<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF
1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_]Preliminary Proxy Statement [_]Confidential, for Use of the
[X]Definitive Proxy Statement Commission Only (as Permitted by Rule
[_]Definitive Additional Materials 14a-6(e)(2))
[_]Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
TSI INTERNATIONAL SOFTWARE LTD.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
- -------------------------------------------------------------------------------
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X]No fee required.
[_]Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: ____
(2) Aggregate number of securities to which transaction applies: _______
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined): _____
(4) Proposed maximum aggregate value of transaction: ___________________
(5) Total fee paid: ____________________________________________________
[_]Fee paid previously with preliminary materials.
[_]Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ____________________________________________
(2) Form, Schedule or Registration Statement No.: ______________________
(3) Filing Party: ______________________________________________________
(4) Date Filed: ________________________________________________________
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
[LOGO OF TSI SOFTWARE APPEARS HERE]
May 6, 1998
To Our Stockholders:
You are cordially invited to attend the 1998 Annual Meeting of Stockholders
of TSI International Software Ltd. to be held at the Landmark Club located at
1 Landmark Square, Stamford, Connecticut, on Monday, June 8, 1998, at 9:30
a.m., Eastern Time.
The matters to be acted upon at the meeting are described in detail in the
accompanying Notice of Annual Meeting of Stockholders and Proxy Statement.
Please use this opportunity to take part in the Company's affairs by voting
on the business to come before this Meeting. WHETHER OR NOT YOU PLAN TO ATTEND
THE MEETING, PLEASE COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE ENCLOSED
PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE PRIOR TO THE MEETING SO THAT YOUR
SHARES WILL BE REPRESENTED AT THE MEETING. Returning the Proxy does not
deprive you of your right to attend the Meeting and to vote your shares in
person.
We hope to see you at the Meeting.
Sincerely,
Constance F. Galley
President and Chief Executive
Officer
<PAGE>
TSI INTERNATIONAL SOFTWARE LTD.
45 DANBURY ROAD
WILTON, CONNECTICUT 06897
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
----------------
To Our Stockholders:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Meeting") of TSI International Software Ltd. (the "Company") will be held at
the Landmark Club located at 1 Landmark Square, Stamford, Connecticut, on
Monday, June 8, 1998, at 9:30 a.m., Eastern Time.
At the Meeting, you will be asked to consider and vote upon the following
matters:
1. The election of five directors of the Company, each to serve until the
next Annual Meeting of Stockholders and until his or her successor has been
elected and qualified or until his or her earlier resignation, death or
removal. The Company's Board of Directors intends to present the following
nominees for election as directors:
Constance F. Galley Ernest E. Keet
Stewart K.P. Gross John J. Pendray
Dennis G. Sisco
2. A proposal to ratify the selection of KPMG Peat Marwick LLP as the
Company's independent accountants for 1998.
3. To transact such other business as may properly come before the Meeting
or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice. Only stockholders of record at the close
of business on April 24, 1998 are entitled to notice of and to vote at the
meeting or any adjournment or postponement thereof.
By Order of the Board of Directors
Ira A. Gerard
Vice President, Finance and
Administration, Chief Financial
Officer and Secretary
Wilton, Connecticut
May 6, 1998
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN
AND PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID
ENVELOPE SO THAT YOUR SHARES WILL BE REPRESENTED AT THE MEETING.
<PAGE>
TSI INTERNATIONAL SOFTWARE LTD.
45 DANBURY ROAD
WILTON, CONNECTICUT 06897
-----------------
PROXY STATEMENT
-----------------
MAY 6, 1998
The accompanying proxy is solicited on behalf of the Board of Directors of
TSI International Software Ltd., a Delaware corporation (the "Company" or "TSI
Software"), for use at the Annual Meeting of Stockholders of the Company to be
held at the Landmark Club located at 1 Landmark Square, Stamford, Connecticut,
on Monday, June 8, 1998, at 9:30 a.m., Eastern Time (the "Meeting"). This
Proxy Statement and the accompanying form of proxy were first mailed to
stockholders on or about May 6, 1998. An annual report for the year ended
December 31, 1997 is enclosed with this Proxy Statement.
RECORD DATE; QUORUM
Only holders of record of the Company's Common Stock at the close of
business on April 24, 1998 (the "Record Date") will be entitled to vote at the
Meeting. A majority of the shares outstanding on the Record Date will
constitute a quorum for the transaction of business at the Meeting. At the
close of business on the Record Date, the Company had 9,098,202 shares of
Common Stock outstanding and entitled to vote.
VOTING RIGHTS; REQUIRED VOTE
Holders of the Company's Common Stock are entitled to one vote for each
share held as of the Record Date. Shares of Common Stock may not be voted
cumulatively. In the event that a broker, bank, custodian, nominee or other
record holder of TSI Software Common Stock indicates on a proxy that it does
not have discretionary authority to vote certain shares on a particular matter
(a "broker non-vote"), then those shares will not be considered present and
entitled to vote with respect to that matter, although they will be counted in
determining whether or not a quorum is present at the Meeting.
Directors will be elected by a plurality of the votes of the shares of
Common Stock present in person or represented by proxy at the Meeting and
entitled to vote on the election of directors. Proposal No. 2 requires for
approval the affirmative vote of the majority of shares of Common Stock
present in person or represented by proxy at the Meeting that are voted for or
against the proposal. Abstentions and broker non-votes will not affect the
outcome of the vote. All votes will be tabulated by the inspector of elections
appointed for the Meeting who will separately tabulate, for each proposal,
affirmative and negative votes, abstentions and broker non-votes.
VOTING OF PROXIES
The proxy accompanying this Proxy Statement is solicited on behalf of the
Board of Directors of TSI Software (the "Board") for use at the Meeting.
Stockholders are requested to complete, date and sign the accompanying proxy
card and promptly return it in the enclosed envelope or otherwise mail it to
TSI Software. All signed, returned proxies that are not revoked will be voted
in accordance with the instructions contained therein; however, returned
signed proxies that give no instructions as to how they should be voted on a
particular proposal at the Meeting will be counted as votes "for" such
proposal (or, in the case of the election of directors, as a vote "for"
election to the Board of all the nominees presented by the Board).
In the event that sufficient votes in favor of the proposals are not
received by the date of the Meeting, the persons named as proxies may propose
one or more adjournments of the Meeting to permit further solicitations of
proxies. Any such adjournment would require the affirmative vote of the
majority of the outstanding shares present in person or represented by proxy
at the Meeting.
<PAGE>
The expenses of soliciting proxies to be voted at the Meeting will be paid
by the Company. Following the original mailing of the proxies and other
soliciting materials, the Company and/or its agents may also solicit proxies
by mail, telephone, telegraph or in person. Following the original mailing of
the proxies and other soliciting materials, the Company will request that
brokers, custodians, nominees and other record holders of the Company's Common
Stock forward copies of the proxy and other soliciting materials to persons
for whom they hold shares of Common Stock and request authority for the
exercise of proxies. In such cases, the Company, upon the request of the
record holders, will reimburse such holders for their reasonable expenses.
REVOCABILITY OF PROXIES
Any person signing a proxy in the form accompanying this Proxy Statement has
the power to revoke it prior to the Meeting or at the Meeting prior to the
vote pursuant to the proxy. A proxy may be revoked by a writing delivered to
the Company stating that the proxy is revoked, by a subsequent proxy that is
signed by the person who signed the earlier proxy and is presented at the
Meeting, or by attendance at the Meeting and voting in person. Please note,
however, that if a stockholder's shares are held of record by a broker, bank
or other nominee and that stockholder wishes to vote at the Meeting, the
stockholder must bring to the Meeting a letter from the broker, bank or other
nominee confirming that stockholder's beneficial ownership of the shares and
that such broker, bank or other nominee is not voting such shares.
PROPOSAL NO. 1--ELECTION OF DIRECTORS
The Board currently consists of five directors, all of whom are nominated
for reelection at the Meeting. Each director will be elected to serve until
the next annual meeting of stockholders and until his successor is duly
elected and qualified or until such director's earlier resignation, death or
removal.
Shares represented by the accompanying proxy will be voted "for" the
election of the five nominees recommended by the Board unless the proxy is
marked in such a manner as to withhold authority so to vote. In the event that
any nominee for any reason is unable to serve or for good cause will not
serve, the proxies may be voted for such substitute nominee as the proxy
holder may determine. The Company is not aware of any nominee who will be
unable to or for good cause will not serve as a director.
DIRECTORS/NOMINEES
The names of the nominees, and certain information about them, are set forth
below:
<TABLE>
<CAPTION>
DIRECTOR
NAME OF DIRECTOR AGE PRINCIPAL OCCUPATION SINCE
---------------- --- -------------------- --------
<S> <C> <C> <C>
Constance F. Galley..... 56 President, Chief Executive Officer, Director, TSI Software 1985
Stewart K.P. Gross...... 38 Managing Director, E.M. Warburg Pincus & Co., LLC 1993
Ernest E. Keet.......... 57 President, Vanguard Atlantic Ltd. 1985
John J. Pendray......... 58 Executive in Residence, George Mason University 1985
Dennis G. Sisco......... 57 Partner, Behrman Capital 1990
</TABLE>
- --------
Constance F. Galley has been President, Chief Executive Officer and a
director of the Company since 1985, when the Company commenced operating as an
independent entity. Prior to 1985, Ms. Galley directed the Company's Marketing
and Development Operations when the Company was part of the Dun & Bradstreet
Corporation. Ms. Galley is a member of the Board of Directors of IVANS and the
software division of ITAA. Ms. Galley holds a Bachelor of Arts degree in
Chemistry from Duke University.
Stewart K.P. Gross has served as a director of the Company since April 1993.
Mr. Gross is a Managing Director of E.M. Warburg Pincus & Co., LLC and has
been employed by E.M. Warburg Pincus & Co., LLC
2
<PAGE>
since 1987. Prior to 1987, Mr. Gross was employed at Morgan Stanley & Co. Mr.
Gross is a director of Vanstar Corporation, BEA Systems, IA Corporation and
several privately-held companies.
Ernest E. Keet has served as a director of the Company since April 1985. Mr.
Keet has been the President and a member of the Board of Directors of Vanguard
Atlantic Ltd. since April 1984. Mr. Keet is the Chief Executive Officer and a
director of Axolotl Corp. and from May 1995 until December 1996, was the
President of Axolotl Corp. Mr. Keet also served as the Chairman and Chief
Executive Officer of ECsoft Ltd. from November 1989 to April 1994.
John J. Pendray has served as a director of the Company since April 1985.
Mr. Pendray has been an Executive in Residence at George Mason University
since November 1996. Prior to joining George Mason University, Mr. Pendray was
the President of the International Group at Cincinnati Bell Information
Systems from March 1993 to August 1996. From July 1992 to March 1993, Mr.
Pendray was an independent consultant. From 1985 until July 1992, Mr. Pendray
was a senior partner at Vanguard Atlantic Ltd.
Dennis G. Sisco has served as a director of the Company since January 1990.
Mr. Sisco is a partner with Behrman Capital. From December 1988 until February
1997, Mr. Sisco was the President of D&B Enterprises, Inc. (now Cognizant
Enterprises, Inc.). From December 1988 until February 1997, Mr. Sisco had also
been employed by Cognizant Corporation and its predecessor The Dun &
Bradstreet Corporation, most recently as an Executive Vice President. Mr.
Sisco is also a director of the Gartner Group, Inc., Oacis Healthcare Holdings
Corporation and Aspect Development, Inc.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
Board of Directors. During 1997, the Board met five times, including one
telephone conference meeting, and acted by written consent three times. No
director attended fewer than 75% of the aggregate of the total number of
meetings of the Board (held during the period for which he was a director) and
the total number of meetings held by all committees of the Board on which such
director served (during the period that such director served).
Standing committees of the Board include an Audit Committee and a
Compensation Committee. The Board does not have a nominating committee or a
committee performing similar functions.
Audit Committee. All of the Board members comprise the current members of
the Audit Committee. The Audit Committee did not meet during 1997. The Audit
Committee meets with the Company's independent accountants to review the
adequacy of the Company's internal control systems and financial reporting
procedures; reviews the general scope of the Company's annual audit and the
fees charged by the independent accountants; reviews and monitors the
performance of non-audit services by the Company's auditors, reviews the
fairness of any proposed transaction between the Company and any officer,
director or other affiliate of the Company (other than transactions subject to
the review of the Compensation Committee), and after such review, makes
recommendations to the full Board; and performs such further functions as may
be required by any stock exchange or over-the-counter market upon which the
Company's Common Stock may be listed.
Compensation Committee. During 1997 the Compensation Committee met four
times. Messrs. Gross, Keet, Pendray and Sisco are the current members of the
Compensation Committee. The Compensation Committee will recommend compensation
for officers and employees of the Company for 1998. In 1997, the Compensation
Committee granted (or delegated authority to grant) options and stock awards
under the Company's employee benefit plans.
DIRECTOR COMPENSATION
The Company reimburses Board members for reasonable expenses associated with
their attendance at Board meetings. None of the members of the Board receives
a fee for attending Board meetings. Members of the Board who are not
employees, consultants or independent contractors of the Company, or any
parent, subsidiary or
3
<PAGE>
affiliate of the Company, are eligible to participate in the Company's 1997
Directors Stock Option Plan (the "Directors Plan"). During 1997, Messrs.
Gross, Keet, Pendray and Sisco were each granted an option pursuant to the
Directors Plan to purchase 15,000 shares of the Company's Common Stock at an
exercise price of $6.67 per share.
THE BOARD RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF THE NOMINATED
DIRECTORS.
PROPOSAL NO. 2: RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
The Company has selected KPMG Peat Marwick LLP as its independent
accountants to perform the audit of the Company's financial statements for
1998, and the stockholders are being asked to ratify such selection. KPMG Peat
Marwick LLP was engaged as the Company's independent accountants for the year
ended December 31, 1997. Representatives of KPMG Peat Marwick LLP will be
present at the Meeting, will have the opportunity to make a statement at the
Meeting if they desire to do so, and will be available to respond to
appropriate questions.
THE BOARD RECOMMENDS A VOTE FOR THE RATIFICATION OF THE SELECTION OF KPMG PEAT
MARWICK LLP.
4
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of TSI Software Common Stock as of April 24, 1998 by: (i)
each stockholder known by the Company to be the beneficial owner of more than
5% of the Company's Common Stock; (ii) each director and nominee; (iii) each
Named Executive Officer set forth in the Summary Compensation Table below; and
(iv) all directors and executive officers as a group.
<TABLE>
<CAPTION>
AMOUNT OF
BENEFICIAL
NAME OF BENEFICIAL OWNER OWNERSHIP(1) PERCENT(1)
- ------------------------ ------------ ----------
<S> <C> <C>
Stewart K.P. Gross.................................... 2,288,655 25.0%
Warburg, Pincus Capital Company, L.P.(2)
Ernest E. Keet........................................ 1,709,177 17.9
Vanguard Atlantic Ltd.(3)
Amerindo Investment Advisors Inc.(4).................. 1,168,000 12.2
Richard L. Chilton, Jr.(5)............................ 500,000 5.2
Constance F. Galley(6)................................ 518,832 5.3
Ira A. Gerard(7)...................................... 72,723 *
Eric A. Amster(8)..................................... 46,958 *
Robert H. Bouton(9)................................... 65,694 *
Saydean Zeldin(10).................................... 241,750 2.5
John J. Pendray(11)................................... 114,807 1.2
Dennis G. Sisco(12)................................... 5,750 *
All executive officers and directors as a group
(9 persons)(13)...................................... 5,178,896 50.1
</TABLE>
- --------
*Less than 1%
(1) Based upon a total of 9,098,202 shares of Common Stock outstanding as of
April 24, 1998. Unless otherwise indicated below, the persons and
entities named in the table have sole voting and sole investment power
with respect to all shares beneficially owned, subject to community
property laws where applicable. Shares of Common Stock subject to options
that are currently exercisable or exercisable within 60 days of April 24,
1998 are deemed to be outstanding and to be beneficially owned by the
person holding such options for the purpose of computing the percentage
ownership of such person but are not treated as outstanding for the
purpose of computing the percentage ownership of any other person.
(2) Includes 382,281 shares of Common Stock issuable to Warburg, Pincus
Capital Company, L.P. ("Warburg") upon exercise of Warrants. Warburg,
Pincus & Co. is the sole General Partner of Warburg and has a 20%
interest in the profits of Warburg. E.M. Warburg, Pincus & Co., LLC, a
New York limited liability company, manages Warburg. Lionel I. Pincus is
the managing partner of Warburg, Pincus & Co. and the managing member of
E.M. Warburg, Pincus & Co., LLC and may be deemed to control both such
entities. The members of E.M. Warburg, Pincus & Co., LLC are
substantially the same as the partners of Warburg, Pincus & Co. Mr.
Gross, a director of the Company, is a Managing Director and member of
E.M. Warburg, Pincus & Co., LLC and a general partner of Warburg, Pincus
& Co. As such, Mr. Gross may be deemed to have an indirect pecuniary
interest (within the meaning of Rule 16a-1 under the Exchange Act) in an
indeterminate portion of the shares beneficially owned by Warburg. Mr.
Gross disclaims beneficial ownership of these shares within the meaning
of Rule 13d-3 under the Securities Exchange Act of 1934. Also includes
3,750 shares subject to stock options exercisable within 60 days of April
24, 1998. The address of Mr. Gross and Warburg is 466 Lexington Avenue,
New York, NY 10017.
(3) Based upon Schedules 13G dated February 2, 1998. Includes 1,559,325
shares of Common Stock held of record by Vanguard Atlantic Ltd.
("Vanguard") and 135,543 shares of Common Stock held of record by Mr.
Keet. Mr. Keet, a director of the Company, is the President of Vanguard
and may be deemed to beneficially own the shares owned by such entity.
Mr. Keet disclaims beneficial ownership of such shares except to the
extent of his indirect pecuniary interest therein. Also includes 3,750
shares subject to stock
5
<PAGE>
options exercisable within 60 days of April 24, 1998. The address of
Vanguard is 304 Main Avenue, Suite 290, Norwalk, Connecticut 06851 and the
address of Mr. Keet is 619 Marina Boulevard, San Francisco, CA 94123.
(4) Based on a Schedule 13D, as amended through April 17, 1998. Amerindo
Investment Advisors Inc., a California corporation ("Amerindo") and
Amerindo Investment Advisors, Inc., a Panama cororation ("Amerindo
Panama") and together with Amerindo, the "Amerindo Companies"), are
registered investment advisors, and in this capacity may be deemed to be
the beneficial owners of the securities listed. Clients of the Amerindo
Companies have the right to receive and direct the receipt of dividends
and proceeds from sales of shares disposed of by the Amerindo Companies.
No single client of the Amerindo Companies owns more than 5% of the
shares reported. Amerindo has shared voting and dispostive power over
815,500 shares of TSI Software Common Stock, and Amerindo Panama has
shared voting and dispositive power over 342,500 shares of TSI Software
Common. Messrs. Alberto Vilar and Gary Tanaka, who are the sole
stockholders and directors of the Amerindo Companies, have shared voting
and dispositive power over all of the shares shown. The Amerindo
Investment Advisors Inc. Profit Sharing Trust (the "Trust") has sole
voting and dispositive power as to 10,000 shares of TSI Software Common
Stock. Each of the Amerindo Companies, the Trust and Messrs. Vilar and
Tanaka disclaim beneficial ownership of all of the shares reported.
(5) Based upon a Schedule 13G dated April 13, 1998. Mr. Chilton reported sole
voting and dispositive power with respect to these shares. The address of
Mr. Chilton is c/o Chilton Investment Co., Inc., 320 Park Avenue, 22nd
Floor, New York, NY 10022.
(6) Includes 194,586 shares of Common Stock subject to options exercisable
within sixty days of April 24, 1998, and 25,005 shares of Common Stock
issuable upon exercise of Warrants. This also includes 60,000 shares of
Common Stock owned by Saugatuck Partners ("Saugatuck"), the investment
advisor of which is the husband of Ms. Galley. Ms. Galley disclaims
beneficial ownership of shares owned by Saugatuck.
(7) Includes 72,000 shares of Common Stock subject to options exercisable
within sixty days of April 24, 1998.
(8) Includes 40,000 shares of Common Stock subject to options exercisable
within sixty days of April 24, 1998.
(9) Includes 63,000 shares of Common Stock subject to options exercisable
within sixty days of April 24, 1998.
(10) Represents 78,250 shares of Common Stock subject to options exercisable
within sixty days of April 24, 1998. Also includes 6,000 shares of Common
Stock, 151,500 shares of Common Stock subject to options exercisable
within 60 days of April 24, 1998 and 6,000 shares of Common Stock
issuable upon exercise of warrants, all of which are held by Ms. Zeldin's
husband, Edward J. Watson. Ms. Zeldin disclaims beneficial ownership of
the shares, options and warrants held by Mr. Watson.
(11) Includes 4,950 shares of Common Stock subject to options, 30,000 shares
of Common Stock held of record by his wife Linda L. Pendray and 6,000
shares of Common Stock held of record by his son, Michael D. Pendray. Mr.
Pendray disclaims beneficial ownership of the shares held by his son.
(12) Includes 3,750 shares of Common Stock subject to options exercisable of
April 24, 1998.
(13) Includes an aggregate of 704,786 shares of Common Stock subject to
options and 413,286 shares of Common Stock issuable upon exercise of
Warrants, including the options and Warrants described in footnotes (2),
(3) and (6) through (12).
6
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded, earned or paid for
services rendered in all capacities to TSI Software and its subsidiaries
during 1996 and 1997 to (i) TSI Software's Chief Executive Officer and (ii)
TSI Software's four other most highly compensated executive officers who were
serving as executive officers at the end of 1997 (the "Named Executive
Officers"). This information includes the dollar values of base salaries and
bonus awards, the number of shares subject to stock options granted and
certain other compensation, if any, whether paid or deferred. TSI Software
does not grant stock appreciation rights and has no long-term compensation
benefits other than stock options.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
--------------------------------- -------------------
OTHER ANNUAL SECURITIES
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION(2) UNDERLYING OPTIONS
- --------------------------- ---- -------- -------- --------------- -------------------
<S> <C> <C> <C> <C> <C>
Constance F. Galley...... 1997 $203,538 $50,000 $ 4,952 112,500
President, Chief Execu-
tive Officer 1996 165,000 50,000 5,031 18,000
and Director 1995 161,133 35,107 144 --
Robert H. Bouton......... 1997 164,000 20,000 4,952 --
Vice President, Market-
ing 1996 158,704 20,000 4,900 --
1995 142,795 10,000 225 --
Ira A. Gerard............ 1997 159,892 26,667 6,417 --
Vice President, Finance
and 1996 146,000 20,000 6,516 --
Administration, Chief
Financial Officer 1995 34,442 -- 22 144,000
and Secretary
Saydean Zeldin........... 1997 154,808 26,667 2,889 --
Vice President, Research
and 1996 130,000 20,000 2,922 36,000
Development. 1995 129,703 15,000 225 45,000
Eric A. Amster........... 1997 125,000 -- 184,918(3) --
Vice President, Sales 1996 125,000 -- 85,951(3) 36,000
1995 9,611 -- 3,920(3) 72,000
</TABLE>
- --------
(1) Bonus amounts are reported in the year paid.
(2) Unless otherwise indicated below, represents the portion of health, life
and disability insurance premiums paid by the Company.
(3) Includes sales commissions paid to Mr. Amster by the Company in the amount
of $3,916, $80,982 and $178,501 in 1995, 1996 and 1997, respectively and
$4, $4,918 and $6,417 for the portion of health, life and disability
insurance premiums paid by the Company in 1995, 1996 and 1997,
respectively.
7
<PAGE>
The following table sets forth further information regarding option grants
pursuant to the Company's 1997 Equity Incentive Plan during 1997 to each of
the Named Executive Officers. In accordance with the rules of the Securities
and Exchange Commission (the "SEC"), the table sets forth the hypothetical
gains or "option spreads" that would exist for the options at the end of their
respective ten-year terms. These gains are based on assumed rates of annual
compound stock price appreciation of 5% and 10% from the date the option was
granted to the end of the option term.
OPTION GRANTS IN 1997
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES
NUMBER OF PERCENTAGE OF OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION
UNDERLYING GRANTED TO FOR OPTION TERM(2)
OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION ---------------------
NAME GRANTED(1) 1997 PER SHARE DATE 5% 10%
---- ---------- ------------- -------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Constance F. Galley..... 112,500 21.4% $6.67 5/8/07 $1,222,282 $1,946,279
Robert H. Bouton........ -- -- -- -- -- --
Ira A. Gerard........... -- -- -- -- -- --
Saydean Zeldin.......... -- -- -- -- -- --
Eric A. Amster.......... -- -- -- -- -- --
</TABLE>
- --------
(1) The options shown in the table were granted at fair market value, are
incentive stock options (to the extent permitted under the Code) and will
expire ten years from the date of grant, subject to earlier termination
upon termination of the optionee's employment.
(2) The 5% and 10% assumed annual compound rates of stock price appreciation
are mandated by the rules of the Securities and Exchange Commission and do
not represent the Company's estimate or projection of future Common Stock
prices or values.
The following table sets forth certain information concerning the exercise
of options by each of the Named Executive Officers during 1997, including the
aggregate amount of gains on the date of exercise. In addition, the table
includes the number of shares covered by both exercisable and unexercisable
stock options as of December 31, 1997. Also reported are values of "in-the-
money" options that represent the positive spread between the respective
exercise prices of outstanding stock options and $9.50 per share, which was
the closing price of TSI Software's Common Stock as reported on the Nasdaq
National Market on December 31, 1997, the last day of trading for 1997.
AGGREGATE OPTION EXERCISES IN 1997 AND YEAR-END VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT YEAR-END(1) AT YEAR-END(2)
------------------------- -------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Constance F. Galley... 161,961 121,500 $1,538,630 $1,344,250
Robert H. Bouton...... 63,000 -- 577,710 --
Ira A. Gerard......... 72,000 72,000 660,240 660,240
Saydean Zeldin........ 75,000 49,000 675,780 418,005
Eric A. Amster........ 45,000 63,000 400,680 541,800
</TABLE>
- --------
(1) These values have not been, and may never be, realized and are based on
the positive spread between the respective exercise prices of outstanding
options and the closing price of the Company's Common Stock on December
31, 1997, the last day of trading for 1997.
8
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
The Company's executive compensation program is administered by the
Compensation Committee of the Board of Directors (the "Compensation
Committee"). The Compensation Committee has four members, Stewart K.P. Gross,
Ernest E. Keet, John J. Pendray and Dennis G. Sisco. Each of these persons is
a non-employee director within the meaning of Section 16 of the Securities
Exchange Act of 1934, as amended, and an "outside director" within the meaning
of Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"). None of the members of the Compensation Committee has any
interlocking relationships as defined by the SEC.
GENERAL COMPENSATION PHILOSOPHY
The role of the Compensation Committee is to set the salaries and other
compensation of the executive officers and certain other key employees of the
Company, and to make grants under, and to administer, the stock option and
other employee equity plans. The Company's compensation philosophy for
executive officers is to relate compensation to corporate performance and
increases in stockholder value, while providing a total compensation package
that is competitive and enables the Company to attract, motivate, reward and
retain key executives and employees. Accordingly, each executive officer's
compensation package may, in one or more years, be comprised of the following
three elements: (i) base salary that is designated primarily to be competitive
with base salary levels in effect at high technology companies that are
comparable in size to the Company and with which the Company competes for
executive personnel; (ii) annual variable performance awards, such as annual
performance bonuses payable in cash and tied to the achievement of performance
goals, financial or otherwise, established by the Compensation Committee; and
(iii) long-term stock-based incentive awards which the Company believes
strengthens the mutuality of interests between the executive officers and the
Company's stockholders.
EXECUTIVE COMPENSATION
Base Salary. Salaries for executive officers for 1997 were generally
determined on an individual basis by evaluating each executive's scope of
responsibility, performance, prior experience and salary history, as well as
the salaries for similar positions at comparable companies. In addition, the
Company's Human Resources department provided information to the Compensation
Committee regarding salary range guidelines for specific positions.
Annual Incentive Awards. All full-time employees of the Company, including
executive officers, are eligible to receive an annual bonus. The Compensation
Committee has the sole discretion to determine the individuals who receive
bonuses paid as a percentage of base wages earned during the year. A
significant portion of all bonuses will be based upon total company financial
goals as determined by the Compensation Committee. The balance will be based
upon achievement of personal and team objectives, as determined by the
Compensation Committee or such person designated by the Compensation
Committee. The weighting between total Company financial goals versus personal
and team goals may vary by position at the sole discretion of the Compensation
Committee.
Long-Term Incentive Awards. The Compensation Committee believes that equity-
based compensation in the form of stock options links the interests of
executive officers with the long-term interest of the Company's stockholders
and encourages executive officers to remain in the Company's employ. Stock
options generally have value for executive officers only if the price of the
Company's stock increases above the fair market value on the grant date and
the officer remains in the Company's employ for the period required for the
shares to vest.
The Company grants stock options in accordance with the Company's 1997
Equity Incentive Plan. In 1997, stock options were granted to certain
executive officers as incentives for them to become employees or to aid in the
retention of executive officers and to align their interests with those of the
stockholders. Stock options typically have been granted to executive officers
when the executive first joins the Company, in connection with
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<PAGE>
a significant change in responsibilities and, occasionally, to achieve equity
within a peer group. The Compensation Committee may, however, grant additional
stock options to executive officers for other reasons. The number of shares
subject to each stock option granted is within the discretion of the
Compensation Committee and is based on anticipated future contribution and
ability to impact the Company's results, past performance or consistency
within the officer's peer group. In 1997, the Compensation Committee
considered these factors, as well as the number of unvested option shares held
by the officer as of the date of grant. At the discretion of the Compensation
Committee, executive officers may also be granted stock options to provide
greater incentive to continue their employment with the Company and to strive
to increase the value of the Company's Common Stock. The stock options
generally become exercisable over a four-year period and are granted at a
price that is equal to the fair market value of the Company's Common Stock on
the date of grant.
CHIEF EXECUTIVE OFFICER COMPENSATION
Ms. Galley's base salary, target bonus, bonus paid and long-term incentive
awards for 1997 were determined in a manner consistent with the factors
described above for all executive officers. Ms. Galley does not participate in
any compensation deliberations with respect to any of her compensation.
INTERNAL REVENUE CODE SECTION 162(M) LIMITATION
Section 162(m) of the Internal Revenue Code limits the tax deduction to $1.0
million for compensation paid to certain executives of public companies.
Having considered the requirements of Section 162(m), the Compensation
Committee believes that grants made pursuant to the Plan meet the requirements
that such grants be "performance based" and are, therefore, exempt from the
limitations on deductability. Historically, the combined salary and bonus of
each executive officer has been below the $1.0 million limit. The Compensation
Committee's present intention is to comply with Section 162(m) unless the
Compensation Committee feels that required changes would not be in the best
interest of the Company or its stockholders.
COMPENSATION COMMITTEE
Stewart K.P. Gross
Ernest E. Keet
John J. Pendray
Dennis G. Sisco
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<PAGE>
COMPANY STOCK PRICE PERFORMANCE
The stock price 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 Exchange Act, 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 graph below compares the cumulative total stockholder return on the
Common Stock of the Company from July 2, 1997 (the first trading date for the
Company's Common Stock on the Nasdaq National Market) to December 31, 1997
with the cumulative total return on the Nasdaq Stock Market--U.S. Index and
the H&Q Technology Index over the same period (assuming the investment of $100
in the Common Stock of Company and in each of the other indices on the date of
the Company's initial public offering, and reinvestment of all dividends).
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
July 3, 1997 7/97 8/97 9/97 10/97 11/97 12/97
<S> <C> <C> <C> <C> <C> <C> <C>
TSI International Software 100 158 136 147 121 113 106
NASDAQ Stock Market--U.S. Index 100 109 109 115 109 110 108
Hambrecht & Quist Technology Index 100 109 113 117 115 116 109
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
From January 1, 1997 to the present, there are no currently proposed
transactions in which the amount involved exceeds $60,000 to which the Company
or any of its subsidiaries was (or is to be) a party and in which any
executive officer, director, 5% beneficial owner of the Company's Common Stock
or member of the immediate family of any of the foregoing persons had (or will
have) a direct or indirect material interest, except for payments set forth
under "Executive Compensation" above.
11
<PAGE>
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the Company's 1999
Annual Meeting of Stockholders must be received by the Company at its
principal executive offices no later than January 2, 1999 in order to be
included in the Company's Proxy Statement and form of proxy relating to that
meeting.
COMPLIANCE UNDER SECTION 16(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16 of the Exchange Act requires the Company's directors and
officers, and persons who own more than 10% of a registered class of the
Company's equity securities, to file initial reports of ownership and reports
of changes in ownership with the SEC. Such persons are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file. Based solely on its review of the copies of such forms furnished to the
Company and written representations from the executive officers and directors
of the Company, the Company believes that all Section 16(a) filing
requirements were met during 1997.
OTHER BUSINESS
The Board does not presently intend to bring any other business before the
Meeting, and, so far as is known to the Board, no matters are to be brought
before the Meeting except as specified in the notice of the Meeting. As to any
business that may properly come before the Meeting, however, it is intended
that proxies, in the form enclosed, will be voted in respect thereof in
accordance with the judgment of the persons voting such proxies.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN
AND PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID
ENVELOPE SO THAT YOUR SHARES WILL BE REPRESENTED AT THE MEETING.
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