<PAGE>
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 (S) 240.14a-11(c) or (S) 240.14a-12
Pervasive Software, Inc.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(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):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
[LOGO] PERVASIVE(R) SOFTWARE
PERVASIVE SOFTWARE INC.
12365 Riata Trace Parkway, Building II
Austin, Texas 78727
October 23, 2000
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
Hotel-Arboretum, 9721 Arboretum Boulevard, Austin, Texas 78759, on Thursday,
November 9, 2000, 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(R) SOFTWARE
PERVASIVE SOFTWARE INC.
12365 Riata Trace Parkway, Building II
Austin, Texas 78727
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held November 9, 2000
The Annual Meeting of Stockholders (the "Annual Meeting") of Pervasive
Software Inc. (the "Company") will be held at The Renaissance Hotel-Arboretum,
9721 Arboretum Boulevard, Austin, Texas 78759, on Thursday, November 9, 2000,
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 1997 Stock Incentive Plan to
increase 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, 2001; 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 October 6, 2000 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 23, 2000
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.
12365 Riata Trace Parkway, Building II
Austin, Texas 78727
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
To be held November 9, 2000
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 Hotel-Arboretum,
9721 Arboretum Boulevard, Austin, Texas 78759, on Thursday, November 9, 2000,
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 23, 2000.
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 October 6, 2000, the record date for determination of
stockholders entitled to vote at the Annual Meeting, there were 15,812,767
shares of Common Stock outstanding. Each stockholder of record on October 6,
2000 is entitled to one vote for each share of Common Stock held by such
stockholder on October 6, 2000. 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 1997 Stock Incentive
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.
<PAGE>
Proposal 3. Ratification of the appointment of Ernst & Young LLP as the
Company's independent auditors for the fiscal year ending June 30, 2001
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.
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. The Company may retain third party
services to aid in the solicitation of proxies from brokers, bank nominees and
other institutional owners. The Company estimates that it will pay a proxy
solicitor a fee of approximately $10,000 for its services and will reimburse
the proxy solicitor for certain out-of-pocket expenses that are usual and
proper. In addition, the Company may reimburse brokerage houses, fiduciaries
and custodians representing beneficial owners of shares 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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<PAGE>
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 2001 Annual
Meeting; Class II, whose term will expire at the 2002 Annual Meeting; and
Class III, whose term will expire at the 2000 Annual Meeting. At the 2000
Annual Meeting, two directors will be elected to serve until the Annual
Meeting to be held in 2003 or until his or her respective successor is elected
and qualified. The Board of Directors has selected two nominees as the
nominees for Class III. 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 2003
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>
Ron R. Harris............................................... 1995 47
David A. Boucher............................................ 1995 50
</TABLE>
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 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. 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.
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>
Joseph Aragona.............................................. 1995 44
David R. Bradford........................................... 1995 49
Shelby H. Carter, Jr........................................ 1996 69
Nancy R. Woodward........................................... 1994 44
</TABLE>
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
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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 one of our directors since October 1995. Mr.
Bradford served as Senior Vice President, General Counsel of Novell, Inc., a
networking software company, from 1985 until July 2000. 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.
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.
Board of Directors Meetings and Committees
During the fiscal year ended June 30, 2000, 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, 2000, the Audit Committee of the
Board of Directors held four (4) meetings and acted by written consent on one
(1) occasion. 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, Mr. Bradford and
Mr. Carter.
During the fiscal year ended June 30, 2000, the Compensation Committee of
the Board of Directors held five (5) meetings and acted by written consent on
four (4) 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 option grant in
a series of four annual installments over the optionee's period of Board
service, beginning one
4
<PAGE>
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 5,000 shares of Common Stock on November 4, 1998 at an exercise price
of $9.81 per share and 5,000 shares of Common Stock on November 3, 1999 at an
exercise price of $10.00 per share. Mr. Bradford was granted options to
purchase 5,000 shares of Common Stock on November 4, 1998 at an exercise price
of $9.81 per share and 5,000 shares of Common Stock on November 3, 1999 at an
exercise price of $10.00 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 and 5,000 shares of Common Stock on November 3, 1999 at an
exercise price of $10.00 per share. Mr. Aragona was granted an option to
purchase 5,000 shares of Common Stock on November 3, 1999 at an exercise price
of $10.00 per share. Pursuant to the Automatic Option Grant Program, each of
Messrs. Boucher, Bradford, Carter and 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.
Recommendation of the Board of Directors
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES LISTED HEREIN.
5
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STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of June 30, 2000, 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, 2000 (1) (2)
------------------------------
Number of Percentage of
Beneficial Owner Shares Class
---------------- --------- -------------
<S> <C> <C>
Firsthand Capital Management................... 2,303,600 14.57%
125 South Market
Suite 1200
San Jose, CA 95113-2206
Douglas C. Woodward (3)........................ 1,499,592 9.49%
P.O. Box 2019
Austin, TX 78758
Ron R. Harris (4).............................. 1,305,816 8.26%
James R. Offerdahl (5)......................... 248,647 *
David Dunnigan................................. -- *
Ramon Acosta (6)............................... 33,000 *
John Farr (7).................................. 64,250 *
Marcus D. Marshall (8)......................... 81,750 *
Casey G.A. Leaman.............................. 81,250 *
Nancy R. Woodward (9).......................... 1,499,592 9.49%
Joseph C. Aragona.............................. 72,527 *
David A. Boucher (10).......................... 1,678 *
David R. Bradford (11)......................... 11,250 *
Shelby H. Carter, Jr. (12)..................... 11,250 *
All current directors and executive officers as
a group (12 persons) (13)..................... 3,266,010 20.66%
</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. Unless otherwise specified,
each beneficial owners address shall be 12365 Riata Trace Parkway,
Building II, Austin, Texas 78727.
(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, 2000.
(3) Includes 182,660 shares held by Northern Trust Bank of Texas N.A. as
trustee of Douglas C. Woodward Grantor Retained Annuity Trust.
(4) Includes options exercisable into 1,305,816 shares of Common Stock.
6
<PAGE>
(5) Includes options exercisable into 62,499 shares of Common Stock. 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 18,750 shares of Common Stock. Includes
1,875 shares of Common Stock that are subject to the Company's repurchase
right which lapses in increments over time.
(7) Includes options exercisable into 10,500 shares of Common Stock. Includes
5,000 shares of Common Stock that are subject to the Company's repurchase
right which lapses in increments over time.
(8) Includes options exercisable into 35,000 shares of Common Stock.
(9) Includes 182,660 shares held by Northern Trust Bank of Texas N.A. as
trustee of Nancy R. Woodward Grantor Retained Annuity Trust.
(10) Includes options exercisable into 1,250 shares of Common Stock.
(11) Includes options exercisable into 11,250 shares of Common Stock.
(12) Includes options exercisable into 8,750 shares of Common Stock.
(13) Includes options exercisable into 1,436,315 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 2000 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 not paid for the 2000 fiscal year
pursuant to the bonus plan; however, discretionary bonuses were granted to
certain employees by the Committee based on individual performance.
Long-Term Incentive Compensation. During fiscal 2000, 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
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<PAGE>
commences employment. Thereafter, option grants may be made at varying times
and in varying amounts at 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 Mr. Dunnigan in connection with his
commencement of employment with the Company and in connection with his
promotion during fiscal 2000.
The 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 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
January 13, 2000. The Committee's decision was made primarily on the basis of
Mr. Harris' performance of his duties.
The remaining components of the Chief Executive Officer's 2000 fiscal year
incentive compensation were entirely dependent upon the Company's financial
performance and provided no dollar guarantees. No option grant was made to the
Chief Executive Officer during the 2000 fiscal year, principally due to
Mr. Harris' significant stock holdings derived from options granted in 1995.
Mr. Harris did not receive a bonus for the 2000 fiscal year pursuant to the
bonus plan.
The members of the Compensation Committee for the fiscal year ending June
30, 2000 were Mr. Aragona, Mr. Carter and Ms. Woodward.
Compensation Committee
Joseph C. Aragona
Shelby H. Carter, Jr.
Nancy R. Woodward
8
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Company's Board was formed in March 1997,
and the current 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 2000, 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, except
that Mr. Harris serves on the board of directors of Exterprise, Inc. and Mr.
Carter is the chairman of the board of directors of Exterprise, Inc.
9
<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 and June 30, 2000
with the cumulative total return of (i) the Nasdaq National Market Composite
Index and (ii) the Chase H&Q Computer Software Index (the "Chase 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 Chase 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 Chase H&Q, 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 Chase H&Q Computer Software Index
[GRAPH]
*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 12/31/99 6/30/00
--------- -------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Pervasive Software
Inc.................... $100.00 $65.91 $ 94.32 $175.00 $226.14 $153.98 $ 51.14
Nasdaq National Market
Composite Index........ 100.00 93.84 112.84 132.23 162.47 245.95 240.00
Chase H&Q Computer
Software Index......... 100.00 92.57 124.56 120.93 137.96 275.14 256.33
</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, 2000, by our chief executive officer
and the four other most highly compensated officers whose salary and bonus for
the 2000 fiscal year were in excess of $100,000 plus additional officers who
ceased employment during the fiscal year. ("Named Officers").
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Long-Term
Compensation Compensation
---------------- ------------
Awards
Securities All Other
Name and Principal Fiscal Salary Underlying Compensation
Position Year (1) Bonus Options (#) (2)
------------------ ------ -------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Ron R. Harris............ 2000 $223,077 -- -- $ 371
President, Chief
Executive Officer and
Director 1999 191,505 $28,500 -- 966
1998 165,851 -- -- 690
James R. Offerdahl....... 2000 193,846 6,750 -- 405
Chief Operating Officer,
Chief Financial Officer 1999 166,172 41,255 150,000 526
and Secretary 1998 153,000 -- 50,000 486
David Dunnigan (3)....... 2000 80,822 59,231(4) 200,000 72,658
Senior Vice President,
Sales and Marketing
Ramon Acosta (5)......... 2000 149,231 5,250 -- 298
Former Vice President,
Engineering 1999 129,947 35,891 65,000 340
1998 111,876 -- 5,000 221
John Farr................ 2000 133,846 9,162 -- 259
Vice President, Finance 1999 114,923 32,253 20,000 220
1998 96,000 1,417 10,500 187
Marcus D. Marshall (6)... 2000 160,991 6,000 -- 493
Former Vice President,
Customer Engineering 1999 156,304 38,129 70,000 804
1998 133,481 -- 20,000 739
Casey G.A. Leaman (7).... 2000 171,638 38,047(4) -- 459
Former Vice President,
Worldwide Sales 1999 136,681 105,728(4) 45,000 1,162
1998 124,500 102,165(4) 50,000 21,116
</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
1998, and Mr. Dunnigan's compensation includes $72,462 in relocation
expenses in 2000.
(3) Mr. Dunnigan commenced employment with the Company on November 5, 1999.
(4) Represents sales commissions.
(5) Mr. Acosta terminated employment with the Company on July 28, 2000.
(6) Mr. Marshall terminated employment with the Company on June 12, 2000.
(7) Mr. Leaman terminated employment with the Company on January 1, 2000.
11
<PAGE>
Option Grants in Last Fiscal Year
The following table contains information concerning the stock option grants
made in the fiscal year ended June 30, 2000, to the Named Officers. No stock
appreciation rights were granted to these individuals during such year.
<TABLE>
<CAPTION>
Individual Grants Potential Realizable
--------------------------------------------- Value at Assumed
Number of % of Total Annual Rates of Stock
Securities Options Price Appreciation for
Underlying Granted To Exercise Option Terms (4)
Options Employees in Price per Expiration -----------------------
Name Granted (1) 2000 (2) Share (3) Date 5% ($) 10% ($)
---- ----------- ------------ --------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Ron R. Harris........... -- -- -- -- -- --
James R. Offerdahl...... -- -- -- -- -- --
David R. Dunnigan....... 100,000 5% $9.875 11/4/09 621,033 1,573,812
100,000 5% $ 7.00 4/25/10 440,226 1,115,620
Ramon Acosta............ -- -- -- -- -- --
John Farr............... -- -- -- -- -- --
Casey G.A. Leaman....... -- -- -- -- -- --
Marcus D. Marshall...... -- -- -- -- -- --
</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 2,056,475 options granted in fiscal 2000.
(3) The exercise price may be paid in cash or through a cashless exercise
procedure. The Company may also finance the option exercise by loaning
the optionee sufficient funds to pay the exercise price for the purchased
shares, together with any federal and state income tax liability incurred
by the optionee in connection with such exercise. The plan administrator
has the discretionary authority to reprice the options through the
cancellation of those options and the grant of replacement options with
an exercise price based on the fair market value of the option shares on
the regrant date. The options have a maximum term of 10 years measured
from the option grant date, subject to earlier termination in the event
of the optionee's cessation of service with the Company.
(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 exercise of
options by the Named Officers in the 2000 fiscal year and the fiscal year-end
number and value of unexercised options with respect to the Named Officers. No
stock appreciation rights were exercised by these individuals in fiscal 2000
or were outstanding at the end of that year.
<TABLE>
<CAPTION>
Number of
Securities Underlying Value of Unexercised
Unexercised Options in-the-Money Options at
Shares at June 30, 2000 (#) (1) June 30, 2000(2)
Acquired on Value ------------------------- -------------------------
Name Exercise Realized ($) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Ron R. Harris........... 30,000 $659,548 1,305,816 -- $7,214,633 --
James R. Offerdahl...... -- -- 62,499 137,501 -- --
David Dunnigan.......... -- -- -- 200,000 -- --
Ramon Acosta (3)........ -- -- 18,750 51,250 -- --
John Farr............... -- -- 10,500 20,000 -- --
Casey G.A. Leaman (4)... 31,250 328,344 -- -- -- --
Marcus D. Marshall (5).. -- -- 35,000 65,000 -- --
</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, 2000, the repurchase right had lapsed as to
all 1,305,816 unexercised option shares for Mr. Harris, 7,500 option
shares for Mr. Marshall. Messrs. Offerdahl, Dunnigan, Acosta, Farr 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, 2000) ($5.625 per share), as reported on the Nasdaq National
Market.
(3) Mr. Acosta terminated his employment with Pervasive on July 28, 2000. All
unexercised, exercisable options will terminate on October 28, 2000 unless
exercised by Mr. Acosta prior to that date. All unexercised, unexercisable
options terminated on July 28, 2000.
(4) Mr. Leaman terminated his employment with Pervasive on January 1, 2000.
All unexercised options have been terminated.
(5) Mr. Marshall terminated his employment with Pervasive on June 12, 2000.
All unexercised, exercisable options terminated on September 12, 2000. All
unexercised, unexercisable options terminated on June 12, 2000.
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 OF THE 1997 STOCK INCENTIVE PLAN
The stockholders are being asked to approve an amendment to the Pervasive
Software Inc. 1997 Stock Incentive Plan (the "Incentive Plan") to increase the
number of shares issuable thereunder automatically, on an annual basis,
beginning July 1, 2001 and ending on July 1, 2003, by the number of shares
equal to the lesser of 5% of the number of shares of Common Stock outstanding
on June 30 of such year, or 1,000,000 shares. The Company believes that equity
awards under the Incentive Plan play an important role in the Company's
efforts to attract, employ and retain employees, directors and consultants of
outstanding ability. Accordingly, the Board is recommending an automatic
annual increase to the number of shares available under the Incentive Plan.
All other provisions of the Incentive Plan are not affected by the amendment.
The Board approved the amendment to the Incentive Plan that is the subject of
this Proposal No. 2 on September 20, 2000. If the stockholders do not approve
the amendment to the Incentive Plan, the Incentive Plan will continue in
effect in accordance with its current terms.
The Incentive Plan is intended to benefit the Company as well as its
stockholders and employees. The Incentive Plan gives the Company the
discretion to grant options or awards to employees, directors and independent
consultants. The Company believes that the stockholders will correspondingly
benefit from the increased interest on the part of employees, directors and
consultants in the profitability of the Company. Finally, the Company will
benefit from the periodic investments of equity capital provided by
participants in the Incentive Plan.
The Incentive Plan was adopted by the Board on July 18, 1997 and approved
by the stockholders on August 22, 1997 as the successor to the 1994 Incentive
Plan ("1994 Incentive Plan"). The following summary of certain Incentive Plan
provisions is qualified, in its entirety, by reference to the Incentive Plan.
Copies of the Incentive Plan document may be obtained by a stockholder upon
written request to the Secretary of the Company at the executive offices in
Austin, Texas.
Purpose. The purpose of the Incentive Plan is to provide the employees,
officers, directors and independent consultants, at the discretion of the plan
administrator, grants of options or awards of shares of Common Stock, and to
provide non-employee members of the Board of Directors automatic option
grants.
Structure. The Incentive Plan is divided into three separate components:
(i) the Discretionary Option Grant Program under which eligible individuals
may, at the discretion of the plan administrator, be granted options to
purchase shares of Common Stock at an exercise price per share not less than
85% of fair market value on the grant date; (ii) the Stock Issuance Program
under which eligible individuals may, in the plan administrator's discretion,
be issued shares of Common Stock directly, through the purchase of such shares
at a price per share not less than 85% of fair market value at the time of
issuance or as a fully-paid bonus for services rendered the Company; and (iii)
the Automatic Option Grant Program under which option grants are automatically
made at periodic intervals to eligible non-employee Board members to purchase
shares of Common Stock at an exercise price equal to the fair market value of
the option shares on the grant date.
Administration. The Compensation Committee of the Board, which is comprised
of two (2) or more Board members, administers the Incentive Plan. Committee
members serve for such period of time as the Board may determine. The
Incentive Plan may also be administered with respect to optionees who are not
executive officers subject to the short-swing profit rules of the federal
securities laws by the Board or a secondary committee comprised of one or more
Board members.
The Committee (or Board or secondary committee to the extent acting as plan
administrator) has full authority (subject to the express provisions of the
Incentive Plan) to determine (i) with respect to the option grants under the
Discretionary Option Grant Program, which eligible persons are to receive
option grants, the time or times when such option grants are to be made, the
number of shares to be covered by each such grant,
14
<PAGE>
the status of the granted option as either an incentive stock option
("Incentive Option") that satisfies the requirements of Section 422 of the
Internal Revenue Code (the "Code") or a non-statutory option not intended to
meet such requirements , the time or times at which each option is to become
exercisable, the vesting schedule (if any) applicable to the option shares and
the maximum term for which the option is to remain outstanding and (ii) with
respect to stock issuances under the Stock Issuance Program, which eligible
persons are to receive stock issuances, the time or times when such issuances
are to be made, the number of shares to be issued to each participant, the
vesting schedule (if any) applicable to the issued shares and the
consideration to be paid by the participant for such shares.
Shares and Terms. The maximum number of shares of Common Stock that may be
issued over the term of the Incentive Plan shall not exceed 6,178,858 shares.
This number includes the number of shares of Common Stock by which the
Incentive Plan's share reserve was automatically increased on July 1 of each
of the calendar years 1998, 1999, and 2000, which was an amount equal to the
lesser of five percent (5%) of the shares of Common Stock outstanding on June
30 of that year, or 1,000,000 shares.
No one person participating in the Incentive Plan may receive options and
direct stock issuances for more than 500,000 shares of Common Stock per
calendar year.
Common Stock subject to a terminated option or award, and Common Stock
previously issued under an option or award which are subsequently repurchased
by the Company, shall be available for future options or awards.
Eligibility. Employees (including officers) and consultants who render
services to the Company or its subsidiary corporations (whether now existing
or subsequently established) are eligible to receive option grants and SARs
under the Discretionary Option Grant Program, and share issuances under the
Stock Issuance Program. A non-employee member of the Board or of the board of
directors of any parent or subsidiary corporation of the Company is also
eligible for option grants or SARs under the Discretionary Option Grant
Program, the Stock Issuance Program, and the Automatic Option Grant Program.
Approximately 224 individuals (including 8 officers) were eligible to be
granted options or awards under the Incentive Plan as of September 30, 2000.
Discretionary Option Grant Program
Price and Exercisability. The option exercise price per share in the case
of an option that qualifies as an incentive stock option under section 422 of
the Internal Revenue Code ("Incentive Option") may not be less than one
hundred percent (100%) of the fair market value of the Common Stock on the
grant date. The option exercise price per share in the case of a non-statutory
option, may not be less than eighty-five percent (85%) of the fair market
value of the Common Stock on the grant date. Options granted under the
Discretionary Option Grant Program become exercisable at such time or times
and during such period as the Committee may determine and set forth in the
instrument evidencing the option grant.
The exercise price may be paid in cash or in shares of Common Stock.
Options may also be exercised through a same-day sale program, pursuant to
which a designated brokerage firm is to effect the immediate sale of the
shares purchased under the option and pay over to the Company, out of the sale
proceeds on the settlement date, sufficient funds to cover the exercise price
for the purchased shares plus all applicable withholding taxes. The Committee
may also assist any optionee (including an officer or director) in the
exercise of his or her outstanding options by (a) authorizing a Company loan
to the optionee or (b) permitting the optionee to pay the exercise price in
installments over a period of years. The terms and conditions of any such loan
or installment payment will be established by the Committee in its sole
discretion. The Committee has the discretionary authority to reprice options
through the cancellation of those options and the grant of replacement options
with an exercise price based on the fair market value of the option shares on
the regrant date.
No optionee is to have any stockholder rights with respect to the option
shares until the optionee has exercised the option, paid the exercise price
and become a holder of record of the shares. Options are not assignable or
transferable other than by will or the laws of descent and distribution, and
during the optionee's lifetime, the option may be exercised only by the
optionee.
15
<PAGE>
Termination of Service. Any option held by the optionee at the time of
cessation of service will not remain exercisable beyond the designated post-
service exercise period. Under no circumstances, however, may any option be
exercised after the specified expiration date of the option term. Each such
option will normally, during such limited period, be exercisable only to the
extent of the number of shares of Common Stock in which the optionee is vested
at the time of cessation of service. The Committee has complete discretion to
extend the period following the optionee's cessation of service during which
his or her outstanding options may be exercised and/or to accelerate the
exercisability of such options in whole or in part. Such discretion may be
exercised at any time while the options remain outstanding, whether before or
after the optionee's actual cessation of service.
The shares of Common Stock acquired upon the exercise of one or more
options may be subject to repurchase by the Company at the original exercise
price paid per share upon the optionee's cessation of service prior to vesting
in such shares. The Committee has complete discretion in establishing the
vesting schedule to be in effect for any such unvested shares and may cancel
the Company's outstanding repurchase rights with respect to those shares at
any time, thereby accelerating the vesting of the shares subject to the
canceled rights.
Incentive Options. Incentive Options may only be granted to individuals who
are employees of the Company or its parent or a subsidiary corporation. During
any calendar year, the aggregate fair market value (determined as of the grant
date(s)) of the Common Stock for which one or more options granted to any
employee under the Incentive Plan (or any other Incentive Plan of the Company
or its parent or subsidiary corporations) may for the first time become
exercisable as incentive stock options under Section 422 of the Code, shall
not exceed $100,000.
Stock Appreciation Rights. One or more eligible individuals may, at the
discretion of the Committee, be granted stock appreciation rights in tandem
with their option grants under the Incentive Plan. Tandem stock appreciation
rights provide the holders with the right to surrender their options for an
appreciation distribution from the Company equal in amount to the excess of
(a) the fair market value of the vested shares of Common Stock subject to the
surrendered option over (b) the aggregate exercise price payable for such
shares. An appreciation distribution may, at the discretion of the Committee,
be made in cash or in shares of Common Stock.
Stock Issuance Program. Shares may be sold under the Stock Issuance Program
at a price per share not less than eighty-five percent (85%) of fair market
value, payable in cash or through a promissory note payable to the Company.
Shares may also be issued solely as a bonus for past services.
The issued shares may either be immediately vested upon issuance or subject
to a vesting schedule tied to the performance of service or the attainment of
performance goals. The Committee will, however, have the discretionary
authority at any time to accelerate the vesting of any and all unvested shares
outstanding under the Incentive Plan.
Automatic Option Grant Program. Under the Automatic Option Grant Program,
each individual who first joined the Board as a non-employee director on or
after the effective date of the 1997 Incentive Plan receives 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
December 31, 1997, each non-employee director, whether or not he or she is
standing for re-election at that particular meeting, is granted a stock option
to purchase 5,000 shares of Common Stock. The optionee vests 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
has 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) an acquisition of the Company by merger,
consolidation or asset sale or (iii) the death or disability of the optionee
while serving as a Board member.
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
16
<PAGE>
to the class and maximum number of shares subject to the Incentive Plan, to
the class and maximum number of shares for which the share reserve is to
increase automatically each year, to the class and maximum number of shares
for which any one person may be granted options over the term of the Incentive
Plan, the class and number of shares for which automatic option grants are to
be made, and the class and number of shares and exercise price per share
subject to outstanding options in order to prevent the dilution or enlargement
of benefits thereunder.
Amendment and Termination. The Incentive 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 Plan shall have been
issued or (iii) a Corporate Transaction, unless the Incentive Plan is earlier
terminated by the Board in its discretion. The Board may at any time alter,
amend, suspend or discontinue the Incentive Plan. The approval of the
stockholders will be obtained as to any share increase and to the extent
required by applicable law.
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 option or award outstanding at that time under the
Incentive Plan will accelerate so that each option or award shall vest or the
repurchase right shall lapse for an additional number of shares of Common
Stock as if the optionee or participant had been in the service of the Company
for an additional 12 months. In addition, each option or repurchase right
outstanding at the time of a Corporate Transaction will accelerate or lapse in
full to the extent the option or repurchase right is not assumed by the
successor corporation (or parent) or to the extent the option or award is not
replaced with a comparable option to purchase shares of the capital stock of
the successor corporation (or parent). Immediately following the consummation
of the Corporate Transaction, all outstanding options will terminate and cease
to be exercisable, and all repurchase rights shall lapse, except to the extent
assumed by the successor corporation.
Any options that are assumed or replaced in the Corporate Transaction and
do not otherwise accelerate at that time, shall automatically accelerate (and
any of the Company's outstanding repurchase rights as to options and awards
that do not otherwise terminate at the time of the Corporate Transaction shall
automatically terminate and the shares of Common Stock subject to those
terminated rights shall immediately vest in full) in the event the optionee's
service should subsequently terminate by reason of an involuntary termination
within twelve (12) months following the effective date of such Corporate
Transaction. Involuntary termination includes discharge without cause and
certain voluntary resignations following a reduction in compensation or
responsibility or a relocation. In addition, the Incentive Plan administrator
has the discretion to accelerate the vesting of options.
New Plan Benefits. Because the Incentive Plan is discretionary, benefits to
be received by individual optionees are not determinable, except for automatic
grants made to non-employee directors, as discussed above. The table below
shows, as to each of the executive officers named in the Summary Compensation
Table and the various indicated groups, (i) the number of shares of Common
Stock for which options have been granted under the Incentive Plan, for the
one (1)-year period ended June 30, 2000 and (ii) the weighted average exercise
price per share. No direct stock issuances have been made under the Incentive
Plan to date.
<TABLE>
<CAPTION>
Weighted
Number Of Average Exercise
Option Price Of
Name And Position Shares Granted Options
----------------- --------- ----------------
<S> <C> <C>
Ron R. Harris................................... -- --
James R. Offerdahl.............................. -- --
David R. Dunnigan............................... 200,000 8.44
John Farr....................................... -- --
Executive Group................................. 200,000 8.44
Non-Executive Director Group.................... 20,000 10.00
Non-Executive Officer Employee Group............ 1,856,475 9.16
</TABLE>
17
<PAGE>
Federal Income Tax Consequences of Options Granted under the Incentive Plan
Options granted under the Incentive Plan may be either incentive stock
options that satisfy the requirements of Section 422 of the Code or non-
statutory options that are not intended to meet such requirements. The federal
income tax treatment for the two types of options differs as follows:
Incentive Stock Options. No taxable income is recognized by the optionee at
the time of the option grant, and no taxable income is generally recognized at
the time the option is exercised. However, the excess of the fair market value
of the purchased shares on the exercise date over the exercise price paid for
the shares generally is includable in alternative minimum taxable income. The
optionee will recognize taxable income in the year in which the purchased
shares are sold or otherwise made the subject of disposition.
For federal tax purposes, dispositions are divided into two categories: (i)
qualifying and (ii) disqualifying. The optionee will make a qualifying
disposition of the purchased shares if the sale or other disposition of such
shares is made after the optionee has held the shares for more than two (2)
years after the grant date of the option and more than one (1) year after the
exercise date. If the optionee fails to satisfy either of these two holding
periods prior to the sale or other disposition of the purchased shares, then a
disqualifying disposition will result.
Upon a qualifying disposition of the shares, the optionee will recognize
long-term capital gain in an amount equal to the excess of (i) the amount
realized upon the sale or other disposition of the purchased shares over (ii)
the exercise price paid for such shares. If there is a disqualifying
disposition of the shares, then the excess of (i) the fair market value of
those shares on the date the option was exercised over (ii) the exercise price
paid for the shares will be taxable as ordinary income. Any additional gain
recognized upon the disposition will be a capital gain.
If the optionee 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 excess of (i) the fair
market value of such shares on the date the option was exercised over (ii) the
exercise price paid for the shares. In no other instance will the Company be
allowed a deduction with respect to the optionee's disposition of the
purchased shares. The Company anticipates that any compensation deemed paid by
the Company upon one or more disqualifying dispositions of incentive stock
option shares by the Company's executive officers will remain deductible by
the Company and will not have to be taken into account for purposes of the $1
million limitation per covered individual on the deductibility of the
compensation paid to certain executive officers of the Company.
Non-Statutory Options. No taxable income is recognized by an optionee upon
the grant of a non-statutory option. The optionee will in general recognize
ordinary income in the year in which the option is exercised equal to the
excess of the fair market value of the purchased shares on the exercise date
over the exercise price paid for the shares, and the optionee will be required
to satisfy the tax withholding requirements applicable to such income.
Special provisions of the Internal Revenue Code apply to the acquisition of
Common Stock under a non-statutory option if the purchased shares are subject
to repurchase by the Company. These special provisions may be summarized as
follows:
(i) If the shares acquired upon exercise of the non-statutory option are
subject to repurchase by the Company at the original exercise price in
the event of the optionee's termination of service prior to vesting in
such shares, the optionee will not recognize any taxable income at the
time of exercise but will have to report as ordinary income, as and
when the Company's repurchase right lapses, an amount equal to the
excess of (a) the fair market value of the shares on the date such
repurchase right lapses with respect to such shares over (b) the
exercise price paid for the shares.
(ii) The optionee may, however, elect under Section 83(b) of the Internal
Revenue Code to include as ordinary income in the year of exercise of
the non-statutory option an amount equal to the excess of (a) the fair
market value of the purchased shares on the exercise date (determined
as if the shares were
18
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not subject to the Company's repurchase right) over (b) the exercise
price paid for such shares. If the Section 83(b) election is made, the
optionee will not recognize any additional income as and when the
repurchase right lapses.
The Company will be entitled to a business expense deduction equal to the
amount of ordinary income recognized by the optionee with respect to the
exercised non-statutory option. The deduction will in general be allowed for
the taxable year of the Company in which such ordinary income is recognized by
the optionee. The Company anticipates that the compensation deemed paid by the
Company upon the exercise of non-statutory options with exercise prices equal
to the fair market value of the option shares on the grant date will remain
deductible by the Company and will not have to be taken into account for
purposes of the $1 million limitation per covered individual on the
deductibility of the compensation paid to certain executive officers of the
Company.
Stock Appreciation Rights. An optionee who is granted a stock appreciation
right will recognize ordinary income in the year of exercise equal to the
amount of the appreciation distribution. The Company will be entitled to a
business expense deduction equal to the appreciation distribution for the
taxable year of the Company in which the ordinary income is recognized by the
optionee.
Stock Issuances. The tax principles applicable to direct stock issuances
under the Incentive Plan will be substantially the same as those summarized
above for the exercise of non-statutory option grants.
Recommendation of the Board of Directors
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE
AMENDMENT TO THE COMPANY'S 1997 STOCK INCENTIVE PLAN.
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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, 2001. 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, 2000. 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, 2001.
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 2000
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 2000
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.
20
<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 2000, 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 2001 ANNUAL MEETING
Stockholder proposals that are intended to be presented at the 2001 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 August 8, 2001, 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 23, 2000
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.
21
<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 9, 2000
The undersigned holder of Common Stock, par value $0.001, 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 Thursday, November 9, 2000 at 9:00 a.m. local time, at
The Renaissance Hotel-Arboretum, 9721 Arboretum Boulevard, 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.
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)
PERVASIVE SOFTWARE INC.
1. To elect the following directors to serve for a term ending upon the 2003
Annual Meeting of Stockholders or until their successors are elected and
qualified:
NOMINEES: Ron R. Harris and David A. Boucher
[_] FOR[_] WITHHELD[_] For all nominees, except for nominees written below.
--------------------------------------------------------------------------------
Nominee exception(s).
2. To approve the amendment to the Company's Stock Incentive 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, 2001.
[_] FOR[_] AGAINST[_] ABSTAIN
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: _____________________________________
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 fiducia-
ry, please give full title as
such. When signing as a corpora-
tion, please sign in full corpo-
rate name by President or other
authorized officer. When signing
as a partnership, please sign in
partnership name by an authorized
person.
