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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (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)
Pervasive Software Inc.
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(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 SOFTWARE INC.
12365 Riata Trace Parkway, Building II
Austin, Texas 78727
October 8, 1999
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 Company's
headquarters located at 12365 Riata Trace Parkway, Building II, Austin, Texas
78727, on Wednesday, November 3, 1999, 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
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[LOGO]
PERVASIVE SOFTWARE INC.
12365 Riata Trace Parkway, Building II
Austin, Texas 78727
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held November 3, 1999
The Annual Meeting of Stockholders (the "Annual Meeting") of Pervasive
Software Inc. (the "Company") will be held at the Company's headquarters,
located at 12365 Riata Trace Parkway, Building II, Austin, Texas, 78727, on
Wednesday, November 3, 1999, 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
and an increase in the number of shares purchasable by a participant on each
purchase date, 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, 2000; 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 24, 1999
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 12365 Riata
Trace Parkway, Building II, 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 8, 1999
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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.
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PERVASIVE SOFTWARE INC.
12365 Riata Trace Parkway, Building II
Austin, Texas 78727
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
To be held November 3, 1999
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 Company's headquarters, located at 12365 Riata Trace
Parkway, Building II, Austin, Texas 78727, on Wednesday, November 3, 1999, 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 8, 1999.
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 24, 1999, the record date for determination of
stockholders entitled to vote at the Annual Meeting, there were 15,612,385
shares of Common Stock outstanding. Each stockholder of record on September 24,
1999 is entitled to one vote for each share of Common Stock held by such
stockholder on September 24, 1999. 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 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, 2000 requires
the affirmative vote of a majority of those shares present
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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.
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.
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PROPOSAL NO. 1
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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 2001 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 1999 Annual
Meeting, two directors will be elected to serve until the Annual Meeting to be
held in 2002 or until his or her respective successor is elected and qualified.
The Board of Directors has selected two nominees as the nominees for Class II.
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 2002
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.
Director
Name Since Age
---------------------- ---------- -------
Shelby H. Carter, Jr. 1996 68
Nancy R. Woodward 1994 43
Mr. Carter has served as a director of the Company since August 1996. Since
January 1986, Mr. Carter has served as a distinguished adjunct professor at the
University of Texas Graduate School of Business and College of Business
Administration. Mr. Carter has founded several successful high technology
companies. Mr. Carter currently serves as chairman of the board of a private
company and as a venture partner of Austin Ventures. Mr. Carter received a
B.B.A. from the University of Texas at Austin.
Ms. Woodward is one of our founders and has served as a director and
Chairman of the Board since our inception. Ms. Woodward received a B.S. in
Computer Science from the University of Michigan.
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.
Director
Name Since Age
---------------------- ---------- ---------
Ron R. Harris 1995 46
Joseph Aragona 1995 43
David A. Boucher 1995 49
David R. Bradford 1995 48
Mr. Harris has served as our President and Chief Executive Officer since
our inception and as a director since June 1995. Prior to joining us, Mr. Harris
served as a Vice President of Citrix Systems, Inc., a developer of thin-
client/server software, from October 1990 to May 1993. He also serves as a
director of several private
3
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companies. Mr. Harris received his B.S. in Computer Science from Vanderbilt
University and an M.B.A. from the University of Texas at Austin.
Mr. Aragona has served as one of our directors 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. Boucher has served as one of our directors 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 Interleaf,
Inc. and various private companies.
Mr. Bradford has served as one of our directors 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 and I-Link Incorporated, a telecommunications 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.
Board of Directors Meetings and Committees
During the fiscal year ended June 30, 1999, the Board of Directors held
four (4) meetings. For the fiscal year, each of the directors during the term of
his or her 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, 1999, 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 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, 1999, the Compensation Committee of
the Board of Directors held six (6) meetings and acted by written consent on
three (3) occasions. 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 as of the date of the annual stockholders meeting. The optionee
will vest in each automatic
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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, 10,000 shares of Common Stock on March 19,
1997 at an exercise price of $2.00 per share and 5,000 shares of Common Stock on
November 4, 1998 at an exercise price of $9.81 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 and 5,000 shares of Common Stock on
November 4, 1998 at an exercise price of $9.81 per share. Mr. Boucher was
granted options to purchase 5,000 shares of Common Stock on November 4, 1998 at
an exercise price of $9.81 per share. Pursuant to the Automatic Option Grant
Program, each of Mr. Boucher, Mr. Bradford, Mr. Carter and Mr. Aragona 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, 1999, 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, 1999 (1) (2)
--------------------------------------------
Beneficial Owner Number of Percentage of
Shares Class
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<S> <C> <C>
TCW Asset Management.................................................. 1,279,604 8.3%
8656 South Figueroa Street
Los Angeles, CA 90017
Paul J. Schupf Associates............................................. 1,201,500 7.8%
P.O. Box 179
Hamilton, NY 13346
Ron R. Harris (3)..................................................... 1,455,816 8.7%
12365 Riata Trace Parkway, Building II
Austin, Texas 78727
Scott Bleakley (4).................................................... 27,450 *
Casey G.A. Leaman (5)................................................. 112,250 *
Marcus D. Marshall (6)................................................ 56,000 *
James R. Offerdahl (7)................................................ 207,926 1.3%
Nancy R. and Douglas C. Woodward (8).................................. 3,279,186 21.2%
12365 Riata Trace Parkway, Building II
Austin, Texas 78727
Joseph C. Aragona (9)................................................. 79,701 *
David A. Boucher...................................................... 428 *
David R. Bradford (10)................................................ 10,000 *
Shelby H. Carter, Jr. (11)............................................ 15,000 *
All current directors and executive officers as a group (12 persons)
(12).................................................................. 5,326,757 31.4%
</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, 1999.
(3) Includes options exercisable into 1,335,816 shares of Common Stock.
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(4) Includes options exercisable into 18,750 shares of Common Stock. Includes
2,000 shares owned by Mr. Bleakley's wife.
(5) Includes options exercisable into 18,750 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 22,500 shares of Common Stock. Also
includes 2,500 shares of Common Stock that are subject to the Company's
repurchase right which lapses in June 2000.
(7) Includes options execisable into 25,000 shares of Common Stock. Includes
100,000 shares of Common Stock that are subject to the Company's repurchase
right which lapses in increments over time.
(8) Includes 182,660 shares held by Northern Trust Bank of Texas N.A. as
trustee of Nancy R. Woodward Grantor Retained Annuity Trust and 182,660
shares held by Northern Trust Bank of Texas N.A. as trustee of Douglas W.
Woodward Grantor Retained Annuity Trust.
(9) Includes 71,734 shares held by Aragona Ltd. Mr. Aragona is a general
partner of the partnership and disclaims beneficial ownership of the shares
owned by the partnership except to the extent of his pecuniary interest
therein.
(10) Includes options exercisable into 10,000 shares of Common Stock.
(11) Includes options exercisable into 10,000 shares of Common Stock.
(12) Includes options exercisable into 1,445,066 shares of Common Stock.
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 1999 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 or commissions, 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 and Commissions. The Company has established a cash
bonus program for all non-commission employees. Each employee has an established
cash bonus target. The annual pool of bonuses 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 employee.
Bonuses were paid for the 1999 fiscal year pursuant to the bonus plan.
Commissions are paid to Mr. Leaman pursuant to a commission plan in which all
sales and other commission employees are eligible to participate.
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Long-Term Incentive Compensation. During fiscal 1999, the Committee, in its
discretion, made option grants 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, grants were made to Messrs. Offerdahl,
Bleakley, 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.
CEO Compensation. The annual base salary for Mr. Harris, the Company's
President and Chief Executive Officer, was established by the Committee on
December 23, 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 1999 fiscal year
incentive compensation were entirely dependent upon the Company's financial
performance and provided no dollar guarantees. A bonus was paid to the Chief
Executive Officer for the 1999 fiscal year based on the same incentive plan for
all employees. 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 1999 fiscal year, principally
due to Mr. Harris' significant stock holdings derived from options granted in
1995.
Compensation Committee
Joseph C. Aragona
Shelby H. Carter, Jr.
Nancy R. Woodward
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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 1999, 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 of any entity that has
one or more executive officers serving as a member of the Company's Board or
Compensation Committee, except that Mr. Harris serves on the board of directors
of a Exterprise, Inc. and Mr. Carter is the chairman of the board of Exterprise,
Inc.
9
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STOCK PERFORMANCE GRAPH
The graph set forth below compares the cumulative total stockholder return
on the Company's Common Stock between September 26, 1997 and June 30, 1999 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
Market Composite Index and the H&Q Software Sector Index
[GRAPH APPEARS HERE]
* THE GRAPH ASSUMES THAT $100 WAS INVESTED ON 9/26/97 IN
PERVASIVE COMMON STOCK AND $100 WAS INVESTED IN EACH OF THE INDICES ON
8/31/97, INCLUDING REINVESTMENT OF DIVIDENDS.
<TABLE>
<CAPTION>
9/26/97** 12/31/97 6/30/98 12/31/98 6/30/99
--------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Pervasive Software Inc. $100.00 $ 65.91 $ 94.32 $175.00 $226.14
Nasdaq National Market Composite Index 100.00 93.84 112.84 132.23 161.25
Hambrecht & Quist Computer Software Index 100.00 92.57 124.56 120.93 137.96
</TABLE>
**The Company effected its initial public offering of its 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, 1997 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.
10
<PAGE>
EXECUTIVE COMPENSATION AND RELATED INFORMATION
Executive Compensation
The following Summary Compensation Table sets forth the compensation earned
for the three fiscal years ended June 30, 1999, by our chief executive officer
and the four other most highly compensated officers whose salary and bonus for
the 1999 fiscal year were in excess of $100,000 ("Named Officers").
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compen-
sation
Annual Compensation Awards
---------------------------- ---------------
Securities All Other
Fiscal Underlying Compensation
Name and Principal Position Year Salary (1) Bonus Options (#) (2)
- --------------------------------------------------- -------- ---------- --------------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Ron R. Harris...................................... 1999 $191,505 $28,500 -- $ 966
President, Chief Executive Officer and Director 1998 165,851 -- -- 690
1997 150,587 50,000 -- 510
James R. Offerdahl................................. 1999 166,172 41,255 150,000 526
Chief Operating Officer, Chief Financial Officer 1998 153,000 -- 50,000 486
and Secretary 1997 (3) 105,000 15,000 200,000 352
Scott J. Bleakley.................................. 1999 158,458 33,426 100,000 496
Senior Vice President, Corporate Strategy 1998 (4) 30,577 25,000 75,000 85
and Development
Casey G.A. Leaman.................................. 1999 136,681 105,728 (6) 45,000 1,162
Vice President, Worldwide Sales 1998 124,500 102,165 (6) 50,000 21,116
1997 (5) 41,654 23,333 (6) 100,000 20,342
Marcus D. Marshall................................. 1999 156,304 38,129 70,000 804
Vice President, Professional Services 1998 133,481 -- 20,000 739
and Training 1997 115,390 10,000 20,000 603
</TABLE>
(1) Salary includes amounts deferred under Pervasive's 401(k) Plan.
(2) All Other Compensation consists of life insurance premiums, except that Mr.
Leaman's compensation includes $20,000 for relocation expenses in each of
1997 and 1998.
(3) Mr. Offerdahl commenced employment with the Company on October 1, 1996.
(4) Mr. Bleakley commenced employment with the Company on April 17, 1998.
(5) Mr. Leaman commenced employment with the Company on February 10, 1997.
(6) Represents sales commissions.
11
<PAGE>
Option Grants in Last Fiscal Year
The following table contains information concerning the stock option grants
made in the fiscal year ended June 30, 1999, to the Named Officers. No stock
appreciation rights were granted to these individuals during such year.
<TABLE>
<CAPTION>
Individual Grants
-------------------------------------------------------------
Potential Realizable
Value at Assumed
Number of % of Total Annual Rates of Stock
Securities Options Price Appreciation for
Underlying Granted To Exercise Option Terms (4)
Options Employees in Price per Expiration --------------------------
Name Granted (1) 1999 (2) Share (3) Date 5% ($) 10% ($)
- -------------------------------- ------------ ------------ ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Ron R. Harris.................. -- - -- -- -- --
James R. Offerdahl............. 50,000 3% $11.88 7/21/08 373,563 946,683
100,000 6% $16.81 5/24/09 1,057,172 2,679,081
Scott J. Bleakley.............. 25,000 2% $ 9.81 11/12/08 154,236 390,865
75,000 5% $16.81 5/24/09 792,879 2,009,311
Casey G.A. Leaman.............. 25,000 2% $11.88 7/21/08 186,782 473,342
20,000 1% $16.81 5/24/09 211,434 535,816
Marcus D. Marshall............. 50,000 3% $11.88 7/21/08 373,563 946,683
20,000 1% $16.81 5/24/09 211,434 535,816
</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 Pervasive.
(2) Based on an aggregate of 1,572,604 options granted in fiscal 1999.
(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
Pervasive'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.
12
<PAGE>
Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values.
The following table sets forth information concerning the fiscal year-end
number and value of unexercised options with respect to the Named Officers. No
options were exercised by these individuals in fiscal 1999. No stock
appreciation rights were exercised by these individuals in fiscal 1999 or were
outstanding at the end of that year.
<TABLE>
<CAPTION>
Number of
Securities Underlying Value of Unexercised
Unexercised Options in-the-Money Options
Name at June 30, 1999 (1) at June 30, 1999 (2)
- ---------------------------------------------- ---------------------------- ----------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Ron R. Harris................................. 1,335,816 -- $33,094,841 --
James R. Offerdahl............................ 12,500 187,500 206,313 $2,075,188
Scott J. Bleakley............................. 18,750 156,250 232,031 1,677,594
Casey G.A. Leaman............................. 12,500 82,500 217,188 1,137,738
Marcus D. Marshall............................ 15,000 85,000 295,275 1,058,625
</TABLE>
(1) 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 Pervasive at the original exercise price paid per share upon
the optionee's cessation of service to Pervasive prior to vesting in such
shares. As of June 30, 1999, the repurchase right had lapsed as to 1,269,740
unexercised option shares for Mr. Harris and 2,500 option shares for Mr.
Marshall. Messrs. Offerdahl, Bleakley, and Leaman do not hold unexercised
options granted before July 1, 1997.
(2) Based on the fair market value of Pervasive's Common Stock at fiscal year
end (June 30, 1999) ($24.875 per share), as reported on the Nasdaq National
Market.
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.
13
<PAGE>
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 250,000 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 2000 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. The amendment also increases the number of shares a participant may
purchase from 250 shares to 500 shares per purchase period. All other
provisions of the Purchase Plan are not affected by the amendment. The Board
approved the amendment to the Purchase Plan that is the subject of this Proposal
No. 2 by unanimous written consent on September 24, 1999. 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 stockholders do not approve
the amendment to the Purchase Plan, 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 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 Purchase Plan was amended on October
8, 1998 to increase the share reserve and the stockholders approved that
amendment at the 1998 Annual Meeting. 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 Common Stock of the Company through payroll deductions.
As of September 24, 1999, 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 1,000,000, not including the 250,000 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.
14
<PAGE>
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 365 employees (including 8 officers) were eligible to participate
in the Purchase Plan as of September 24, 1999.
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, 1999 and will end on October 31, 2001.
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 24, 1999 was
$24.69.
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 500
shares on any one purchase date. A limit of 250 shares per participant applied
prior to the amendment that is the subject of this Proposal No. 2.
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.
15
<PAGE>
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 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.
16
<PAGE>
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.
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, 1999 each
of the Named Officers purchased the following number of shares of Common Stock
at a purchase price of $8.08 per share. Mr. Harris: no shares, Mr. Offerdahl:
213, Mr. Bleakley: 250, Mr. Marshall: 250, and Mr. Leaman: 250; and all
executive officers as a group (7 persons) purchased 1,463 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 $8.08 per
share on each of the October 30, 1999, April 30, 2000 and October 31, 2000
purchase dates and a maximum of 500 shares on each of the April 30, 2000,
October 31, 2000 and April 30, 2001 purchase dates, assuming approval of this
Proposal No. 2.
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.
17
<PAGE>
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, 2000. 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, 1999. 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, 2000.
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 1999 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 1999 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, except that a report for each of Ron
R. Harris, James R. Offerdahl, Nancy R. Woodward, Casey G. A. Leaman, Marcus D.
Marshall, and Joseph C. Aragona reporting the sale of Common Stock in connection
with the Company's secondary offering was prepared timely but was received late
by the SEC.
18
<PAGE>
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 1999, INCLUDING THE FINANCIAL
STATEMENTS, SCHEDULE AND LIST OF EXHIBITS. REQUESTS SHOULD BE SENT TO PERVASIVE
SOFTWARE INC., 12365 RIATA TRACE PARKWAY, BUILDING II, AUSTIN, TEXAS 78727,
ATTN: PAM HANNAH, INVESTOR RELATIONS.
STOCKHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Stockholder proposals that are intended to be presented at the 2000 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, 2000, in order to be included. Such stockholder proposals should
be addressed to Pervasive Software Inc., 12365 Riata Trace Parkway, Building II,
Austin, Texas 78727, Attn: James R. Offerdahl, Corporate Secretary.
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 8, 1999
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
19
<PAGE>
PROXY PERVASIVE SOFTWARE INC. PROXY
12365 Riata Trace Parkway, Building II, Austin, Texas 78727
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 3, 1999
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 3, 1999 at 9:00 a.m. local time, at
the Company's headquarters located at 12365 Riata Trace Parkway, Building II,
Austin, Texas 78727, and at any adjournments or postponements of the Annual
Meeting. The undersigned stockholder hereby revokes any proxy or proxies
heretofore executed for such matters.
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 MARK, SIGN, DATE AND RETURN THIS CARD PROMPTLY USING THE
ENCLOSED RETURN ENVELOPE. If you receive more than one proxy card, please sign
and return ALL cards in the enclosed envelope.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
(Reverse)
PERVASIVE SOFTWARE INC.
[X] Please mark votes
as in this example
<TABLE>
<S> <C> <C>
1. To elect the following directors to serve for a 2. To approve the amendment to FOR AGAINST ABSTAIN
term ending upon the 2002 Annual Meeting of the Company's Employee Stock [_] [_] [_]
Stockholders or until their successors are elected Purchase Plan.
and qualified:
Nominees: Shelby H. Carter and Nancy R. Woodward
FOR WITHHELD For all nominees, 3. To ratify the appointment of FOR AGAINST ABSTAIN
except for nominees Ernst & Young LLP as the [_] [_] [_]
written below. Company's independent
auditors for the fiscal year
ending June 30, 2000.
[_] [_] [_]
</TABLE>
_________________________________
Nominee exception(s).
<PAGE>
In their discretion, the proxies are
authorized to vote upon such other
business as may properly come before the
Annual Meeting.
The undersigned acknowledges receipt of the accompanying Notice of Annual
Meeting of Stockholders and Proxy Statement.
Signature:__________________________ Signature (if held jointly): _____________
______Date:___________ , 1999
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.
