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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 Section240.14a-11(c) or
Section240.14a-12
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / 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:
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(4) Date Filed:
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<PAGE>
[PROBUSINESS LOGO]
ProBusiness Services, Inc.
4125 Hopyard Road
Pleasanton, CA 94588
To our Stockholders:
I am pleased to invite you to the Annual Meeting of Stockholders of
ProBusiness Services, Inc. The meeting will be held Thursday, November 18, 1999,
at 9:00 a.m., local time, at the Pleasanton Hilton located at 7050 Johnson
Drive, Pleasanton, California.
At this meeting, Stockholders will be asked to elect Class II directors,
approve an amendment to the Company's employee stock option plan and ratify the
selection of Ernst & Young LLP as the Company's independent auditors for fiscal
year 2000. The accompanying Notice and Proxy Statement describes these
proposals. I encourage you to read this information carefully.
I am very pleased you have chosen to invest in ProBusiness Services, Inc.
Your vote is important, regardless of how many shares you own. Please take a few
minutes now to complete, sign and date your proxy card and return it in the
envelope provided.
Sincerely,
/s/ Thomas H. Sinton
Thomas H. Sinton
CHAIRMAN OF THE BOARD,
PRESIDENT AND CHIEF
EXECUTIVE OFFICER
<PAGE>
[PROBUSINESS LOGO]
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 18, 1999
------------------------
To the Stockholders:
Notice is hereby given that the 1999 Annual Meeting of Stockholders (the
"Annual Meeting") of ProBusiness Services, Inc., a Delaware corporation (the
"Company"), will be held on Thursday, November 18, 1999 at 9:00 a.m., local
time, at the Pleasanton Hilton, 7050 Johnson Drive, Pleasanton, California, for
the following purposes:
1. To elect the Class II directors to serve for terms of three years.
2. To approve an amendment to the Company's 1996 Stock Option Plan to increase
the number of shares reserved for issuance thereunder by 1,500,000 shares.
3. To ratify the appointment of Ernst & Young LLP as independent accountants of
the Company for the fiscal year ending June 30, 2000.
4. To transact such other business as may properly come before the meeting or
any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice of Annual Meeting of Stockholders. Only
stockholders of record at the close of business on October 4, 1999 are entitled
to notice of, and to vote at, the Annual Meeting.
All stockholders are cordially invited to attend the Annual Meeting in
person. However, to assure your representation at the Annual Meeting, you are
urged to mark, sign, date and return the enclosed proxy card as promptly as
possible in the postage-prepaid envelope enclosed for that purpose. Any
stockholder attending the Annual Meeting may vote in person even if he or she
has returned a proxy card.
By Order of the Board of Directors
/s/ Steven E. Klei
Steven E. Klei
SENIOR VICE PRESIDENT, FINANCE,
CHIEF FINANCIAL OFFICER AND SECRETARY
Pleasanton, California
October 18, 1999
IMPORTANT: WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE REQUESTED TO
COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE
IN THE ENCLOSED ENVELOPE.
<PAGE>
PROBUSINESS SERVICES, INC.
------------------------
PROXY STATEMENT
FOR
1999 ANNUAL MEETING OF STOCKHOLDERS
------------------------
PROCEDURAL MATTERS
GENERAL
The enclosed Proxy is solicited on behalf of the Board of Directors of
ProBusiness Services, Inc., a Delaware corporation (the "Company"), for use at
the 1999 Annual Meeting of Stockholders (the "Annual Meeting") to be held on
Thursday, November 18, 1999 at 9:00 a.m., local time, and at any adjournment
thereof, for the purposes set forth herein and in the accompanying Notice of
Annual Meeting of Stockholders. The Annual Meeting will be held at the
Pleasanton Hilton, 7050 Johnson Drive, Pleasanton, California. The Company's
principal executive offices are located at 4125 Hopyard Road, Pleasanton,
California 94588, and its telephone number at that location is (925) 737-3500.
This Proxy Statement and the enclosed proxy card were mailed on or about
October 18, 1999, together with the Company's 1999 Annual Report to
Stockholders, to all stockholders entitled to vote at the Annual Meeting.
RECORD DATE
Stockholders of record at the close of business on October 4, 1999 (the
"Record Date") are entitled to notice of and to vote at the Annual Meeting. As
of the Record Date, 22,959,038 shares of the Company's common stock, $0.001 par
value (the "Common Stock"), were issued and outstanding and entitled to be voted
at the Annual Meeting. For information regarding security ownership by
management and by the beneficial owners of more than 5% of the Company's Common
Stock, see "Security Ownership of Certain Beneficial Owners and Management." The
closing price of the Company's Common Stock on the Nasdaq National Market on the
Record Date was $25.00 per share.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted by delivering to the Secretary of the
Company a written notice of revocation or a duly executed proxy bearing a date
later than that of the previously submitted proxy, or by attending the Annual
Meeting and voting in person.
VOTING AND SOLICITATION
Each stockholder is entitled to one vote for each share of Common Stock on
all matters presented at the Annual Meeting. Stockholders do not have the right
to cumulate their votes in the election of directors.
The cost of soliciting proxies will be borne by the Company. The Company may
reimburse brokerage firms and other persons representing beneficial owners of
Common Stock for their reasonable expenses in forwarding solicitation materials
to such beneficial owners. Proxies may also be solicited by certain of the
Company's directors, officers and regular employees, without additional
compensation, personally or by telephone, telegram, letter or facsimile.
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QUORUM; ABSTENTIONS; BROKER NON-VOTES
The presence at the Annual Meeting, either in person or by proxy, of the
holders of a majority of the outstanding shares of Common Stock entitled to vote
shall constitute a quorum for the transaction of business. The Company intends
to include abstentions and broker non-votes as present for purposes of
establishing a quorum for the transaction of business and to include abstentions
and to exclude broker non-votes from the calculation of shares entitled to vote
with respect to any proposal for which authorization to vote was withheld.
PROCEDURE FOR SUBMITTING STOCKHOLDER PROPOSALS
Any proposal of a stockholder of the Company which is intended to be
presented by such stockholder at the Company's 2000 Annual Meeting of
Stockholders, either pursuant to inclusion in the proxy statement and form of
proxy relating to such meeting or otherwise, must be received by the Secretary
of the Company no later than June 10, 1999.
The Company's Bylaws provide that a stockholder's notice to the Secretary
shall set forth as to each matter the stockholder proposes to bring before the
annual meeting: (i) a brief description of the business desired to be brought
before the annual meeting and the reasons for conducting such business at the
annual meeting, (ii) the name and address, as they appear on the corporation's
books, of the stockholder proposing such business, (iii) the class and number of
shares of the corporation which are beneficially owned by the stockholder, (iv)
any material interest of the stockholder in such business and (v) any other
information that is required to be provided by the stockholder pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (the "1934
Act"), in his capacity as a proponent to a stockholder proposal. In addition,
such stockholder's notice shall set forth as to each person, if any, whom the
stockholder proposes to nominate for election or re-election as a director: (i)
the name, age, business address and residence address of such person, (ii) the
principal occupation or employment of such person, (iii) the class and number of
shares of the corporation which are beneficially owned by such person, (iv) a
description of all arrangements or understandings between the stockholder and
each nominee and any other person or persons (naming such person or persons)
pursuant to which the nominations are to be made by the stockholder, and (v) any
other information relating to such person that is required to be disclosed in
solicitations of proxies for elections of directors, or is otherwise required,
in each case pursuant to Regulation 14A under the 1934 Act (including without
limitation such person's written consent to being named in the proxy statement,
if any, as a nominee and to serving as a director if elected).
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PROPOSAL NO. 1
ELECTION OF CLASS II DIRECTORS
DIRECTORS AND NOMINEES FOR CLASS II DIRECTORS
The Company's Board of Directors currently consists of five members who are
divided into three classes serving staggered terms. Class I consists of one
director, and Class II and Class III consist of two directors each. The Class II
directors will be elected at the Annual Meeting for terms of three years.
The Board of Directors has selected the nominees listed below to be
re-elected at the Annual Meeting as Class II directors. Unless otherwise
instructed, the proxy holders will vote the proxies received by them for these
nominees. In the event that the nominees are unable or decline to serve as a
director at the time of the Annual Meeting, the proxies will be voted for any
nominee who shall be designated by the present Board of Directors to fill the
vacancy; however, the Company has no reason to believe that the listed nominees
will be unable or will decline to serve as directors. The directors elected at
this Annual Meeting will serve until the term of that director's class expires
in 2002 or until such director's successor has been elected and qualified.
The name of the nominees for Class II directors and the names of each of the
other directors of the Company whose term of office continues after the Annual
Meeting, their ages as of October 4, 1999, and certain other related information
are set forth below. There are no family relationships between any director,
executive officer or the nominee.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- ------------------------------------------------------------------ --- ---------------------------------------
<S> <C> <C>
NOMINEES FOR CLASS II DIRECTORS FOR A TERM EXPIRING IN 2002
William T. Clifford............................................... 53 Director
David C. Hodgson.................................................. 42 Director
CLASS III DIRECTORS WHOSE TERMS EXPIRE IN 2000
Ronald W. Readmond................................................ 56 Director
Thomas P. Roddy................................................... 64 Director
CLASS I DIRECTOR WHOSE TERM EXPIRES IN 2001
Thomas H. Sinton.................................................. 51 Chairman of the Board, President and
Chief Executive Officer
</TABLE>
Thomas H. Sinton, founder of the Company, has served as a Director of the
Company since the Company's incorporation in October 1984. From March 1993 to
present, Mr. Sinton has served as the President and Chief Executive Officer of
the Company. Since December 1996 and for a period between September 1989 and
February 1993, Mr. Sinton served as Chairman of the Board. Mr. Sinton holds a
B.A. degree in English Literature, Magna Cum Laude, from Harvard University, an
M.S. degree in Food Science from the University of California at Davis and an
M.B.A. degree from Stanford University. Mr. Sinton received a Fulbright
Fellowship to study at the University of Vienna in Vienna, Austria.
William T. Clifford, who has served as a Director of the Company since
August 1997, will stand for re-election at the Annual Meeting. Mr. Clifford has
served as the Chief Executive Officer of Gartner Group, Inc. since January 1999
and as President of Gartner Group, Inc. since October 1997. From April 1995 to
January 1999, he was the Chief Operating Officer of Gartner Group, Inc., and
from October 1993 to September 1997, he was Executive Vice President, Operations
of Gartner Group, Inc. From December 1998 to October 1993, Mr. Clifford held
various positions at Automatic Data Processing, Inc., including President of
National Accounts and Corporate Vice President, Information Services. Mr.
Clifford holds a B.A. degree in Economics from the University of Connecticut.
David C. Hodgson has served as a Director of the Company since March 1997.
Mr. Hodgson is a Managing Member of General Atlantic Partners LLC ("GAP LLC")
and has been with GAP LLC since
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1982. Mr. Hodgson is also a director of Baan Company, N.V., a publicly-traded
software company, Atlantic Data Services, Inc., a publicly-traded information
technology consulting company, and several other privately-held software
companies, in which GAP LLC or one of its affiliates is an investor. Mr. Hodgson
holds an A.B. degree in Mathematics from Dartmouth College and an M.B.A. degree
from Stanford University.
Ronald W. Readmond has served as a Director of the Company since February
1997. Since June 1998, Mr. Readmond has been President and Co-Chief Executive
Officer of Wit Capital Group Incorporated and has been an advisor of Barbour
Griffith & Rogers, a lobbying firm, and Chairman of International Equity
Partners, L.P., a private equity and project development company since January
1997. From August 1989 to December 1996, Mr. Readmond held various positions at
Charles Schwab & Co. Inc., most recently serving as Vice Chairman. Mr. Readmond
holds a B.A. degree in Economics from Western Maryland College.
Thomas P. Roddy has served as a Director of the Company since 1992. Since
1988, Mr. Roddy has served as President and Chief Executive Officer of Lafayette
Investments Inc., an investment banking and investment advisory company. Mr.
Roddy holds a B.S. degree in Biochemistry from Villanova University.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of five meetings during
fiscal 1999. Each incumbent director attended at least 75% of the aggregate of
the total number of meetings of the Board of Directors and the total number of
meetings of the committees upon which he or she served. Certain matters were
approved by the Board of Directors and its committees by unanimous written
consent. The Board of Directors of the Company has two standing committees: an
Audit Committee and a Compensation Committee.
The Audit Committee, which currently consists of Mr. Clifford, Mr. Readmond
and Mr. Roddy, is responsible for (i) recommending engagement of the Company's
independent accountants, (ii) approving the services performed by such
accountants, (iii) consulting with such accountants and reviewing with them the
results of their examinations, (iv) reviewing and approving any material
accounting policy changes affecting the Company's operating results, (v)
reviewing the Company's control procedures and personnel and (vi) reviewing and
evaluating the Company's accounting principles and its system of internal
accounting controls. The Audit Committee held one meeting during fiscal 1999.
The Compensation Committee, which currently consists of Mr. Hodgson and Mr.
Readmond, is responsible for (i) reviewing and approving the compensation and
benefits for the Company's officers and other employees, (ii) administering the
Company's stock option plans and (iii) making recommendations to the Board of
Directors regarding such matters. The Compensation Committee did not hold any
meetings during fiscal 1999 excluding Actions by Unanimous Written Consent.
DIRECTOR COMPENSATION
Members of the Company's Board of Directors do not receive compensation for
their services as directors. Certain directors have been granted options to
purchase Common Stock in the past, and options may be granted to Directors of
the Company in the future. In fiscal 1998, Mr. Clifford and Mr. Hodgson each
received options to purchase 22,500 shares of the Company's Common Stock, at an
exercise price of $6.00 per share. In fiscal year 1997, Mr. Readmond received
options to purchase 22,500 shares of the Company's Common Stock at an exercise
price of $4.83 per share. During the period extending from fiscal 1993 to fiscal
1996, Mr. Roddy received 93,750 shares of the Company's Common Stock at exercise
prices ranging from $0.16 to $2.63 per share
REQUIRED VOTE
The nominees for Class II directors receiving the highest numbers of
affirmative votes of the shares entitled to be voted shall be elected to the
Board of Directors. Votes withheld are counted for purposes of determining the
presence or absence of a quorum for the transaction of business, but they
otherwise have no legal effect under Delaware law in connection with the
election of directors.
RECOMMENDATION: THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" THE ELECTION OF MR. CLIFFORD AND MR. HODGSON.
4
<PAGE>
PROPOSAL NO. 2
AMENDMENT TO 1996 STOCK OPTION PLAN
GENERAL
The Board of Directors adopted the Company's 1996 Stock Option Plan (the
"Option Plan") in February 1996. The Option Plan provides for the granting to
employees (including officers and employee directors) of incentive stock options
and for the granting to employees, directors and consultants of non-statutory
stock options. The number of shares reserved for issuance under the Option Plan
is 1,700,881 plus any shares which were forfeited after the Company's initial
public offering and which were issued or subject to issuance pursuant to options
granted under the 1989 Stock Option Plan (the "1989 Plan") (which plan
terminated in connection with Company's initial public offering of Common
Stock), plus annual increases equal to the lesser of (a) 375,000 shares, (b) two
percent (2%) of the number of outstanding shares of Common Stock on each
anniversary of the adoption of the Option Plan or (c) a lesser amount determined
by the Board. As of October 4, 1999, a total of 3,076,741 shares of Common Stock
were reserved for issuance under the Option Plan and a total of 1,839,948 shares
remained available for future grant.
PROPOSAL
In September 1999, the Board of Directors adopted, subject to stockholder
approval, an amendment to the Option Plan to increase the number of shares
reserved for issuance by an additional 1,500,000 shares of Common Stock, for an
aggregate of 4,576,741 shares reserved for issuance thereunder and 3,339,948
shares available for future grant as of October 4, 1999. This amendment will
enable the Company to continue to grant options to eligible employees and
consultants under the terms and conditions of the Option Plan.
The Board of Directors believes that the approval of the amendment to the
Option Plan is in the best interests of the Company and its stockholders, as the
availability of an adequate number of shares for issuance under the Option Plan
and the ability to grant stock options are important factors in attracting,
motivating and retaining qualified personnel essential to the success of the
Company.
REQUIRED VOTE
The affirmative vote by the holders of a majority of the Common Stock
present in person or represented by proxy and entitled to vote on the subject
matter is required to approve the amendment to the Option Plan.
RECOMMENDATION: THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" THE AMENDMENT TO THE OPTION PLAN.
SUMMARY OF THE OPTION PLAN
The following summary of the Option Plan is qualified in its entirety by the
specific language of the Option Plan, a copy of which is available to any
stockholder upon written request to the Secretary of the Company.
PURPOSES. The purposes of the Option Plan are to attract and retain the
best available directors and personnel for positions of substantial
responsibility, to provide additional incentive to employees and consultants of
the Company and to promote the success of the Company's business.
ADMINISTRATION. The Option Plan may be administered by the Board of
Directors or a committee of the Board of Directors (the "Administrator"), which
committee is required to be constituted to comply with Section 16(b) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
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<PAGE>
applicable laws. Subject to the provisions of the Option Plan, the Administrator
has the authority to determine the individuals to whom stock options are to be
granted, the number of shares to be covered by each option, the exercise price,
the fair market value of the Common Stock, the type of option, the term of the
option, the restrictions, if any, on the exercise of the option, the terms for
the payment of the option price and other terms and conditions. The
Administrator also has the power to reprice options if the exercise price of
outstanding options exceeds the fair market value of the Company's Common Stock.
ELIGIBILITY; LIMITATIONS. The Option Plan provides that nonstatutory stock
options may be granted to employees, directors and consultants. Incentive stock
options may be granted only to employees. An optionee who has been granted an
option may, if he or she is otherwise eligible, be granted additional options.
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), limits the deductibility of compensation paid to certain executive
officers of the Company. To maximize the Company's deduction attributable to
options granted to such persons, the Option Plan provides that no employee may
be granted, in any fiscal year, options to purchase more than 187,500 shares of
Common Stock. Over the remaining term of the Option Plan, an employee may be
granted options to purchase up to an additional 375,000 shares of Common Stock
which shall not count against the above limit.
TERMS AND CONDITIONS OF OPTIONS. Each option granted under the Option Plan
is evidenced by a written stock option agreement between the optionee and the
Company and is subject to the following terms and conditions:
(a) Exercise Price. The Administrator determines the exercise price of
options to purchase shares of Common Stock at the time the options are
granted. However, the exercise price of an incentive stock option must not
be less than 100% (110% if issued to any person possessing more than 10% of
the voting power of all classes of stock of the Company (a "10%
Stockholder")) of the fair market value of the Common Stock on the date the
option is granted. For so long as the Company's Common Stock is traded on
the Nasdaq National Market, the fair market value of a share of Common Stock
will be the closing sales price for such stock (or the closing bid if no
sales were reported) on the last trading day prior to the date of grant, as
reported in THE WALL STREET JOURNAL or such source as the Administrator
deems reliable.
(b) Exercise of the Option. Each stock option agreement will specify the
term of the option and the date when the option is to become exercisable.
The terms of such vesting are to be determined by the Administrator. Options
granted under the Option Plan to date generally become exercisable over four
years at a rate of one-fourth of the shares subject to the options at the
end of one year from the date of grant and 1/48th at the end of each month
thereafter and have a ten-year term. The maximum term of an incentive stock
option granted to a 10% Stockholder is five years. An option is exercised by
giving written notice of exercise to the Company, specifying the number of
full shares of Common Stock to be purchased and by tendering full payment of
the purchase price to the Company.
(c) Form of Consideration. The consideration to be paid for the shares
of Common Stock issued upon exercise of an option shall be determined by the
Administrator and is set forth in the stock option agreement. Such form of
consideration may vary for each option, and may consist entirely of cash,
check, promissory note, other shares of the Company's Common Stock, any
combination thereof, or any form of consideration as may be provided in the
stock option agreement.
(d) Termination of Employment. In the event an optionee's continuous
status as an employee, consultant or director terminates for any reason
(other than upon the optionee's death or disability), the optionee may
exercise his or her option within such period of time as is specified in
such optionee's stock option agreement but only to the extent that the
optionee was entitled to exercise the option at the date of such termination
(but in no event later than the expiration of the term of such option as set
forth in the stock option agreement). Options granted under the Option Plan
to date
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have generally provided that optionees may exercise their options within
sixty days from the date of termination of employment (other than for death
or disability).
(e) Disability. In the event an optionee's continuous status as an
employee, consultant or director terminates as a result of permanent and
total disability (as defined in Section 22(e)(3) of the Code), the optionee
may exercise his or her option, but only within twelve months from the date
of such termination, unless otherwise provided in the stock option
agreement, and only to the extent that the optionee was entitled to exercise
it at the date of such termination (but in no event later than the
expiration of the term of such option as set forth in the stock option
agreement).
(f) Death. In the event of an optionee's death, the optionee's estate or
a person who acquired the right to exercise the deceased optionee's option
by bequest or inheritance may exercise the option, but only within twelve
months following the date of death, unless otherwise provided in the stock
option agreement, and only to the extent that the optionee was entitled to
exercise it at the date of death (but in no event later than the expiration
of the term of such option as set forth in the stock option agreement).
(g) Term of Options. The term of each option is the term stated in the
stock option agreement; provided, however, that the term may not exceed ten
years from the date of grant. In the case of an incentive stock option
granted to a 10% Stockholder, the term may not exceed five years from the
date of grant. No option may be exercised by any person after the expiration
of its term.
(h) Nontransferability of Options. An option is nontransferable by the
optionee unless determined otherwise by the Administrator, other than by
will or the laws of descent and distribution, and is exercisable during the
optionee's lifetime only by the optionee. In the event of the optionee's
death, options may be exercised by a person who acquires the right to
exercise the option by bequest or inheritance.
(i) Value Limitation. If the aggregate fair market value (as determined
on date of grant) of all shares of Common Stock subject to an optionee's
incentive stock option which are exercisable for the first time during any
calendar year exceeds $100,000, the excess options shall be treated as
nonstatutory options.
(j) Other Provisions. The stock option agreement may contain such other
terms, provisions and conditions not inconsistent with the Option Plan as
may be determined by the Administrator.
ADJUSTMENT UPON CHANGES IN CAPITALIZATION; CORPORATE TRANSACTIONS. In the
event of changes in the outstanding Common Stock of the Company by reason of any
stock splits, reverse stock splits, stock dividends, combinations,
reclassifications or any other increase or decrease in the number of issued
shares of Common Stock issued without receipt of consideration by the Company,
an appropriate adjustment shall be made by the Administrator in the following:
(i) the number of shares of Common Stock subject to the Option Plan, (ii) the
number and class of shares of stock subject to any option outstanding under the
Option Plan, (iii) and the exercise price of any such outstanding option. The
determination of the Board as to which adjustments made shall be conclusive. In
the event of a proposed dissolution or liquidation of the Company, the
Administrator will notify the holders of options as soon as practicable prior to
the effective date of such action, and all outstanding options will terminate
immediately prior to the consummation of such proposed action. Notwithstanding
the above, in the event of a merger of the Company with or into another
corporation or the sale of substantially all of the assets of the Company, the
Option Plan requires that each outstanding option be assumed or an equivalent
option be substituted by the successor corporation; provided, however, if such
successor or purchaser refuses to assume or substitute the then outstanding
options, the Option Plan provides for the full acceleration of the
exercisability of all outstanding options for a period of fifteen days from the
date of notice of acceleration to the holder and all options will terminate upon
the expiration of such period.
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AMENDMENT AND TERMINATION OF THE OPTION PLAN. The Board may at any time
amend, alter, suspend or terminate the Option Plan. The Company shall obtain
stockholder approval of any amendment to the Option Plan in such a manner and to
such a degree as is necessary and desirable to comply with Rule 16b-3 under the
Exchange Act and Sections 162(m) and 422 of the Code (or any other applicable
law or regulation, including the requirements of any exchange or quotation
system on which the Common Stock is traded). Any amendment or termination of the
Option Plan shall not affect options already granted and such options shall
remain in full force and effect as if the Option Plan had not been amended or
terminated, unless mutually agreed otherwise between the optionee and the
Company, which agreement must be in writing and signed by the optionee and the
Company. In any event, the Option Plan shall terminate in February 2006. Any
options outstanding under the Option Plan at the time of its termination shall
remain outstanding until they expire by their terms.
FEDERAL INCOME TAX CONSEQUENCES
INCENTIVE STOCK OPTIONS. An optionee who is granted an incentive stock
option does not recognize taxable income at the time the option is granted or
upon its exercise, although the exercise may subject the optionee to the
alternative minimum tax. Upon a disposition of the shares more than two years
after grant of the option and one year after exercise of the option, any gain or
loss is treated as long-term capital gain or loss. If these holding periods are
not satisfied, the optionee recognizes ordinary income at the time of
disposition equal to the difference between the exercise price and the lower of
(i) the fair market value of the shares at the date of the option exercise or
(ii) the sale price of the shares. Any gain or loss recognized on such a
premature disposition of the shares in excess of the amount treated as ordinary
income is treated as long-term or short-term capital gain or loss, depending on
the holding period. Long-term capital gains are grouped and netted by holding
periods. Net capital gains on assets held for more than twelve months are
currently taxed at a maximum federal rate of 20%. Capital losses are allowed in
full against capital gains and up to $3,000 against other income. A different
rule for measuring ordinary income upon such a premature disposition may apply
if the optionee is also an officer, director, or 10% Stockholder of the Company.
The Company is entitled to a deduction in the same amount as the ordinary income
recognized by the optionee.
NONSTATUTORY STOCK OPTIONS. An optionee does not recognize any taxable
income at the time he or she is granted a nonstatutory stock option. Upon
exercise, the optionee recognizes taxable income generally measured by the
excess of the then fair market value of the shares over the exercise price. Any
taxable income recognized in connection with an option exercise by an employee
of the Company is subject to tax withholding by the Company. The Company is
entitled to a deduction in the same amount as the ordinary income recognized by
the optionee. Upon a disposition of such shares by the optionee, any difference
between the sale price and the optionee's exercise price, to the extent not
recognized as taxable income as provided above, is treated as long-term or
short-term capital gain or loss, depending on the holding period. Net capital
gains on assets held for more than twelve months are currently taxed at a
maximum federal rate of 20%. Capital losses are allowed in full against capital
gains and up to $3,000 against other income.
The purchaser may accelerate to the date of purchase his or her recognition
of ordinary income, if any, and the beginning of any capital gain holding period
by timely filing an election pursuant to Section 83(b) of the Code. In such
event, the ordinary income recognized, if any, is measured as the difference
between the purchase price and the fair market value of the stock on the date of
purchase, and the capital gain holding period commences on such date. The
ordinary income recognized by a purchaser who is an employee will be subject to
tax withholding by the Company. Different rules may apply if the purchaser is
also an officer, director, or 10% Stockholder of the Company.
THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF FEDERAL INCOME TAXATION
UPON OPTIONEES AND THE COMPANY WITH RESPECT TO THE GRANT AND EXERCISE OF OPTIONS
UNDER THE OPTION PLAN. IT DOES NOT PURPORT TO BE COMPLETE, AND DOES NOT DISCUSS
THE TAX CONSEQUENCES OF THE EMPLOYEE'S OR CONSULTANT'S DEATH OR THE
8
<PAGE>
PROVISIONS OF THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY
IN WHICH THE EMPLOYEE OR CONSULTANT MAY RESIDE.
PARTICIPATION IN THE OPTION PLAN
The grant of options under the Option Plan to employees, including the Named
Executive Officers (as defined under "Executive Officer Compensation"), is
subject to the discretion of the Administrator. As of the date of this proxy
statement, there has been no determination by the Administrator with respect to
future awards under the Option Plan, as amended. Accordingly, future awards are
not determinable. Non-employee directors are eligible to participate in the
Option Plan. The following table sets forth information with respect to the
grant of options pursuant to the Option Plan to the Named Executive Officers, to
all current executive officers as a group and to all other employees as a group
during the last fiscal year.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES EXERCISE
UNDERLYING OPTIONS PRICE
NAME OF INDIVIDUAL AND POSITION GRANTED ($ PER SHARE)
- ----------------------------------------------------------------------------- ------------------- -------------
<S> <C> <C>
Thomas H. Sinton............................................................. 30,000 27.00
Chairman of the Board, President and Chief Executive Officer
Jeffrey M. Bizzack........................................................... 22,500 27.00
Senior Vice President, Sales
Jerry W. Blalock(2).......................................................... 67,500 27.00
Senior Vice President, Operations and Group General Manager
Leslie A. Johnson............................................................ 18,750 27.00
Senior Vice President, Client Services and Chief Service Officer
Steven E. Klei............................................................... 18,750 27.00
Senior Vice President, Finance, Chief Financial Officer and Secretary
Robert E. Schneider.......................................................... 18,750 27.00
Senior Vice President, Product Development and Chief Technical Officer
All current Named Executive Officers as a group (6 persons).................. 176,250 27.00(1)
All current directors who are not Named Executive Officers as a group (4
persons)................................................................... -- --
All employees, including all current officers who are not Named Executive
Officers, as a group....................................................... 965,043 30.86(1)
</TABLE>
- ------------------------
(1) Represents a weighted average per share exercise price.
(2) Mr. Blalock was appointed Executive Officer by the Company's Board of
Directors on August 4, 1999.
9
<PAGE>
PROPOSAL NO. 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected Ernst & Young LLP, independent
accountants, to audit the financial statements of the Company for the fiscal
year ending June 30, 2000. Ernst & Young LLP has been the Company's auditors
since June 1996. Representatives of Ernst & Young LLP are expected to attend the
Annual Meeting to make a statement and respond to appropriate questions.
REQUIRED VOTE
The Board of Directors has conditioned its appointment of the Company's
independent accountants upon the receipt of the affirmative vote by the holders
of a majority of the Common Stock present in person or represented by proxy and
entitled to vote at the Annual Meeting. In the event that the stockholders do
not approve the selection of Ernst & Young LLP, the appointment of the
independent accountants will be reconsidered by the Board of Directors.
RECOMMENDATION: THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY'S
INDEPENDENT ACCOUNTANTS.
10
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of Common Stock of the Company, as of June 30, 1999, by (a) each
person known by the Company to be the beneficial owner of more than 5% of the
outstanding shares of Common Stock, (b) each director and nominee for director,
(c) each of the executive officers named in the Summary Compensation Table, and
(d) all directors and executive officers of the Company as a group. Unless
otherwise noted in the footnotes to the table, the Company believes that the
persons named in the table have sole voting and investing power with respect to
all shares of Common Stock indicated as being beneficially owned by them and
officers and directors can be contacted at the principal office of the Company.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY PERCENT OF
NAME OF BENEFICIAL OWNER OWNED(1) TOTAL
- ------------------------------------------------------------ -------------------- -------------
<S> <C> <C>
Thomas H. Sinton(2)......................................... 4,186,245 18.2%
General Atlantic Partners, LLC(3)........................... 2,174,199 9.5%
Jeffrey M. Bizzack(4)....................................... 164,373 *
Jerry W. Blalock(5)......................................... 16,875 *
Leslie A. Johnson(6)........................................ 142,984 *
Steven E. Klei(7)........................................... 71,916 *
Robert E. Schneider(8)...................................... 115,838 *
William T. Clifford(9)...................................... 11,250 *
David C. Hodgson(3)......................................... 2,185,449 9.5%
Ronald W. Readmond(10)...................................... 28,194 *
Thomas P. Roddy(11)......................................... 255,686 1.1%
All Named Executive Officers and directors as a group (10
persons)(12).............................................. 7,178,810 31.3%
</TABLE>
- ------------------------
* Represents beneficial ownership of less than one percent.
(1) Based on 22,942,362 shares of Common Stock outstanding as of June 30, 1999.
A person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days of June 30, 1999 upon the exercise of
warrants or vested options. Calculations of percentage of beneficial
ownership assume the exercise by only the respective named stockholder of
all options and warrants for the purchase of Common Stock held by such
stockholder which are exercisable within 60 days of June 30, 1999.
(2) Includes 35,469 shares issuable upon exercise of vested options and 9,375
shares subject to the Company's repurchase rights. Also includes shares held
by the Silas D. Trust Estate, the Thomas H. Sinton and Jane Nibley Sinton
1989 Irrevocable Trust and Jane N. Sinton as a custodian for minor children.
(3) Includes 1,851,009 shares held by General Atlantic Partners 39, L.P. ("GAP
39") and 323,190 shares held by GAP Coinvestment Partners, L.P. ("GAP
Coinvestment"). The general partner of GAP 39 is General Atlantic Partners,
LLC ("GAP LLC"). The managing members of GAP LLC are Steven A. Denning,
Stephen P. Reynolds, David C. Hodgson, J. Michael Cline, William O. Grabe,
William E. Ford, Peter L. Bloom and Franchon M. Smithson. The same managing
members of GAP LLC are the general partners of GAP Coinvestment. GAP 39, GAP
LLC, and GAP Coinvestment are a "group" within the meaning of Rule 13d-5 of
the Securities Exchange Act of 1934, as amended. Mr. Hodgson disclaims
beneficial ownership of such securities, except to the extent of his
pecuniary interests therein. Mr. Hodgson is a director of the Company. Also
includes with respect to Mr. Hodgson 11,250 shares issuable upon exercise of
vested options held personally by Mr. Hodgson. The address for GAP 39, GAP
Coinvestment, GAP LLC and Mr. Hodgson is c/o General Atlantic Service
Corporation, Three Pickwick Plaza, Greenwich, CT 06830.
11
<PAGE>
(4) Includes 21,094 shares issuable upon exercise of vested options and 3,094
shares subject to the Company's repurchase rights.
(5) Includes 16,875 shares issuable upon exercise of vested options held by Mr.
Blalock.
(6) Includes 34,298 shares issuable upon exercise of vested options and 937
shares subject to the Company's repurchase rights. Also includes 27,085
shares held by Weir L. Johnson, of which 8,156 shares are issuable upon
exercise of vested options and 469 shares are subject to the Company's
repurchase rights.
(7) Includes 47,079 shares issuable upon exercise of vested options and 3,281
shares subject to the Company's repurchase rights.
(8) Includes 12,579 shares issuable upon exercise of vested options and 37,500
shares subject to the Company's repurchase rights.
(9) Includes 11,250 shares issuable upon exercise of vested options held by Mr.
Clifford.
(10) Includes 18,750 shares issuable upon exercise of vested options held by Mr.
Readmond.
(11) Includes (i) 20,000 shares held by Lafayette Investments Inc. of which Mr.
Roddy is President and Chief Executive Officer, (ii) 51,207 shares held by
Delaware Charter Guarantee FBO Thomas P. Roddy R-IRA, (iii) 24,000 shares
held by Guarantee and Trust Co. TTEE FBO Thomas P. Roddy IRA and (iv)
160,479 shares held by Thomas P. Roddy and Mary W. Roddy.
(12) Includes 216,800 shares issuable upon exercise of vested options and 54,656
shares subject to the Company's repurchase rights.
12
<PAGE>
EXECUTIVE OFFICER COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid to the Company's Chief
Executive Officer and each of the five other most highly compensated executive
officers of the Company determined as of the end of the last fiscal year
(referred to herein as the "Named Executive Officers") for services rendered to
the Company in all capacities during the last three fiscal years.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION -------------
SECURITIES
-------------------- UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#)(1)
- --------------------------------------------------------------------- --------- --------- --------- -------------
<S> <C> <C> <C> <C>
Thomas H. Sinton..................................................... 1999 300,000 162,000 30,000
Chairman of the Board, President and 1998 181,250 120,000 52,500
Chief Executive Officer 1997 150,000 -- --
Jeffrey M. Bizzack................................................... 1999 200,000 185,000 22,500
Senior Vice President, Sales 1998 150,000 115,000 30,000
1997 131,250 82,000 --
Jerry W. Blalock (2)................................................. 1999 196,875 108,000 67,500
Senior Vice President, Operations and 1998 -- -- --
Group General Manager 1997 -- -- --
Leslie A. Johnson.................................................... 1999 200,000 96,000 18,750
Senior Vice President, Client Services and 1998 150,000 90,000 15,000
Chief Service Officer 1997 131,250 30,000 --
Steven E. Klei....................................................... 1999 200,000 96,000 18,750
Senior Vice President, Finance and 1998 150,000 50,000 30,000
Chief Financial Officer 1997 127,100 30,000 --
Robert E. Schneider.................................................. 1999 200,000 96,000 18,750
Senior Vice President, Product Development and 1998 150,000 75,000 15,000
Chief Technical Officer 1997 82,980 25,000 --
</TABLE>
- ------------------------
(1) The options granted are immediately exercisable, but are subject to
repurchase in the event the optionee's employment with the Company ceases
for any reason. The options generally vest over four years as follows: 25%
of the shares one year from the grant date and as to 1/48th of the shares in
each successive month thereafter, with full vesting occurring on the fourth
anniversary date. The options have a term of ten years, subject to earlier
termination in certain situations related to termination of employment.
(2) Mr. Blalock's employment with the Company commenced on August 17, 1998.
13
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information regarding stock options granted
during the fiscal year ended June 30, 1999 to each of the Named Executive
Officers.
OPTION GRANTS IN YEAR ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
---------------------------------------------------- VALUE AT ASSUMED
% OF TOTAL ANNUAL RATES OF
NUMBER OF OPTIONS STOCK PRICE
SECURITIES GRANTED TO APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OPTION TERM($)(3)
OPTIONS IN FISCAL PRICE PER EXPIRATION ----------------------
NAME GRANTED 1999(1) SHARE($)(2) DATE 5% 10%
- ---------------------------------------------- ----------- ------------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Thomas H. Sinton.............................. 30,000 2.63 27.00 7/1/2008 859,617 1,727,741
Jeffrey M. Bizzack............................ 22,500 1.97 27.00 7/1/2008 644,713 1,295,806
Jerry W. Blalock.............................. 67,500 5.91 27.00 8/17/2008 1,934,138 3,887,418
Leslie A. Johnson............................. 18,750 1.64 27.00 7/1/2008 537,261 1,079,838
Steven E. Klei................................ 18,750 1.64 27.00 7/1/2008 537,261 1,079,838
Robert E. Schneider........................... 18,750 1.64 27.00 7/1/2008 537,261 1,079,838
</TABLE>
- ------------------------
(1) Based on a total of options granted to all employees, consultants and
directors during fiscal 1999.
(2) Represents the fair market value of the underlying Common Stock as
determined by the Board of Directors on the date of grant.
(3) The potential realizable value at 5% and 10% appreciation is calculated by
assuming that the last reported sales price of $35.875 per share on June 30,
1999 appreciates at the indicated rate for the remaining portion of the term
of the option and that the option is exercised at the exercise price and
sold on the last day of its term at the appreciated price. Stock price
appreciation of 5% and 10% is assumed pursuant to rules promulgated by the
Securities and Exchange Commission and does not represent the Company's
prediction of its stock price performance.
14
<PAGE>
OPTION EXERCISES AND HOLDINGS
The following table sets forth, as to the Named Executive Officers, certain
information concerning stock options exercised during fiscal 1999 and the number
of shares subject to exercisable and unexercisable stock options as of June 30,
1999. The table also sets forth certain information with respect to the value of
stock options held by such individuals as of June 30, 1999.
FISCAL YEAR AGGREGATED OPTION EXERCISES
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT FISCAL YEAR-END FISCAL YEAR-END(1)
SHARES ACQUIRED VALUE -------------------------- -------------------------
NAME ON EXERCISE REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------- ------------------- --------------- ----------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Thomas H. Sinton..................... -- -- 25,156 57,344 573,347 889,465
Jeffrey M. Bizzack................... -- -- 13,750 38,750 413,073 687,865
Jerry W. Blalock..................... -- -- -- 67,500 -- 599,063
Leslie A. Johnson.................... -- -- 27,156 41,094 851,561 853,908
Steven E. Klei....................... -- -- 47,000 36,250 1,597,161 699,098
Robert E. Schneider.................. -- -- 6,875 26,875 206,537 410,495
</TABLE>
- ------------------------
(1) The amount set forth represents the difference between the closing Common
Stock share price of $35.875 on June 30, 1999, as reported by the Nasdaq
National Market, and the applicable exercise price, multiplied by the
applicable number of options.
CERTAIN TRANSACTIONS
On December 5, 1996, the Company loaned $544,000 under a full recourse note
agreement at an interest rate of 6.31% per year to Robert E. Schneider, an
officer of the Company, to permit Mr. Schneider to exercise options to purchase
Common Stock of the Company. All principal and interest is due December 5, 2000.
As of June 30, 1999, Mr. Schneider had not paid any amount on the note.
On January 31, 1997, the Company loaned $250,000 under a full recourse note
agreement at an interest rate of 6.1% per year to Jeffrey M. Bizzack, an officer
of the Company, to permit Mr. Bizzack to purchase a residence. Accrued interest
must be paid on a monthly basis beginning two years from the date of the note.
All principal and accrued but unpaid interest is due January 31, 2001 unless Mr.
Bizzack's employment with the Company terminates, in which case, the note may
become due earlier. As of June 30, 1999, Mr. Bizzack had not paid any amount on
the note.
Thomas H. Sinton and certain affiliates of GAP LLC are the principal
stockholders of InterPro Expense Systems, Inc., a Delaware corporation
("InterPro"), which in April 1998 purchased rights to certain early-stage travel
and entertainment expense processing software. Mr. Sinton is the President,
Chief Executive Officer and Chairman of the Board of the Company. David C.
Hodgson, a Director of the Company, is a managing member of GAP LLC, affiliates
of which hold more than 5% of the Company's outstanding stock. Because Mr.
Sinton and Mr. Hodgson are officers and Directors of the Company, their
investment in InterPro was required to be, and was, approved by the
disinterested directors of the Company. Any future transaction or relationship
between the Company and InterPro would be entered into on an arms-length basis
and would be approved by the Company's disinterested directors.
On September 8, 1998, the Company loaned $250,000 under a full recourse note
agreement at an interest rate of 5.42% per year to Jerry W. Blalock, an officer
of the Company, to permit Mr. Blalock to purchase a residence. All principal and
accrued but unpaid interest is due September 8, 2001 unless
15
<PAGE>
Mr. Blalock's employment with the Company terminates, in which case, the note
may become due earlier. As of June 30, 1999, Mr. Blalock had not paid any amount
on the note.
On November 20, 1998, the Company loaned $450,000 to William M. Hewitt, an
executive of the Company, under full recourse note agreements with an interest
rate of 5.42% per year. The notes were to permit Mr. Hewitt to purchase a
residence. Principal and interest under the notes is due in two installments of
$200,000 and $250,000 plus interest on November 20, 2000 and November 20, 2003,
respectively. As of June 30, 1999, Mr. Hewitt had not paid any amount on the
notes.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's executive officers and directors, and persons who own more than
10% of a registered class of the Company's equity securities to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
("SEC"). Executive officers, directors and greater than 10% stockholders are
required by SEC rules to furnish the Company with copies of all forms they file.
Based solely on its review of the copies of such forms received by the Company
and written representations from certain reporting persons, the Company believes
that, during fiscal 1999, all Section 16(a) filing requirements applicable to
its executive officers, directors and 10% stockholders were satisfied, except
that the Form 4 for Jeffrey M. Bizzack, Senior Vice President, Sales, for
September 1998 was filed late.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee was formed in November 1996 and is currently
composed of Messrs. Hodgson and Readmond. No interlocking relationship exists
between any member of the Company's Compensation Committee and any member of any
other company's board of directors or compensation committee.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Compensation Committee of the Board of Directors (the "Committee") was
established in November 1996 and is responsible for reviewing the compensation
and benefits for the Company's executive officers, as well as supervising and
making recommendations to the Board on compensation matters generally. The
Committee also administers the Company's stock plans.
COMPENSATION PHILOSOPHY AND POLICY
The policy of the Committee is to attract and retain executive officers and
employees through the payment of competitive base salaries and to encourage and
reward performance through bonuses and stock ownership. The objectives of the
Committee are to:
attract, retain and motivate highly qualified executive officers and
employees who contribute to the long-term success of the Company;
align the compensation of executive officers with business objectives
and performance; and
align incentives for executive officers with the interests of
stockholders in maximizing value.
The Company has taken the necessary steps to conform its compensation
practices to comply with the $1 million compensation deduction cap under Section
162(m) of the Internal Revenue Code, as amended.
ELEMENTS OF COMPENSATION
Compensation for executive officers includes both cash and equity elements.
16
<PAGE>
Cash compensation consists of (i) base salary which is determined on the
basis of the level of responsibility, expertise and experience of the executive
officer, taking into account competitive conditions in the industry and (ii)
cash bonuses subject to meeting all or a portion of targeted objectives.
Ownership of the Company's Common Stock is a key element of executive
compensation. Executive officers and other employees of the Company are eligible
to participate in the 1996 Stock Option Plan (the "Option Plan") and the 1997
Employee Stock Purchase Plan (the "Purchase Plan"). The Option Plan permits the
Board of Directors or the Committee to grant stock options to employees on such
terms as the Board or the Committee may determine. The Committee is currently
administering stock option grants to all employees. In determining the size of a
stock option grant to a new executive officer or other employee, the Committee
takes into account equity participation by comparable employees within the
Company, external competitive circumstances and other relevant factors.
Additional options may be granted to current executive officers and employees to
reward exceptional performance or to provide additional unvested equity
incentives. Options typically vest over a four-year period and thus require the
employee's continuing service to the Company. The Purchase Plan permits
employees to acquire Common Stock of the Company through payroll deductions and
promotes broad-based equity participation throughout the Company. The Committee
believes that such stock plans align the interests of the employees with the
long-term interests of the stockholders.
The Company also maintains a 401(k) retirement savings plan (the "401(k)
Plan"). The 401(k) Plan provides that each participant may contribute up to 18%
of his or her pre-tax gross compensation (up to a statutory prescribed annual
limit of $10,000 in 1999).
FISCAL 1999 EXECUTIVE COMPENSATION
Executive compensation for fiscal 1999 included base salary and incentive
cash bonuses based upon achievement of corporate goals, individual performance
goals and financial performance goals. Executive officers, like other employees,
were eligible for option grants under the Option Plan and to participate in the
Purchase Plan.
CHIEF EXECUTIVE OFFICER COMPENSATION FOR FISCAL 1999
Thomas H. Sinton founded the Company in 1984 and has served as President and
Chief Executive Officer since March 1993. In fiscal 1999, Mr. Sinton earned
$300,000 in salary and $162,000 in bonus awards. Mr. Sinton's salary and bonus
were based on the same factors considered for each executive officer, as
previously described. Mr. Sinton was also granted options to purchase 30,000
shares of the Company's Common Stock in September 1998.
COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
David C. Hodgson
Ronald W. Readmond
17
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total return to stockholders on
the Company's Common Stock with the cumulative total return of the Nasdaq Stock
Market Composite Index and the Russell 2000 Index. The graph assumes that $100
was invested on September 19, 1997 (the date of the Company's initial public
offering) in the Company's Common Stock, the Nasdaq Stock Market Composite Index
and the Russell 2000 Index, assuming reinvestment of dividends, if any. No cash
dividends have been declared or paid on the Company's Common Stock. Note that
historic stock price performance is not necessarily indicative of future stock
price performance.
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG PROBUSINESS SERVICES, INC.,
THE NASDAQ STOCK MARKET (U.S.)
INDEX AND THE RUSSELL 2000 INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
DOLLARS
<S> <C> <C> <C>
ProBusiness Services,
Inc. Nasdaq Stock Market (U.S.) Russell 2000
9/19/97 100.00 100.00 100.00
12/31/97 148.00 93.00 96.00
3/31/98 189.00 109.00 107.00
6/30/98 302.00 113.00 102.00
9/30/98 219.00 100.00 80.00
12/31/98 294.00 130.00 93.00
3/31/99 271.00 146.00 88.00
6/30/99 231.00 159.00 101.00
</TABLE>
18
<PAGE>
OTHER MATTERS
The Company knows of no other matters to be submitted at the meeting. If any
other matters properly come before the meeting, it is the intention of the
persons named in the enclosed proxy card to vote the shares they represent as
the Board of Directors may recommend.
It is important that your shares be represented at the meeting, regardless
of the number of shares held. You are, therefore, urged to execute and return,
at your earliest convenience, the accompanying proxy card in the enclosed
envelope.
THE BOARD OF DIRECTORS
Pleasanton, California
October 18, 1999
19
<PAGE>
PROBUSINESS SERVICES, INC.
1999 ANNUAL MEETING OF
STOCKHOLDERS
NOVEMBER 18, 1999
9:00 A.M.
PLEASANTON HILTON
7050 JOHNSON DRIVE
PLEASANTON, CA 94588
PROBUSINESS SERVICES, INC.
4125 HOPYARD ROAD, PLEASANTON, CA, 94588 PROXY
- -------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF PROBUSINESS
SERVICES, INC. FOR USE AT THE ANNUAL MEETING OF SHAREHOLDERS
The undersigned stockholder of ProBusiness Services, Inc., a Delaware
corporation, hereby acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement each dated October 15, 1999 and hereby
appoints Thomas H. Sinton and Steven E. Klei or either of them, proxies and
attorneys-in-fact, with full power to each of substitution, on behalf and in
the name of the undersigned to represent the undersigned at the 1999 Annual
Meeting of Stockholders of ProBusiness Services, Inc. to be held on November
18, 1999 at 9:00 a.m., local time, at the Pleasanton Hilton, 7050 Johnson
Drive, Pleasanton California, 94588 and at any postponement or adjournment
thereof, and to vote all shares of Common Stock which undersigned would be
entitled to vote if then and there personally present, on the matters set
forth below:
SEE REVERSE SIDE
SEE REVERSE FOR VOTING INSTRUCTIONS
<PAGE>
Mark, sign and date your proxy card and return it in the postage-paid
envelope we've provided or return it to ProBusiness Services, Inc., c/o
Shareowner Services,-SM- P.O. Box 64873, St. Paul, MN 55164-0873.
- PLEASE DETACH HERE -
<TABLE>
<S> <C> <C> <C> <C> <C>
1. Election of Class II Directors 01 Nominee: William T. Clifford / / FOR / / WITHHOLD
03 Nominee: David C. Hodgson / / FOR / / WITHHOLD
2. Proposal to approve an amendment to the 1996 Stock Option Plan to
increase the shares of Common Stock reserved for issuance thereunder by / / For / / Against / / Abstain
1,500,000 to a new total of 4,576,741 shares.
3. Proposal to ratify the appointment of Ernst & Young LLP as independent / / For / / Against / / Abstain
auditors of the Company for the year ending June 30, 2000.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS INDICATED, WILL BE VOTED AS FOLLOWS: (1) FOR
THE ELECTION OF THE NOMINATED CLASS II DIRECTORS; (2) FOR APPROVAL OF THE AMENDMENT TO THE COMPANY'S 1996 STOCK
OPTION PLAN; (3) FOR RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS; AND (4) AS THE
PROXY HOLDERS DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY COME BEFORE THE MEETING.
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS HEREON. IF THE STOCK IS REGISTERED IN THE NAMES OF TWO OR MORE PERSONS,
EACH SHOULD SIGN. EXECUTORS, ADMINISTRATORS, TRUSTEES, GUARDIANS AND ATTORNEYS-IN-FACT SHOULD ADD THEIR TITLES.
IF SIGNER IS A CORPORATION, PLEASE GIVE FULL CORPORATE NAME AND HAVE A DULY AUTHORIZED OFFICER SIGN, STATING
TITLE. IF SIGNER IS A PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY AUTHORIZED PERSON.
PLEASE SIGN, DATE AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED RETURN ENVELOPE WHICH IS POSTAGE PREPAID IF
MAILED IN THE UNITED STATES.
Dated: , 1999
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Signature(s) in Box
(If there are co-owners both must sign)
NOTE: (THIS PROXY SHOULD BE MARKED, SIGNED BY THE
STOCKHOLDER(S) EXACTLY AS HIS OR HER NAME APPEARS
HEREON, AND RETURNED PROMPTLY IN THE ENCLOSED ENVELOPE.
PERSONS SIGNING IN A FIDUCIARY CAPACITY SHOULD SO
INDICATE. IF SHARES ARE HELD BY JOINT TENANTS OR AS
COMMUNITY PROPERTY, BOTH SHOULD SIGN.)
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