<PAGE>
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF
1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Confidential, for Use of the
[_] Preliminary Proxy Statement Commission Only (as Permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to 14a-11(c) or 14a-12
ARIS CORPORATION
-----------------------------------------------------
(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)(4) and 0-11.
CALCULATION OF FILING FEE
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
PER UNIT PRICE
OR OTHER
TITLE OF UNDERLYING
EACH CLASS AGGREGATE VALUE OF
OF NUMBER OF TRANSACTION PROPOSED
SECURITIES SECURITIES TO COMPUTED MAXIMUM
TO WHICH WHICH PURSUANT TO AGGREGATE
TRANSACTION TRANSACTION EXCHANGE ACT VALUE OF TOTAL FEE
APPLIES: APPLIES: RULE 0-11: TRANSACTION: PAID:
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
[_] 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.
Amount Previously Paid: _____________ Filing Party: _________________________
Form, Schedule or Registration Date Filed: _________________________
Statement no.: ______________________
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
[LOGO OF ARIS CORPORATION]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 28, 1998
To ARIS Corporation Shareholders:
Notice is hereby given, that the Annual Meeting of Shareholders of ARIS
Corporation, a Washington corporation (the "Company"), will be held on
Tuesday, April 28, 1998 at 5:00 p.m. in Room 401 of the Meydenbauer Center,
11100 NE 6th Street, Bellevue, Washington 98004, for the following purposes:
1. To elect one Class III Director for a three year term.
2. To consider and act upon a proposal to approve an amendment to the
Company's 1997 Stock Option Plan (the "1997 Plan") to increase the
number of shares of Common Stock reserved for issuance under the 1997
Plan to 2,000,000 shares, as recommended by the Board of Directors.
3. To consider and act upon a proposal to approve the adoption of the
Company's 1998 Employee Stock Purchase Plan (the "ESPP"), as
recommended by the Board of Directors.
4. To approve the Company's form of Indemnification Agreement as signed
by the Company's officers and directors.
5. To transact such other business as may properly come before the
meeting and any adjournments thereof.
Shareholders entitled to notice of and to vote at the meeting shall be
determined as of the close of business on March 6, 1998, the record date fixed
by the Board of Directors for such purpose. A list of such shareholders will
be available during regular business hours at the Company's corporate
headquarters located at 2229 112th Avenue NE, Bellevue, Washington, for the
ten days before the meeting for inspection by any shareholder for any purpose
germane to the meeting.
By Order of the Board of Directors,
ARIS CORPORATION
NORBERT W. SUGAYAN, JR.
Secretary
April 6, 1998
SHAREHOLDERS ARE REQUESTED TO SIGN THE ENCLOSED PROXY CARD AND RETURN IT IN
THE ENCLOSED STAMPED ENVELOPE BY RETURN MAIL.
<PAGE>
ARIS CORPORATION
2229 112TH AVENUE NE
BELLEVUE, WASHINGTON, 98004
PROXY STATEMENT
APRIL 6, 1998
Proxies in the form enclosed with this Proxy Statement are solicited by the
Board of Directors of ARIS Corporation (the "Company") for use at the Annual
Meeting of Shareholders of the Company to be held on Tuesday, April 28, at
5:00 p.m. in Room 401 of the Meydenbauer Center, 11100 NE 6th Street,
Bellevue, Washington, or at any adjournments thereof.
An Annual Report to Shareholders, containing financial statements for the
fiscal year ended December 31, 1997, is being mailed together with this proxy
statement to all shareholders entitled to vote at the Annual Meeting. It is
anticipated that this Proxy Statement and the accompanying proxy will be first
mailed to shareholders on or about April 6, 1998.
Only shareholders of record as of the close of business on March 6, 1998
(the "Record Date") will be entitled to vote at the meeting and any
adjournments thereof. As of the Record Date, 10,248,003 shares of Common Stock
of the Company were issued and outstanding. Each share outstanding as of the
Record Date will be entitled to one vote, and shareholders may vote in person
or by proxy. Execution of a proxy will not in any way affect a shareholder's
right to attend the meeting and vote in person. Any shareholder delivering a
proxy has the right to revoke it by written notice to the Secretary at any
time before it is exercised.
The representation in person or by proxy of at least a majority of all
shares of Common Stock issued, outstanding and entitled to vote at the meeting
is necessary to constitute a quorum for the transaction of business. Votes
withheld from any nominee for election as a director, as well as abstentions
and broker "non-votes" with respect to all other matters being submitted to
shareholders, are counted as present or represented for purposes of
determining the presence or absence of a quorum for the meeting. A "non-vote"
occurs when a nominee holding shares for a beneficial owner votes on one
proposal, but does not vote on another proposal because, in respect of such
other proposal, the nominee does not have discretionary voting power and has
not received instructions from the beneficial owner.
The election of directors by the shareholders shall be determined by a
plurality of the votes cast by shareholders entitled to vote. Votes may be
cast in favor of or withheld from each nominee. On all other matters being
submitted to shareholders, an affirmative vote of a majority of the shares
present in person or by proxy and entitled to vote on each such matter is
required for approval. Abstentions will have the practical effect of voting
against each such matter since they are included in the number of shares
present and voting on each such matter. Shares subject to broker "non-votes"
are not considered to have been voted for the particular matter and have the
practical effect of reducing the number of affirmative votes required to
achieve a majority for such matter by reducing the total number of shares from
which the majority is calculated.
Each of the persons named as proxies in the proxy is an officer of the
Company. All properly executed proxies returned in time to be cast at the
meeting will be voted. With respect to the election of a Class III director,
any shareholder submitting a proxy has a right to withhold authority to vote
for any individual nominee to the Board of Directors by writing the name of
such individual in the space provided on the proxy. The proxies will be voted
as stated below and under "Election of Directors." In addition to the election
of a Class III director, the shareholders will act upon proposals to (i)
approve an amendment to the Company's 1997 Stock Option Plan (the "1997 Plan")
to increase the number of shares of Common Stock available for issuance under
the 1997 Plan to 2,000,000 shares, as recommended by the Board of Directors,
(ii) to adopt the Company's 1998 Employee Stock Purchase Plan (the "ESPP"), as
recommended by the Board of Directors and (iii) to approve the Company's form
of Indemnification Agreement as signed by the Company's officers and directors
and as recommended by the Board of Directors. Where a choice has been
specified on the proxy with respect to these matters, shares represented by
the Proxies will be voted in accordance with the specification and will be
voted FOR if no specification is indicated.
<PAGE>
The Board of Directors knows of no other matter to be presented at the
meeting. If any other matter should be presented at the meeting upon which a
vote may be properly taken, shares represented by all proxies received by the
Board of Directors will be voted with respect thereto in accordance with the
judgment of the persons named as Proxies on the proxy card.
PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table sets forth, as of the Record Date, certain information
regarding the beneficial ownership of the Company's outstanding Common Stock
by: (i) each person who, to the knowledge of management, owned beneficially
more than 5% of the Common Stock; (ii) each director and director nominee of
the Company, (iii) each of the Named Executive Officers for whom compensation
is reported in this Proxy Statement and (iv) all directors and executive
officers of the Company as a group. Based on information furnished by the
beneficial owners to the Company, and except as otherwise noted and subject to
community property laws where applicable, the Company believes that the
beneficial owners listed below have sole voting and investment power with
respect to such shares.
<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS AMOUNT AND NATURE OF OF
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP (1) CLASS
------------------- ----------------------- -------
<S> <C> <C>
5% OWNERS:
Paul Y. Song.............................. 4,470,000 45.0521%
2229 112th Avenue NE (2)(3)
Bellevue, Washington 98004
Tina J. Song.............................. 4,470,000 45.0521%
2229 112th Avenue NE (2)(3)
Bellevue, Washington 98004
Song Family Limited Partnership........... 4,470,000 45.0521%
3700 First Interstate Center (2)(3)
999 Third Avenue
Seattle, Washington 98104
Stephen J. Brugger........................ 505,494 5.0948%
2229 112th Avenue NE (4)
Bellevue, Washington 98004
Pilgrim Baxter & Associates, Ltd.......... 567,500 5.81%
825 Duportail Road
Wayne, Pennsylvania 19087-5525
DIRECTORS AND NAMED EXECUTIVE OFFICERS:
Jeffrey W. Gilles......................... 460,000 4.6362%
(5)
Kendall W. Kunz........................... 336,000 3.3797%
(6)
John Y. Song.............................. 203,500 2.0486%
(7)
John J. Griffin........................... 31,000 *
(8)
Bruce R. Kennedy.......................... 5,417 *
(9)
Kenneth A. Williams....................... 5,417 *
(9)
All current directors and executive offi-
cers as a group
(14 persons)............................. 6,174,348 62.2191%
(10)
</TABLE>
2
<PAGE>
- --------
* owns less than 1% of the Company's outstanding Common Stock.
(1) Beneficial ownership is determined in accordance with the rules of the
Commission and generally includes voting or investment power with respect
to securities. Common Stock subject to options currently exercisable or
exercisable within sixty (60) days of the Record Date are deemed
outstanding for purposes of computing the percentage ownership of the
person holding such option but are not deemed outstanding for purposes of
computing the percentage ownership of any other person.
(2) Includes 650,000 shares owned by Song Family Limited Partnership, of
which Mr. Song and Ms. Song are each General Partners. Also includes
522,000 shares owned by Tina Song, the spouse of Mr. Song and 3,298,000
shares owned by Paul Song, the spouse of Ms. Song.
(3) Mr. Song and Ms. Song have shared voting power of the Company's Common
Stock owned by Song Family Limited Partnership.
(4) Includes 2,000 shares registered in the name of Aidan J. Brugger Trust,
40,000 shares registered in the name of Brugger Family Children Trust,
and 2,760 shares registered in the name of Aidan J. Brugger, over all of
which Stephen J. Brugger exercises voting and dispositive power.
(5) Includes 100,000 shares registered in the name of The Jeffrey & Glenda
Gilles Unitrust of which Mr. Gilles is a Co-Trustee. Mr. Gilles exercises
voting and dispositive power over the standard unit trust.
(6) Includes 20,000 shares of Common Stock subject to options that are
exercisable within 60 days of March 6, 1998.
(7) Includes 12,000 shares of Common Stock subject to options that are
exercisable within 60 days of March 6, 1998.
(8) Includes 11,000 shares of Common Stock subject to options that are
exercisable within 60 days of March 6, 1998.
(9) Represents shares of Common Stock subject to options that are exercisable
within 60 days of March 6, 1998.
(10) Includes shares of Common Stock subject to options that are exercisable
within 60 days of March 6, 1998.
SECTION 16 REPORTING
Section 16(a) of the Securities Exchange Act of 1933, as amended (the
"Exchange Act") requires the Company's directors, executive officers and
holders of more than 10% of the Company's Common Stock (collectively,
"Reporting Persons") to file with the Securities and Exchange Commission (the
"Commission") initial reports of ownership and reports of changes in ownership
of Common Stock of the Company. Such persons are required by regulations of
the Commission to furnish the Company with copies of all such filings. Based
on its review of the copies of such filings received by it with respect to the
fiscal year ended December 31, 1997, and written representations from certain
Reporting Persons, the Company believes that all Reporting Persons complied
with all Section 16(a) filing requirements in the fiscal year ended December
31, 1997.
ELECTION OF DIRECTORS
The Board of Directors of the Company currently consists of four directors,
divided into three classes. One class is elected at each annual meeting of
shareholders, with the members of each class to hold office for a three-year
term and until successors of such class have been elected and qualified. Paul
Y. Song and Bruce R. Kennedy serve as Class I directors of the Company until
the annual meeting of shareholders held in 2000, or until their respective
successors have been elected and qualified. Kenneth A. Williams serves as a
Class II director of the Company until the annual meeting of shareholders held
in 1999, or until his successor has been elected and qualified. Kendall W.
Kunz serves as a Class III director of the Company whose term is to expire as
of the date of the 1998 Annual Meeting of Shareholders. Notwithstanding the
foregoing, each director shall serve until his successor is duly elected and
qualified or until his death, resignation or removal.
One Class III director shall be elected at the 1998 Annual Meeting of
Shareholders. The sole nominee for election as a Class III director is Kendall
W. Kunz. Information as to the nominee is provided below. Shares
3
<PAGE>
represented by all proxies received by the Board of Directors and not so
marked as to withhold authority to vote for any individual director will be
voted (unless the sole nominee is unable or unwilling to serve) for the
election of the sole nominee. The Board of Directors knows of no reason why
such nominee should be unable or unwilling to serve, but if such should be the
case, proxies will be voted for the election of some other person, as
determined by the holder of the Proxy in his sole discretion.
NOMINEE FOR ELECTION AS CLASS III DIRECTOR (TERM TO EXPIRE IN 2001)
KENDALL W. KUNZ (age 34) was appointed as the Company's Senior Vice
President of North America in January 1998, and has been a Director of the
Company since March 1997. Mr. Kunz is responsible for the Company's operations
throughout North America. Mr. Kunz served as the Company's Senior Vice
President of Western Operations from March 1997 until December 1997, and as
Senior Vice President of Education from October 1996 to March 1997. From
August 1995 to October 1996, Mr. Kunz was the Company's Vice President of
Consulting. From June 1994 to August 1995, Mr. Kunz served as Vice President
of Sales and Marketing. From July 1992 until June 1994, Mr. Kunz served as the
Company's Director of Sales and Marketing. Between June 1988 and July 1992,
Mr. Kunz was employed by Oracle in a number of capacities. Mr. Kunz received a
B.S. degree in Management from Purdue University.
CONTINUING CLASS II DIRECTOR (TERM TO EXPIRE IN 1999)
KENNETH A. WILLIAMS (age 43) was appointed as a Director of the Company in
March 1997. Mr. Williams is Chairman and Chief Executive Officer of World
Stream Communications, a consumer Internet broadcasting company, which he
founded in 1997. From 1996 through December 1997, Mr. Williams was Vice
Chairman and a director of CUC International, a consumer services company. He
was also a member of the Office of the President of CUC International. Prior
to joining CUC International, Mr. Williams was the Chairman of the Board and
Chief Executive Officer of Sierra On-Line, Inc., a consumer software company,
which he co-founded in 1979 and which was acquired by CUC International in
1996.
CONTINUING CLASS I DIRECTORS (TERMS TO EXPIRE IN 2000)
PAUL Y. SONG (age 35), founder of the Company, has been the Company's
President, Chief Executive Officer and Chairman since its incorporation in
October 1990. Mr. Song also serves as Chairman for the Company's subsidiaries,
ARIS Software Inc. ("ASI"), Oxford Computer Group Limited ("Oxford") and
Barefoot Computer Training Limited ("Barefoot"). From 1988 to 1990, Mr. Song
was employed by Oracle's Consulting division in a number of capacities. Mr.
Song received a B.S. in Electrical Engineering from General Motors Institute
and an M.S. in Computer Science from the Massachusetts Institute of
Technology. Paul Y. Song is the husband of Tina J. Song and the brother of
John Y. Song.
BRUCE R. KENNEDY (age 59) was appointed as a Director of the Company in
March 1997. Mr. Kennedy is Chairman Emeritus of Alaska Air Group, Inc., a New
York Stock Exchange listed company. Since 1991, Mr. Kennedy has served as a
Director, and as Chairman of the Executive Committee of the Board, of Alaska
Air Group, Inc. He served as Chairman, Chief Executive Officer and President
of Alaska Air Group, Inc., Chairman, Chief Executive Officer and President of
Alaska Airlines, Inc. and as Chairman of Horizon Air Industries, Inc. from
1979 to 1991.
COMPENSATION OF DIRECTORS
Directors of the Company do not receive cash compensation for their services
as directors or members of the committees of the Board of Directors. Each non-
employee director is entitled to receive non-discretionary grants of options
to purchase the Company's Common Stock pursuant to the provisions of the
Company's 1997 Stock Option Plan. See "--Stock Option Plans."
4
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company and their ages as of
March 6, 1998, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Paul Y. Song............ 35 Chairman of the Board, Chief Executive Officer and President
Kendall W. Kunz......... 34 Senior Vice President of North America and Director
John Y. Song............ 36 Vice President of North America Education
Thomas W. Averill....... 53 Vice President of Finance and Chief Financial Officer
Jeffrey W. Gilles....... 47 Vice President of Research and Development
John J. Griffin......... 40 Vice President of Sales
Nicholas W. Hulse....... 32 Vice President of Marketing
Steve Brugger........... 43 Vice President of Microsoft Technology
Tina J. Song............ 34 Vice President of Administration
David W. Melin.......... 42 President of ARIS Software, Inc.
Hugh Simpson-Wells...... 41 Managing Director of Oxford Computer Group Limited
Norbert W. Sugayan,
Jr. ................... 37 General Counsel and Secretary
Bruce R. Kennedy(1)(2).. 59 Director
Kenneth A.
Williams(1)(2)......... 43 Director
</TABLE>
- --------
(1) Member of Audit Committee
(2) Member of Compensation Committee
Each officer named above will serve until their successors are appointed or
until death, resignation or removal. It is expected that each of the above
officers will be reappointed at the Annual Meeting of the Board of Directors
to be held on April 28, 1998, immediately following the 1998 Annual Meeting of
Shareholders.
For the biographical summary of Paul Y. Song, Kendall W. Kunz, Bruce R.
Kennedy and Kenneth A. Williams, see "Election of Directors."
JOHN Y. SONG was appointed as the Company's Vice President of North America
Education in January 1998, and served as Vice President of Eastern Operations
from March 1997 to December 1997. Mr. Song also served as the Company's Vice
President of Business Development from September 1996 to March 1997. Mr. Song
is responsible for the Company's training operations throughout North America.
From March 1996 to August 1996, Mr. Song was the Company's Executive Director
for the Federal and Public Sector. From February 1991 to February 1996, Mr.
Song was Director of Business Development of the Company. Prior to joining the
Company, Mr. Song worked in Hong Kong for Hill and Knowlton, a public
relations firm, and in Seoul, Korea for Lee and Associates, a management
consulting firm. Mr. Song received a B.A. in Journalism from Western
Washington University and an M.B.A. from the Graduate School of International
Studies at Yonsei University (Republic of Korea). John Y. Song is the brother
of Paul Y. Song.
THOMAS W. AVERILL has served as Vice President of Finance and Chief
Financial Officer since joining ARIS in July 1996 and is responsible for the
Company's financial operations. Mr. Averill also serves as a Director for the
Company's subsidiaries, ASI, Oxford and Barefoot. From November 1994 to July
1996, Mr. Averill was self-employed as a private business and finance
consultant. Between November 1992 and November 1995, Mr. Averill also was a
Vice President of Finance and a director of Simon Golub and Sons, Inc., a
manufacturer and international wholesale distributor of personal time pieces
and fine jewelry. Between 1983 and 1985, Mr. Averill was Director of Auditing
for Clark Nuber Inc., a public accounting firm, and between 1974 and 1983, Mr.
Averill was an audit manager with Price Waterhouse, a public accounting firm.
5
<PAGE>
JEFFREY W. GILLES was appointed as Vice President of Research and
Development in January 1998, and served as the Company's Vice President of
Education Business Development from October 1996 to December 1997. Mr. Gilles
is responsible for new product and technology directions, vendor-specific
field support and relationship management, and the development of new services
and courseware. From January 1995 to October 1996, Mr. Gilles was Vice
President of Education of the Company, responsible for the operations of the
Company's Education Division. From June 1992 to December 1994, Mr. Gilles was
founder and President of Clarity, Inc., which was acquired by the Company in
January 1995. From July 1988 to June 1992, Mr. Gilles was Regional Education
Manager for Oracle. Mr. Gilles received a B.A. in Broadcasting and Film, a
B.S. in Computer Science and an M.S. in Computer Science from the University
of Iowa.
JOHN J. GRIFFIN has served as the Company's Vice President of Sales since
July 1996. From 1988 to 1996, Mr. Griffin held various sales and account
management positions at Oracle and immediately prior to joining the Company,
was Oracle's Global Account Manager for the Boeing Company. Prior to joining
Oracle, Mr. Griffin held technical, management, and sales positions for a
number of companies. Mr. Griffin received a B.A. in Organizational
Communications from the University of Utah.
NICHOLAS W. HULSE was appointed Vice President of Marketing in November
1997. Prior to joining the Company, Mr. Hulse served as Director of Worldwide
Marketing for New Horizons Computer Learning Centers, an international
computer training organization. In addition, Mr. Hulse has served as Director
of National Marketing Programs for Thorn EMI, and served in various
marketing/advertising positions in direct mail, retail, and computer
publishing companies. Mr. Hulse received a four year degree in Marketing from
Northumbria University in England.
TINA J. SONG was appointed Vice President of Administration in January 1998,
and served as the Company's Director of Human Resources and Information
Technology from January 1995 to December 1997. Ms. Song was a Vice President
of the Company from October 1990 until March 1996, and was a Director of the
Company from October 1990 until November 1994. From April 1993 to January
1995, Ms. Song was also the Company's Consulting Resource Manager. Ms. Song
received a B.S. in Electrical Engineering from the General Motors Institute.
Ms. Song is the wife of Paul Y. Song.
DAVID W. MELIN has served as President of ASI and its predecessor
corporations since August 1996. From 1990 to 1996, Mr. Melin owned and
operated Allied Bolt Co., an industrial fastener distribution and
manufacturing company. Mr. Melin was Product Manager for MS-DOS and Microsoft
LAN Manager at Microsoft from 1984 to 1989. Mr. Melin received a B.A. in
Mechanical Engineering from the University of Washington and an M.S. in
Engineering Management from Stanford University.
HUGH SIMPSON-WELLS is Managing Director and Secretary of Oxford and is
Managing Director and Assistant Secretary of Barefoot, the U.K. subsidiaries
of the Company and is responsible for all operations of Oxford. Mr. Simpson-
Wells founded Oxford in 1983 and it was acquired by the Company in February
1997. Prior to founding Oxford, Mr. Simpson-Wells was an engineer with the
Ford Motor Company in the U.K. Mr. Simpson-Wells received a Master's Degree in
Engineering Science from Oxford University.
NORBERT W. SUGAYAN, JR. has served as the Company's General Counsel since
February 1996, and as its Secretary since April 1997. He also serves as
Secretary of ASI and Barefoot. Prior to joining the Company on a full-time
basis, Mr. Sugayan practiced law in Seattle, Washington as of counsel to Lane
Powell Spears Lubersky from February 1996 to December 1996, as a principal of
Harris, Sugayan & Hull, from March 1994 to February 1996 and as an attorney
with Bogle & Gates from February 1992 to March 1994. Prior to February 1992,
Mr. Sugayan practiced law in Seoul, Republic of Korea and Dallas, Texas. Mr.
Sugayan received a B.A. in Economics and English from the University of
Michigan, a J.D. from the University of Notre Dame Law School, and an L.L.M.
in Corporations Law from New York University.
CHANGE IN CONTROL ARRANGEMENTS
The Company does not have change of control agreements with any of its Named
Executive Officers or Directors, except for Nicholas W. Hulse.
6
<PAGE>
BOARD COMMITTEES AND MEETINGS
The Board of Directors had nine meetings in 1997. During 1997, no incumbent
director attended fewer than 75% of the aggregate of (i) the total number of
meetings of the Board of Directors (held during the period for which he has
been a director) and (ii) the total number of meetings held by all committees
of the Board on which he served (during the period that he served).
The Board of Directors has created an Audit Committee and a Compensation
Committee. The Audit Committee consists of Bruce R. Kennedy and Kenneth A.
Williams (Chair). Among other functions, the Audit Committee makes
recommendations to the Board of Directors regarding the selection of
independent auditors, reviews the results and scope of the audit and other
services provided by the Company's independent auditors and reviews the
Company's balance sheet, statement of operations and cash flows and reviews
and evaluates the Company's internal control functions.
The Compensation Committee consists of Mr. Williams and Mr. Kennedy (Chair).
The Compensation Committee reviews and approves the compensation and benefits
for the Company's executive officers, administers the Company's stock option
plans and makes recommendations to the Board of Directors regarding such
matters.
The current membership of the Committees was determined by the Board of
Directors on May 1, 1997.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company does not have any transactions with management in which the
amount involved exceeds $60,000. The Company had not had a business
relationship with any nominee or Director during the last fiscal year that
consisted of property or services in excess of five percent of: (i) the
Company's consolidated gross revenues for its last full fiscal year, or (ii)
any other entity's consolidated gross revenues for its last full fiscal year.
7
<PAGE>
COMPENSATION AND OTHER INFORMATION
CONCERNING EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
COMPENSATION SUMMARY
The following table sets forth certain information regarding annual and
long-term compensation for services in all capacities to the Company earned by
the Company's Chief Executive Officer and the four other executive officers
who earned in excess of $100,000 in salary and bonus during fiscal 1997, 1996
and 1995 (the "Named Executive Officers"). The Company did not make any
restricted stock awards, grant any stock appreciation rights or make any long-
term incentive plan payouts during 1997, 1996 or 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL ------------
COMPENSATION SECURITIES
--------------- UNDERLYING ALL OTHER
SALARY BONUS OPTIONS/SARS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($)(1) (#) ($)
--------------------------- ---- ------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Paul Y. Song.................... 1997 150,000 92,897 0 4,214(2)
President and Chief Executive
Officer 1996 120,000 90,553 0 3,655(2)
1995 96,000 155,877 0 50,871(3)
Kendall W. Kunz................. 1997 126,000 51,440 80,000 --
Senior Vice President of North
America 1996 108,000 81,644 0 1,190(2)
1995 72,000 135,996 320,000 68,628(4)
John Y. Song.................... 1997 120,000 29,893 60,000 --
Vice President of North America 1996 76,000 53,660 0 3,046(2)
Education 1995 60,000 66,834 200,000 31,305(5)
John J. Griffin................. 1997 80,000 51,299 0 --
Vice President of Sales 1996 36,000 10,000 40,000 --
1995 N/A N/A N/A
Jeffrey W. Gilles............... 1997 102,000 29,235 0 --
Vice President of Research and 1996 102,000 74,830 0 --
Development 1995 102,000 94,592 0 --
</TABLE>
- --------
(1) Represents payments under the Company's Executive Profit Bonus Plan.
(2) Represents amount paid by the Company for automobile expenses.
(3) Includes $48,000 realized upon exercise of non-statutory stock options
to purchase shares of the Company's Common Stock and $2,871 paid by the
Company for automobile expenses.
(4) Includes $66,900 realized upon exercise of non-statutory stock options
to purchase shares of the Company's Common Stock and $1,728 paid by the
Company for automobile expenses.
(5) Includes $29,250 realized upon exercise of non-statutory stock options
to purchase shares of the Company's Common Stock and $2,055 paid by the
Company for automobile expenses.
8
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table shows information regarding grants of stock options to
the Named Executive Officers during the year ended December 31, 1997.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------
POTENTIAL
REALIZABLE VALUE
AT ASSUMED ANNUAL
PERCENT OF RATES OF STOCK
NUMBER OF TOTAL OPTIONS PRICE
SHARES GRANTED TO APPRECIATION FOR
UNDERLYING EMPLOYEES IN EXERCISE OPTION TERM(3)
OPTIONS FISCAL PRICE EXPIRATION -----------------
NAME GRANTED(#)(1) YEAR($)(1)(2) ($/SHARE) DATE 5%($) 10%($)
---- ------------- ------------- --------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Paul Y. Song............ 0 0% N/A N/A N/A N/A
Kendall W. Kunz......... 80,000 6.3675% $5.00 1/15/04 $162,840 $379,487
John Y. Song............ 60,000 4.7756% $5.00 1/15/04 $122,130 $284,615
John J. Griffin......... 0 0% N/A N/A N/A N/A
Jeffrey W. Gilles....... 0 0% N/A N/A N/A N/A
</TABLE>
- --------
(1) The exercise price per share of each option is equal to the fair market
value per share of the underlying Common Stock on the date of grant.
(2) Options to purchase 1,256,385 shares of Common Stock were granted by the
Company to its employees during 1997.
(3) Amounts represent hypothetical gains that could be achieved for the
respective options exercised at the end of the option term. These gains
are based on assumed rates of appreciation of 5% and 10% compounded
annually from the date the respective options were granted to their
expiration date. The gains shown are net of the option exercise price,
but do not include deductions for taxes or other expenses associated
with the exercise of the options or sale of the underlying shares. The
actual gains, if any, on the stock option exercises will depend on the
future performance of the Common Stock, the optionholder's continued
employment through the option period, and the date on which the options
are exercised.
9
<PAGE>
OPTION EXERCISES AND YEAR-END VALUES
The following table provides information on stock option exercises by the
Named Executive Officers and the number and value of the Named Executive
Officers' unexercised options at December 31, 1997.
AGGREGATED OPTION EXERCISES DURING 1997 ANDOPTION VALUES AT DECEMBER 31, 1997
<TABLE>
<CAPTION>
TOTAL NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
VALUE FISCAL YEAR-END (#) AT FISCAL YEAR-END ($)(1)
SHARES ACQUIRED REALIZED ------------------------- -------------------------
NAME ON EXERCISE (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Paul Y. Song............ 0 0 0 0 0 0
Kendall W. Kunz......... 0 0 0 80,000 0 $1,280,000
John Y. Song............ 0 0 0 60,000 0 $ 960,000
John J. Griffin......... 0 0 6,000 34,000 $109,920 $ 496,480
Jeffrey W. Gilles....... 0 0 0 0 0 0
</TABLE>
- --------
(1) This amount is the aggregate number of the outstanding options multiplied
by the difference between $21 (the closing price of the Common Stock as
reported on the Nasdaq National Market on December 31, 1997) and the
exercise price of such options.
DESCRIPTION OF THE 1997 PLAN AND THE 1995 PLAN
1997 Stock Option Plan. On March 13, 1997, the Board of Directors adopted
the ARIS Corporation 1997 Stock Option Plan. On April 25, 1997, the
shareholders adopted the 1997 Stock Option Plan at the 1997 Annual Meeting of
Shareholders. The 1997 Stock Option Plan provides for the grant of qualified
and non-qualified options to employees, directors, officers and non-employee
directors of the Company by the Plan Administrator. The Company authorized two
million shares of its Common Stock for issuance under the 1997 Stock Option
Plan, subject to certain adjustments, less that number of shares that were
granted and have not subsequently become available for grant under the 1995
Stock Option Plan. The 1997 Stock Option Plan provides for automatic, non-
discretionary grants of 5,000 non-qualified stock options to non-employee
directors (as defined under Rule 16b (3) of the Exchange Act) for each year of
service (or pro-rata for any portion thereof) on the Board of Directors of the
Company. For all other grants under the 1997 Stock Option Plan, the date of
grant, number of options, option price, vesting period and other terms
specific to the options are to be determined by the Plan Administrator. The
option price for qualified stock options is based on the fair market value of
the Company's stock on the date of grant. Options granted under the 1997 Stock
Option Plan expire on the tenth anniversary of the date of grant and vest over
periods of up to four years.
The exercise price per share of options granted to non-employee directors
under the 1997 Stock Option Plan is 100% of the fair market value of the
Company's Common Stock on the date the option is granted. Generally, options
expire on the tenth anniversary of the date of the option grant except for
non-qualified options granted to United Kingdom resident employees which
expire on the seventh anniversary of the date of the option grant. Options may
not be assigned or transferred except by will or by the laws of descent or
distribution and are exercisable only while the optionee is serving as a
director of the Company or within 90 days after the optionee ceases to serve
as a director of the Company (except that if a director dies or becomes
disabled while serving as a director of the Company, the option is exercisable
until the scheduled expiration date of the option).
On March 20, 1997, Mr. Kennedy received a non-discretionary option to
purchase 15,417 shares of Common Stock as a non-employee Class I director, and
Mr. Williams received a non-discretionary option to purchase 10,417 shares of
Common Stock as a non-employee Class II director pursuant to the Company's
1997 Plan. Options to purchase 5,417 shares are exercisable one year after the
date of grant and options to purchase
10
<PAGE>
an additional 5,000 shares vests each anniversary of the grant date
thereafter. These options expire on the tenth anniversary of the date of the
option grants (March 20, 2007).
1995 Stock Option Plan. In January 1995, the Company adopted the ARIS 1995
Stock Option Plan, which provided for the grant of qualified and non-qualified
options to purchase shares of the Company's Common Stock to employees,
officers, directors, shareholders and consultants and project managers of the
Company, as determined by the Plan Administrator. The Company authorized 1.6
million shares of its Common Stock for issuance under the ARIS 1995 Stock
Option Plan. The date of grant, number of options granted, option price,
vesting period and other terms specific to options granted under the ARIS 1995
Stock Option Plan were determined by the Plan Administrator. The option price
for qualified stock options was based on the fair market value of the
Company's stock on the date of grant. Options granted under the ARIS 1995
Stock Option Plan expire on the seventh anniversary of the date of grant and
vest over periods of up to four years. The Company ended grants under the ARIS
1995 Stock Option Plan in March 1997.
Prior to January 1995, the Company from time to time granted non-qualified
stock options to key employees. These grants were not part of any formal
policy or plan.
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
GENERAL
The purpose of the Compensation Committee is to review and make
recommendations to the Board of Directors regarding all forms of compensation
to be provided to the executive officers and directors of the Company and its
subsidiaries, including stock compensation and loans, and all bonus and stock
compensation to all employees. The Committee members consist of the Company's
non-employee directors, Bruce R. Kennedy and Kenneth A. Williams, who are
appointed by and serve at the discretion of the Board of Directors.
STATEMENT OF PHILOSOPHY
The philosophy of the Compensation Committee is to provide compensation to
the Company's officers and directors in such a manner as to attract and retain
the best available personnel for positions of substantial responsibility with
the Company, to provide incentives for such persons to perform to the best of
their abilities for the Company, and to promote the success of the Company's
business.
The current executive compensation program includes three components: base
salary; a cash bonus based on the Company achieving its financial targets
under the Company's Executive Profit Bonus Plan; and grants of stock options
under the Company's 1997 Stock Option Plan. The Compensation Committee based
its determination for 1998 executive compensation in part upon its review of
compensation paid by other comparable publicly-traded information technology
services companies to their executives, and the recommendations of the Chief
Executive Officer.
ANNUAL BASE SALARY
Base salaries for executive officers are targeted at competitive market
levels for their respective position, level of responsibility and experience
based in part on the Compensation Committee's analysis of publicly reported
comparable companies, and the recommendation of the Chief Executive Officer.
EXECUTIVE PROFIT BONUS PLAN
In January 1998, the Compensation Committee set the terms for the 1998
Executive Profit Bonus Plan. This plan established a cash bonus pool for
executive officers based on the Company achieving a threshold pre-tax income
target. When the Company achieves 90% of the Executive Profit Bonus Plan pre-
tax income target, 10% of the pre-tax income thereafter is contributed to the
bonus pool and shared by all participating executive officers according to the
percentage established for each officer by the Compensation Committee. The
bonus pool is
11
<PAGE>
doubled should the Company achieve 110% of the 1998 target pre-tax operating
income. See "Compensation and Other Information Concerning Executive
Officers--Executive Compensation" for a description of bonuses paid to
executive officers in 1997.
1997 STOCK OPTION PLAN
The Compensation Committee believes that equity compensation aligns
employees' long-term objectives with those of shareholders in striving to
maximize the Company's value. The Company's 1997 Stock Option Plan provides
all employees with the opportunity to receive stock options. These options
vest over a four-year period upon the following schedule: 20%, 20%, 30%, 30%.
Each executive officer (other than the Chief Executive Officer) was granted
stock options at the time of hiring and periodically thereafter.
OTHER COMPENSATION PLANS
The Company also has various broad-based employee benefit plans, including
pension, insurance and other benefit plans for its employees. Executive
officers participate in these plans on the same terms as eligible, non-
executive employees. The Company initiated on January 1, 1998, the 1998
Employee Stock Purchase Plan (the "ESPP"). Under the ESPP, employees may elect
to set aside up to 10% of their gross compensation to purchase shares of
Common Stock annually at a 15% discount to market price. See "Proposal to
Approve 1998 Employee Stock Purchase Plan" for a description of the ESPP.
Executive officers (other than the Chief Executive Officer) participate in
these plans on the same terms as eligible, non-executive employees. The 1998
Employee Stock Purchase Plan was approved by the Company's Board of Directors
on November 17, 1997, subject to the approval of the shareholders at the 1998
Annual Meeting.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The 1997 base salary for Mr. Song, the Company's Chief Executive Officer and
President, was set by the Compensation Committee in December 1995 (at that
time, Mr. Song was the sole member of the Compensation Committee). Mr. Song
did not receive any option grants in 1997. See "Compensation and Other
Information Concerning Executive Officers--Option Grants in 1997." Mr. Song's
base salary for 1997 was $150,000. Automobile related expenses in the amount
of $4,214 were paid by the Company on behalf of Mr. Song. Mr. Song's portion
of the 1997 Executive Bonus Plan was $92,897 and was the largest share in The
Plan allocated to any executive officer. Accordingly, approximately 38% of his
1997 cash compensation was based on 1997 corporate performance. Under Mr.
Song's stewardship, net income for 1997 increased to $5.3 million compared to
$2.0 million in 1996. Net revenues increased to $55.1 million in 1997 from
$26.9 in 1996. The Compensation Committee believes that, under Mr. Song's
direction, the Company continues to effectively execute upon its business plan
and goals and to capitalize upon the rapidly changing global demand for
information technology services and products.
12
<PAGE>
STOCK PERFORMANCE GRAPH
The performance graph below is required by the SEC and shall not be deemed
to be incorporated by reference by any general statement incorporating by
reference this Proxy Statement into any filing under the Securities Act of
1933, as amended, or under the Securities Exchange Act of 1934, as amended,
except to the extent that the Company specifically incorporates this
information by reference, and shall not otherwise be deemed soliciting
material or filed under such acts.
The following graph compares the yearly percentage change in the cumulative
total shareholder return on the Company's Common Stock for the period
beginning with the Company's initial public offering on June 18, 1997 through
December 31, 1997, with the cumulative total return for the Standard & Poors
Smallcap 600 and an appropriate "peer group" index. The comparison assumes
$100 was invested on June 18, 1997 in the Company's Common Stock and in each
of the foregoing indices and assumes reinvestment of dividends, if any.
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
MEASUREMENT PERIOD ARIS S&P PEER GROUP
(FISCAL YEAR ENDING) CORPORATION SMALLCAP 600 INDEX (1)
-------------------- ----------- ------------ ----------
<S> <C> <C> <C>
June 18, 1997.......................... $100.00 $100.00 $100.00
December 31, 1997...................... $140.00 $117.55 $122.17
</TABLE>
- --------
(1) Peer Group Index includes twenty four entities selected in good faith on
the same industry basis as the Company. The Peer Group Index consists of
the following entities: American Management Systems, Incorporated,
Analysts International Corporation, Cambridge Technology Partners
(Massachusetts), Inc., Carnegie Group Inc., CIBER, Inc., Claremont
Technology Group, Inc., Computer Horizons Corp., Computer Management
Sciences, Inc., Computer Task Group, Incorporated, ECSoft Group plc,
Electronic Data Systems Corporation, Information Management Resources,
Inc., Intelligroup, Inc., Keane, Inc., Learning Tree International, Inc.,
Mastech Corporation, Nova Corporation/GA, Premiere Technologies, Inc.,
Sapient Corporation, SunGard(R) Data Systems Inc., TechForce Corporation,
Technology Solutions Company, Whittman-Hart, Inc., XLConnect Solutions,
Inc. The returns for each issuer within the Peer Group Index have been
weighted according to such issuer's respective stock market capitalization
at the beginning of the period presented.
13
<PAGE>
DEDUCTIBILITY OF EXECUTIVE COMPENSATION EXPENSES
In general, under Section 162(m) of the Code, the Company cannot deduct, for
federal income tax purposes, compensation in excess of $1,000,000 paid to any
Named Executive Officer, except to the extent such excess constitutes
performance-based compensation. The policy of the Company is to qualify future
compensation arrangements to ensure deductibility, except in those limited
cases where shareholder value is maximized by an alternate approach.
THE 1997 COMPENSATION COMMITTEE
Bruce R. Kennedy, Chair
Kenneth A. Williams
PROPOSAL TO AMEND THE 1997 STOCK OPTION PLAN
The 1997 Stock Option Plan (the "1997 Plan") was adopted by the Company's
Board of Directors and approved by the Company's shareholders in March 1997
and April 1997, respectively. At the time of adoption, the aggregate number of
shares of Common Stock reserved for issuance under the 1997 Plan was 2,000,000
shares, less the 1,134,357 shares that were granted and had not subsequently
become available for future grant under the Company's 1995 Stock Option Plan
(the "1995 Plan"). The Board of Directors has adopted and recommended to the
shareholders that they approve an amendment to the 1997 Plan to increase the
number of shares reserved for issuance pursuant to the 1997 Plan to 2,000,000
shares. Assuming the proposed amendment had been in effect as of the Record
Date and further assuming that all options outstanding under the 1995 Plan had
been exercised, the number of shares remaining available under the 1997 Plan
would have been 1,368,616.
The Company's management relies on stock options as an essential part of the
compensation packages necessary for the Company to attract and retain
experienced officers and employees and motivate employees to maximize
shareholder value. The Board of Directors of the Company believes that the
proposed increase in the number of shares available under the 1997 Plan is
essential to permit the Company's management to continue to provide long-term,
equity-based incentives to present and future key employees. Additionally, the
Board of Directors has determined that any future option grants resulting from
the proposed increase will be at exercise prices equal to at least fair market
value at the time of grant, except in those limited cases where shareholder
value would be maximized by an alternate approach. Accordingly, the value of
the future options is tied to the future performance of the Company's stock
and will provide value to the recipient only to the extent that shareholders
as a whole have benefited from an increase in the market value of the
Company's Common Stock.
In 1997, the Company granted options under the 1997 Plan with fair market
value exercise prices to the following Named Executive Officers: Mr. Paul Y.
Song, Mr. Jeffrey W. Gilles and Mr. John J. Griffin, no shares; Mr. Kendall W.
Kunz, 80,000 shares; Mr. John Y. Song, 60,000 shares; all executive officers
as a group, 193,000 shares; non-employee directors, 25,834 shares; and all
other employees, 1,037,551 shares. Other than options granted to all new
employees and for promotions to existing employees in amounts specified under
certain guidelines adopted by the Compensation Committee as Plan
Administrator, the Company has not, at the present time, determined who will
receive options to purchase the additional shares of Common Stock that will be
authorized for issuance under the 1997 Plan, if the proposed amendment is
approved.
Approval of the proposal to amend the Company's 1997 Plan will require an
affirmative vote of a majority of the outstanding shares of Common Stock of
the Company represented in person or by proxy entitled to vote at the Annual
Meeting. The Board of Directors recommends a vote FOR the approval of the
proposal to approve the amendment to the Company's 1997 Plan to increase the
number of shares of Common Stock reserved for issuance under the 1997 Plan to
2,000,000 shares, as authorized by the Board of Directors.
14
<PAGE>
PROPOSAL TO APPROVE 1998 EMPLOYEE STOCK PURCHASE PLAN
The ARIS Corporation 1998 Employee Stock Purchase Plan (the "Purchase Plan")
provides a means for qualified employees of the Company and its designated
subsidiaries to purchase shares of the Company's common stock under favorable
terms through payroll deductions. The Purchase Plan authorizes 300,000 shares
of common stock to be sold to employees electing to participate in the
Purchase Plan. The Board of Directors has approved and recommended to the
shareholders that they adopt the Purchase Plan at the Annual Meeting.
The Purchase Plan will be administered by a Company executive officer
designated by the Board or the Compensation Committee, except for those items
expressly reserved to the Board or the Compensation Committee under the
Purchase Plan. Any discretionary decisions will be applicable equally to all
eligible employees. Employees of subsidiaries will be eligible to participate
in the Purchase Plan only if the Board or the Compensation Committee has
designated the subsidiary as eligible for participation.
To be eligible to participate in the Purchase Plan, employees must have been
with the Company for at least ninety days, work more than 20 hours each week,
customarily work more than five months a year and own less than 5% of the
Company's stock. The Plan Administrator has the ability to reduce the minimum
hourly and monthly requirement for future offering periods.
The Purchase Plan will be divided into two six-month coextensive offering
and purchase periods beginning on January 1 and July 1 of each year. At the
end of each purchase period, eligible participating employees will purchase
shares of the Company's Common Stock at a price equal to 85% of the lesser of
(a) the fair market value of the Common Stock on the first business day of the
offering period or (b) the fair market value of Common Stock on the last
business day of the purchase period. The Board or the Compensation Committee
can establish different offering periods and purchase periods. A purchase
period may be the same as the offering period or may be shorter consecutive
periods within the offering period, as determined by the Board or the
Compensation Committee. The Board or the Compensation Committee can also
decrease the amount of the discount for future offering periods.
Eligible employees may authorize payroll deductions in whole percentages up
to 10% of their regular cash compensation in payment of the discounted
purchase, subject to a maximum fair market value purchase amount in any
calendar year of $25,000. Participants will be automatically reenrolled in the
next offering period unless they have withdrawn from the Purchase Plan.
Termination of an employee's employment with the Company for any reason will
result in the immediate termination of the employee's participation in the
Purchase Plan. Any accumulated payroll deductions will be refunded to the
employee, without interest.
The Board of Directors believes that the Purchase Plan provides the Company
with a further equity-based compensation incentive with which the Company can
continue to attract, motivate and retain key employees, thereby maximizing
shareholder value.
Approval of the proposal to adopt the Purchase Plan will require an
affirmative vote of a majority of the outstanding shares of Common Stock of
the Company represented in person or by proxy at the Annual Meeting entitled
to vote. The Board of Directors recommends a vote FOR the approval of the
proposal to adopt the Purchase Plan.
DESCRIPTION OF FORM OF INDEMNIFICATION AGREEMENT
On August 5, 1997, the Board of Directors approved the form of
Indemnification Agreement to be entered into between the Company and each of
its officers and directors. The Indemnification Agreements provide that the
Company shall hold harmless and indemnify officers and directors of the
Company who are involved in certain actions or proceedings to the full extent
permitted by then current corporate law.
15
<PAGE>
Approval of the proposal to adopt the form of Indemnification Agreement will
require an affirmative vote of a majority of the outstanding shares of Common
Stock of the Company, represented in person or by proxy, who are entitled to
vote at the Annual Meeting. The Board of Directors recommends a vote FOR the
approval of the proposal to adopt the form of Indemnification Agreement.
SHAREHOLDER PROPOSALS
Proposals of shareholders intended for inclusion in the proxy statement to
be furnished to all shareholders entitled to vote at the next annual meeting
of the Company must be received at the Company's principal executive offices
no later than December 8, 1998. In order to curtail controversy as to the date
on which a proposal was received by the Company, it is suggested that
proponents submit their proposals by Certified Mail--Return Receipt Requested.
EXPENSES AND SOLICITATION
The cost of solicitation of proxies will be borne by the Company, and in
addition to soliciting shareholders by mail through its regular employees, the
Company may request banks, brokers and other custodians, nominees and
fiduciaries to solicit their customers who have stock of the Company
registered in the names of a nominee and, if so, will reimburse such banks,
brokers and other custodians, nominees and fiduciaries for their reasonable
out-of-pocket costs. Solicitation by officers and employees of the Company may
also be made of some shareholders in person or by mail, telephone, telegraph
or electronic mail following the original solicitation. The Company may retain
a Proxy Solicitation firm to assist in the solicitation of proxies in
connection with the Annual Meeting. If the Company retains a proxy
solicitation firm, it will pay such firm customary fees, expected to be
approximately $10,000, plus expenses.
16
<PAGE>
APPENDIX A
AMENDMENT DATED MARCH 24, 1998
TO
ARIS CORPORATION
1997 STOCK OPTION PLAN
The ARIS Corporation 1997 Stock Option Plan (the "Plan") is hereby amended
as follows:
1. Section 4 of the Plan is amended to read as follows:
4.STOCK.
The Plan Administrator is authorized to grant Options to acquire up to a
total of Two Million (2,000,000) shares of the Company's authorized but
unissued, or reacquired, Common Stock. The number of shares with respect to
which Options may be granted hereunder is subject to adjustment as set
forth in Section 5(m) hereof. If any outstanding Option expires or is
terminated for any reason, the shares of Common Stock allocable to the
unexercised portion of such Option may again be subject to an Option to the
same Optionee or to a different person eligible under Section 3 of this
Plan.
The date of the adoption of such amendment by the Board of Directors of the
corporation is March 24, 1998.
The date of the approval of such amendment by the shareholders of the
corporation is , 1998.
17
<PAGE>
APPENDIX B
ARIS CORPORATION
1998 STOCK PURCHASE PLAN
SECTION 1. PURPOSE
The purposes of the ARIS Corporation 1998 Stock Purchase Plan (the "Plan")
are to (a) assist employees of ARIS Corporation, a Washington corporation (the
"Company"), and its designated subsidiary corporations in acquiring a stock
ownership interest in the Company pursuant to a plan that is intended to
qualify as an "employee stock purchase plan" under Section 423 of the Internal
Revenue Code of 1986, as amended (the "Code"), and (b) help employees provide
for their future security and encourage them to remain in the employ of the
Company and its subsidiary corporations. Stock purchased under the Plan may be
paid for by regular payroll deductions. Only employees of the Company and its
designated subsidiary corporations are eligible to participate in the Plan,
and participation is voluntary.
SECTION 2. DEFINITIONS
For purposes of the Plan, the following terms shall be defined as set forth
below.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the Company's Compensation Committee or another committee
appointed by the Board and given authority by the Board to administer the
Plan.
"Company" means ARIS Corporation, a Washington corporation.
"Designated Subsidiary" has the meaning set forth under the definition of
"Eligible Employee" in this Section 2.
"Eligible Compensation" means all regular cash compensation, including
overtime, cash bonuses and commissions. Regular cash compensation does not
include severance pay, hiring and relocation bonuses, pay in lieu of vacation
or sick leave, or any other special payments, or any gain from stock option
exercises.
"Eligible Employee" means any employee of the Company, or any Subsidiary
Corporation designated by the Board or the Committee (a "Designated
Subsidiary"), who is in the employ of the Company (or any Designated
Subsidiary) on one or more Offering Dates and who meets the following
criteria:
(a) the employee does not, immediately after the Option is granted, own
stock (as defined by the Code) possessing 5% or more of the total combined
voting power or value of all classes of stock of the Company or of a
Designated Subsidiary;
(b) the employee has been employed for at least ninety (90) consecutive
days;
(c) the employee's customary employment is for more than 20 hours per
week; provided, however, that the Plan Administrator, in its sole
discretion, may reduce this minimum hourly requirement for future Offering
Periods; and
(d) the employee's customary employment is for more than five (5) months
in a calendar year; provided, however, that the Plan Administrator, in its
sole discretion, may reduce this minimum requirement for future Offering
Periods.
If the Company permits any employee of a Designated Subsidiary to
participate in the Plan, then all employees of that Designated Subsidiary who
meet the requirements of this paragraph shall also be considered Eligible
Employees.
18
<PAGE>
"Enrollment Period" has the meaning set forth in Section 6.1.
"SPP Broker" has the meaning set forth in Section 10.
"Offering" has the meaning set forth in Section 5.1.
"Offering Date" means the first day of an Offering.
"Offering Period" has the meaning set forth in Section 5.1.
"Option" means an option granted under the Plan to an Eligible Employee to
purchase shares of Stock.
"Parent Corporation" means any corporation, other than the Company, in an
unbroken chain of corporations ending with the Company if, at the time of the
granting of the Option, each of the corporations, other than the Company, owns
stock possessing 50% or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain.
"Participant" means any Eligible Employee who has elected to participate in
an Offering in accordance with the procedures set forth in Section 6.1 and who
has not withdrawn from the Plan or whose participation in the Plan is not
terminated.
"Plan" means the ARIS Corporation 1998 Stock Purchase Plan.
"Plan Administrator" has the meaning set forth in Section 3.1.
"Purchase Date" means the last day of each Purchase Period.
"Purchase Period" has the meaning set forth in Section 5.2.
"Purchase Price" has the meaning set forth in Section 8.
"Stock" means the Common Stock, no par value, of the Company.
"Subscription" has the meaning set forth in Section 6.1.
"Subsidiary Corporation" means any corporation, other than the Company, in
an unbroken chain of corporations beginning with the Company if, at the time
of the granting of the Option, each of the
"Subsidiary Corporation" means any corporation, other than the Company, in
an unbroken chain of corporations beginning with the Company if, at the time
of the granting of the Option, each of the corporations, other than the last
corporation in the unbroken chain, owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
SECTION 3. ADMINISTRATION
3.1 PLAN ADMINISTRATOR
The Plan shall be administered by the Board or the Committee or, if and to
the extent the Board or the Committee designates an executive officer of the
Company to administer the Plan, by such executive officer.
3.2 ADMINISTRATION AND INTERPRETATION BY THE PLAN ADMINISTRATOR
Subject to the provisions of the Plan, the Plan Administrator shall have the
authority, in its sole discretion, to determine all matters relating to
Options granted under the Plan, including all terms, conditions, restrictions
and limitations of Options; provided, however, that all Participants granted
Options pursuant to the Plan shall
19
<PAGE>
have the same rights and privileges within the meaning of Code Section 423.
The Plan Administrator shall also have exclusive authority to interpret the
Plan and may from time to time adopt, and change, rules and regulations of
general application for the Plan's administration. The Plan Administrator's
interpretation of the Plan and its rules and regulations, and all actions
taken and determinations made by the Plan Administrator pursuant to the Plan,
unless revised by the Board or the Committee, shall be conclusive and binding
on all parties involved or affected. The Plan Administrator may delegate
administrative duties to such of the Company's other officers or employees as
the Plan Administrator so determines.
SECTION 4. STOCK SUBJECT TO PLAN
Subject to adjustment from time to time as provided in Section 19, a maximum
of 300,000 shares of Stock may be sold under the Plan. Shares sold under the
Plan shall be drawn from authorized and unissued shares or shall be shares
acquired by the Company. Any shares of Stock subject to an Option that cease
to be subject to the Option (other than by reason of exercise of the Option),
including, without limitation, in connection with the cancellation or
termination of the Option, shall again be available for sale in connection
with future grants of Options under the Plan.
SECTION 5. OFFERING DATES
5.1 OFFERING PERIODS
The Plan shall be implemented by a series of offerings (each, an
"Offering"). Except as otherwise set forth below, Offerings shall commence on
January 1 and July 1 of each year and end on the next June 30 and December 31,
respectively, occurring thereafter. The first Offering Period shall begin
January 1, 1998 and end on June 30, 1998. Notwithstanding the foregoing, the
Board or the Committee may establish (a) a different term for one or more
future Offerings and (b) different commencing and ending dates for such
Offerings; provided, however, that an offering period (the "Offering Period")
may not exceed five years; and provided, further, that if the Purchase Price
may be less than 85% of the fair market value of the Stock on the Purchase
Date, the Offering Period may not exceed 27 months. In the event the first or
the last day of an Offering Period is not a regular business day, then the
first day of the Offering Period shall be deemed to be the next regular
business day and the last day of the Offering Period shall be deemed to be the
last preceding regular business day. An employee who becomes eligible to
participate in the Plan after an Offering Period has commenced shall not be
eligible to participate in such Offering but may participate in any subsequent
Offering, provided that such Employee is still an Eligible Employee as of the
commencement of any such subsequent Offering. Eligible Employees may not
participate in more than one Offering at a time.
5.2 PURCHASE PERIODS
Each Offering Period shall consist of one or more consecutive purchase
periods (each, a "Purchase Period"). Except as otherwise set forth below,
Purchase Periods shall commence on January 1 and July 1 of each year and end
on the next June 30 and December 31, respectively, occurring thereafter. The
first Purchase Period shall begin January 1, 1998 and end on June 30, 1998.
Notwithstanding the foregoing, the Board or the Committee may establish for
any future Offering (a) different terms for one or more Purchase Periods
within the Offering Period and (b) different commencing dates and Purchase
Dates for any such Purchase Periods. The last day of each Purchase Period
shall be the Purchase Date for such Purchase Period. In the event the first or
last day of a Purchase Period is not a regular business day, then the first
day of the Purchase Period shall be deemed to be the next regular business day
and the last day of the Purchase Period shall be deemed to be the last
preceding regular business day.
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SECTION 6. PARTICIPATION IN THE PLAN
6.1 INITIAL PARTICIPATION
An Eligible Employee shall become a Participant on the first Offering Date
after satisfying the eligibility requirements and delivering to the Plan
Administrator during the enrollment period established by the Plan
Administrator (the "Enrollment Period") a subscription (the "Subscription"):
(a) indicating the Eligible Employee's election to participate in the
Plan;
(b) authorizing payroll deductions and stating the amount to be deducted
regularly from the Participant's pay; and
(c) authorizing the purchase of Stock for the Participant in each
Purchase Period.
An Eligible Employee who does not deliver a Subscription to the Plan
Administrator during the Enrollment Period shall not participate in the Plan
for that Offering Period or any subsequent Offering Period unless such
Eligible Employee subsequently enrolls in the Plan by delivering a
Subscription to the Plan Administrator during the Enrollment Period for such
subsequent Offering Period. The Plan Administrator may, from time to time,
change the Enrollment Period for any future Offering as deemed advisable by
the Plan Administrator in its, his or her sole discretion for the proper
administration of the Plan.
6.2 CONTINUED PARTICIPATION
Unless the Plan Administrator determines otherwise for any future Offering,
a Participant shall automatically participate in the next Offering Period
until such time as the Participant withdraws from the Plan pursuant to Section
11.1 or terminates employment as provided in Section 12.
SECTION 7. LIMITATIONS ON RIGHT TO PURCHASE SHARES
7.1 $25,000 LIMITATION
No Participant shall be entitled to purchase Stock under the Plan (or any
other employee stock purchase plan that is intended to meet the requirements
of Code Section 423 sponsored by the Company, any Parent Corporation or any
Subsidiary Corporation) at a rate that exceeds $25,000 in fair market value,
determined as of the Offering Date for each Offering Period (or such other
limit as may be imposed by the Code), for each calendar year in which a
Participant participates in the Plan (or any other employee stock purchase
plan described in this Section 7.1).
7.2 PRO RATA ALLOCATION
In the event the number of shares of Stock that might be purchased by all
Participants in the Plan exceeds the number of shares of Stock available in
the Plan, the Plan Administrator shall make a pro rata allocation of the
remaining shares of Stock in as uniform a manner as shall be practicable and
as the Plan Administrator shall determine to be equitable. Fractional shares
may be issued under the Plan unless the Board or the Committee determines
otherwise.
SECTION 8. PURCHASE PRICE
The purchase price (the "Purchase Price") at which Stock may be acquired in
an Offering pursuant to the exercise of all or any portion of an Option
granted under the Plan shall be 85% of the lesser of (a) the fair market value
of the Stock on the Offering Date of such Offering and (b) the fair market
value of the Stock on the Purchase Date. Notwithstanding the foregoing, the
Board or the Committee may establish a different Purchase Price for any future
Offering, which shall not be less than 85% of the lesser of (a) the fair
market value of the Stock on the Offering Date of such Offering and (b) the
fair market value of the Stock on the Purchase Date.
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The fair market value of the Stock on the Offering Date or on the Purchase
Date shall be the average of the high and low per share trading prices for the
Stock as reported for such day by the Nasdaq National Market. If no sales of
the Stock were made on the Nasdaq National Market on the transaction date,
fair market value shall mean the average of the high and low per share trading
prices for the Stock as reported for the next preceding day on which sales of
the Stock were made on the Nasdaq National Market.
SECTION 9. PAYMENT OF PURCHASE PRICE
9.1 GENERAL RULES
Stock that is acquired pursuant to the exercise of all or any portion of an
Option may be paid for only by means of payroll deductions from the
Participant's Eligible Compensation. Except as set forth in this Section 9,
the amount of compensation to be withheld from a Participant's Eligible
Compensation during each pay period shall be determined by the Participant's
Subscription.
9.2 CHANGE NOTICES
Unless otherwise determined by the Plan Administrator for any future
Offering, a Participant may not elect during an Offering Period to increase or
decrease the amount withheld from his or her compensation in future pay
periods during an Offering Period.
9.3 PERCENT WITHHELD
The amount of payroll withholding with respect to the Plan for any
Participant during any pay period shall not exceed 10% of the Participant's
Eligible Compensation for such pay period. Amounts shall be withheld only in
whole percentages.
9.4 PAYROLL DEDUCTIONS
Payroll deductions shall commence on the first payday following the Offering
Date and shall continue through the last payday of the Offering Period unless
sooner altered or terminated as provided in the Plan.
9.5 MEMORANDUM ACCOUNTS
Individual accounts shall be maintained for each Participant for memorandum
purposes only. All payroll deductions from a Participant's compensation shall
be credited to such account but shall be deposited with the general funds of
the Company. All payroll deductions received or held by the Company may be
used by the Company for any corporate purpose.
9.6 NO INTEREST
No interest shall be paid on payroll deductions received or held by the
Company.
9.7 ACQUISITION OF STOCK
On each Purchase Date of an Offering Period, each Participant shall
automatically acquire, pursuant to the exercise of the Participant's Option,
the number of shares of Stock arrived at by dividing the total amount of the
Participant's accumulated payroll deductions for the Purchase Period by the
Purchase Price; provided, however, that the number of shares of Stock
purchased by the Participant shall not exceed the number of whole shares of
Stock so determined, if the Board or the Committee has determined for any
future Offering that fractional shares may not be issued under the Plan.
9.8 EXCESS CASH BALANCES
Any cash balance remaining in the Participant's account under the Plan after
a purchase of Stock at the end of a Purchase Period which is an amount less
than the amount necessary to purchase a whole share of Stock (if the Board or
the Committee has determined that fractional shares may not be issued), shall
be maintained in the
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Participant's account and carried over to the next Purchase Period or Offering
Period if the Participant continues to participate in the Plan. If the
Participant does not continue to participate, such amounts shall be refunded
to the Participant as soon as practicable after the Purchase Date without the
payment of any interest.
9.9 WITHHOLDING OBLIGATIONS
At the time the Option is exercised, in whole or in part, or at the time
some or all of the Stock is disposed of, the Participant shall make adequate
provision for federal and state withholding obligations of the Company, if
any, that arise upon exercise of the Option or upon disposition of the Stock.
The Company may, but shall not be obligated to, withhold from the
Participant's compensation the amount necessary to meet such withholding
obligations.
9.10 TERMINATION OF PARTICIPATION
No Stock shall be purchased on behalf of a Participant on a Purchase Date if
his or her participation in the Plan has terminated prior to such Purchase
Date.
9.11 PROCEDURAL MATTERS
The Plan Administrator may, from time to time, establish (a) limitations on
the frequency and/or number of any permitted changes in the amount withheld
during an Offering, (b) an exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, (c) payroll withholding in excess of the
amount designated by a Participant in order to adjust for delays or mistakes
in the Company's processing of properly completed withholding elections, and
(d) such other limitations or procedures as deemed advisable by the Plan
Administrator, in its sole discretion, that are consistent with the Plan and
in accordance with the requirements of Code Section 423.
9.12 LEAVES OF ABSENCE
During leaves of absence approved by the Company and meeting the
requirements of the applicable Treasury Regulations promulgated under the
Code, a Participant may continue participation in the Plan by delivering cash
payments to the Plan Administrator on the Participant's normal paydays equal
to the amount of his or her payroll deduction under the Plan had the
Participant not taken a leave of absence.
SECTION 10. STOCK PURCHASED UNDER THE PLAN
10.1 SPP BROKER
If the Plan Administrator designates or approves a stock brokerage or other
financial services firm (the "SPP Broker") to hold shares purchased under the
Plan for the accounts of Participants, the following procedures shall apply.
Promptly following each Purchase Date, the number of shares of Stock purchased
by each Participant shall be deposited into an account established in the
Participant's name with the SPP Broker. A Participant shall be free to
undertake a disposition of the shares of Stock in his or her account at any
time, but, in the absence of such a disposition, the shares of Stock must
remain in the Participant's account at the SPP Broker until the holding period
set forth in Code Section 423 has been satisfied. With respect to shares of
Stock for which the Code Section 423 holding periods have been satisfied, the
Participant may move those shares of Stock to another brokerage account of the
Participant's choosing or request that a stock certificate be issued and
delivered to him or her. A Participant who is not subject to payment of U.S.
income taxes may move his or her shares of Stock to another brokerage account
of his or her choosing or request that a stock certificate be delivered to him
or her at any time, without regard to the Code Section 423 holding period.
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10.2 NOTICE OF DISPOSITION
By entering the Plan, each Participant agrees to promptly give the Company
notice of any Stock disposed of within the later of one year from the Purchase
Date and two years from the Offering Date for such Stock, showing the number
of such shares disposed of and the Purchase Date and Offering Date for such
Stock. This notice shall not be required if and so long as the Company has a
designated SPP Broker.
SECTION 11. VOLUNTARY WITHDRAWAL
11.1 WITHDRAWAL FROM THE PLAN
A Participant may withdraw from the Plan by delivering to the Plan
Administrator a notice of withdrawal in the form required by the Plan
Administrator for such purpose. Any withdrawal from an Offering shall
constitute a withdrawal from the Plan unless the Board or the Committee
determines for any future Offerings that withdrawal from an Offering shall not
result in a withdrawal from the Plan and any succeeding Offering. Such notice
must be delivered at least ten days prior to the end of the Purchase Period
for which such withdrawal is to be effective or by any other date specified by
the Plan Administrator for any future Offering. If a Participant withdraws
after the Purchase Date for a Purchase Period of an Offering, the withdrawal
shall not affect Stock acquired by the Participant in that Purchase Period and
any earlier Purchase Periods. In the event a Participant voluntarily elects to
withdraw from the Plan, the withdrawing Participant may not resume
participation in the Plan during the same Offering Period but may participate
in any subsequent Offering under the Plan by again satisfying the definition
of a Participant.
11.2 RETURN OF PAYROLL DEDUCTIONS
Upon withdrawal from the Plan pursuant to Section 11.1, the withdrawing
Participant's accumulated payroll deductions that have not been applied to the
purchase of Stock shall be returned as soon as practical after the withdrawal,
without the payment of any interest, to the Participant, and the Participant's
interest in the Offering shall terminate. Such accumulated payroll deductions
may not be applied to any other Offering under the Plan.
SECTION 12. TERMINATION OF EMPLOYMENT
Termination of a Participant's employment with the Company for any reason,
including retirement, disability or death, or the failure of a Participant to
remain an Eligible Employee, shall immediately terminate the Participant's
participation in the Plan. The payroll deductions credited to the
Participant's account since the last Purchase Date shall, as soon as
practical, be returned to the Participant or, in the case of a Participant's
death, to the Participant's legal representative, and all the Participant's
rights under the Plan shall terminate. Interest shall not be paid on sums
returned to a Participant pursuant to this Section 12.
SECTION 13. RESTRICTIONS UPON ASSIGNMENT
An Option granted under the Plan shall not be transferable otherwise than by
will or by the applicable laws of descent and distribution and shall be
exercisable during the Participant's lifetime only by the Participant. The
Plan Administrator will not recognize, and shall be under no duty to
recognize, any assignment or purported assignment by a Participant, other than
by will or by the applicable laws of descent and distribution, of the
Participant's interest in the Plan, of his or her Option, or of any rights
under his or her Option.
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SECTION 14. NO RIGHTS OF SHAREHOLDER UNTIL SHARES ISSUED
With respect to shares of Stock subject to an Option, a Participant shall
not be deemed to be a shareholder of the Company, and he or she shall not have
any of the rights or privileges of a shareholder. A Participant shall have the
rights and privileges of a shareholder of the Company when, but not until, the
shares have been issued following exercise of the Participant's Option.
SECTION 15. AMENDMENT OF THE PLAN
The Board or the Committee may amend the Plan in such respects as it shall
deem advisable; provided, however, that, to the extent required for compliance
with Code Section 423 or any applicable law or regulation, shareholder
approval will be required for any amendment that will (a) increase the total
number of shares as to which Options may be granted under the Plan, (b) modify
the class of employees eligible to receive Options, or (c) otherwise require
shareholder approval under any applicable law or regulation.
SECTION 16. TERMINATION OF THE PLAN
The Board may suspend or terminate the Plan at any time. The Plan shall have
no fixed expiration date. No Options shall be granted during any period of
suspension of the Plan.
SECTION 17. NO RIGHTS AS AN EMPLOYEE
Nothing in the Plan shall be construed to give any person (including any
Eligible Employee or Participant) the right to remain in the employ of the
Company or a Subsidiary Corporation or to affect the right of the Company and
the Subsidiary Corporations to terminate the employment of any person
(including any Eligible Employee or Participant) at any time with or without
cause.
SECTION 18. EFFECT UPON OTHER PLANS
The adoption of the Plan shall not affect any other compensation or
incentive plans in effect for the Company or any Subsidiary Corporation.
Nothing in the Plan shall be construed to limit the right of the Company or
any Subsidiary Corporation to (a) establish any other forms of incentives or
compensation for employees of the Company or any Subsidiary Corporation or (b)
grant or assume options otherwise than under the Plan in connection with any
proper corporate purpose, including, but not by way of limitation, the grant
or assumption of options in connection with the acquisition, by purchase,
lease, merger, consolidation or otherwise, of the business, stock or assets of
any corporation, firm or association.
SECTION 19. ADJUSTMENTS
19.1 ADJUSTMENT OF SHARES
In the event that, at any time or from time to time, a stock dividend, stock
split, spin-off, combination or exchange of shares, recapitalization, merger,
consolidation, distribution to shareholders other than a normal cash dividend,
or other change in the Company's corporate or capital structure results in (a)
the outstanding shares, or any securities exchanged therefor or received in
their place, being exchanged for a different number or class of securities of
the Company or of any other corporation or (b) new, different or additional
securities of the Company or of any other corporation being received by the
holders of shares of Stock, then (subject to any required action by the
Company's shareholders), the Board or the Committee, in its sole discretion,
shall make such equitable adjustments as it shall deem appropriate in the
circumstances in (i) the maximum number and kind of securities subject to the
Plan as set forth in Section 4 and (ii) the number and kind of securities that
are subject to any outstanding Option and the per share price of such
securities. The determination by the Board or the Committee as to the terms of
any of the foregoing adjustments shall be conclusive and binding.
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19.2 MERGER, ACQUISITION OR LIQUIDATION OF THE COMPANY
In the event of the merger or consolidation of the Company into another
corporation, the acquisition by another corporation of all or substantially
all of the Company's assets, or the liquidation or dissolution of the Company,
the Purchase Date with respect to outstanding Options shall be the business
day immediately preceding the effective date of such merger, consolidation,
acquisition, liquidation or dissolution unless the Board or the Committee
shall, in its sole discretion, provide for the assumption or substitution of
such Options in a manner complying with Code Section 424(a).
19.3 LIMITATIONS
The grant of Options will in no way affect the Company's right to adjust,
reclassify, reorganize or otherwise change its capital or business structure
or to merge, consolidate, dissolve, liquidate or sell or transfer all or any
part of its business or assets.
SECTION 20. REGISTRATION
The Company shall be under no obligation to any Participant to register for
offering or resale under the Securities Act of 1933, as amended, or register
or qualify under state securities laws, any shares of Stock. The Company may
issue certificates for shares with such legends and subject to such
restrictions on transfer and stop-transfer instructions as counsel for the
Company deems necessary or desirable for compliance by the Company with
federal and state securities laws.
SECTION 21. EFFECTIVE DATE
The Plan's effective date is the date on which it is adopted by the Board,
so long as it is approved by the Company's shareholders at any time within 12
months of such adoption.
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APPENDIX C
ARIS CORPORATION
INDEMNIFICATION AGREEMENT
INDEMNIFICATION AGREEMENT, dated as of , 199 , between ARIS
CORPORATION, a Washington corporation (the "Company"), and ,
a director and/or officer of the Company (the "Indemnitee").
RECITALS
A. Indemnitee is a director and/or officer of the Company and in such
capacity is performing valuable services for the Company.
B. The Company and Indemnitee recognize the difficulty in obtaining
directors' and officers' liability insurance, the significant cost of such
insurance and the general reduction in the coverage of such insurance.
C. The Company and Indemnitee further recognize the substantial increase in
litigation subjecting directors and officers to expensive litigation risks at
the same time that such liability insurance has been severely limited.
D. The shareholders of the Company have adopted bylaws (the "Bylaws")
providing for the indemnification of the directors, officers, agents and
employees of the Company to the full extent permitted by the Business
Corporation Law of Washington (the "Statute").
E. The Bylaws and the Statute specifically provide that they are not
exclusive, and thereby contemplate that contracts may be entered into between
the Company and the members of its Board of Directors and its officers with
respect to indemnification of such directors and officers.
F. In order to induce Indemnitee to serve, or to continue to serve, as a
director and/or officer of the Company, the Company has agreed to enter into
this Agreement with Indemnitee.
AGREEMENTS
In consideration of the recitals above, the mutual covenants and agreements
herein contained, and Indemnitee's continued service as a director and/or
officer after the date hereof, the parties to this Agreement agree as follows:
1. INDEMNITY OF INDEMNITEE
1.1. SCOPE
The Company agrees to hold harmless and indemnify Indemnitee to the full
extent permitted by law, notwithstanding that such indemnification is not
specifically authorized by this Agreement, the Company's Articles of
Incorporation, the Bylaws, the Statute or otherwise. In the event of any
change, after the date of this Agreement, in any applicable law, statute or
rule regarding the right of a Washington corporation to indemnify a member of
its board of directors or an officer, such changes, to the extent that they
would expand Indemnitee's rights hereunder, shall be within the purview of
Indemnitee's rights and the Company's obligations hereunder, and, to the
extent that they would narrow Indemnitee's rights hereunder, shall be excluded
from this Agreement; provided, however, that any change that is required by
applicable laws, statutes or rules to be applied to this Agreement shall be so
applied regardless of whether the effect of such change is to narrow
Indemnitee's rights hereunder.
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1.2. NONEXCLUSIVITY
The indemnification provided by this Agreement shall not be deemed exclusive
of any rights to which Indemnitee may be entitled under the Company's Articles
of Incorporation, the Bylaws, any agreement, any vote of shareholders or
disinterested directors, the Statute, or otherwise, whether as to action in
Indemnitee's official capacity or otherwise.
1.3. INCLUDED COVERAGE
If Indemnitee was or is made a party, or is threatened to be made a party,
to or is otherwise involved (including, without limitation, as a witness) in
any Proceeding (as defined below), the Company shall hold harmless and
indemnify Indemnitee from and against any and all losses, claims, damages,
liabilities or expenses (including attorneys' fees, judgments, fines, ERISA
excise taxes or penalties, amounts paid in settlement and other expenses
incurred in connection with such Proceeding) (collectively, "Damages").
1.4. DEFINITION OF PROCEEDING
For purposes of this Agreement, "Proceeding" shall mean any actual, pending
or threatened action, suit, claim or proceeding, whether civil, criminal,
administrative or investigative and whether formal or informal, in which
Indemnitee is, was or becomes involved by reason of the fact that Indemnitee
is or was a director, officer, employee or agent of the Company or that, being
or having been such a director, officer, employee or agent, Indemnitee is or
was serving at the request of the Company as a director, officer, employee,
trustee or agent of another corporation or of a partnership, joint venture,
trust or other enterprise (collectively a "Related Company"), including
service with respect to an employee benefit plan, whether the basis of such
proceeding is alleged action (or inaction) by Indemnitee in an official
capacity as a director, officer, employee, trustee or agent or in any other
capacity while serving as a director, officer, employee, trustee or agent;
provided, however, that, except with respect to an action to enforce the
provisions of this Agreement, "Proceeding" shall not include any action, suit,
claim or proceeding instituted by or at the direction of Indemnitee unless
such action, suit, claim or proceeding is or was authorized by the Company's
Board of Directors.
1.5. DETERMINATION OF ENTITLEMENT
In the event that a determination of Indemnitee's entitlement to
indemnification is required pursuant to Section 23B.08.550 of the Statute or a
successor statute or pursuant to other applicable law, the appropriate
decision-maker shall make such determination; provided, however, that
Indemnitee shall initially be presumed in all cases to be entitled to
indemnification, that Indemnitee may establish a conclusive presumption of any
fact necessary to such a determination by delivering to the Company a
declaration made under penalty of perjury that such fact is true and that,
unless the Company shall deliver to Indemnitee written notice of a
determination that Indemnitee is not entitled to indemnification within twenty
(20) days after the Company's receipt of Indemnitee's initial written request
for indemnification, such determination shall conclusively be deemed to have
been made in favor of the Company's provision of indemnification and Company
hereby agrees not to assert otherwise.
1.6. SURVIVAL
The indemnification provided under this Agreement shall apply to any and all
Proceedings, notwithstanding that Indemnitee has ceased to be a director,
officer, employee, trustee or agent of the Company or a Related Company.
2. EXPENSE ADVANCES
2.1. GENERALLY
The right to indemnification of Damages conferred by Section 1 shall include
the right to have the Company pay Indemnitee's expenses in any Proceeding as
such expenses are incurred and in advance of such Proceeding's final
disposition (such right is referred to hereinafter as an "Expense Advance").
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2.2. CONDITIONS TO EXPENSE ADVANCE
The Company's obligation to provide an Expense Advance is subject to the
following conditions:
2.2.1 UNDERTAKING
If the Proceeding arose in connection with Indemnitee's service as a
director or an officer of the Company (and not in any other capacity in which
Indemnitee rendered service, including service to any Related Company), then
Indemnitee or his representative shall have executed and delivered to the
Company an undertaking, which need not be secured and shall be accepted
without reference to Indemnitee's financial ability to make repayment, by or
on behalf of Indemnitee to repay all Expense Advances if and to the extent
that it shall ultimately be determined by a final, unappealable decision
rendered by a court having jurisdiction over the parties and the question that
Indemnitee is not entitled to be indemnified for such Expense Advance under
this Agreement or otherwise.
2.2.2. COOPERATION
Indemnitee shall give the Company such information and cooperation as it may
reasonably request and as shall be within Indemnitee's power.
2.2.3. AFFIRMATION
Indemnitee shall furnish, upon request by the Company and if required under
applicable law, a written affirmation of Indemnitee's good faith belief that
any applicable standards of conduct have been met by Indemnitee.
3. PROCEDURES FOR ENFORCEMENT
3.1. ENFORCEMENT
In the event that a claim for indemnity, an Expense Advance or otherwise is
made hereunder and is not paid in full within sixty days (twenty days for an
Expense Advance) after written notice of such claim is delivered to the
Company, Indemnitee may, but need not, at any time thereafter bring suit
against the Company to recover the unpaid amount of the claim (an "Enforcement
Action").
3.2. PRESUMPTIONS IN ENFORCEMENT ACTION
In any Enforcement Action the following presumptions (and limitation on
presumptions) shall apply:
(a) The Company shall conclusively be presumed to have entered into this
Agreement and assumed the obligations imposed on it hereunder in order to
induce Indemnitee to continue as a director and/or officer of the Company;
(b) Neither (i) the failure of the Company (including the Company's Board
of Directors, independent or special legal counsel or the Company's
shareholders) to have made a determination prior to the commencement of the
Enforcement Action that indemnification of Indemnitee is proper in the
circumstances nor (ii) an actual determination by the Company, its Board of
Directors, independent or special legal counsel or shareholders that
Indemnitee is not entitled to indemnification shall be a defense to the
Enforcement Action or create a presumption that Indemnitee is not entitled
to indemnification hereunder; and
(c) If Indemnitee is or was serving as a director, officer, employee,
trustee or agent of a corporation of which a majority of the shares
entitled to vote in the election of its directors is held by the Company or
in an executive or management capacity in a partnership, joint venture,
trust or other enterprise of which the Company or a wholly owned subsidiary
of the Company is a general partner or has a majority ownership,
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then such corporation, partnership, joint venture, trust or enterprise
shall conclusively be deemed a Related Company and Indemnitee shall
conclusively be deemed to be serving such Related Company at the request of
the Company.
3.3. ATTORNEYS' FEES AND EXPENSES FOR ENFORCEMENT ACTION
In the event Indemnitee is required to bring an Enforcement Action, the
Company shall indemnify and hold harmless Indemnitee against all of
Indemnitee's fees and expenses in bringing and pursuing the Enforcement Action
(including attorneys' fees at any stage, including on appeal); provided,
however, that the Company shall not be required to provide such indemnity for
such attorneys' fees or expenses if a court of competent jurisdiction
determines that each of the material assertions made by Indemnitee in such
Enforcement Action was not made in good faith or was frivolous.
4. LIMITATIONS ON INDEMNITY; MUTUAL ACKNOWLEDGMENT
4.1. LIMITATION ON INDEMNITY
No indemnity pursuant to this Agreement shall be provided by the Company:
(a) On account of any suit in which a final, unappealable judgment is
rendered against Indemnitee for an accounting of profits made from the
purchase or sale by Indemnitee of securities of the Company in violation of
the provisions of Section 16(b) of the Securities Exchange Act of 1934 and
amendments thereto; or
(b) For Damages that have been paid directly to Indemnitee by an
insurance carrier under a policy of officers' and directors' liability
insurance maintained by the Company.
4.2. MUTUAL ACKNOWLEDGMENT
The Company and Indemnitee acknowledge that, in certain instances, federal
law or public policy may override applicable state law and prohibit the
Company from indemnifying Indemnitee under this Agreement or otherwise. For
example, the Company and Indemnitee acknowledge that the Securities and
Exchange Commission (the "SEC") has taken the position that indemnification is
not permissible for liabilities arising under certain federal securities laws,
and federal legislation prohibits indemnification for certain ERISA
violations. Furthermore, Indemnitee understands and acknowledges that the
Company has undertaken or may be required in the future to undertake with the
SEC to submit the question of indemnification to a court in certain
circumstances for a determination of the Company's right under public policy
to indemnify Indemnitee.
5. NOTIFICATION AND DEFENSE OF CLAIM
5.1. NOTIFICATION
Promptly after receipt by Indemnitee of notice of the commencement of any
Proceeding, Indemnitee will, if a claim in respect thereof is to be made
against the Company under this Agreement, notify the Company of the
commencement thereof; but the omission so to notify the Company will not
relieve the Company from any liability which it may have to Indemnitee under
this Agreement unless and only to the extent that such omission can be shown
to have prejudiced the Company's ability to defend the Proceeding.
5.2. DEFENSE OF CLAIM
With respect to any such Proceeding as to which Indemnitee notifies the
Company of the commencement thereof:
(a) The Company may participate therein at its own expense;
(b) The Company, jointly with any other indemnifying party similarly
notified, may assume the defense thereof, with counsel satisfactory to
Indemnitee. After notice from the Company to Indemnitee of
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its election so to assume the defense thereof, the Company shall not be
liable to Indemnitee under this Agreement for any legal or other expenses
(other than reasonable costs of investigation) subsequently incurred by
Indemnitee in connection with the defense thereof unless (i) the employment
of counsel by Indemnitee has been authorized by the Company, (ii)
Indemnitee shall have reasonably concluded that there may be a conflict of
interest between the Company and Indemnitee in the conduct of the defense
of such action, or (iii) the Company shall not in fact have employed
counsel to assume the defense of such action, in each of which cases the
fees and expenses of counsel shall be at the expense of the Company. The
Company shall not be entitled to assume the defense of any action, suit or
proceeding brought by or on behalf of the Company or as to which Indemnitee
shall have made the conclusion provided for in (ii) above;
(c) The Company shall not be liable to indemnify Indemnitee under this
Agreement for any amounts paid in settlement of any Proceeding effected
without its written consent;
(d) The Company shall not settle any action or claim in any manner which
would impose any penalty or limitation on Indemnitee without Indemnitee's
written consent; and
(e) Neither the Company nor Indemnitee shall unreasonably withhold its,
his or her consent to any proposed settlement.
6. SEVERABILITY
Nothing in this Agreement is intended to require or shall be construed as
requiring the Company to do or fail to do any act in violation of applicable
law. The Company's inability, pursuant to court order, to perform its
obligations under this Agreement shall not constitute a breach of this
Agreement. The provisions of this Agreement shall be severable, as provided in
this Section 6. If this Agreement or any portion hereof shall be invalidated
on any ground by any court of competent jurisdiction, then the Company shall
nevertheless indemnify Indemnitee to the full extent permitted by any
applicable portion of this Agreement that shall not have been invalidated, and
the balance of this Agreement not so invalidated shall be enforceable in
accordance with its terms.
7. GOVERNING LAW; BINDING EFFECT; AMENDMENT AND TERMINATION
(a) This Agreement shall be interpreted and enforced in accordance with
the laws of the state of Washington.
(b) This Agreement shall be binding upon Indemnitee and upon the Company,
its successors and assigns, and shall inure to the benefit of Indemnitee,
Indemnitee's heirs, personal representatives and assigns and to the benefit
of the Company, its successors and assigns.
(c) No amendment, modification, termination or cancellation of this
Agreement shall be effective unless in writing signed by both parties
hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and
as of the day and year first above written.
ARIS CORPORATION
By __________________________________
Paul Song,President and Chief
Executive Officer
INDEMNITEE:
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ARIS CORPORATION
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
APRIL 28, 1998
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Norbert W. Sugayan, Jr. and Thomas W. Averill,
and each or both of them, proxies with full power of substitution to vote all
shares of stock of the Company which the undersigned is entitled to vote at the
Annual Meeting of Shareholders of ARIS Corporation, to be held on Tuesday, April
28, 1998, at 5:00 p.m., at the Meydenbauer Center, Room 401, 11100 NE 6th
Street, Bellevue, Washington and at any adjournment thereof, upon matters set
forth in the Notice of Annual Meeting of Shareholders and Proxy Statement dated
April 6, 1998, at copy of which has been received by the undersigned. The
proxies are further authorized to vote, in their discretion, upon such other
business as may properly come before the meeting or any adjournment thereof.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED, OR, IF NO
DIRECTION IS GIVEN, WILL BE VOTED FOR THE ELECTION OF DIRECTORS AS DESCRIBED IN
ITEM 1 AND FOR THE PROPOSALS IN ITEMS 2, 3 AND 4.
(CONTINUED, AND TO BE MARKED, DATED AND SIGNED ON THE OTHER SIDE.)
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Please mark your votes as
indicated in this example. [X]
1. Election of one Class III director:
NOMINEE: Kendall W. Kunz
FOR [_] AGAINST [_] ABSTAIN [_]
2. To amend the ARIS Corporation 1997 Stock Option Plan (the "1997 Plan") to
increase the number of shares of Common Stock available for issuance under
the 1997 Plan to 2,000,000 as authorized by the Compensation Committee of
the Board of Directors.
FOR [_] AGAINST [_] ABSTAIN [_]
3. To adopt the ARIS Corporation 1998 Employee Stock Purchase Plan.
FOR [_] AGAINST [_] ABSTAIN [_]
4. To approve the ARIS Corporation form of Indemnification Agreement.
FOR [_] AGAINST [_] ABSTAIN [_]
5. To transact such other business as may properly come before the meeting and
any adjournments thereof.
[_] Check this box if you plan on attending the Annual Meeting of
Shareholders in person.
Signature(s) of Shareholder(s)_________________________________________________
Print Name(s)_________________________________________ Date: April _____, 1998
(If signing as attorney, executor, trustee or guardian, please give your full
title as such. If shares are held jointly, each holder should sign.)
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