<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
SILVERSTREAM SOFTWARE, INC.
(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> 2
SILVERSTREAM SOFTWARE, INC.
NOTICE OF 2000 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 2, 2000
The Annual Meeting of Stockholders of SilverStream Software, Inc. will be
held on Tuesday, May 2, 2000, at 10:00 a.m., local time, at the offices of Hale
and Dorr LLP, 60 State Street, 26th Floor, Boston, Massachusetts 02109, to
consider and act upon the following matters:
1. To elect two directors of SilverStream.
2. To approve (a) the continuance of SilverStream's Amended and Restated
1997 Stock Incentive Plan; (b) an amendment to the 1997 Stock Incentive
Plan increasing from 3,500,000 to 6,000,000 the number of shares of
common stock reserved for issuance under the 1997 Stock Incentive Plan;
and (c) other amendments as more fully described in the accompanying
proxy statement.
3. To ratify the selection by SilverStream of Ernst & Young LLP as the
independent auditors of SilverStream for the fiscal year ending
December 31, 2000.
4. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The Board of Directors has no knowledge of any other business to be
transacted at the meeting or at any adjournments thereof.
Stockholders of record at the close of business on March 27, 2000 are
entitled to notice of, and to vote at, the annual meeting and at any
adjournments thereof. SilverStream's stock record books will remain open for the
purchase and sale of SilverStream's common stock. The list of SilverStream's
stockholders entitled to vote at the meeting will be available for examination
by any stockholder, for any purpose germane to the meeting, during ordinary
business hours for ten days prior to the meeting at SilverStream's principal
executive offices, One Burlington Woods, Suite 200, Burlington, Massachusetts
01803.
All stockholders are cordially invited to attend the meeting.
By Order of the Board of Directors,
DAVID A. LITWACK
President and Chief Executive Officer
Burlington, Massachusetts
April 3, 2000
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY CARD AND PROMPTLY MAIL IT IN THE ENCLOSED ENVELOPE IN
ORDER TO ASSURE REPRESENTATION OF YOUR SHARES AT THE MEETING. NO POSTAGE NEED BE
AFFIXED IF THE PROXY CARD IS MAILED IN THE UNITED STATES.
<PAGE> 3
SILVERSTREAM SOFTWARE, INC.
ONE BURLINGTON WOODS, SUITE 200
BURLINGTON, MASSACHUSETTS 01803
PROXY STATEMENT FOR THE 2000 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 2, 2000
THIS PROXY STATEMENT IS FURNISHED IN CONNECTION WITH THE SOLICITATION OF
PROXIES BY THE BOARD OF DIRECTORS OF SILVERSTREAM SOFTWARE, INC. FOR USE AT THE
2000 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 2, 2000 AND AT ANY
ADJOURNMENT OR ADJOURNMENTS OF THAT MEETING.
All proxies will be voted in accordance with the instructions contained
therein, and if no choice is specified, the proxies will be voted in favor of
the matters set forth in the accompanying Notice of Meeting. Any proxy may be
revoked by a stockholder at any time before it is exercised by delivery of
written revocation to the Secretary of SilverStream. Attendance at the meeting
will not itself be deemed to revoke a proxy unless the stockholder affirmatively
revokes the proxy.
SILVERSTREAM'S ANNUAL REPORT FOR THE YEAR ENDED DECEMBER 31, 1999 IS BEING
MAILED TO STOCKHOLDERS WITH THE MAILING OF THIS NOTICE AND PROXY STATEMENT ON OR
ABOUT APRIL 3, 2000.
A COPY OF SILVERSTREAM'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1999, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, EXCEPT
FOR EXHIBITS, WILL BE FURNISHED WITHOUT CHARGE TO ANY STOCKHOLDER UPON WRITTEN
REQUEST TO: SECRETARY, SILVERSTREAM SOFTWARE, INC., ONE BURLINGTON WOODS, SUITE
200, BURLINGTON, MASSACHUSETTS 01803. EXHIBITS WILL BE PROVIDED UPON WRITTEN
REQUEST AND PAYMENT OF AN APPROPRIATE PROCESSING FEE.
VOTING SECURITIES AND VOTES REQUIRED
On March 27, 2000, the record date for the determination of stockholders
entitled to notice of and to vote at the meeting, there were outstanding and
entitled to vote an aggregate of 19,619,214 shares of common stock of the
company, $.001 par value per share. Each share is entitled to one vote.
Under SilverStream's by-laws, the holders of a majority of the shares of
common stock issued, outstanding and entitled to vote on any matter shall
constitute a quorum with respect to that matter at the annual meeting. Shares of
common stock present in person or represented by proxy (including shares which
abstain or do not vote with respect to one or more of the matters presented for
stockholder approval) will be counted for purposes of determining whether a
quorum is present.
The affirmative vote of the holders of a plurality of the shares of common
stock voting on the matter is required for the election of directors. The
affirmative vote of the holders of a majority of the shares of common stock
voting on the matter is required for the approval of the continuance of and the
amendments to SilverStream's 1997 Stock Incentive Plan and the ratification of
the appointment of Ernst & Young LLP as SilverStream's independent auditors for
the fiscal year ending December 31, 2000.
Shares which abstain from voting as to a particular matter and shares held
in "street name" by brokers or nominees who indicate on their proxies that they
do not have discretionary authority to vote such shares as to a particular
matter will not be counted as votes in favor of such matter and will also not be
counted as votes cast or shares voting on such matter. Accordingly, abstentions
and "broker non-votes" will have no effect on the voting on a matter that
requires the affirmative vote of a certain percentage of the shares voting on a
matter.
<PAGE> 4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of March 16, 2000,
with respect to the beneficial ownership of SilverStream's common stock by: (i)
each person known by SilverStream to own beneficially more than 5% of the
outstanding shares of common stock; (ii) each director and nominee for director;
(iii) each executive officer named below in the Summary Compensation Table under
the heading "Executive Compensation;" and (iv) all directors and executive
officers of SilverStream as a group.
The number of shares of SilverStream's common stock beneficially owned by
each director or executive officer is determined under the rules of the
Securities and Exchange Commission, and the information is not necessarily
indicative of beneficial ownership for any other purpose. Under such rules,
beneficial ownership includes any shares as to which the individual has sole or
shared voting or investment power and also any shares which the individual has
the right to acquire within 60 days after March 16, 2000 through the exercise of
any stock option or other right. The inclusion herein of any shares deemed
beneficially owned does not constitute an admission of beneficial ownership of
those shares. Unless otherwise indicated, the address of each person owning more
than 5% of the outstanding shares of common stock is c/o SilverStream Software,
Inc., One Burlington Woods, Suite 200, Burlington, Massachusetts 01803.
<TABLE>
<CAPTION>
SHARES APPROXIMATE PERCENT
OF COMMON STOCK OF COMMON STOCK
NAME AND ADDRESS BENEFICIALLY OWNED(1) OWNED(%)
- ---------------- --------------------- -------------------
<S> <C> <C>
Matrix IV Management Co., L.P.(2)......................... 1,493,341 7.6%
1000 Winter Street, Suite 4500
Waltham, MA 02451
David R. Skok(3).......................................... 2,090,270 10.7
David A. Litwack(4)....................................... 2,079,849 10.6
Peter E. Brumme........................................... 519,056 2.6
John W. Pearce............................................ 321,283 1.6
Kim A. Sheffield.......................................... 322,319 1.6
Arnold Epstein............................................ 408,877 2.1
Timothy Barrows(2)........................................ 1,493,341 7.6
c/o Matrix IV Management Co., L.P.
1000 Winter Street, Suite 4500
Waltham, MA 02451
Richard A. D'Amore(5)..................................... 886,053 4.5
c/o North Bridge Venture Partners, L.P.
950 Winter Street, Suite 4600
Waltham, MA 02451
Paul J. Severino.......................................... 33,591 *
Craig A. Dynes(6)......................................... 74,483 *
Diane Gordon(7)........................................... 12,468 *
All directors and executive officers as a group (11 8,241,590 42.0
persons)(8).............................................
</TABLE>
2
<PAGE> 5
- ---------------
* Represents beneficial ownership of less than one percent of the common
stock.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to shares. Except as indicated by footnote,
and subject to community property laws where applicable, the persons named
in the table above have sole voting and investment power with respect to all
shares of common stock shown as beneficially owned by them.
(2) Consists of 1,418,674 shares held by Matrix Partners IV, L.P. and 74,667
shares held by Matrix IV Entrepreneurs Fund, L.P. Matrix IV Management Co.,
L.P. is the general partner of each of Matrix Partners IV, L.P. and Matrix
IV Entrepreneurs Fund, L.P. Mr. Barrows, a director of SilverStream, is a
general partner of Matrix IV Management Co., L.P. Mr. Barrows disclaims
beneficial ownership of the shares held by Matrix Partners IV, L.P. and
Matrix IV Entrepreneurs Fund, L.P. except to the extent of his pecuniary
interests therein arising from his general partnership interest in Matrix IV
Management Co., L.P.
(3) Includes 900,000 shares held by the Farrar Trust and 90,000 shares held by
the Concord Trust.
(4) Includes 1,010,214 shares held by the Litwack Irrevocable Trust.
(5) Consists of 886,053 shares held by North Bridge Venture Partners, L.P. Mr.
D'Amore, a director of SilverStream, is a general partner of North Bridge
Venture Management L.P., which is the general partner of North Bridge
Venture Partners, L.P. Mr. D'Amore disclaims beneficial ownership of the
shares held by North Bridge Venture Partners, L.P. except to the extent of
his pecuniary interests therein arising from his general partnership
interests in North Bridge Venture Management L.P.
(6) Includes 2,000 shares issuable upon the exercise of stock options
exercisable within 60 days of March 16, 2000.
(7) Consists of 12,000 shares issuable upon the exercise of stock options
exercisable within 60 days of March 16, 2000.
(8) Includes an aggregate of 14,000 shares of common stock of the company
issuable upon exercise of stock options held by all officers and directors
as a group which are exercisable within 60 days of March 16, 2000.
PROPOSAL 1 -- ELECTION OF DIRECTORS
SilverStream's Board of Directors currently consists of five persons,
divided into three classes serving staggered terms of three years. Currently
there are two directors in Class I (whose terms expire at this annual meeting),
two directors in Class II (whose terms expire at the annual meeting of
stockholders in 2001) and one director in Class III (whose term expires at the
annual meeting of stockholders in 2002). Two Class I directors are to be elected
at this annual meeting. Each of these Class I directors will hold office until
the annual meeting of stockholders in 2003 or until his successor has been duly
elected and qualified.
In the event that any nominee for Class I director becomes unavailable or
declines to serve as a director at the time of the annual meeting, the proxy
holders will vote the proxies in their discretion for any nominee who is
designated by the current Board of Directors to fill the vacancy. It is not
expected that any of the nominees will be unavailable to serve.
Set forth below are the name and age of each member of the Board of
Directors (including the nominees for election as Class I directors), and the
positions and offices held by him, his principal occupation and business
experience during the past five years, the names of other publicly held
companies of which he serves as a director and the year of the commencement of
his term as a director of SilverStream. Also set forth below
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<PAGE> 6
are the names of the other current executive officers of SilverStream, their
ages and their principal occupations and business experiences during the past
five years. Information with respect to the number of shares of common stock
beneficially owned by each director, directly or indirectly, as of March 16,
2000, appears above under the heading "Security Ownership of Certain Beneficial
Owners and Management."
NOMINEES FOR TERMS EXPIRING IN 2003 (CLASS I DIRECTORS)
David R. Skok, age 44, founded SilverStream and has served as its Chairman
of the Board of Directors since inception and its President and Chief Executive
Officer from May 1996 to November 1996. He also served as Treasurer from May
1996 to June 1999. Before founding SilverStream, Mr. Skok founded Watermark
Software, a document management and imaging company, and served as its President
and Chief Executive Officer from January 1993 until June 1996. Mr. Skok also
currently serves as a director of Xionics.
Timothy Barrows, age 43, has served as a director of SilverStream since
July 1996. Mr. Barrows has been a general partner of Matrix Partners since
August 1984. Mr. Barrows is also a director of Sycamore Networks, Inc. and
OnDisplay, Inc.
DIRECTORS WHOSE TERMS EXPIRE IN 2001 (CLASS II DIRECTORS)
David A. Litwack, age 53, has served as SilverStream's President and Chief
Executive Officer since May 1997 and as a member of its Board of Directors since
November 1996. Before joining SilverStream, Mr. Litwack served as Executive Vice
President of Sybase Inc., an enterprise software company, from February 1995 to
May 1997 and as President of Powersoft Corporation, a client server development
tools company, from June 1991 to its acquisition by Sybase in February 1995. In
addition, Mr. Litwack is a director of Object Design, Inc., a data management
company.
Richard A. D'Amore, age 46, has served as a director of SilverStream since
July 1996. Mr. D'Amore has been a general partner of North Bridge Venture
Partners since 1994. He is also a director of Solectron Corporation, Veeco
Instruments Inc., Xionics and SmarterKids.com.
DIRECTOR WHOSE TERM EXPIRES IN 2002 (CLASS III DIRECTOR)
Paul J. Severino, age 53, has served as a director of SilverStream since
May 1999. Mr. Severino has served as the Chairman of NetCentric Corporation, a
provider of Internet protocol telephony applications, since August 1997, and
Chief Executive Officer from February 1998 to April 1999. Prior to that, he
served as NetCentric's Acting Chief Executive Officer from August 1997 to
February 1998. He is a founder of Wellfleet Communications, Inc., a supplier of
internetworking communication products, where he served as President and Chief
Executive Officer from October 1986 to October 1994. From October 1994 to
October 1996, he served as Chairman of BayNetworks after its formation from the
merger of Wellfleet and Synoptics. Mr. Severino is also a director of Media 100,
Inc., Interspeed, Inc. and MCK Communications.
OTHER EXECUTIVE OFFICERS OF SILVERSTREAM
Peter E. Brumme, age 50, has served as SilverStream's Vice President,
Marketing and Business Development since October 1999 and was Executive Vice
President, Sales and Marketing from January 1998 to September 1999. From January
1997 to December 1998, Mr. Brumme served as Chief Operating Officer.
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<PAGE> 7
Prior to joining SilverStream, Mr. Brumme served as Chief Operating Officer of
Watermark from July 1995 to December 1996 and as Senior Vice President, Sales
and Marketing from April 1993 to June 1995.
Craig A. Dynes, age 45, has served as SilverStream's Vice President and
Chief Financial Officer since July 1997 and as Treasurer and Secretary since
June 1999. Prior to joining SilverStream, Mr. Dynes served as Vice President of
Finance, Products Group, of Sybase from October 1996 to June 1997. Mr. Dynes
served as Vice President of Finance and Operations and Chief Financial Officer
of Powersoft from August 1995 to October 1996, and as Chief Financial Officer of
Watcom, a compiler software company, from 1992 until its acquisition by
Powersoft in July 1995.
Arnold S. Epstein, age 50, has served as SilverStream's Vice President and
Chief Technology Officer since July 1996. Prior to joining SilverStream, Mr.
Epstein served as Chief Technical Officer of Watermark from March 1993 to June
1996.
Diane Gordon, age 41, has served as SilverStream's Vice President, Customer
Services since January 1999. Prior to joining SilverStream, Ms. Gordon served as
Vice President of Operations of Gartner Learning, an independent research
company, from March 1997 to September 1998. From March 1991 to February 1997,
Ms. Gordon served as Director of Professional Services of Progress Software, a
software company.
John W. Pearce, age 46, has served as SilverStream's Vice President,
Worldwide Sales since January 2000. He also served as Vice President,
International Operations from January 1997 to January 2000 and Chief Financial
Officer from July 1996 to July 1997. Prior to joining SilverStream, Mr. Pearce
served as Vice President, International Sales and Chief Financial Officer of
Watermark from January 1993 to June 1996.
Kim A. Sheffield, age 44, has served as SilverStream's Vice President,
Research and Development since July 1996. Prior to joining SilverStream, Mr.
Sheffield served as Vice President of Research & Development, Powersoft Division
of Sybase from February 1995 to June 1996. From 1988 to February 1995, Mr.
Sheffield served in various capacities with Powersoft including as Vice
President of Engineering from July 1994 to February 1995.
BOARD AND COMMITTEE MEETINGS
SilverStream's Board of Directors held 12 meetings during the fiscal year
ended December 31, 1999. Each director attended at least 75% of the total number
of such meetings.
The Board of Directors has an Audit Committee and a Compensation Committee.
From time to time, during 1999, the Board created various ad hoc committees for
special purposes.
The Audit Committee consists of three outside directors, Messrs. Barrows,
D'Amore and Severino. The Audit Committee reviews the professional services
provided by SilverStream's independent auditors, the independence of such
auditors from SilverStream's management and SilverStream's annual financial
statements and system of internal accounting controls. The Audit Committee also
reviews such other matters with respect to SilverStream's accounting, auditing
and financial reporting practices and procedures as it may find appropriate or
may be brought to its attention. The Audit Committee held three meetings in the
last fiscal year and each member of the Audit Committee attended at least 75% of
the total of such meetings.
The Compensation Committee consists of three outside directors, Messrs.
Barrows, D'Amore and Severino. The Compensation Committee reviews executive
salaries, administers SilverStream's bonus, incentive compensation and stock
plans, and approves the salaries and other benefits of the executive officers of
SilverStream. In addition, the Compensation Committee consults with
SilverStream's management regarding SilverStream's benefit plans and
compensation policies and practices. The Compensation Commit-
5
<PAGE> 8
tee held two meetings during the last fiscal year and each member of the
Compensation Committee attended at least 75% of the total of such meetings.
COMPENSATION FOR DIRECTORS
SilverStream reimburses directors for reasonable out-of-pocket expenses
incurred in attending meetings of the Board of Directors. SilverStream may, in
its discretion, grant stock options and other equity awards to its non-employee
directors from time to time pursuant to the 1997 Stock Incentive Plan. On April
30, 1999, SilverStream granted to Paul J. Severino an option to purchase 25,000
shares of common stock at a per share exercise price of $8.00 under the 1997
Stock Incentive Plan in connection with his joining the Board of Directors. Mr.
Severino's option was fully vested upon grant.
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table sets forth, for the year
ended December 31, 1999, certain information with respect to the annual and
long-term compensation of each of SilverStream's Chairman of the Board of
Directors, SilverStream's President and Chief Executive Officer and
SilverStream's four other most highly compensated executive officers whose total
annual salary and bonus for the year ended December 31, 1999 exceeded $100,000
(collectively, the "named executive officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
FISCAL --------------------- AWARDS OF OPTIONS
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) (# OF SHARES)
- --------------------------- ------ --------- -------- -----------------
<S> <C> <C> <C> <C>
David R. Skok.................................. 1999 $120,000 $ -- --
Chairman of the Board of Directors 1998 120,000 -- --
David A. Litwack............................... 1999 120,000 -- --
President and Chief Executive Officer 1998 120,000 -- --
John W. Pearce................................. 1999 100,000 78,234 --
Vice President, Worldwide Sales 1998 125,000 20,000 --
Craig A. Dynes................................. 1999 124,583 55,000 10,000
Vice President, Chief Financial Officer, 1998 119,583 20,000 --
Treasurer and Secretary
Peter E. Brumme................................ 1999 150,000 25,000 --
Vice President, Marketing and Business 1998 125,000 20,000 --
Development
Diane Gordon................................... 1999 119,616 50,000 55,000
Vice President, Customer Service 1998 -- -- --
(joined SilverStream in January 1999)
</TABLE>
The Board of Directors awarded the cash bonuses to the members of senior
management as identified above in recognition of individual performance and the
achievement of SilverStream's goals in 1999.
6
<PAGE> 9
Option Grant Table. The following table sets forth each grant of stock
options during the fiscal year ended December 31, 1999 by SilverStream to each
of the named executive officers. No appreciation rights were granted during such
fiscal year.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
PERCENT OF ANNUAL RATES OF
NUMBER OF TOTAL STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(3)
OPTIONS EMPLOYEES PRICE(2) EXPIRATION ---------------------
NAME GRANTED (#) IN 1999(1) ($/SH) DATE 5%($) 10%($)
- ---- ----------- ------------ -------------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
David R. Skok.................. -- --% $ -- -- $ -- $ --
David A. Litwack............... -- -- -- -- -- --
John W. Pearce................. -- -- -- -- -- --
Craig A. Dynes................. 10,000 0.9 8.00 4/30/09 50,312 127,499
Peter E. Brumme................ -- -- -- -- -- --
Diane Gordon................... 40,000 3.8 4.00 1/04/09 100,623 254,999
5,000 0.5 8.00 4/30/09 25,156 63,750
10,000 0.9 14.00 8/04/09 88,045 223,124
</TABLE>
- ---------------
(1) Based on options to purchase an aggregate of 1,070,300 shares granted to
employees under the 1997 Stock Incentive Plan during the 12 months ended
December 31, 1999.
(2) The exercise price was equal to the fair market value of SilverStream's
common stock as valued by the Board of Directors on the date of grant.
(3) The potential realizable value is calculated based on the term of the option
at its time of grant. Stock price appreciation of 5% and 10% is assumed
pursuant to rules promulgated by the Securities and Exchange Commission and
does not represent SilverStream's prediction of its stock price performance.
The potential realizable values at 5% and 10% appreciation are calculated by
assuming that the exercise price on the date of grant appreciates at the
indicated rate for the entire term of the option and that the option is
exercised at the exercise price and sold on the last day of its term at the
appreciated price.
7
<PAGE> 10
Year-End Option Table. The following table sets forth for each of the
named executive officers options exercised and the number and value of
securities underlying unexercised options that are held by the named executive
officers as of December 31, 1999. None of the named executive officers exercised
any stock options during the year ended December 31, 1999.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-
SHARES OPTIONS AT THE-MONEY OPTIONS AT
ACQUIRED ON VALUE DECEMBER 31, 1999 DECEMBER 31, 1999(1)
NAME EXERCISE (#) REALIZED ($) EXERCISABLE/UNEXERCISABLE(#) EXERCISABLE/UNEXERCISABLE($)
- ---- ------------ ------------ ---------------------------- ----------------------------
<S> <C> <C> <C> <C>
David R. Skok........... -- -- 0/0 $0/0
David A. Litwack........ -- -- 0/0 0/0
John W. Pearce.......... -- -- 0/0 0/0
Craig A. Dynes.......... -- -- 0/10,000 0/1,110,000
Peter E. Brumme......... -- -- 0/0 0/0
Diane Gordon............ -- -- 0/55,000 0/6,205,000
</TABLE>
- ---------------
(1) On December 31, 1999, the last sale price reported on the Nasdaq National
Market for SilverStream's common stock was $119.00 per share.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities and Exchange Act of 1934, as amended,
requires SilverStream's directors, executive officers and holders of more than
10% of SilverStream's common stock to file with the Securities and Exchange
Commission initial reports of ownership and reports of changes in ownership of
the common stock of SilverStream. In April 2000, to correct his initial report
of ownership of SilverStream's common stock originally filed on Form 3, Mr.
Severino filed an amended Form 3 to reflect that he had exercised his option to
purchase SilverStream common stock. Except as described in the preceding
sentence, SilverStream believes that during the year ended December 31, 1999 all
officers, directors and holders of more than 10% of SilverStream's common stock
complied with all Section 16(a) filing requirements.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors has furnished the
following report on executive compensation.
SilverStream's executive compensation program is administered by the
Compensation Committee. The Compensation Committee, which is comprised of three
outside directors, establishes and administers SilverStream's executive
compensation policies and plans and administers SilverStream's stock option and
other equity-related employee compensation plans. The Compensation Committee
considers internal and external information in determining certain officers'
compensation, including outside survey data.
Compensation Philosophy
SilverStream's compensation policies for executive officers are based on
the belief that the interests of executives should be closely aligned with those
of SilverStream's stockholders. The compensation policies are designed to
achieve the following objectives:
- Offer compensation opportunities that attract highly qualified
executives, reward outstanding initiative and achievement, and retain the
leadership and skills necessary to build long-term stockholder value.
8
<PAGE> 11
- Maintain a significant portion of executives' total compensation at risk,
tied to both the annual and long-term financial performance of
SilverStream and the creation of stockholder value.
- Further SilverStream's short and long-term strategic goals and values by
aligning compensation with business objectives and individual
performance.
Compensation Program
SilverStream's executive compensation program has three major integrated
components, base salary, annual incentive awards and long term incentives.
Base Salary. Base salary levels for executive officers are determined
annually by reviewing the pay practices of software companies of similar size
and market capitalization, the skills, performance level, and contribution to
the business of individual executives, and the needs of SilverStream. Overall,
SilverStream believes that base salaries for its executive officers are
competitive with median base salary levels for similar positions in comparable
software companies.
Annual Incentive Awards. SilverStream's executive officers are eligible to
receive annual cash bonus awards designed to motivate executives to attain
short-term and longer-term corporate and individual management goals. The
Compensation Committee establishes the annual incentive opportunity for each
executive officer in relation to his or her base salary. Awards under this
program are based on the attainment of specific company performance measures and
by the achievement of specified individual objectives and the degree to which
each executive officer contributes to the overall success of SilverStream and
the management team. For 1999, the formula for these bonuses was based on sales
growth, the successful execution of strategies related to mergers and
acquisitions and other individual objectives, thus establishing a direct link
between executive pay and SilverStream's growth. SilverStream achieved the
objectives set by the Compensation Committee in 1999.
Long-Term Incentives. The Compensation Committee believes that stock
options are an excellent vehicle for compensating its officers and employees.
SilverStream provides long-term incentives through its 1996 Founders Stock
Incentive Plan and 1997 Stock Incentive Plan, the purposes of which are to
create a direct link between executive compensation and increases in stockholder
value. Stock options are granted at fair market value and vest in installments,
generally over four or five years. When determining option awards for an
executive officer, the Compensation Committee considers the executive's current
contribution to SilverStream's performance, the anticipated contribution to
meeting SilverStream's long-term strategic performance goals, and industry
practices and norms. Long-term incentives granted in prior years and existing
levels of stock ownership are also taken into consideration. Because the receipt
of value by an executive officer under a stock option is dependent upon an
increase in the price of SilverStream's common stock, this portion of the
executive's compensation is directly aligned with an increase in stockholder
value.
Chairman of the Board of Directors
Mr. Skok's base salary, annual incentive award and long-term incentive
compensation are determined by the Compensation Committee based upon the same
factors as those employed by the Compensation Committee for executive officers
generally. Mr. Skok's current annual base salary is $120,000 subject to annual
review and increase by the Board of Directors of SilverStream. As of December
31, 1999 Mr. Skok beneficially owned 2,322,055 shares of SilverStream common
stock.
President and Chief Executive Officer
Mr. Litwack's base salary, annual incentive award and long-term incentive
compensation are determined by the Compensation Committee based upon the same
factors as those employed by the Compensation Committee for executive officers
generally. Mr. Litwack's current annual base salary is $120,000 subject to
9
<PAGE> 12
annual review and increase by the Board of Directors of SilverStream. As of
December 31, 1999 Mr. Litwack beneficially owned 2,312,055 shares of
SilverStream common stock.
Section 162(m) Limitation
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), disallows a deduction to public companies for compensation over
$1,000,000 paid to the company's chief executive officer and four most highly
compensated executive officers. Qualifying performance-based compensation will
not be subject to the deduction limit if certain requirements are met. Having
considered the requirements of Section 162(m) of the Code, the Compensation
Committee believes that grants made pursuant to SilverStream's 1996 Founders
Stock Incentive Plan and 1997 Stock Incentive Plan meet such requirements and
are, therefore, exempt from the limitations on deductibility. Historically, the
compensation of each executive officer has been well below the $1,000,000 limit.
The Compensation Committee's present intention is to structure its stock option
grants and certain other equity-based awards in a manner that complies with
Section 162(m) of the Code unless the Compensation Committee believes that such
compliance would not be in the best interest of SilverStream or its
stockholders.
COMPENSATION COMMITTEE
Richard A. D'Amore
Timothy Barrows
Paul J. Severino
10
<PAGE> 13
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. D'Amore, Barrows and Severino served as members of the Compensation
Committee during the year ended December 31, 1999. Messrs. D'Amore, Barrows and
Severino were not at any time during 1999, or formerly, officers or employees of
SilverStream or any of its subsidiaries.
No executive officer of SilverStream has served as a director or member of
the Compensation Committee (or other committee serving an equivalent function)
of any other entity, one of whose executive officers served as a director of or
member of the Compensation Committee of SilverStream.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Between March 1, 1999 and May 27, 1999, SilverStream issued and sold shares
of Series D preferred stock to the following persons and entities who are
executive officers, directors or principal stockholders of SilverStream at a
purchase price of $9.50 per share. The number of shares of Series D preferred
stock issued to each such entity is set forth below. All outstanding shares of
preferred stock were converted to common stock on the close of SilverStream's
initial public offering on August 20, 1999 on a one-for-one basis.
<TABLE>
<CAPTION>
SERIES D
PREFERRED
INVESTOR STOCK
- -------- ---------
<S> <C>
David R. Skok............................................... 52,632
David A. Litwack............................................ 52,632
Matrix IV Management Co., L.P.(1)........................... 134,210
North Bridge Venture Partners, L.P.(2)...................... 105,263
</TABLE>
- ---------------
(1) Composed of Matrix Partners IV, L.P. and Matrix IV Entrepreneurs Fund, L.P.
Matrix IV Management Co., L.P. is the general partner of each of Matrix
Partners IV, L.P. and Matrix IV Entrepreneurs Fund, L.P. Timothy Barrows, a
director of SilverStream, is a general partner of Matrix IV Management Co.,
L.P.
(2) Richard A. D'Amore, a director of SilverStream, is a general partner of
North Bridge Venture Management L.P., which is the general partner of North
Bridge Venture Partners, L.P.
SilverStream believes the sales of Series D preferred stock disclosed above
were made on terms no less favorable to SilverStream than could have been
obtained from unaffiliated third parties. SilverStream agreed to the material
terms of the sales of the Series D preferred stock issuances set forth above
after arms'-length negotiations with previously unaffiliated persons.
11
<PAGE> 14
COMPARATIVE STOCK PERFORMANCE
The graph set forth below compares the cumulative total stockholder return
on SilverStream's common stock (as measured by dividing (i) the sum of (A) the
cumulative amount of dividends for the period indicated, assuming dividend
reinvestment and (B) the difference between SilverStream's share price at the
end of the period and on August 17, 1999, the date of SilverStream's initial
public offering, by (ii) the share price at August 17, 1999) for the period from
August 17, 1999 through December 31, 1999 with the cumulative return over such
period of (i) IBM, Microsoft, Sun Microsystems, Oracle, Allaire, BEA Systems and
Bluestone Software (the "Peer Group Stock Index") and (ii) The NASDAQ Stock
Market (U.S.) Index. The graph assumes the investment of $100 in SilverStream's
common stock (at the initial public offering price) and in each of such indices
(and the reinvestment of all dividends). The performance shown is not
necessarily indicative of future performance.
<TABLE>
<CAPTION>
SILVERSTREAM SOFTWARE, INC. PEER GROUP INDEX NASDAQ MARKET INDEX
--------------------------- ---------------- -------------------
<S> <C> <C> <C>
8/17/03 100.00 100.00 100.00
8/31/99 95.63 104.65 100.00
9/30/99 98.81 105.63 100.14
10/29/99 165.48 103.45 107.89
11/30/99 263.29 110.21 120.67
12/31/99 377.78 139.38 147.53
</TABLE>
<TABLE>
<CAPTION>
8/17/99 8/31/99 9/30/99 10/29/99 11/30/99 12/31/99
<S> <C> <C> <C> <C> <C> <C>
SilverStream Software, Inc........... 100.00 95.63 98.81 165.48 263.29 377.78
Peer Group Index..................... 100.00 104.65 105.63 103.45 110.21 139.38
NASDAQ Market Index.................. 100.00 100.00 100.14 107.89 120.67 147.53
</TABLE>
PROPOSAL 2 -- APPROVAL OF CONTINUANCE OF AND AMENDMENTS TO 1997 STOCK INCENTIVE
PLAN
In the opinion of the Board of Directors, the future success of
SilverStream depends, in large part, on its ability to maintain a competitive
position in attracting, retaining and motivating key employees. Under
SilverStream's 1997 Stock Incentive Plan, SilverStream is currently authorized
to grant options to purchase up to an aggregate of 3,500,000 shares of common
stock to its officers, directors, employees, consultants and advisors. As of
March 1, 2000, there were 139,450 shares available for future grant under the
1997 Stock Incentive Plan. Accordingly, the Board of Directors adopted, subject
to stockholder approval, the following amendments to the 1997 Stock Incentive
Plan: (i) increasing the number of shares of common stock authorized for
issuance under the 1997 Stock Incentive Plan from 3,500,000 shares to 6,000,000
shares,
12
<PAGE> 15
(ii) providing that the exercise price of options granted shall not be less than
50% of the fair market value of the common stock, as determined by the Board at
the time the option is granted, and (iii) providing that no option will be
granted for a term in excess of ten years. The Board of Directors of
SilverStream believe that the amendments to the 1997 Stock Incentive Plan are in
the best interests of SilverStream and its stockholders and recommends that the
stockholders vote FOR this proposal.
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), generally disallows a deduction for compensation in excess of
$1,000,000 paid by a public company to its chief executive officer and its four
other most highly compensated executive officers. Certain performance-based
compensation is excluded from this limitation. In particular, income recognized
upon the exercise of stock options generally is not subject to this limitation
if the options or awards were issued under a plan approved by stockholders that
provides for, among other things, a limit to the number of shares that may be
issued under the plan to any individual. In order for future options to be
granted under the 1997 Stock Incentive Plan, as amended, to comply with Section
162(m) of the Code, the amendments to and the continuance of the 1997 Stock
Incentive Plan, as amended, must be approved by the stockholders. If the
stockholders do not vote to approve the amendments and to continue the 1997
Stock Incentive Plan, SilverStream will not grant any further options or make
any further awards under the 1997 Stock Incentive Plan.
The principal provisions of the 1997 Stock Incentive Plan are summarized
below. The summary is qualified in its entirety by reference to the 1997 Stock
Incentive Plan, a copy of which is attached hereto as Appendix A.
DESCRIPTION OF AWARDS
The 1997 Stock Incentive Plan provides for the grant of incentive stock
options intended to qualify under Section 422 of the Code, nonstatutory stock
options, restricted stock awards and other stock-based awards, including the
grant of shares based upon certain conditions, the grant of securities
convertible into common stock and the grant of stock appreciation rights
(collectively "Awards").
Incentive Stock Options and Nonstatutory Stock Options. Optionees receive
the right to purchase a specified number of shares of common stock at a
specified option price and subject to such other terms and conditions as are
specified in connection with the option grant. Options may be granted at an
exercise price which may be less than, equal to or greater than the fair market
value of the common stock on the date of grant. Under present law, however,
incentive stock options and options intended to qualify as performance-based
compensation under Section 162(m) of the Code may not be granted at an exercise
price less than the fair market value of the common stock on the date of grant
(or less than 110% of the fair market value in the case of incentive stock
options granted to optionees holding more than 10% of the voting power of the
company). Options may not be granted for a term in excess of ten years. The 1997
Stock Incentive Plan permits the Board to determine the manner of payment of the
exercise price of options, including through payment by cash, check or in
connection with a "cashless exercise" through a broker, by surrender to
SilverStream of shares of common stock, by delivery to SilverStream of a
promissory note, or by any other lawful means.
Restricted Stock Awards. Restricted stock awards entitle recipients to
acquire shares of common stock, subject to the right of SilverStream to
repurchase all or part of such shares from the recipient in the event that the
conditions specified in the applicable Award are not satisfied prior to the end
of the applicable restriction period established for such Award.
Other Stock-Based Awards. Under the 1997 Stock Incentive Plan, the Board
has the right to grant other Awards based upon the common stock having such
terms and conditions as the Board may determine,
13
<PAGE> 16
including the grant of shares based upon certain conditions, the grant of
securities convertible into common stock and the grant of stock appreciation
rights.
ELIGIBILITY TO RECEIVE AWARDS
Officers, directors, employees, consultants and advisors of SilverStream
and any future subsidiaries are eligible to be granted Awards under the 1997
Stock Incentive Plan. Under present law, however, incentive stock options may
only be granted to employees. The maximum number of shares with respect to which
an Award may be granted to any participant under the 1997 Stock Incentive Plan
may not exceed 250,000 shares per calendar year.
As of March 1, 2000, approximately 374 people were eligible to receive
Awards under the 1997 Stock Incentive Plan, including SilverStream's eight
executive officers and three non-employee directors. The granting of Awards
under the 1997 Stock Incentive Plan is discretionary, and SilverStream cannot
now determine the number or type of Awards to be granted in the future to any
particular person or group.
ADMINISTRATION
The 1997 Stock Incentive Plan is administered by the Board of Directors.
The Board has the authority to adopt, amend and repeal the administrative rules,
guidelines and practices relating to the 1997 Stock Incentive Plan and to
interpret the provisions of the 1997 Stock Incentive Plan. The Board has
authorized the Compensation Committee to administer certain aspects of the 1997
Stock Incentive Plan, including the granting of options to executive officers.
Subject to any applicable limitations contained in the 1997 Stock Incentive
Plan, the Board of Directors, the Compensation Committee, or any other committee
to whom the Board delegates authority, as the case may be, selects the
recipients of Awards and determines (i) the number of shares of common stock
covered by options and the dates upon which such options become exercisable,
(ii) the exercise price of options, (iii) the duration of options, and (iv) the
number of shares of common stock subject to any restricted stock or other
stock-based Awards and the terms and conditions of such Awards, including
conditions for repurchase, issue price and repurchase price.
In the event of a merger or other acquisition event, the Board of Directors
is authorized to provide for outstanding options or other stock-based Awards to
be assumed or substituted for, by the acquiring or succeeding corporation. If
the acquiring or succeeding corporation does not agree to assume, or substitute
for, such options, then the Board of Directors shall provide (i) that all
unexercised options will become exercisable in full prior to the acquisition
event and will terminate immediately prior to the consummation of such
acquisition event or (ii) for cash payment in exchange for such options.
AMENDMENT OR TERMINATION
No Award may be made under the 1997 Stock Incentive Plan after June 9,
2009, but Awards previously granted may extend beyond that date. The Board of
Directors may at any time amend, suspend or terminate the 1997 Stock Incentive
Plan, except that after the date of such amendment no Award intended to comply
with Section 162(m) of the Code shall become exercisable, realizable or vested
unless and until such amendment shall have been approved by SilverStream's
stockholders.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the United States federal income tax
consequences that generally will arise with respect to Awards granted under the
1997 Stock Incentive Plan and with respect to the sale of common stock acquired
under the 1997 Stock Incentive Plan.
14
<PAGE> 17
Incentive Stock Options. In general, a participant will not recognize
taxable income upon the grant or exercise of an incentive stock option. Instead,
a participant will recognize taxable income with respect to an incentive stock
option only upon the sale of common stock acquired through the exercise of the
option ("ISO Stock"). The exercise of an incentive stock option, however, may
subject the participant to the alternative minimum tax.
Generally, the tax consequences of selling ISO Stock will vary with the
length of time that the participant has owned the ISO Stock at the time it is
sold. If the participant sells ISO Stock after having owned it for at least two
years from the date the option was granted (the "Grant Date") and one year from
the date the option was exercised (the "Exercise Date"), then the participant
will recognize long-term capital gain in an amount equal to the excess of the
sale price of the ISO Stock over the exercise price.
If the participant sells ISO Stock for more than the exercise price prior
to having owned it for at least two years from the Grant Date and one year from
the Exercise Date (a "Disqualifying Disposition"), then all or a portion of the
gain recognized by the participant will be ordinary compensation income and the
remaining gain, if any, will be a capital gain. This capital gain will be a
long-term capital gain if the participant has held the ISO Stock for more than
one year prior to the date of sale.
If a participant sells ISO Stock for less than the exercise price, then the
participant will recognize capital loss in an amount equal to the excess of the
exercise price over the sale price of the ISO Stock. This capital loss will be a
long-term capital loss if the participant has held the ISO Stock for more than
one year prior to the date of sale.
Nonstatutory Stock Options. As in the case of an incentive stock option, a
participant will not recognize taxable income upon the grant of a nonstatutory
stock option. Unlike the case of an incentive stock option, however, a
participant who exercises a nonstatutory stock option generally will recognize
ordinary compensation income in an amount equal to the excess of the fair market
value of the common stock acquired through the exercise of the option ("NSO
Stock") on the Exercise Date over the exercise price.
With respect to any NSO Stock, a participant will have a tax basis equal to
the exercise price plus any income recognized upon the exercise of the option.
Upon selling NSO Stock, a participant generally will recognize capital gain or
loss in an amount equal to the difference between the sale price of the NSO
Stock and the participant's tax basis in the NSO Stock. This capital gain or
loss will be a long-term gain or loss if the participant has held the NSO Stock
for more than one year prior to the date of the sale.
Restricted Stock Awards. A participant will not recognize taxable income
upon the grant of a restricted stock award, unless the participant makes an
election under Section 83(b) of the Code (a "Section 83(b) Election"). If the
participant makes a Section 83(b) Election within 30 days of the date of the
grant, then the participant will recognize ordinary compensation income, for the
year in which the Award is granted, in an amount equal to the difference between
the fair market value of the common stock at the time the Award is granted and
the purchase price paid for the common stock. If a Section 83(b) Election is not
made, then the participant will recognize ordinary compensation income, at the
time that the forfeiture provisions or restrictions on transfer lapse, in an
amount equal to the difference between the fair market value of the common stock
at the time of such lapse and the original purchase price paid for the common
stock. The participant will have a tax basis in the common stock acquired equal
to the sum of the price paid and the amount of ordinary compensation income
recognized.
Upon the disposition of the common stock acquired pursuant to a restricted
stock award, the participant will recognize a capital gain or loss equal to the
difference between the sale price of the common stock and the participant's
basis in the common stock. This capital gain or loss will be a long-term capital
gain or loss if the shares are held for more than one year. For this purpose,
the holding period shall begin just after the date on
15
<PAGE> 18
which the forfeiture provisions or restrictions lapse if a Section 83(b)
Election is not made, or just after the Award is granted if a Section 83(b)
Election is made.
Other Stock-Based Awards. The tax consequences associated with any other
stock-based award granted under the 1997 Stock Incentive Plan will vary
depending on the specific terms of such Award. Among the relevant factors are
whether or not the Award has a readily ascertainable fair market value, whether
or not the Award is subject to forfeiture provisions or restrictions on
transfer, the nature of the property to be received by the participant under the
Award, and the participant's holding period and tax basis for the Award or
underlying common stock.
TAX CONSEQUENCES TO THE COMPANY
The grant of an Award under the 1997 Stock Incentive Plan will have no tax
consequences to SilverStream. Moreover, in general, neither the exercise of an
incentive stock option nor the sale of any common stock acquired under the 1997
Stock Incentive Plan will have any tax consequences to SilverStream.
SilverStream generally will be entitled to a business-expense deduction,
however, with respect to any ordinary compensation income recognized by a
participant under the 1997 Stock Incentive Plan, including in connection with a
restricted stock award or as a result of the exercise of a nonstatutory stock
option or a Disqualifying Disposition. Any such deduction will be subject to the
limitations of Section 162(m) of the Code.
PROPOSAL 3 -- RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young LLP, independent
auditors, to audit the financial statements of SilverStream for the year ending
December 31, 2000. Ernst & Young LLP has audited the financial statements of
SilverStream for each fiscal year since SilverStream's inception. The
affirmative vote of holders of a majority of the shares of common stock
represented at the meeting is necessary to appoint Ernst & Young LLP as
SilverStream's independent auditors and the Board of Directors recommends that
the stockholders vote FOR confirmation of such selection. In the event of a
negative vote, the Board of Directors will reconsider its selection.
Representatives of Ernst & Young LLP are expected to be present at the annual
meeting with the opportunity to make a statement if they desire to do so, and
are expected to be available to respond to appropriate questions.
OTHER MATTERS
The Board of Directors does not know of any other matters which may come
before the meeting. However, if any other matters are properly presented to the
meeting, it is the intention of the persons named in the accompanying proxy to
vote, or otherwise act, in accordance with their judgment on such matters.
All costs of solicitation of proxies will be borne by SilverStream. In
addition to solicitations by mail, SilverStream's directors, officers and
regular employees, without additional remuneration, may solicit proxies by
telephone, telegraph and personal interviews. Brokers, custodians and
fiduciaries will be requested to forward proxy soliciting material to the owners
of stock held in their names, and SilverStream will reimburse them for their
reasonable out-of-pocket expenses incurred in connection with the distribution
of proxy materials.
DEADLINE FOR SUBMISSION OF STOCKHOLDER PROPOSALS FOR THE 2001 ANNUAL MEETING
Proposals of stockholders intended to be presented at the 2001 Annual
Meeting pursuant to Rule 14a-8 promulgated under the Securities Exchange Act of
1934, as amended, must be received by SilverStream no
16
<PAGE> 19
later than December 4, 2000 in order that they may be included in the proxy
statement and form of proxy relating to that meeting.
In addition, SilverStream's by-laws require that SilverStream be given
advance notice of stockholder nominations for election to SilverStream's Board
of Directors and of other business which stockholders wish to present for action
at an annual meeting of stockholders (other than matters included in
SilverStream's proxy statement in accordance with Rule 14a-8). The required
notice must be made in writing and delivered to or mailed and received by the
Secretary at SilverStream's principal executive offices not less than 70 days
nor more than 90 days prior to the first anniversary of the preceding year's
annual meeting. However, if the date of the annual meeting is advanced more than
20 days or delayed more than 70 days from such anniversary date, the required
notice of stockholder nominations must be delivered or received not earlier than
the 90th day prior to the annual meeting and not later than the close of
business on the later of (i) the 70th day prior to the annual meeting and (ii)
the 10th day following the day notice of the date of the annual meeting was
mailed or publicly disclosed, whichever occurs first.
THE BOARD OF DIRECTORS ENCOURAGES STOCKHOLDERS TO ATTEND THE MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. A PROMPT RESPONSE WILL
GREATLY FACILITATE ARRANGEMENTS FOR THE MEETING AND YOUR COOPERATION WILL BE
APPRECIATED. STOCKHOLDERS WHO ATTEND THIS MEETING MAY VOTE THEIR STOCK
PERSONALLY AFTER DELIVERY OF WRITTEN REVOCATION OF THEIR PROXY TO THE SECRETARY
OF THE COMPANY.
By Order of the Board of Directors,
DAVID A. LITWACK
President and Chief Executive Officer
April 3, 2000
APPENDIX A -- AMENDED AND RESTATED 1997 STOCK INCENTIVE PLAN
17
<PAGE> 20
APPENDIX A
SILVERSTREAM SOFTWARE, INC.
AMENDED AND RESTATED 1997 STOCK INCENTIVE PLAN
1. PURPOSE
The purpose of this Amended Restated 1997 Stock Incentive Plan (the "Plan")
of SilverStream Software, Inc., a Delaware corporation (the "Company"), is to
advance the interests of the Company's stockholders by enhancing the Company's
ability to attract, retain and motivate persons who make (or are expected to
make) important contributions to the Company by providing such persons with
equity ownership opportunities and performance-based incentives and thereby
better aligning the interests of such persons with those of the Company's
stockholders. Except where the context otherwise requires, the term "Company"
shall include any of the Company's present or future subsidiary corporations as
defined in Section 424(f) of the Internal Revenue Code of 1986, as amended, and
any regulations promulgated thereunder (the "Code"), and any other business
venture (including, without limitation, joint venture or limited liability
company) in which the Company has a significant interest, as determined by the
Board of Directors of the Company (the "Board").
2. ELIGIBILITY
All of the Company's employees, officers, directors, consultants and
advisors (and any individuals who have accepted an offer for employment) are
eligible to be granted options, restricted stock awards, or other stock-based
awards (each, an "Award") under the Plan. Each person who has been granted an
Award under the Plan shall be deemed a "Participant."
3. ADMINISTRATION, DELEGATION
a. Administration by Board of Directors. The Plan will be administered by
the Board. The Board shall have authority to grant Awards and to adopt, amend
and repeal such administrative rules, guidelines and practices relating to the
Plan as it shall deem advisable. The Board may correct any defect, supply any
omission or reconcile any inconsistency in the Plan or any Award in the manner
and to the extent it shall deem expedient to carry the Plan into effect and it
shall be the sole and final judge of such expediency. All decisions by the Board
shall be made in the Board's sole discretion and shall be final and binding on
all persons having or claiming any interest in the Plan or in any Award. No
director or person acting pursuant to the authority delegated by the Board shall
be liable for any action or determination relating to or under the Plan made in
good faith.
b. Appointment of Committees. To the extent permitted by applicable law,
the Board may delegate any or all of its powers under the Plan to one or more
committees or subcommittees of the Board (a "Committee"). All references in the
Plan to the "Board" shall mean the Board or a Committee of the Board to the
extent that the Board's powers or authority under the Plan have been delegated
to such Committee.
4. STOCK AVAILABLE FOR AWARDS
a. Number of Shares. Subject to adjustment under Section 8, Awards may be
made under the Plan for up to 6,000,000 shares of Common Stock, $.001 par value
per share of the Company (the "Common Stock"). If any Award expires or is
terminated, surrendered or canceled without having been fully exercised or is
forfeited in whole or in part or results in any Common Stock not being issued,
the unused Common Stock
A-1
<PAGE> 21
covered by such Award shall again be available for the grant of Awards under the
Plan, subject, however, in the case of Incentive Stock Options (as hereinafter
defined), to any limitation required under the Code. Shares issued under the
Plan may consist in whole or in part of authorized but unissued shares or
treasury shares.
b. Per-Participant Limit. Subject to adjustment under Section 8, for
Awards granted after the Common Stock is registered under the Securities
Exchange Act of 1934 (the "Exchange Act"), the maximum number of shares of
Common Stock with respect to which an Award may be granted to any Participant
under the Plan shall be 250,000 per calendar year. The Per-Participant limit
described in this Section 4(b) shall be construed and applied consistently with
Section 162(m) of the Code ("Section 162(m)").
5. STOCK OPTIONS
a. General. The Board may grant options to purchase Common Stock (each,
an "Option") and determine the number of shares of Common Stock to be covered by
each Option, the exercise price of each Option and the conditions and
limitations applicable to the exercise of each Option, including conditions
relating to applicable federal or state securities laws, as it considers
necessary or advisable. An Option which is not intended to be an Incentive Stock
Option (as hereinafter defined) shall be designated a "Nonstatutory Stock
Option."
b. Incentive Stock Options. An Option that the Board intends to be an
"incentive stock option" as defined in Section 422 of the Code (an "Incentive
Stock Option") shall only be granted to employees of the Company and shall be
subject to and shall be construed consistently with the requirements of Section
422 of the Code. The Company shall have no liability to a Participant, or any
other party, if an Option (or any part thereof) which is intended to be an
Incentive Stock Option is not an Incentive Stock Option.
c. Exercise Price. The Board shall establish the exercise price at the
time each Option is granted and specify it in the applicable option certificate,
provided, however, that the exercise price shall not be less than 50% of the
fair market value of the Common Stock, as determined by the Board at the time
the Option is granted.
d. Duration of Options. Each Option shall be exercisable at such times
and subject to such terms and conditions as the Board may specify in the
applicable option certificate, provided, however, that no option will be granted
for a term in excess of 10 years.
e. Exercise of Option. Options may be exercised only by delivery to the
Company of a written notice of exercise (including electronic notice) or by any
other form of notice approved by the Board and by payment in full as specified
in Section 5(f) for the number of shares for which the Option is exercised.
f. Payment Upon Exercise. Common Stock purchased upon the exercise of an
Option granted under the Plan shall be paid for as follows:
(1) in cash or by check, payable to the order of the Company;
(2) except as the Board may, in its sole discretion, otherwise provide
in an option agreement or option certificate, by (i) delivery of an
irrevocable and unconditional undertaking by a creditworthy broker to
deliver promptly to the Company sufficient funds to pay the exercise price
or (ii) delivery by the Participant to the Company of a copy of irrevocable
and unconditional instructions to a creditworthy broker to deliver promptly
to the Company cash or a check sufficient to pay the exercise price;
(3) when the Common Stock is registered under the Exchange Act, by
delivery of shares of Common Stock owned by the Participant valued at their
fair market value as determined by (or in a
A-2
<PAGE> 22
manner approved by) the Board in good faith ("Fair Market Value"), provided
(i) such method of payment is then permitted under applicable law and (ii)
such Common Stock was owned by the Participant at least six months prior to
such delivery;
(4) to the extent permitted by the Board, in its sole discretion by
(i) delivery of a promissory note of the Participant to the Company on
terms determined by the Board, or (ii) payment of such other lawful
consideration as the Board may determine; or
(5) by any combination of the above permitted forms of payment.
g. Substitute Options. In connection with a merger or consolidation of an
entity with the Company or the acquisition by the Company of property or stock
of an entity, the Board may grant Options in substitution for any options or
other stock or stock-based awards granted by such entity or an affiliate
thereof. Substitute Options may be granted on such terms as the Board deems
appropriate in the circumstances, notwithstanding any limitations on Options
contained in other sections of this Section 5.
6. RESTRICTED STOCK
a. Grants. The Board may grant Awards entitling recipients to acquire
shares of Common Stock, subject to the right of the Company to repurchase all or
part of such shares at their issue price or other stated or formula price (or to
require forfeiture of such shares if issued at no cost) from the recipient in
the event that conditions specified by the Board in the applicable Award are not
satisfied prior to the end of the applicable restriction period or periods
established by the Board for such Award (each, a "Restricted Stock Award").
b. Terms and Conditions. The Board shall determine the terms and
conditions of any such Restricted Stock Award, including the conditions for
repurchase (or forfeiture) and the issue price, if any. Any stock certificates
issued in respect of a Restricted Stock Award shall be registered in the name of
the Participant and, unless otherwise determined by the Board, deposited by the
Participant, together with a stock power endorsed in blank, with the Company (or
its designee). At the expiration of the applicable restriction periods, the
Company (or such designee) shall deliver the certificates no longer subject to
such restrictions to the Participant or if the Participant has died, to the
beneficiary designated, in a manner determined by the Board, by a Participant to
receive amounts due or exercise rights of the Participant in the event of the
Participant's death (the "Designated Beneficiary"). In the absence of an
effective designation by a Participant, Designated Beneficiary shall mean the
Participant's estate.
7. OTHER STOCK-BASED AWARDS
The Board shall have the right to grant other Awards based upon the Common
Stock having such terms and conditions as the Board may determine, including the
grant of shares based upon certain conditions, the grant of securities
convertible into Common Stock and the grant of stock appreciation rights.
8. ADJUSTMENTS FOR CHANGES IN COMMON STOCK AND CERTAIN OTHER EVENTS
a. Changes in Capitalization. In the event of any stock split, reverse
stock split, stock dividend, recapitalization, combination of shares,
reclassification of shares, spin-off or other similar change in capitalization
or event, or any distribution to holders of Common Stock other than a normal
cash dividend, (i) the number and class of securities available under this Plan,
(ii) the per-Participant limit set forth in Section 4(b), (iii) the number and
class of securities and exercise price per share subject to each outstanding
Option, (iv) the repurchase price per share subject to each outstanding
Restricted Stock Award, and (v) the terms of each other outstanding Award shall
be appropriately adjusted by the Company (or substituted
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<PAGE> 23
Awards may be made, if applicable) to the extent the Board shall determine, in
good faith, that such an adjustment (or substitution) is necessary and
appropriate. If this Section 8(a) applies and Section 8(c) also applies to any
event, Section 8(c) shall be applicable to such event, and this Section 8(a)
shall not be applicable.
b. Liquidation or Dissolution. In the event of a proposed liquidation or
dissolution of the Company, the Board shall upon written notice to the
Participants provide that all then unexercised Options will (i) become
exercisable in full as of a specified time at least ten business days prior to
the effective date of such liquidation or dissolution and (ii) terminate
effective upon such liquidation or dissolution, except to the extent exercised
before such effective date. The Board may specify the effect of a liquidation or
dissolution on any Restricted Stock Award or other Award granted under the Plan
at the time of the grant of such Award.
c. Acquisition Events
(1) Definition. An "Acquisition Event" shall mean: (a) any merger or
consolidation of the Company with or into another entity as a result of which
the Common Stock is converted into or exchanged for the right to receive cash,
securities or other property or (b) any exchange of shares of the Company for
cash, securities or other property pursuant to a statutory share exchange
transaction.
(2) Consequences of an Acquisition Event on Options. Upon the occurrence
of an Acquisition Event, or the execution by the Company of any agreement with
respect to an Acquisition Event, the Board shall provide that all outstanding
Options shall be assumed, or equivalent options shall be substituted, by the
acquiring or succeeding corporation (or an affiliate thereof). For purposes
hereof, an Option shall be considered to be assumed if, following consummation
of the Acquisition Event, the Option confers the right to purchase, for each
share of Common Stock subject to the Option immediately prior to the
consummation of the Acquisition Event, the consideration (whether cash,
securities or other property) received as a result of the Acquisition Event by
holders of Common Stock for each share of Common Stock held immediately prior to
the consummation of the Acquisition Event (and if holders were offered a choice
of consideration, the type of consideration chosen by the holders of a majority
of the outstanding shares of Common Stock); provided, however, that if the
consideration received as a result of the Acquisition Event is not solely common
stock of the acquiring or succeeding corporation (or an affiliate thereof), the
Company may, with the consent of the acquiring or succeeding corporation,
provide for the consideration to be received upon the exercise of Options to
consist solely of common stock of the acquiring or succeeding corporation (or an
affiliate thereof) equivalent in fair market value to the per share
consideration received by holders of outstanding shares of Common Stock as a
result of the Acquisition Event.
Notwithstanding the foregoing, if the acquiring or succeeding corporation
(or an affiliate thereof) does not agree to assume, or substitute for, such
Options, then the Board shall, upon written notice to the Participants, provide
that all then unexercised Options will become exercisable in full as of a
specified time prior to the Acquisition Event and will terminate immediately
prior to the consummation of such Acquisition Event, except to the extent
exercised by the Participants before the consummation of such Acquisition Event;
provided, however, that in the event of an Acquisition Event under the terms of
which holders of Common Stock will receive upon consummation thereof a cash
payment for each share of Common Stock surrendered pursuant to such Acquisition
Event (the "Acquisition Price"), then the Board may instead provide that all
outstanding Options shall terminate upon consummation of such Acquisition Event
and that each Participant shall receive, in exchange therefor, a cash payment
equal to the amount (if any) by which (A) the Acquisition Price multiplied by
the number of shares of Common Stock subject to such outstanding Options
(whether or not then exercisable), exceeds (B) the aggregate exercise price of
such Options.
(3) Consequences of an Acquisition Event on Restricted Stock Awards. Upon
the occurrence of an Acquisition Event, the repurchase and other rights of the
Company under each outstanding Restricted Stock
A-4
<PAGE> 24
Award shall inure to the benefit of the Company's successor and shall apply to
the cash, securities or other property which the Common Stock was converted into
or exchanged for pursuant to such Acquisition Event in the same manner and to
the same extent as they applied to the Common Stock subject to such Restricted
Stock Award.
(4) Consequences of an Acquisition Event on Other Awards. The Board shall
specify the effect of an Acquisition Event on any other Award granted under the
Plan at the time of the grant of such Award.
9. GENERAL PROVISIONS APPLICABLE TO AWARDS
a. Transferability of Awards. Except as the Board may otherwise determine
or provide in an Award, Awards shall not be sold, assigned, transferred, pledged
or otherwise encumbered by the person to whom they are granted, either
voluntarily or by operation of law, except by will or the laws of descent and
distribution, and, during the life of the Participant, shall be exercisable only
by the Participant. References to a Participant, to the extent relevant in the
context, shall include references to authorized transferees.
b. Documentation. Each Award shall be evidenced by a written instrument
in such form as the Board shall determine. Each Award may contain terms and
conditions in addition to those set forth in the Plan.
c. Board Discretion. Except as otherwise provided by the Plan, each Award
may be made alone or in addition or in relation to any other Award. The terms of
each Award need not be identical, and the Board need not treat Participants
uniformly.
d. Termination of Status. The Board shall determine the effect on an
Award of the disability, death, retirement, authorized leave of absence or other
change in the employment or other status of a Participant and the extent to
which, and the period during which, the Participant, the Participant's legal
representative, conservator, guardian or Designated Beneficiary may exercise
rights under the Award.
e. Withholding. Each Participant shall pay to the Company, or make
provision satisfactory to the Board for payment of, any taxes required by law to
be withheld in connection with Awards to such Participant no later than the date
of the event creating the tax liability. Except as the Board may otherwise
provide in an Award, when the Common Stock is registered under the Exchange Act,
Participants may, to the extent then permitted under applicable law, satisfy
such tax obligations in whole or in part by delivery of shares of Common Stock,
including shares retained from the Award creating the tax obligation, valued at
their Fair Market Value. The Company may, to the extent permitted by law, deduct
any such tax obligations from any payment of any kind otherwise due to a
Participant.
f. Amendment of Award. The Board may amend, modify or terminate any
outstanding Award, including but not limited to, substituting therefor another
Award of the same or a different type, changing the date of exercise or
realization, and converting an Incentive Stock Option to a Nonstatutory Stock
Option, provided that the Participant's consent to such action shall be required
unless the Board determines that the action, taking into account any related
action, would not materially and adversely affect the Participant.
g. Conditions on Delivery of Stock. The Company will not be obligated to
deliver any shares of Common Stock pursuant to the Plan or to remove
restrictions from shares previously delivered under the Plan until (i) all
conditions of the Award have been met or removed to the satisfaction of the
Company, (ii) in the opinion of the Company's counsel, all other legal matters
in connection with the issuance and delivery of such shares have been satisfied,
including any applicable securities laws and any applicable stock exchange or
stock market rules and regulations, and (iii) the Participant has executed and
delivered to the Company such representations or agreements as the Company may
consider appropriate to satisfy the requirements of any applicable laws, rules
or regulations.
A-5
<PAGE> 25
h. Acceleration. The Board may at any time provide that any Options shall
become immediately exercisable in full or in part, that any Restricted Stock
Awards shall be free of restrictions in full or in part or that any other Awards
may become exercisable in full or in part or free of some or all restrictions or
conditions, or otherwise realizable in full or in part, as the case may be.
10. MISCELLANEOUS
a. No Right To Employment or Other Status. No person shall have any claim
or right to be granted an Award, and the grant of an Award shall not be
construed as giving a Participant the right to continued employment or any other
relationship with the Company. The Company expressly reserves the right at any
time to dismiss or otherwise terminate its relationship with a Participant free
from any liability or claim under the Plan, except as expressly provided in the
applicable Award.
b. No Rights As Stockholder. Subject to the provisions of the applicable
Award, no Participant or Designated Beneficiary shall have any rights as a
stockholder with respect to any shares of Common Stock to be distributed with
respect to an Award until becoming the record holder of such shares.
Notwithstanding the foregoing, in the event the Company effects a split of the
Common Stock by means of a stock dividend and the exercise price of and the
number of shares subject to such Option are adjusted as of the date of the
distribution of the dividend (rather than as of the record date for such
dividend), then an optionee who exercises an Option between the record date and
the distribution date for such stock dividend shall be entitled to receive, on
the distribution date, the stock dividend with respect to the shares of Common
Stock acquired upon such Option exercise, notwithstanding the fact that such
shares were not outstanding as of the close of business on the record date for
such stock dividend.
c. Effective Date and Term of Plan. The Plan shall become effective on
the date on which it is adopted by the Board, but no Award granted to a
Participant that is intended to comply with Section 162(m) shall become
exercisable, vested or realizable, as applicable to such Award, unless and until
the Plan has been approved by the Company's stockholders to the extent
stockholder approval is required by Section 162(m) in the manner required under
Section 162(m) (including the vote required under Section 162(m)). No Awards
shall be granted under the Plan after the completion of ten years from the
earlier of (i) the date on which the Plan was adopted by the Board or (ii) the
date the Plan was approved by the Company's stockholders, but Awards previously
granted may extend beyond that date.
d. Amendment of Plan. The Board may amend, suspend or terminate the Plan
or any portion thereof at any time, provided that to the extent required by
Section 162(m), no Award granted to a Participant that is intended to comply
with Section 162(m) after the date of such amendment shall become exercisable,
realizable or vested, as applicable to such Award, unless and until such
amendment shall have been approved by the Company's stockholders as required by
Section 162(m) (including the vote required under Section 162(m)).
e. Governing Law. The provisions of the Plan and all Awards made
hereunder shall be governed by and interpreted in accordance with the laws of
the State of Delaware, without regard to any applicable conflicts of law.
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<PAGE> 26
PROXY
SILVERSTREAM SOFTWARE, INC.
One Burlington Woods, Suite 200
Burlington, MA 01803
Annual Meeting of Stockholders to be held May 2, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE COMPANY'S BOARD OF DIRECTORS
The undersigned holder of Common Stock of SilverStream Software, Inc., a
Delaware corporation, hereby appoints David R. Skok, David A. Litwack and Craig
A. Dynes, and each of them, as proxies for the undersigned, each with full power
of substitution, for and in the name of the undersigned to act for the
undersigned and to vote, as designated on the reverse side of this proxy card,
all of the shares of stock of the company that the undersigned is entitled to
vote at SilverStream's 2000 Annual Meeting of Stockholders, to be held on
Tuesday, May 2, 2000 at 10:00 a.m., local time, at Hale and Dorr LLP, 60 State
Street, 26th floor, Boston, Massachusetts 02109, and at any adjournments or
postponements thereof.
In their discretion, the proxies are authorized to vote on such other
matters as may properly come before the meeting or any adjournment or
postponement thereof.
- ----------- -----------
SEE REVERSE PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED SEE REVERSE
SIDE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
- ----------- -----------
<PAGE> 27
[X] Please mark
votes as in
this example.
A VOTE FOR THE DIRECTOR NOMINEES AND FOR PROPOSAL NUMBERS 2 AND 3 IS
RECOMMENDED BY THE BOARD OF DIRECTORS.
<TABLE>
<S> <C> <C> <C> <C> <C>
A. Election of Directors 2. Approval the continuance of and FOR AGAINST ABSTAIN
NOMINEES: (01) David R. Skok and (02) Timothy amendments to the Amended and
Barrows Restated 1997 Stock Incentive [ ] [ ] [ ]
Plan.
FOR WITHHELD
[ ] [ ] 3. Ratify the appointment of Ernst & FOR AGAINST ABSTAIN
Young LLP as independent
auditors. [ ] [ ] [ ]
[ ]
-------------------------------------------
(INSTRUCTION: To withhold authority to vote for MARK HERE IF YOU PLAN TO ATTEND THE MEETING [ ]
any individual nominee, write that nominee's name
in the space provided above.) MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
The signature on this proxy should correspond exactly with stockholder's
name as printed to the left. In the case of joint tenants, co-executors or
co-trustees, both should sign. Persons signing as attorney, executor,
administrator, trustee or guardian should give their full title.
VOTES MUST BE INDICATED [X] IN BLACK OR BLUE INK.
PLEASE MARK, SIGN AND DATE THIS PROXY CARD AND PROMPTLY RETURN IT IN THE
ENVELOPE PROVIDED. NO POSTAGE NECESSARY IF MAILED IN THE UNITED STATES.
Signature: __________________________ Date: ________________________Signature: __________________________ Date: ___________________
</TABLE>
