<PAGE>
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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Pervasive Software Inc.
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
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LOGO
[PERVASIVE LOGO APPEARS HERE]
PERVASIVE SOFTWARE INC.
8834 CAPITAL OF TEXAS HIGHWAY, SUITE 300
AUSTIN, TEXAS 78759
October 19, 1998
TO THE STOCKHOLDERS OF PERVASIVE SOFTWARE INC.
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Pervasive Software Inc. (the "Company"), which will be held at the Renaissance
Austin Hotel located at 9721 Arboretum Blvd., Austin, Texas 78759, on
Wednesday, November 4, 1998, at 9:00 a.m.
Details of the business to be conducted at the Annual Meeting are given in
the attached Proxy Statement and Notice of Annual Meeting of Stockholders.
It is important that your shares be represented and voted at the meeting.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, SIGN,
DATE AND PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID
ENVELOPE. Returning the proxy does NOT deprive you of your right to attend the
Annual Meeting. If you decide to attend the Annual Meeting and wish to change
your proxy vote, you may do so automatically by voting in person at the
meeting.
On behalf of the Board of Directors, I would like to express our
appreciation for your continued interest in the affairs of the Company. We
look forward to seeing you at the Annual Meeting.
Sincerely,
/s/ RON R. HARRIS
Ron R. Harris
President, Chief Executive Officer
and Director
<PAGE>
LOGO
[PERVASIVE LOGO APPEARS HERE]
PERVASIVE SOFTWARE INC.
8834 CAPITAL OF TEXAS HIGHWAY, SUITE 300
AUSTIN, TEXAS 78759
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 4, 1998
The Annual Meeting of Stockholders (the "Annual Meeting") of Pervasive
Software Inc. (the "Company") will be held at the Renaissance Austin Hotel,
located at 9721 Arboretum Blvd., Austin, Texas, 78759, on Wednesday, November
4, 1998, at 9:00 a.m. for the following purposes:
1. To elect two directors of the Board of Directors to serve until their
three-year term expires or until their successors have been duly elected
and qualified;
2. To approve an amendment to the Company's Employee Stock Purchase Plan,
including an increase to the number of shares available for issuance
thereunder, as set forth in the accompanying Proxy Statement;
3. To ratify the appointment of Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending June 30, 1999; and
4. To transact such other business as may properly come before the
meeting or any adjournments or postponements thereof.
The foregoing items of business are more fully described in the attached
Proxy Statement.
Only stockholders of record at the close of business on September 21, 1998
are entitled to notice of, and to vote at, the Annual Meeting and at any
adjournments or postponements thereof. A list of such stockholders will be
available for inspection at the Company's headquarters located at 8834 Capital
of Texas Highway, Suite 300, Austin, Texas, during ordinary business hours for
the ten-day period prior to the Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS,
/s/ JAMES R. OFFERDAHL
James R. Offerdahl
Chief Operating Officer, Chief
Financial Officer and Secretary
Austin, Texas
October 19, 1998
IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE,
SIGN, DATE AND PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE. YOU MAY REVOKE YOUR PROXY AT ANY TIME PRIOR TO THE
ANNUAL MEETING. IF YOU DECIDE TO ATTEND THE ANNUAL MEETING AND WISH TO
CHANGE YOUR PROXY VOTE, YOU MAY DO SO AUTOMATICALLY BY VOTING IN PERSON AT
THE MEETING.
<PAGE>
PERVASIVE SOFTWARE INC.
8834 CAPITAL OF TEXAS HIGHWAY, SUITE 300
AUSTIN, TEXAS 78759
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 4, 1998
These proxy materials are furnished in connection with the solicitation of
proxies by the Board of Directors of Pervasive Software Inc., a Delaware
corporation (the "Company"), for the Annual Meeting of Stockholders (the
"Annual Meeting") to be held at the Renaissance Austin Hotel, located at 9721
Arboretum Blvd., Austin, Texas 78759, on Wednesday, November 4, 1998, at 9:00
a.m., and at any adjournment or postponement of the Annual Meeting. These
proxy materials were first mailed to stockholders on or about October 19,
1998.
PURPOSE OF MEETING
The specific proposals to be considered and acted upon at the Annual Meeting
are summarized in the accompanying Notice of Annual Meeting of Stockholders.
Each proposal is described in more detail in this Proxy Statement.
VOTING RIGHTS AND SOLICITATION OF PROXIES
The Company's Common Stock is the only type of security entitled to vote at
the Annual Meeting. On September 21, 1998, the record date for determination
of stockholders entitled to vote at the Annual Meeting, there were 13,403,177
shares of Common Stock outstanding. Each stockholder of record on September
21, 1998 is entitled to one vote for each share of Common Stock held by such
stockholder on September 21, 1998. Shares of Common Stock may not be voted
cumulatively. All votes will be tabulated by the inspector of election
appointed for the meeting, who will separately tabulate affirmative and
negative votes, abstentions and broker non-votes.
QUORUM REQUIRED
The Company's bylaws provide that the holders of a majority of the Company's
Common Stock issued and outstanding and entitled to vote at the Annual
Meeting, present in person or represented by proxy, shall constitute a quorum
for the transaction of business at the Annual Meeting. Abstentions and broker
non-votes will be counted as present for the purpose of determining the
presence of a quorum.
VOTES REQUIRED
PROPOSAL 1. Directors are elected by a plurality of the affirmative votes
cast by those shares present in person, or represented by proxy, and entitled
to vote at the Annual Meeting. The two nominees for director receiving the
highest number of affirmative votes will be elected. Abstentions and broker
non-votes will not be counted toward a nominee's total. Stockholders may not
cumulate votes in the election of directors.
PROPOSAL 2. Approval of the adoption of the amendment to the Company's
Employee Stock Purchase Plan requires the affirmative vote of a majority of
those shares present in person or represented by proxy, and entitled to vote
at the Annual Meeting. Abstentions are not affirmative votes and, therefore,
will have the same effect as a vote against the proposal. Broker non-votes
will not be treated as entitled to vote on the matter and thus, will not
affect the outcome of the voting on the proposal.
PROPOSAL 3. Ratification of the appointment of Ernst & Young LLP as the
Company's independent auditors for the fiscal year ending June 30, 1999
requires the affirmative vote of a majority of those shares present in person,
or represented by proxy, and cast either affirmatively or negatively at the
Annual Meeting. Abstentions and broker non-votes will not be counted as having
been voted on the proposal.
<PAGE>
PROXIES
Whether or not you are able to attend the Company's Annual Meeting, you are
urged to complete and return the enclosed proxy, which is solicited by the
Company's Board of Directors and which will be voted as you direct on your
proxy when properly completed. In the event no directions are specified, such
proxies will be voted FOR the Nominees of the Board of Directors (as set forth
in Proposal No. 1), FOR Proposal Nos. 2 and 3, and in the discretion of the
proxy holders as to other matters that may properly come before the Annual
Meeting. You may also revoke or change your proxy at any time before the
Annual Meeting. To do this, send a written notice of revocation or another
signed proxy with a later date to the Secretary of the Company at the
Company's principal executive offices before the beginning of the Annual
Meeting. You may also automatically revoke your proxy by attending the Annual
Meeting and voting in person. All shares represented by a valid proxy received
prior to the Annual Meeting will be voted.
SOLICITATION OF PROXIES
The Company will bear the entire cost of solicitation, including the
preparation, assembly, printing, and mailing of this Proxy Statement, the
proxy, and any additional soliciting material furnished to stockholders.
Copies of solicitation material will be furnished to brokerage houses,
fiduciaries, and custodians holding shares in their names that are
beneficially owned by others so that they may forward this solicitation
material to such beneficial owners. In addition, the Company may reimburse
such persons for their costs of forwarding the solicitation material to such
beneficial owners. The original solicitation of proxies by mail may be
supplemented by solicitation by telephone, telegram, or other means by
directors, officers, employees or agents of the Company. No additional
compensation will be paid to these individuals for any such services. Except
as described above, the Company does not presently intend to solicit proxies
other than by mail.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Company currently has authorized six directors. In accordance with the
terms of the Company's Certificate of Incorporation, the Board of Directors is
divided into three classes: Class I, whose term will expire at the 1998 Annual
Meeting; Class II, whose term will expire at the 1999 Annual Meeting; and
Class III, whose term will expire at the 2000 Annual Meeting. At the 1998
Annual Meeting, two directors will be elected to serve until the Annual
Meeting to be held in 2001 or until his respective successor is elected and
qualified. The Board of Directors has selected two nominees as the nominees
for Class I. The nominees for the Board of Directors are both currently
directors of the Company and are set forth below. The proxy holders intend to
vote all proxies received by them in the accompanying form for the nominees
for directors listed below. In the event any nominee is unable or declines to
serve as a director at the time of the Annual Meeting, the proxies will be
voted for any nominee who shall be designated by the present Board of
Directors to fill the vacancy. In the event that additional persons are
nominated for election as directors, the proxy holders intend to vote all
proxies received by them for the nominees listed below. As of the date of this
Proxy Statement, the Board of Directors is not aware of any nominee who is
unable or will decline to serve as a director.
NOMINEES FOR TERM ENDING IN 2001
Set forth below is information regarding the nominees, including their ages,
the period during which they have served as directors, and information
furnished by them as to principal occupations and directorships held by them
in corporations whose shares are publicly registered.
<TABLE>
<CAPTION>
DIRECTOR
NAME SINCE AGE
---- -------- ---
<S> <C> <C>
Joseph C. Aragona........................................... 1995 42
David R. Bradford........................................... 1995 47
</TABLE>
2
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Mr. Aragona has served as a director of the Company since June 1995. Since
June 1982, Mr. Aragona has served as a General Partner of Austin Ventures, a
venture capital firm. He also serves as a director for various private
companies. Mr. Aragona received a B.A. from Harvard College and an M.B.A. from
the Harvard University Graduate School of Business.
Mr. Bradford has served as a director of the Company since October 1995. Mr.
Bradford has served as Senior Vice President, General Counsel of Novell, Inc.,
a networking software company, since 1985. Mr. Bradford also serves as a
director of a private company. Mr. Bradford received a B.A. in Political
Science and a J.D. from Brigham Young University and an M.B.A. from Pepperdine
University.
Set forth below is information regarding the continuing directors of the
Company, including their ages, the period in which they have served as
directors, and information furnished by them as to principal occupations and
directorships held by them in corporations whose shares are publicly
registered.
<TABLE>
<CAPTION>
DIRECTOR
NAME SINCE AGE
---- -------- ---
<S> <C> <C>
Ron R. Harris............................................... 1995 45
Nancy R. Woodward........................................... 1994 43
David A. Boucher............................................ 1995 47
Shelby H. Carter, Jr........................................ 1996 67
</TABLE>
Mr. Harris has served as President and Chief Executive Officer since its
inception and as a director since June 1995. He has also served as the
Company's acting Vice President of Research and Development since May 1997.
Prior to joining the Company, Mr. Harris served as a Vice President of Citrix
Systems, Inc., a developer of thin-client/server software, from October 1990
to May 1993. Mr. Harris received his B.S. in Computer Science from Vanderbilt
University and an M.B.A. from the University of Texas at Austin.
Ms. Woodward is a founder of the Company and has served as a director and
Chairman of the Board since its inception. Ms. Woodward served as Secretary of
the Company from inception through October 1996. Ms. Woodward received a B.S.
in Computer Science from the University of Michigan.
Mr. Boucher has served as a director of the Company since October 1995. Mr.
Boucher has served as a General Partner of Applied Technology, a venture
capital firm, since January 1993. From January 1981 to August 1992, Mr.
Boucher served as President and Chief Executive Officer of Interleaf, Inc., an
electronic publishing software developer. Mr. Boucher also serves as director
of Wang Laboratories, Inc., a network integration services company, Interleaf,
Inc. and various private companies.
Mr. Carter has served as a director of the Company since August 1996. Since
January 1986, Mr. Carter has served as an adjunct professor at the University
of Texas Graduate School of Business and College of Business Administration.
Mr. Carter also serves as a director of InPut/OutPut, Inc., a manufacturer of
seismic data acquisition systems, and several private companies. Mr. Carter
received a B.B.A. from the University of Texas at Austin.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
During the fiscal year ended June 30, 1998, the Board of Directors held
seven (7) meetings. For the fiscal year, each of the directors during the term
of their tenure attended or participated in at least 75% of the aggregate of
(i) the total number of meetings or actions by written consent of the Board of
Directors and (ii) the total number of meetings held by all committees of the
Board of Directors on which each such director served. The Board of Directors
has two (2) standing committees: the Audit Committee and the Compensation
Committee.
During the fiscal year ended June 30, 1998, the Audit Committee of the Board
of Directors held two (2) meetings. The Audit Committee reviews, acts on and
reports to the Board of Directors with respect to various
3
<PAGE>
auditing and accounting matters, including the selection of the Company's
independent accountants, the scope of the annual audits, fees to be paid to
the independent accountants, the performance of the Company's independent
accountants and the accounting practices of the Company. The members of the
Audit Committee are Mr. Boucher and Mr. Carter.
During the fiscal year ended June 30, 1998, the Compensation Committee of
the Board of Directors held ten (10) meetings. The Compensation Committee
establishes salaries, incentives and other forms of compensation for officers
and other employees of the Company and administers the incentive compensation
and benefit plans of the Company. The members of the Compensation Committee
are Ms. Woodward, Mr. Aragona and Mr. Carter.
DIRECTOR COMPENSATION
Certain non-employee directors receive $1,000 per meeting attended, plus a
retainer of $8,000 annually for serving on the Board of Directors. Directors
are not compensated for attending Committee meetings. All directors are
reimbursed for reasonable expenses incurred by them in attending Board and
Committee meetings. Certain non-employee Board members are eligible for option
grants pursuant to the provisions of the Automatic Option Grant Program under
the Company's 1997 Stock Incentive Plan. Under the Automatic Option Grant
Program, each individual who first joins the Board as an eligible non-employee
director on or after the effective date of the 1997 Stock Incentive Plan will
receive at that time, an automatic option grant for 20,000 shares of Common
Stock. In addition, at each annual stockholders meeting, beginning with the
first annual meeting after June 30, 1998, each eligible non-employee director,
whether or not he or she is standing for re-election at that particular
meeting, will be granted a stock option to purchase 5,000 shares of Common
Stock. A non-employee director is not eligible for automatic option grants if
such individual is a preferred stockholder, owns 5% or more of the voting
power of the Company, or represents entities that own preferred stock or 5% or
more of the voting power of the Company. The optionee will vest in each
automatic option grant in a series of four annual installments over the
optionee's period of Board service, beginning one year from the grant date.
Each option will have an exercise price equal to the fair market value of the
Common Stock on the automatic grant date and a maximum term of ten years,
subject to earlier termination following the optionee's cessation of Board
service. Vesting of the automatic option shares will automatically accelerate
and the options become fully exercisable upon (i) a change in control of the
Company by merger or consolidation, sale of all or substantially all of its
assets or tender offer for 50% or more of the Company's outstanding voting
stock or (ii) the death or disability of the optionee while serving as a Board
member. Mr. Carter was granted options to purchase 10,000 shares of Common
Stock on August 21, 1996 at an exercise price of $0.13 per share and 10,000
shares of Common Stock on March 19, 1997 at an exercise price of $2.00 per
share. Mr. Bradford was granted options to purchase 10,000 shares of Common
Stock on October 4, 1995 at an exercise price of $0.13 per share. Pursuant to
the Automatic Option Grant Program, each of Mr. Boucher, Mr. Bradford and Mr.
Carter will be granted options to purchase 5,000 shares of Common Stock on the
date of the Annual Meeting.
Directors who are also employees of the Company are eligible to participate
in the Company's Bonus Plan, to receive options and be issued shares of Common
Stock directly under the 1997 Stock Incentive Plan and are also eligible to
participate, subject to certain limitations, in the Company's Employee Stock
Purchase Plan, subject to certain limitations.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES LISTED HEREIN.
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STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of June 30, 1998, certain information
with respect to shares beneficially owned by (i) each person who is known by
the Company to be the beneficial owner of more than five percent of the
Company's outstanding shares of Common Stock, (ii) each of the Company's
directors and the executive officers named in the Summary Compensation Table
and (iii) all current directors and executive officers as a group. Beneficial
ownership has been determined in accordance with Rule 13d-3 under the Exchange
Act. Under this rule, certain shares may be deemed to be beneficially owned by
more than one person (if, for example, persons share the power to vote or the
power to dispose of the shares). In addition, shares are deemed to be
beneficially owned by a person if the person has the right to acquire shares
(for example, upon exercise of an option or warrant) within sixty (60) days of
the date as of which the information is provided; in computing the percentage
ownership of any person, the amount of shares is deemed to include the amount
of shares beneficially owned by such person (and only such person) by reason
of such acquisition rights. As a result, the percentage of outstanding shares
of any person as shown in the following table does not necessarily reflect the
person's actual voting power at any particular date.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED AS OF
JUNE 30, 1998(1)(2)
--------------------
NUMBER OF PERCENTAGE
BENEFICIAL OWNER SHARES OF CLASS
---------------- --------- ----------
<S> <C> <C>
Funds affiliated with Austin Ventures(3).............. 2,330,057 17.4%
114 West Seventh Street
1300 Norwood Tower
Austin, TX 78701
Paul J. Schupf Associates............................. 1,283,400 9.6%
P.O. Box 179
Hamilton, NY 13346
Ron R. Harris(4)...................................... 1,455,816 9.9%
Robert J. Adams, Jr.(5)............................... 100,500 *
Theodule J. Doucet, Jr.(6)............................ 100,000 *
Casey G.A. Leaman(7).................................. 98,000 *
Marcus D. Marshall(8)................................. 70,500 *
James R. Offerdahl(9)................................. 192,500 1.4%
Nancy R. and Douglas W. Woodward(10).................. 4,287,686 32.1%
Joseph C. Aragona(11)................................. 2,330,057 17.4%
David A. Boucher(12).................................. 160,000 1.2%
David R. Bradford(13)................................. 10,000 *
Shelby H. Carter, Jr.(14)............................. 20,000 *
All current directors and executive officers as a
group (12 persons)(15)............................... 8,825,059 59.5%
</TABLE>
- --------
* Less than 1% of the outstanding shares of Common Stock.
(1) Except as indicated in the footnotes to this table and pursuant to
applicable community property laws, the persons named in the table have
sole voting and investment power with respect to all shares of Common
Stock. To the Company's knowledge, the entities named in the table have
sole voting and investment power with respect to all shares of Common
Stock shown as beneficially owned by them.
(2) The number of shares of Common Stock deemed outstanding includes shares
issuable pursuant to stock options that may be exercised within sixty
(60) days after June 30, 1998.
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<PAGE>
(3) Includes 752,117 shares held by Austin Ventures IV-A, L.P. and 1,577,940
shares held by Austin Ventures IV-B, L.P.
(4) Includes options exercisable into 1,335,816 shares of Common Stock.
(5) Includes options exercisable into 50,000 shares of Common Stock. Also
includes 50,000 shares of Common Stock that are subject to the Company's
repurchase right which lapses in increments over time.
(6) Includes options exercisable into 50,000 shares of Common Stock. Also
includes 17,500 shares of Common Stock that are subject to the Company's
repurchase right which lapses in increments over time.
(7) Includes 75,000 shares of Common Stock that are subject to the Company's
repurchase right which lapses in increments over time.
(8) Includes options exercisable into 10,000 shares of Common Stock. Also
includes 17,500 shares of Common Stock that are subject to the Company's
repurchase right which lapses in increments over time.
(9) Includes 150,000 shares of Common Stock that are subject to the Company's
repurchase right which lapses in increments over time.
(10) Includes 300,000 shares held by Northern Trust Bank of Texas N.A. as
trustee of Nancy R. Woodward Grantor Retained Annuity Trust and 300,000
shares held by Northern Trust Bank of Texas N.A. as trustee of Douglas W.
Woodward Grantor Retained Annuity Trust.
(11) Includes 752,117 shares held by Austin Ventures IV-A, L.P. and 1,577,940
shares held by Austin Ventures IV-B, L.P. Mr. Aragona is a general
partner of the partnerships and disclaims beneficial ownership of the
shares owned by the partnerships except to the extent of his pecuniary
interest therein.
(12) Includes 160,000 shares held by Technologies for Information and
Entertainment, L.P.
(13) Includes options exercisable into 10,000 shares of Common Stock.
(14) Includes options exercisable into 10,000 shares of Common Stock.
(15) Includes options exercisable into 1,465,816 shares of Common Stock.
6
<PAGE>
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Company's Board of Directors (the
"Compensation Committee" or the "Committee") has the exclusive authority to
establish the level of base salary payable to the Chief Executive Officer
("CEO") and certain other executive officers of the Company and to administer
the Company's 1997 Stock Incentive Plan and Employee Stock Purchase Plan. In
addition, the Committee has the responsibility for approving the individual
bonus programs to be in effect for the CEO and certain other executive
officers and other key employees each fiscal year.
For the 1998 fiscal year, the process utilized by the Committee in
determining executive officer compensation levels was based on the subjective
judgment of the Committee. Among the factors considered by the Committee were
the recommendations of the CEO with respect to the compensation of the
Company's key executive officers. However, the Committee made the final
compensation decisions concerning such officers.
GENERAL COMPENSATION POLICY. The Committee's fundamental policy is to offer
the Company's executive officers competitive compensation opportunities based
upon overall Company performance, their individual contribution to the
financial success of the Company and their personal performance. It is the
Committee's objective to have a substantial portion of each officer's
compensation contingent upon the Company's performance, as well as upon his or
her own level of performance. Accordingly, each executive officer's
compensation package consists of: (i) base salary, (ii) cash bonus awards and
(iii) long-term stock-based incentive awards.
BASE SALARY. The base salary for each executive officer is set on the basis
of general market levels and personal performance. Each individual's base pay
is positioned relative to the total compensation package, including cash
incentives and long-term incentives.
ANNUAL CASH BONUSES. Each executive officer has an established cash bonus
target. The annual pool of bonuses for executive officers is distributed on
the basis of the Company's achievement of the financial performance targets
established at the start of the fiscal year and personal objectives
established for each executive. The Company did not achieve the revenue and
operating income targets established for the 1998 fiscal year and,
accordingly, no bonuses were paid to employees at the level of Vice President
and above for the 1998 fiscal year pursuant to the management bonus plan.
Discretionary bonuses were paid to certain individuals.
LONG-TERM INCENTIVE COMPENSATION. During fiscal 1998, the Committee, in its
discretion, made option grants to Messrs. Offerdahl, Leaman, and Marshall
under the 1997 Stock Incentive Plan. Generally, a significant grant is made in
the year that an officer commences employment. Thereafter, option grants may
be made at varying times and in varying amounts in the discretion of the
Committee. Generally, the size of each grant is set at a level that the
Committee deems appropriate to create a meaningful opportunity for stock
ownership based upon the individual's position with the Company, the
individual's potential for future responsibility and promotion, the
individual's performance in the recent period and the number of unvested
options held by the individual at the time of the new grant. The relative
weight given to each of these factors will vary from individual to individual
at the Committee's discretion. Applying these principles, a grant was made to
Messrs. Offerdahl, Leaman, and Marshall in connection with their annual
reviews applying the foregoing factors in the judgment of the Committee.
Each grant allows the officer to acquire shares of the Company's common
stock at a fixed price per share (the market price on the grant date) over a
specified period of time. The option vests in periodic installments over a
four year period, contingent upon the executive officer's continued employment
with the Company. The vesting schedule and the number of shares granted are
established to ensure a meaningful incentive in each year following the year
of grant. Accordingly, the option will provide a return to the executive
officer only if he or she remains in the Company's employ, and then only if
the market price of the Company's Common Stock appreciates over the option
term.
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<PAGE>
CEO COMPENSATION. The annual base salary for Mr. Harris, the Company's
President and Chief Executive Officer, was established by the Committee on
January 16, 1998. The Committee's decision was made primarily on the basis of
Mr. Harris' personal performance of his duties.
The remaining components of the Chief Executive Officer's 1998 fiscal year
incentive compensation were entirely dependent upon the Company's financial
performance and provided no dollar guarantees. No bonus was paid to the Chief
Executive Officer for the 1998 fiscal year based on the same incentive plan
for all other officers. Each year, the annual incentive plan is reevaluated
with a new achievement threshold and new targets for revenue and profit. No
option grant was made to the Chief Executive Officer during the 1998 fiscal
year, principally due to Mr. Harris' significant stock holdings derived from
options granted in 1995.
TAX LIMITATION. Under the Federal tax laws, a publicly-held company such as
the Company will not be allowed a federal income tax deduction for
compensation paid to certain executive officers to the extent that
compensation exceeds $1 million per officer in any year. To qualify for an
exemption from the $1 million deduction ceiling, the stockholders were asked
to approve a limitation under the Company's 1997 Stock Incentive Plan on the
maximum number of shares of Common Stock for which any one participant may be
granted stock options per calendar year. Because this limitation was adopted,
any compensation deemed paid to an executive officer when he exercises an
outstanding option under the 1997 Stock Incentive Plan with an exercise price
equal to the fair market value of the option shares on the grant date will
qualify as performance-based compensation that will not be subject to the $1
million tax deduction ceiling. This limitation will be in effect for all
fiscal years of the Company after December 31, 2000 unless the 1997 Plan is
amended before that date but it is not expected that the cash compensation to
be paid to the Company's executive officers for the 1999 fiscal year will
exceed the $1 million limit per officer. The Committee is deferring any
decision on whether to limit the dollar amount of all other compensation
payable to the Company's executive officers to the $1 million cap.
Compensation Committee
Joseph C. Aragona
Shelby H. Carter, Jr.
Nancy R. Woodward
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Company's Board was formed in March 1997,
and the members of the Compensation Committee are Joseph C. Aragona, Shelby H.
Carter, Jr. and Nancy R. Woodward. Other than Nancy R. Woodward, who has
served as Secretary of the Company and is currently Chairman of the Board,
none of these individuals was at any time during fiscal 1998, or at any other
time, an officer or employee of the Company. No member of the Compensation
Committee of the Company serves as a member of the Board of Directors or
compensation committee of any entity that has one or more executive officers
serving as a member of the Company's Board or Compensation Committee.
8
<PAGE>
STOCK PERFORMANCE GRAPH
The graph set forth below compares the cumulative total stockholder return
on the Company's Common Stock between September 26, 1997 (the date of first
trading of the Company's Common Stock after the initial public offering) and
June 30, 1998 with the cumulative total return of (i) the Nasdaq National
Market Composite Index and (ii) the Hambrecht & Quist Computer Software Index
(the "H&Q Software Index"), over the same period. This graph assumes the
investment of $100.00 on September 26, 1997 in the Company's Common Stock and
on August 31, 1997 in the Nasdaq National Market Composite Index and the H&Q
Software Index, and assumes the reinvestment of dividends, if any.
The comparisons shown in the graph below are based upon historical data. The
Company cautions that the stock price performance shown in the graph below is
not indicative of, nor intended to forecast, the potential future performance
of the Company's Common Stock. Information used in the graph was obtained from
Hambrecht & Quist LLC, a source believed to be reliable, but the Company is
not responsible for any errors or omissions in such information.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG PERVASIVE SOFTWARE INC.,
THE NASDAQ NATIONAL MARKET COMPOSITE INDEX AND THE H&Q SOFTWARE SECTOR INDEX
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
9/26/97* 9/30/97 12/31/97 3/31/98 6/30/98
-------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Pervasive Software Inc........... $100.00 $104.55 $65.91 $131.82 $ 94.32
Nasdaq National Market Composite
Index........................... $100.00 $105.92 $99.32 $116.19 $119.54
Hambrecht & Quist Computer Soft-
ware Index...................... $100.00 $103.70 $96.48 $125.24 $129.82
</TABLE>
9
<PAGE>
The Company effected its initial public offering of Common Stock on
September 25, 1997 and trading of the Company's Common Stock commenced on
September 26, 1997. The closing price on September 26, 1998 was $11.00 per
share. The graph above commences with the price of $11.00 per share on
September 26, 1997.
Notwithstanding anything to the contrary set forth in any of the Company's
previous or future filings under the Securities Act of 1933, as amended, or
the Securities Exchange Act of 1934, as amended, that might incorporate this
Proxy Statement or future filings made by the Company under those statutes,
the Compensation Committee Report and Stock Performance Graph shall not be
deemed filed with the Securities and Exchange Commission and shall not be
deemed incorporated by reference into any of those prior filings or into any
future filings made by the Company under those statutes.
EXECUTIVE COMPENSATION AND RELATED INFORMATION
SUMMARY COMPENSATION TABLE
The following Summary Compensation Table sets forth the compensation earned
for the two fiscal years ended June 30, 1998 by the Company's Chief Executive
Officer and the four other most highly compensated officers whose salary and
bonus for the 1998 fiscal year were in excess of $100,000 and one additional
officer who ceased employment prior to the end of the fiscal year but whose
salary and bonus for the 1998 fiscal year were in excess of $100,000
(collectively, the "Named Officers"), for services rendered in all capacities
to the Company and its subsidiaries for that fiscal year.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL ------------
COMPENSATION SECURITIES
NAME AND PRINCIPAL ----------------- UNDERLYING ALL OTHER
POSITION YEAR SALARY(1) BONUS OPTIONS (#) COMPENSATION(2)
- ------------------ ---- --------- ------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Ron R. Harris........... 1998 $165,851 -- -- $ 690
President, Chief 1997 150,587 $50,000 -- 510
Executive Officer
and Director
James R. Offerdahl(3)... 1998 153,000 -- 50,000 486
Chief Operating 1997 105,000 15,000 200,000 352
Officer, Chief
Financial Officer and
Secretary
Robert J. Adams, Jr..... 1998 154,299 13,988 -- 11,967
Vice President, World-
wide Marketing 1997 142,654 24,200 50,000 308
Casey G.A. Leaman(4).... 1998 124,500 44,165(5) 50,000 21,116
Vice President, World-
wide Sales 1997 41,654 25,333(5) 100,000 20,342
Marcus D. Marshall...... 1998 133,481 -- 20,000 739
Vice President, Cus-
tomer Engineering 1997 115,390 10,000 20,000 603
Theodule J. Doucet,
Jr..................... 1998 114,166 49,842(5) -- 196
Vice President, Stra-
tegic Sales 1997 104,112 56,281(5) 40,000 314
</TABLE>
- --------
(1) Salary includes amounts deferred under the Company's 401(k) Plan.
(2) All Other Compensation consists of life insurance premiums, except that
Mr. Adam's compensation includes $11,637 in 1998 for relocation expenses
and Mr. Leaman's compensation includes $20,000 for relocation expenses in
each of 1997 and 1998.
(3) Mr. Offerdahl commenced employment with the Company on October 1, 1996.
(4) Mr. Leaman commenced employment with the Company on February 10, 1997.
(5) Represents sales commissions.
10
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table contains information concerning the stock option grants
made to each of the Named Officers in the fiscal year ended June 30, 1998. No
stock appreciation rights were granted to these individuals during such year.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION
FOR OPTION TERMS(4)
----------------------
INDIVIDUAL GRANTS
------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES PRICE PER EXPIRATION
NAME GRANTED(1) IN 1998(2) SHARE(3) DATE 5% ($) 10% ($)
- ---- ---------- ---------- --------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Ron R. Harris........... -- -- -- -- -- --
James R. Offerdahl...... 50,000 7% $8.37 10/28/07 263,192 666,981
Robert J. Adams, Jr..... -- -- -- -- -- --
Casey G.A. Leaman....... 50,000 7 7.50 12/16/07 235,835 597,653
Marcus D. Marshall...... 20,000 3 8.37 10/28/07 105,277 266,792
Theodule J. Doucet,
Jr..................... -- -- -- -- -- --
</TABLE>
- --------
(1) The options listed in the table become exercisable in four equal annual
installments. Upon a merger or other change in control, the option shall
become exercisable and the option shares shall become vested as if the
optionee had been employed for an additional 12 months. In addition, the
option shares shall vest in full if outstanding options are not assumed by
the acquiring entity. Should options be assumed but the optionee's
employment be involuntarily terminated within 12 months of such a change
in control, then the option shares shall vest in full. Each option has a
maximum term of ten years, subject to earlier termination in the event of
the optionee's cessation of employment with the Company.
(2) Based on an aggregate of 726,400 options granted in fiscal 1998.
(3) The exercise price may be paid in cash or through a cashless exercise
procedure.
(4) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by rules of the Securities and Exchange Commission. There can
be no assurance provided to any executive officer or any other holder of
the Company's securities that the actual stock price appreciation over the
10-year option term will be at the assumed 5% and 10% levels or at any
other defined level. Unless the market price of the Common Stock
appreciates over the option term, no value will be realized from the
option grants made to the executive officers.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth information concerning the shares acquired
and the value realized upon the exercise of stock options during fiscal 1998
and the year-end number and value of unexercised options with respect to each
of the Named Officers. No stock appreciation rights were exercised by the
Named Officers in fiscal 1998 or were outstanding at the end of that year.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT JUNE 30, IN-THE-MONEY OPTIONS AT
ACQUIRED ON 1998 (#)(2) JUNE 30, 1998(3)
EXERCISE VALUE ------------------------- -------------------------
NAME (#) REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Ron R. Harris........... -- -- 1,335,816 -- $13,725,510 --
James R. Offerdahl...... -- -- -- 50,000 -- $100,250
Robert J. Adams, Jr. ... -- -- 50,000 -- 338,750 --
Theodule J. Doucet,
Jr. ................... 17,500(4) $189,800 50,000 -- 407,301 --
Casey G.A. Leaman....... 100,000(4) 500,000 -- 50,000 -- 143,750
Marcus D. Marshall...... -- -- 10,000 20,000 67,750 40,100
</TABLE>
- --------
(1) Market price at exercise less exercise price.
11
<PAGE>
(2) The options granted before July 1, 1997 are immediately exercisable for
all the option shares, but any shares purchased thereunder will be subject
to repurchase by the Company at the original exercise price paid per share
upon the optionee's cessation of service to the Company prior to vesting
in such shares. As of June 30, 1998, the repurchase right had lapsed as to
1,038,475 unexercised option shares for Mr. Harris, none for Mr.
Offerdahl, 12,500 option shares for Mr. Adams, 7,500 option shares for Mr.
Doucet, none for Mr. Leaman, and 2,500 option shares for Mr. Marshall.
(3) Based on the fair market value of the Company's Common Stock at fiscal
year end (June 30, 1998) ($10.375 per share), as reported on the Nasdaq
National Market.
(4) The acquired shares include options for vested and unvested shares. As of
June 30, 1998 the Company's repurchase right had lapsed with respect to
shares acquired during the fiscal year as follows: Mr. Doucet (no shares)
and Mr. Leaman (25,000 shares).
BONUS PLAN. The Company has adopted a bonus program pursuant to which all
full-time, non-commissioned employees are eligible for annual cash bonuses
based upon a combination of the Company achieving specified objectives and the
employee meeting specified individual performance objectives.
EMPLOYMENT CONTRACTS AND CHANGE IN CONTROL ARRANGEMENTS
The Compensation Committee of the Board of Directors, as plan administrator
of the 1997 Plan, has the authority to provide for accelerated vesting of the
shares of Common Stock subject to outstanding options held by the Named
Officers and any other executive officer, employee or director in connection
with certain changes in control of the Company or the subsequent termination
of the officer's employment following the change in control event. None of the
Named Officers have employment agreements with the Company, and their
employment may be terminated at any time. In connection with Mr. Doucet's
termination of employment, the Company entered into an agreement dated January
23, 1998, pursuant to which he agreed to make himself available up to 40 hours
per week and the Company agreed to continue his salary and certain benefits
and to continue vesting his option shares through June 30, 1998 and
thereafter, through September 5, 1998, he agreed to make himself available for
up to 20 hours per week at a reduced salary. Pursuant to the agreement, Mr.
Doucet agreed to release any potential claims against the Company.
PROPOSAL NO. 2
AMENDMENT TO THE EMPLOYEE STOCK PURCHASE PLAN
The stockholders are being asked to approve an amendment to the Pervasive
Software Inc. Employee Stock Purchase Plan (the "Purchase Plan") to increase
the number of shares issuable thereunder by 500,000 shares. The Company has
been advised by its counsel that it should reserve a sufficient number of
shares under its Purchase Plan to last through the end of each twenty-four
month offering period beginning prior to the 1999 stockholder's meeting. In
accordance with recently issued accounting guidance, an insufficient number of
shares reserved at the beginning of an offering period may result in an
unintended and potentially adverse accounting treatment. Accordingly, the
Board is recommending an increase to the number of shares available under the
Purchase Plan. All other provisions of the Purchase Plan, including
limitations on the number of shares a participant may purchase, are not
affected by the amendment. The Board approved the amendment to the Purchase
Plan which is the subject of this Proposal No. 2 on October 7, 1998. The
Purchase Plan, and the right of participants to make purchases thereunder, is
intended to meet the requirements of an "employee stock purchase plan" as
defined in Section 423 of the Internal Revenue Code (the "Code"). If the
amendment to the Purchase Plan is not approved by the stockholders, the
Purchase Plan will continue in effect in accordance with its current terms.
The Purchase Plan is intended to benefit the Company as well as its
stockholders and employees. The Purchase Plan gives employees an opportunity
to purchase shares of Common Stock at a favorable price. The Company believes
that the stockholders will correspondingly benefit from the increased interest
on the part of
12
<PAGE>
participating employees in the profitability of the Company. Finally, the
Company will benefit from the periodic investments of equity capital provided
by participants in the Purchase Plan.
The Purchase Plan was adopted by the Board on July 18, 1997 and approved by
the stockholders on August 22, 1997. The following summary of certain Purchase
Plan provisions is qualified, in its entirety, by reference to the Purchase
Plan. Copies of the Purchase Plan document may be obtained by a stockholder
upon written request to the Secretary of the Company at the executive offices
in Austin, Texas.
In addition to the Purchase Plan, the Company maintains the International
Employee Stock Purchase Plan ("International Plan") pursuant to which eligible
non-U.S. citizens and U.S. citizens working abroad who are not paid in U.S.
currency, and who are employed by the Company or any participating subsidiary
or parent corporation on a regularly-scheduled basis of more than twenty (20)
hours per week for more than five (5) months per calendar year or such other
eligible individuals in the Corporation's service as the Plan Administrator
may designate from time to time may purchase Common Stock pursuant to payroll
deductions.
Purpose. The purpose of the Purchase Plan is to provide employees of the
Company and designated parent or subsidiary corporations (collectively,
"Participating Companies") an opportunity to participate in the ownership of
the Company by purchasing participating Common Stock of the Company through
payroll deductions. As of August 31, 1998, employees of all domestic and
foreign subsidiaries are eligible to participate in the Purchase Plan or the
International Plan.
Administration. The Purchase Plan is administered by the Compensation
Committee of the Board (the "Committee") and may be administered by the Board.
All costs and expenses incurred in plan administration will be paid by the
Company without charge to participants. All cash proceeds received by the
Company from payroll deductions under the Purchase Plan shall be credited to a
non-interest bearing book account.
Shares and Terms. The stock issuable under the Purchase Plan is the
Company's authorized but unissued or reacquired Common Stock. The maximum
number of shares of Common Stock that may be issued in the aggregate under the
Purchase Plan and the International Plan is 500,000, not including the 500,000
shares which are the subject of this Proposal No. 2. Common Stock subject to a
terminated purchase right shall be available for purchase pursuant to purchase
rights subsequently granted.
Adjustments. If any change in the Common Stock occurs (through
recapitalization, stock dividend, stock split, combination of shares, exchange
of shares, or other change affecting the outstanding Common Stock as a class
without the Company's receipt of consideration), appropriate adjustments shall
be made by the Company to the class and maximum number of shares subject to
the Purchase Plan, to the class and maximum number of shares purchasable by
each participant on any one purchase date, and the class and number of shares
and purchase price per share subject to outstanding purchase rights in order
to prevent the dilution or enlargement of benefits thereunder.
Eligibility. Generally, any individual who is customarily employed by a
Participating Company more than 20 hours per week and for more than five
months per calendar year is eligible to participate in the Purchase Plan.
Approximately 240 employees (including 5 officers) were eligible to
participate in the Purchase Plan as of August 31, 1998.
Offering Periods. The Purchase Plan is implemented by offering periods that
generally have a duration of twenty-four months; each offering period is
comprised of a series of one or more successive purchase periods, which
generally have a duration of six (6) months. Offering periods are concurrent
and successive and, accordingly, a new offering period commences every six
months and runs concurrently with each prior offering period. The Committee in
its discretion may vary the beginning date and ending date of the offering
periods, provided no offering period shall exceed twenty-four (24) months in
length, and may vary the duration of an offering period or purchase period.
Generally, purchase periods start on the first business day in each of May and
November and end, respectively, on the last business day of October of the
same year and April of the following year. A new offering period will begin on
November 1, 1998 and will end on October 31, 2000.
13
<PAGE>
The participant will have a separate purchase right for each offering period
in which he or she participates. The purchase right will be granted on the
first day of the offering period and will be automatically exercised in
successive installments on the last day of each purchase period within the
offering period.
Purchase Price. The purchase price per share under the Purchase Plan is 85%
of the lower of (i) the fair market value of a share of Common Stock on the
first day of the applicable offering period, or (ii) the fair market value of
a share of Common Stock on the purchase date. Generally, the fair market value
of the Common Stock on a given date is the closing sale price of the Common
Stock, as reported on the Nasdaq National Market System. The market value of
the Common Stock as reported on the Nasdaq Stock Market as of September 30,
1998 was $10.875 per share.
Limitations. The plan imposes certain limitations upon a participant's
rights to acquire Common Stock, including the following:
1. No purchase right shall be granted to any person who immediately
thereafter would own, directly or indirectly, stock or hold outstanding
options or rights to purchase stock possessing five percent (5%) or more of
the total combined voting power or value of all classes of stock of the
Company or any of its parent or subsidiary corporations.
2. In no event shall a participant be permitted to purchase more than 250
shares on any one purchase date, except that a limit of 500 shares per
participant applied on the April 30, 1998 purchase date.
3. The right to purchase Common Stock under the Purchase Plan (or any
other employee stock purchase plan that the Company or any of its
subsidiaries may establish) in an offering intended to qualify under
Section 423 of the Code may not accrue at a rate that exceeds $25,000 in
fair market value of such Common Stock (determined at the time such
purchase right is granted) for any calendar year in which such purchase
right is outstanding.
The purchase right shall be exercisable only by the participant during the
participant's lifetime and shall not be assignable or transferable by the
participant.
Payment of Purchase Price; Payroll Deductions. Payment for shares by
participants shall be by accumulation of after-tax payroll deductions during
the purchase period. The deductions may not exceed 10% of a participant's cash
compensation paid during a purchase period. Cash compensation for this purpose
will include elective contributions that are not includable in income under
Code Sections 125 or 401(k) and all bonuses, overtime, commissions, and other
amounts to the extent paid in cash.
The participant will receive a purchase right for each offering period in
which he or she participates to purchase up to the number of shares of Common
Stock determined by dividing such participant's payroll deductions accumulated
prior to the purchase date by the applicable purchase price (subject to the
"Limitations" section). The Plan Administrator may allow for the purchase of
fractional shares. In the event that participants are allowed to purchase only
whole shares, any payroll deductions accumulated in a participant's account
that are not sufficient to purchase a full share will be retained in the
participant's account for the subsequent purchase period or refunded at the
discretion of the Plan Administrator. No interest shall accrue on the payroll
deductions of a participant in the Purchase Plan.
Termination and Change to Payroll Deductions. A purchase right shall
terminate at the end of the offering period or earlier if (i) the participant
terminates employment and any payroll deductions that the participant may have
made with respect to a terminated purchase right will be refunded or (ii) the
participant elects to withdraw from the Purchase Plan. Any payroll deductions
that the participant may have made with respect to a terminated purchase right
under clause (ii) will be refunded unless the participant elects to have the
funds applied to the purchase of shares on the next purchase date. A
participant may decrease his or her deductions during a purchase period as
permitted by the Committee.
Amendment and Termination. The Purchase Plan shall continue in effect until
the earlier of (i) the last business day in April, 2007, (ii) the date on
which all shares available for issuance under the Purchase Plan shall
14
<PAGE>
have been issued or (iii) a Corporate Transaction, unless the Purchase Plan is
earlier terminated by the Board in its discretion.
The Board may at any time alter, amend, suspend or discontinue the Purchase
Plan. The approval of the stockholders will be obtained as to any share
increase and to the extent required by applicable law.
In addition, the Company has specifically reserved the right, exercisable in
the sole discretion of the Board, to modify or terminate the Purchase Plan
immediately following any six-month purchase period. If such right is
exercised by the Board, then the Purchase Plan may terminate in its entirety
and no further purchase rights will be granted or exercised, and no further
payroll deductions shall thereafter be collected under the Purchase Plan, or
the Purchase Plan may continue with a new purchase period or new offering
period.
Corporate Transaction. In the event of (i) a merger or consolidation in
which securities possessing more than fifty percent (50%) of the total
combined voting power of the Company's outstanding securities are transferred
to a person or persons different from the persons holding those securities
immediately prior to such transaction or (ii) the sale, transfer or other
disposition of all or substantially all of the assets of the Company in
complete liquidation or dissolution of the Company (a "Corporate
Transaction"), each purchase right under the Purchase Plan will automatically
be exercised immediately before consummation of the Corporate Transaction as
if such date were the last purchase date of the offering period. The purchase
price per share shall be equal to eighty-five percent (85%) of the lower of
the fair market value per share of Common Stock on the start date of the
offering period or the fair market value per share of Common Stock immediately
prior to the effective date of such Corporate Transaction. Any payroll
deductions not applied to such purchase shall be promptly refunded to the
participant.
The grant of purchase rights under the Purchase Plan will in no way affect
the right of the Company to adjust, reclassify, reorganize, or otherwise
change its capital or business structure or to merge, consolidate, dissolve,
liquidate or sell or transfer all or any part of its business or assets.
Proration of Purchase Rights. If the total number of shares of Common Stock
for which purchase rights are to be granted on any date exceeds the number of
shares then remaining available under the Purchase Plan, the Committee shall
make a pro rata allocation of the shares remaining.
Federal Income Tax Consequences. The following is a general description of
certain federal income tax consequences of the Purchase Plan. This description
does not purport to be complete.
The Purchase Plan is intended to qualify as an "employee stock purchase
plan" under Section 423 of the Code. Under a plan which so qualifies, no
taxable income will be reportable by a participant, and no deductions will be
allowable to the Company, by reason of the grant or exercise of the purchase
rights issued thereunder. A participant will, however, recognize taxable
income in the year in which the purchased shares are sold or otherwise made
the subject of disposition.
A sale or other disposition of the purchased shares will be a disqualifying
disposition if made before the later of two years after the start of the
offering period in which such shares were acquired or one year after the
shares are purchased. If the participant makes a disqualifying disposition of
the purchased shares, then the Company will be entitled to an income tax
deduction for the taxable year in which such disposition occurs, equal to the
amount by which the fair market value of such shares on the date of purchase
exceeded the purchase price, and the participant will be required to satisfy
the employment and income tax withholding requirements applicable to such
income. In no other instance will the Company be allowed a deduction with
respect to the participant's disposition of the purchased shares.
Any additional gain or loss recognized upon the disposition of the shares
will be a capital gain, which will be long-term if the shares have been held
for more than one (1) year following the date of purchase under the Purchase
Plan.
15
<PAGE>
The foregoing is only a summary of the federal income taxation consequences
to the participant and the Company with respect to the shares purchased under
the Purchase Plan. In addition, the summary does not discuss the tax
consequences of a participant's death or the income tax laws of any city,
state or foreign country in which the participant may reside.
New Purchase Plan Benefits. Since purchase rights are subject to discretion,
including an employee's decision not to participate in the Purchase Plan,
awards under the Purchase Plan for the current fiscal year are not
determinable. However, in the purchase period that ended on April 30, 1998
each of the Named Officers purchased the following number of shares of Common
Stock at a purchase price of $8.50 per share. Mr. Harris: 0, Mr. Offerdahl:
500, Mr. Adams: 500, Mr. Doucet: 500, Mr. Marshall: 500, and Mr. Leaman: 500;
and all executive officers as a group (7 persons) purchased 3,000 shares. In
addition, each of the Named Officers, other than Mr. Harris, have the right to
purchase a maximum of 250 shares of Common Stock at a price that will not
exceed $8.50 per share on each of the October 30, 1998, April 30, 1999 and
October 31, 1999 purchase dates.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE AMENDMENT
TO THE COMPANY'S EMPLOYEE STOCK PURCHASE PLAN.
PROPOSAL NO. 3
RATIFICATION OF INDEPENDENT AUDITORS
The Company is asking the stockholders to ratify the appointment of Ernst &
Young LLP as the Company's independent auditors for the fiscal year ending
June 30, 1999. The affirmative vote of the holders of a majority of shares
present or represented by proxy and voting at the Annual Meeting will be
required to ratify the appointment of Ernst & Young LLP.
In the event the stockholders fail to ratify the appointment, the Board of
Directors will reconsider its selection. Even if the appointment is ratified,
the Board of Directors, in its discretion, may direct the appointment of a
different independent accounting firm at any time during the year if the Board
of Directors feels that such a change would be in the Company's and its
stockholders' best interests.
Ernst & Young LLP has audited the Company's financial statements since
inception through June 30, 1998. Its representatives are expected to be
present at the Annual Meeting, will have the opportunity to make a statement
if they desire to do so, and will be available to respond to appropriate
questions.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
SELECTION OF ERNST & YOUNG LLP TO SERVE AS THE COMPANY'S INDEPENDENT AUDITORS
FOR THE FISCAL YEAR ENDING JUNE 30, 1999.
16
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company's Certificate of Incorporation limits the liability of its
directors for monetary damages arising from a breach of their fiduciary duty
as directors, except to the extent otherwise required by the Delaware General
Corporation Law. Such limitation of liability does not affect the availability
of equitable remedies such as injunctive relief or rescission.
The Company's Bylaws provide that the Company shall indemnify its directors
and officers to the fullest extent permitted by Delaware law, including in
circumstances in which indemnification is otherwise discretionary under
Delaware law. The Company has also entered into indemnification agreements
with its officers and directors containing provisions that may require the
Company, among other things, to indemnify such officers and directors against
certain liabilities that may arise by reason of their status or service as
directors or officers and to advance their expenses incurred as a result of
any proceeding against them as to which they could be indemnified.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The members of the Board of Directors, the executive officers of the Company
and persons who hold more than 10% of the Company's outstanding Common Stock
are subject to the reporting requirements of Section 16(a) of the Securities
Exchange Act of 1934, as amended, which require them to file reports with
respect to their ownership of the Company's Common Stock and their
transactions in such Common Stock. Based upon (i) the copies of Section 16(a)
reports that the Company received from such persons for their 1998 fiscal year
transactions in the Common Stock and their Common Stock holdings and (ii) the
written representations received from one or more of such persons that no
annual Form 5 reports were required to be filed by them for the 1998 fiscal
year, the Company believes that all reporting requirements under Section 16(a)
for such fiscal year were met in a timely manner by its executive officers,
Board members and greater than ten-percent stockholders.
FORM 10-K
THE COMPANY WILL MAIL WITHOUT CHARGE, UPON WRITTEN REQUEST, A COPY OF THE
COMPANY'S FORM 10-K REPORT FOR FISCAL YEAR 1998, INCLUDING THE FINANCIAL
STATEMENTS, SCHEDULE AND LIST OF EXHIBITS. REQUESTS SHOULD BE SENT TO
PERVASIVE SOFTWARE INC., 8834 CAPITAL OF TEXAS HIGHWAY, SUITE 300, AUSTIN,
TEXAS 78759, ATTN: PAM HANNAH, INVESTOR RELATIONS.
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Stockholder proposals that are intended to be presented at the 1999 Annual
Meeting that are eligible for inclusion in the Company's proxy statement and
related proxy materials for that meeting under the applicable rules of the
Securities and Exchange Commission must be received by the Company not later
than June 2, 1999, in order to be included. Such stockholder proposals should
be addressed to Pervasive Software Inc., 8834 Capital of Texas Highway, Suite
300, Austin, Texas 78759, Attn: James R. Offerdahl, Corporate Secretary.
Stockholder proposals sent after October 31, 1998 should be mailed to the
Company's new address: 12365 Riata Trace Parkway, Building II, Austin, Texas
78727.
17
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OTHER MATTERS
The Board knows of no other matters to be presented for stockholder action
at the Annual Meeting. However, if other matters do properly come before the
Annual Meeting or any adjournments or postponements thereof, the Board intends
that the persons named in the proxies will vote upon such matters in
accordance with their best judgment.
BY ORDER OF THE BOARD OF DIRECTORS,
/s/ JAMES R. OFFERDAHL
James R. Offerdahl
Chief Operating Officer, Chief
Financial Officer and Secretary
Austin, Texas
October 19, 1998
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE,
SIGN, DATE AND PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE. YOU MAY REVOKE YOUR PROXY AT ANY TIME PRIOR TO THE
ANNUAL MEETING. IF YOU DECIDE TO ATTEND THE ANNUAL MEETING AND WISH TO
CHANGE YOUR PROXY VOTE, YOU MAY DO SO AUTOMATICALLY BY VOTING IN PERSON AT
THE MEETING.
THANK YOU FOR YOUR ATTENTION TO THIS MATTER. YOUR PROMPT RESPONSE WILL
GREATLY FACILITATE ARRANGEMENTS FOR THE ANNUAL MEETING.
18
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PROXY PROXY
PERVASIVE SOFTWARE INC.
8834 CAPITAL OF TEXAS HIGHWAY, SUITE 300, AUSTIN, TEXAS 78759
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF PERVASIVE
SOFTWARE INC.
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD NOVEMBER 4, 1998
The undersigned holder of Common Stock, par value $.001, of Pervasive
Software Inc. (the "Company") hereby appoints James R. Offerdahl and John E.
Farr, or either of them, proxies for the undersigned, each with full power of
substitution, to represent and to vote as specified in this Proxy all Common
Stock of the Company that the undersigned stockholder would be entitled to vote
if personally present at the Annual Meeting of Stockholders (the "Annual
Meeting") to be held on Wednesday, November 4, 1998 at 9:00 a.m. local time, at
the Renaissance Austin Hotel located at 9721 Arboretum Blvd., Austin, Texas
78759, and at any adjournments or postponements of the Annual Meeting. The
undersigned stockholder hereby revokes any proxy or proxies heretofore executed
for such matters.
1. To elect the following directors to serve for a term ending upon the 2001
Annual Meeting of Stockholders or until their successors are elected and
qualified:
NOMINEES: Joseph C. Aragona and David R. Bradford
[_] FOR [_] WITHHELD [_] FOR ALL NOMINEES, EXCEPT FOR NOMINEES WRITTEN
BELOW.
_________________________
NOMINEE EXCEPTION(S).
2. To approve the amendment to the Company's Employee Stock Purchase Plan.
[_] FOR [_] AGAINST [_] ABSTAIN
3. To ratify the appointment of Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending June 30, 1999.
[_] FOR [_] AGAINST [_] ABSTAIN
================================================================================
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER AS DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR THE ELECTION OF THE DIRECTORS, FOR PROPOSALS 2 AND 3, AND IN THE
DISCRETION OF THE PROXIES AS TO ANY OTHER MATTERS THAT MAY PROPERLY COME BEFORE
THE MEETING. THE UNDERSIGNED STOCKHOLDER MAY REVOKE THIS PROXY AT ANY TIME
BEFORE IT IS VOTED BY DELIVERING TO THE CORPORATE SECRETARY OF THE COMPANY
EITHER A WRITTEN REVOCATION OF THE PROXY OR A DULY EXECUTED PROXY BEARING A
LATER DATE, OR BY APPEARING AT THE ANNUAL MEETING AND VOTING IN PERSON.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE DIRECTORS
AND "FOR" PROPOSALS 2 AND 3.
Please date and sign exactly as your name(s) is (are) shown on the share
certificate(s) to which the Proxy applies. When shares are held as joint-
tenants, both should sign. When signing as an executor, administrator, trustee,
guardian, attorney-in fact or other fiduciary, please give full title as such.
When signing as a corporation, please sign in full corporate name by President
or other authorized officer. When signing as a partnership, please sign in
partnership name by an authorized person.
DATE: ___________________, 1998
_______________________________
SIGNATURE
_______________________________
SIGNATURE (IF HELD JOINTLY)
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