders to be held in 1998 must be received at the
Company's principal executive offices in Lowell, Massachusetts on or before
December 30, 1997. Receipt by the Company of any such proposal from a qualified
stockholder in a timely manner will not ensure its inclusion in the proxy
material because there are other requirements in the proxy rules for such
inclusions.
In addition to the Securities and Exchange Commission requirements
regarding stockholder proposals, the Company's By-laws contain provisions
regarding matters to be brought before stockholder meetings. If such matters are
to be included in the Company's proxy statement and form of proxy, notice
thereof must be delivered to the Company in accordance with the Securities and
Exchange Commission requirements set forth in the paragraph above. If such
matters are not to be included in the Company's proxy statement and form of
proxy, notice of them must be given by personal delivery or by United States
mail, postage prepaid, to the Secretary of the Company on or before February 28,
1998.
OTHER MATTERS
Management knows of no matters which may properly be and are likely to be
brought before the meeting other than the matters discussed herein. However, if
any other matters properly come before the meeting, the persons named in the
enclosed proxy will vote in accordance with their best judgment.
The cost of this solicitation will be borne by the Company. It is expected
that the solicitation will be made primarily by mail, but regular employees or
representatives of the Company (none of whom will receive any extra compensation
for their activities) may also solicit proxies by telephone, telecopier and in
person and arrange for brokerage houses and other custodians, nominees and
fiduciaries to send proxies and proxy material to their principals at the
expense of the Company.
19
<PAGE> 22
10-K REPORT
THE COMPANY WILL PROVIDE EACH BENEFICIAL OWNER OF ITS SECURITIES WITH A
COPY OF AN ANNUAL REPORT ON FORM 10-K, INCLUDING THE FINANCIAL STATEMENTS AND
SCHEDULES THERETO, REQUIRED TO BE FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION FOR THE COMPANY'S MOST RECENT FISCAL YEAR, WITHOUT CHARGE, UPON
RECEIPT OF A WRITTEN REQUEST FROM SUCH PERSON. SUCH REQUEST SHOULD BE SENT TO
INVESTOR RELATIONS, GEOTEL COMMUNICATIONS CORPORATION, 25 PORTER ROAD,
LITTLETON, MASSACHUSETTS 01460 UNTIL MAY 31, 1997. AFTER MAY 31, 1997, SUCH
REQUEST SHOULD BE SENT TO INVESTOR RELATIONS, GEOTEL COMMUNICATIONS CORPORATION,
900 CHELMSFORD STREET, TOWER II, LOWELL, MASSACHUSETTS 01851.
VOTING PROXIES
The Board of Directors recommends an affirmative vote on all proposals
specified. Proxies will be voted as specified. If signed proxies are returned
without specifying an affirmative or negative vote on any proposal, the shares
represented by such proxies will be voted in favor of the Board of Directors'
recommendations.
By order of the Board of Directors
/s/ Timothy J. Allen
TIMOTHY J. ALLEN
Vice President of Finance,
Chief Financial Officer,
Treasurer and Assistant Secretary
April 29, 1997
20
<PAGE> 23
GEOTEL COMMUNICATIONS CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of GeoTel Communications Corporation, a Delaware
corporation ("GeoTel"), hereby acknowledges receipt of the Notice of Annual
Meeting of Stockholders and Proxy Statement dated April 29, 1997, and hereby
appoints John C. Thibault and Timothy J. Allen, or any one of them, attorneys
with full power of substitution to each for and in the name of the undersigned,
with all powers the undersigned would possess if personally present to vote the
Common Stock of the undersigned in GeoTel at the Annual Meeting of its
stockholders to be held May 29, 1997 at Cross Point, Tower 3, 900 Chelmsford
Street, Lowell Conference Room - 1st Floor, Lowell, Massachusetts at 10:00 a.m.,
local time, or any adjournment or postponement thereof.
1. ELECTION OF DIRECTORS: FOR all nominees listed below
(except marked to the contrary below) [ ]
AGAINST all nominees listed below [ ]
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU INSTRUCT THE PROXIES TO VOTE FOR ALL
OF THE NOMINEES LISTED BELOW.
NOMINEES: G. Wayne Andrews and Gary Bowen
(INSTRUCTION: TO VOTE AGAINST ANY INDIVIDUAL NOMINEE, WRITE THAT NOMINEE'S NAME
IN THE SPACE PROVIDED BELOW.)
- --------------------------------------------------------------------------------
2. To ratify the selection of Coopers & Lybrand L.L.P. as independent
auditors of GeoTel for the fiscal year ending December 31, 1997.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU INSTRUCT THE PROXIES TO VOTE FOR
PROPOSAL NO. 2.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment or
postponement thereof.
(continued and to be signed on reverse side)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
PROPOSAL NOS. 1 AND 2 AND AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS
AS MAY COME BEFORE THE MEETING.
PLEASE SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED ENVELOPE
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING IN PERSON.
Please sign exactly as name appears below. When shares are held in more than
one name, including joint tenants, each party should sign. When signing as
attorney, executor, administrator, trustee or guardian, please give full title
as such.
Dated
------------------------,1997
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Signature
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Signature, if held jointly
[ ] MARK HERE IF YOU PLAN TO ATTEND THE MEETING [ ] MARK HERE FOR ADDRESS
CHANGE AND NOTE ABOVE
