<PAGE> 1
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
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
KOFAX IMAGE PRODUCTS, INC.
................................................................................
(Name of Registrant as Specified In Its Charter)
KOFAX IMAGE PRODUCTS, INC.
................................................................................
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2)
or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] 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:
....................................................................
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11.*
....................................................................
4) Proposed maximum aggregate value of transaction:
....................................................................
*Set forth the amount on which the filing fee is calculated and state
how it was determined.
[ ] Fee previously paid by written preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount previously paid:
....................................................................
2) Form, Schedule or Registration Statement No.:
....................................................................
3) Filing Party:
....................................................................
4) Date Filed:
....................................................................
Notes:
<PAGE> 2
[LOGO]
KOFAX IMAGE PRODUCTS, INC.
3 JENNER STREET
IRVINE, CA 92618
(949) 727-1733
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
--------------------
TO BE HELD NOVEMBER 17, 1998
The 1998 Annual Meeting of Stockholders of Kofax Image Products, Inc.
(the "Company") will be held at the Company's headquarters, 3 Jenner Street,
Irvine, California, on Tuesday, November 17, 1998, beginning at 10:00 A.M. local
time, for the following purposes:
(1) To elect the following six (6) directors to serve until the
next Annual Meeting of Stockholders or until their successors
are elected and qualified:
David S. Silver Dean A. Hough Alexander P. Cilento
William E. Drobish David C. Seigle B. Allen Lay
(2) To ratify the appointment of Deloitte & Touche LLP as
independent auditors of the Company for the fiscal year ending
June 30, 1999; and
(3) To transact such other business as may properly come before
the meeting or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only Stockholders of record at the close of business on October 2,
1998, are entitled to notice of and to vote at the meeting or any adjournment or
postponement thereof.
By Order of the Board of Directors,
David S. Silver
President and Chief Executive Officer
Irvine, California
October 15, 1998
YOUR VOTE IS IMPORTANT. THEREFORE, WHETHER OR NOT YOU PLAN TO ATTEND
THE MEETING YOU SHOULD COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY. Any
Stockholder present at the meeting may withdraw his or her proxy and vote
personally on each matter brought before the meeting. Stockholders attending the
meeting whose shares are held in the name of a broker or other nominee who
desire to vote their shares at the meeting should bring with them a proxy or
letter from that firm confirming their ownership of shares.
<PAGE> 3
KOFAX IMAGE PRODUCTS, INC.
3 JENNER STREET
IRVINE, CALIFORNIA 92618
---------------
PROXY STATEMENT
---------------
INTRODUCTION
This Proxy Statement is being furnished in connection with the
solicitation of proxies by the Board of Directors of Kofax Image Products, Inc.,
a Delaware corporation (the "Company"), for use at its 1998 Annual Meeting of
Stockholders ("Annual Meeting") to be held at the Company's headquarters at 3
Jenner Street, Irvine, California 92618, on Tuesday, November 17, 1998 at 10:00
A.M., local time, and any and all adjournments thereof. These proxy materials
are being mailed on or about October 15, 1998, to all holders of the Company's
Common Stock of record as of October 2, 1998. It is contemplated that this
solicitation of proxies will be made primarily by mail; however, if it should
appear desirable to do so in order to ensure adequate representation at the
meeting, directors, officers and employees of the Company may communicate with
stockholders, brokerage houses and others by telephone, telegraph or in person
to request that proxies be furnished and may reimburse banks, brokerage houses,
custodians, nominees and fiduciaries for their reasonable expenses in forwarding
proxy materials to the beneficial owners of the shares held by them. All
expenses incurred in connection with this solicitation shall be borne by the
Company.
Holders of shares of Common Stock of the Company ("stockholders") who
execute proxies retain the right to revoke them at any time before they are
voted. Any proxy given by a stockholder may be revoked or superseded by
executing a later dated proxy, by giving notice of revocation to the Secretary,
Kofax Image Products, Inc., 3 Jenner Street, Irvine, California 92618 in writing
prior to or at the meeting or by attending the meeting and voting in person. A
proxy, when executed and not so revoked, will be voted in accordance with the
instructions given in the proxy. If a choice is not specified in the proxy, the
proxy will be voted "FOR" the nominees for election of directors named in this
Proxy Statement, "FOR" the ratification of Deloitte & Touche LLP as the
Company's independent auditors and as to any other matter that may be properly
brought before the Annual Meeting, in accordance with the judgment of the proxy
holder.
VOTING SECURITIES
The shares of Common Stock, $0.001 par value, constitute the only
outstanding class of voting securities of the Company. Only the stockholders of
the Company of record as of the close of business on October 2, 1998 (the
"Record Date") will be entitled to vote at the meeting or any adjournment or
postponement thereof. As of the Record Date, there were 5,300,027 shares of
Common Stock outstanding and entitled to vote. No shares of the Company's
preferred stock, $0.001 par value, were outstanding. A majority of shares
entitled to vote represented in person or by proxy will constitute a quorum at
the meeting. Each stockholder is entitled to one vote for each share of Common
Stock held as of the Record Date. Abstentions and broker non-votes are each
included in the determination of the number of shares present and voting for the
purpose of determining whether a quorum is present. Abstentions will be treated
as shares present and entitled to vote for purposes of any matter requiring the
affirmative vote of a majority or other proportion of the shares present and
entitled to vote. With respect to shares relating to any proxy as to which a
broker non-vote is indicated on a proposal, those shares will not be considered
present and entitled to vote with respect to any such proposal. Abstentions or
broker non-votes or other failures to vote will have no effect in the election
of directors, who will be elected by a plurality of the affirmative votes cast.
With respect to any matter brought before the Annual Meeting requiring the
affirmative vote of a majority or other proportion of the outstanding shares, an
abstention or broker non-vote will have the same effect as a vote against the
matter being voted upon.
-2-
<PAGE> 4
PROPOSAL ONE
ELECTION OF DIRECTORS
Currently, there are seven (7) members of the Board of Directors. The
Board has approved a reduction in the number of directors from seven (7) to six
(6) to be effective on November 17, 1998, at which time the Board will also
accept the resignation of Clifford L. Haas as a director of the Company.
Directors are elected at each annual stockholders' meeting to hold office until
the next annual meeting or until their successors are elected and qualified.
Unless otherwise instructed, the proxy holders named in the enclosed proxy will
vote the proxies received by them for the six (6) nominees named below. David S.
Silver, Dean A. Hough, William E. Drobish, Alexander P. Cilento, David C. Seigle
and B. Allen Lay are presently directors of the Company.
If any nominee becomes unavailable for any reason before the election,
the enclosed proxy will be voted for the election of such substitute nominee or
nominees, if any, as shall be designated by the Board of Directors. The Board of
Directors has no reason to believe that any of the nominees will be unavailable
to serve.
Under Delaware law, the six (6) nominees receiving the highest number
of votes will be elected as directors at the annual meeting. As a result,
proxies voted to "Withhold Authority," which will be counted, and broker
non-votes which will not be counted, will have no practical effect.
The names and certain information concerning the six (6) nominees for
election as directors are set forth below. THE BOARD OF DIRECTORS RECOMMENDS
THAT YOU VOTE "FOR" THE ELECTION OF EACH OF THE NOMINEES NAMED BELOW.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- --------------------------------- ------- ------------------------------------------------------------
<S> <C> <C>
David S. Silver 40 Chairman of the Board, President and Chief Executive Officer
Dean A. Hough 40 Vice President Engineering and Director
David C. Seigle 58 Director
Alexander P. Cilento 49 Director
William E. Drobish 59 Director
B. Allen Lay 64 Director
</TABLE>
DAVID S. SILVER co-founded the Company in August 1985 and has served as
President and Chief Executive Officer and a director of the Company since its
inception. From 1982 to 1985, Mr. Silver was employed by FileNet Corporation, a
manufacturer of document image processing systems, as a member of the
development team for the FileNet imaging system. Prior to 1982, Mr. Silver held
various engineering positions with MAI Basic Four Corporation, a manufacturer of
computer equipment and associated application software programs.
DEAN A. HOUGH co-founded the Company in August 1985 and has served as a
Vice President and a Director of the Company since that time. From 1983 to 1985,
Mr. Hough was employed by FileNet Corporation, where he participated in the
development of a variety of the imaging components of the FileNet imaging
system. Prior to 1983, Mr. Hough held various design and engineering positions
with MAI Basic Four Corporation and Scientific Atlanta, a manufacturer of
scientific instruments and equipment.
DAVID C. SEIGLE has been a member of the Company's Board of Directors
since 1992. From 1996 to 1998, Mr. Seigle was president of Technology's Edge, a
franchisor of technology integrators. From 1992 to 1996 Mr. Seigle was a
consultant and private investor. From 1982 to 1991, Mr. Seigle was employed by
FileNet Corporation in various positions, including Senior Vice President of
International Operations from 1987 to 1991. Mr. Seigle is currently a director
of Interface Systems, Inc., a manufacturer and distributor of computer
peripherals and software.
-3-
<PAGE> 5
ALEXANDER P. CILENTO has been a member of the Company's Board of
Directors since 1986. Since 1991, Mr. Cilento has been a General Partner of
Aspen Venture Partners, a private venture capital investment partnership. From
1985 through 1991, Mr. Cilento was employed by 3i Securities Corporation, a
venture capital investment firm, where he served as Vice President.
WILLIAM E. DROBISH has been a member of the Company's Board of
Directors since 1986. Since 1998, Dr. Drobish has been President of Ditrans, a
developer of digital transceivers for the wireless industry and since 1984 an
instructor at the University of California, Irvine's Extension Program. Dr.
Drobish was a founder, Vice President, director and Secretary of Silicon
Systems, Inc., a manufacturer of integrated circuits. Until it was acquired in
January 1998, Dr. Drobish was also a director of Technology Modeling Associates,
Inc., a provider of physical simulation software to support integrated circuit
design and manufacturing.
B. ALLEN LAY has been a member of the Company's Board of Directors
since 1990. Since 1982, Mr. Lay has been a general partner of Southern
California Ventures, a private venture capital investment partnership. Mr. Lay
also serves as a director of the following public companies: PairGain
Technologies, Inc., a provider of telecommunications products; and ViaSat, Inc.,
a provider of wireless telecommunications products.
OTHER EXECUTIVE OFFICERS
RICHARD M. MURPHY, 52, joined the Company as a Vice President, Sales in
November 1989. From 1984 to 1989, Mr. Murphy held various sales management
positions with Emulex Corporation, a manufacturer of computer storage,
communications, graphics and peripheral products, where he served as Vice
President, Domestic Sales from September 1987 to January 1989 and as Vice
President, North American Sales from January 1989 to November 1989. Prior to
1984, Mr. Murphy held various sales positions with Hamilton-Avnet Electronics,
Kierulff Electronics and Telefile Computer Products.
RONALD J. FIKERT, 50, joined the Company as Vice President, Finance in
February 1990. From March 1989 to February 1990, Mr. Fikert worked as an
independent management consultant. From 1984 to 1989, Mr. Fikert was employed by
General Monitors, a manufacturer of sensing, monitoring and detection equipment,
where he served as Controller. From 1979 to 1984, he was employed by Modular
Command Systems, a manufacturer of electronic communications hardware and
software, as Vice President, Finance and Secretary. Prior to joining Modular
Command Systems, Mr. Fikert was Director of Finance for Esterline Electronics, a
manufacturer of electronic products, and was an accountant with Arthur Andersen
& Co. Mr. Fikert is a Certified Public Accountant.
KEVIN DRUM, 39, joined the Company in November 1992 and was promoted to
Vice President, Marketing in July 1995. Prior to that time, his positions with
the Company included Director of Marketing and Senior Product Manager. From 1984
to 1992, Mr. Drum was employed by Emulex Corporation, where he served as a
senior product manager from 1988 to 1992.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company did not enter into any transactions with its executive
officers, directors and principal stockholders during the period from July 1,
1997 to the date of this proxy.
-4-
<PAGE> 6
BOARD MEETINGS AND ATTENDANCE
The Board of Directors of the Company held a total of seven (7)
meetings during the fiscal year ended June 30, 1998. Each incumbent Director
attended at least seventy-five percent (75%) of the aggregate of the number of
meetings of the Board and the number of meetings held by all committees of the
Board on which he served. There are no family relationships between any
director, executive officer or person nominated or chosen by the Company to
become a director or executive officer.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has a Compensation Committee and an Audit
Committee. The functions of the Compensation Committee include advising the
Company on salaries and incentive compensation for employees of, and consultants
to, the Company. The Compensation Committee, which currently consists of Messrs.
Haas, Lay and Seigle, held one (1) meeting during the fiscal year ended June 30,
1998, with 100% attendance. The Audit Committee is responsible for recommending
to the Board of Directors the appointment of the Company's outside auditors,
examining the results of audits and reviewing internal accounting controls. The
Audit Committee, which consists of Messrs. Cilento, Drobish and Seigle, held one
(1) meeting during the fiscal year ended June 30, 1998, with 100% attendance.
The Board of Directors does not have a nominating committee. Instead, the Board
of Directors, as a whole, identifies and screens candidates for membership on
the Company's Board of Directors.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth compensation received for the fiscal
years ended June 30, 1998, 1997 and 1996 by the Company's Chief Executive
Officer and its other most highly compensated executive officers (collectively,
the "Named Executive Officers") whose aggregate salary and bonus exceeded
$100,000 for the fiscal year ended June 30, 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------------------------------------
NAME AND FISCAL YEAR OTHER ANNUAL
PRINCIPAL POSITION ENDING JUNE 30 SALARY($) BONUS($) COMPENSATION($)(1)
- ------------------------- -------------- --------- --------- ------------------
<S> <C> <C> <C> <C>
David S. Silver 1998 $145,000 $59,458 $750
President and Chief 1997 135,000 64,893 750
Executive Officer 1996 135,000 48,456 --
Dean A. Hough 1998 118,000 19,806 750
Vice President - 1997 114,078 21,083 750
Engineering 1996 107,621 15,672 --
Ronald J. Fikert 1998 109,000 23,250 750
Vice President - Finance, 1997 103,843 23,908 750
Chief Financial Officer 1996 98,898 21,298 --
and Secretary
Richard Murphy 1998 104,000 60,405(2) 750
Vice President - Sales 1997 100,000 76,761(2) 750
1996 90,000 53,872(2) --
Kevin Drum 1998 109,000 21,528 750
Vice President - 1997 102,290 22,295 750
Marketing 1996 96,500 15,980 --
</TABLE>
- ----------
(1) Consists of matching payments made under the Company's 401(k) Plan
(2) Includes $43,547, $59,895 and $37,927 in sales commissions earned by
Mr. Murphy during fiscal years 1998, 1997 and 1996, respectively.
-5-
<PAGE> 7
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table provides information on the value of unexercised
in-the-money options held by the Named Executive Officers as of June 30, 1998.
<TABLE>
<CAPTION>
SHARES
ACQUIRED ON VALUE NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN-THE-MONEY
NAME EXERCISE(#) REALIZED($) OPTIONS AT JUNE 30, 1998 OPTIONS AT JUNE 30, 1998
- ------------------ ----------- ----------- ---------------------------- ---------------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
David S. Silver -- -- -- -- -- --
Dean A. Hough -- -- -- -- -- --
Ronald F. Fikert -- -- 3,750 1,250 $ 14,775.00 $ 4,925.00
Richard M. Murphy -- -- -- -- -- --
Kevin Drum 25,625 $239,062.50 1,875 7,500 7,387.50 34,300.00
</TABLE>
The Company did not grant any options to purchase shares of the
Company's Common Stock to any of its officers during the fiscal year ended June
30, 1998.
COMPENSATION OF DIRECTORS
1997 Stock Option Plan for Non-Employee Directors. Pursuant to the
Company's 1997 Stock Option Plan for Non-Employee Directors, as amended, each
non-employee director receives an initial grant of options to purchase 10,000
shares of the Company's Common Stock upon commencement of service as a director
which option vests and becomes exercisable at a rate of twenty five percent per
year over the four year period following the grant date. In addition, upon each
anniversary of the initial grant of options during a non-employee director's
term of office, such non-employee director shall receive an additional option
covering 2,500 shares of the Company's Common Stock, with the same vesting
schedule as the initial grant. The exercise price of options granted under this
plan is 100% of the fair market value on the date of grant. During the fiscal
year ended June 30, 1998, options were granted to each of Messrs. Drobish,
Seigle, Lay, Haas and Cilento to purchase 10,000 shares of the Company's Common
Stock.
Director Fees. On July 1, 1998, the Company's Board of Directors
approved the payment of the following fees to non-employee directors for
attendance at meetings of the Board of Directors, the Annual Meeting of
Stockholders and committee meetings: $1,250 for each scheduled meeting of the
Board of Directors attended, $1,000 for the Annual Meeting of Stockholders and
$750 plus travel expenses for each committee meeting that is not scheduled on
the same day as a meeting of the Board of Directors. No fees to non-employee
directors were paid in the fiscal year ended June 30, 1998 pursuant to this
resolution.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES ACT OF 1934
Based upon its review of the copies of reporting forms furnished to the
Company, the Company believes that all filing requirements under Section 16(a)
of the Securities Exchange Act of 1934 applicable to its directors, officers,
and any persons holding ten percent or more of the Company's Common Stock with
respect to the Company's fiscal year ended June 30, 1998, were satisfied.
-6-
<PAGE> 8
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of Common Stock of the Company as of August 31, 1998, as to
(a) all directors, (b) the Named Executive Officers identified in the Summary
Compensation Table located at page 5, (c) all directors and executive officers
as a group, and (d) each person known to the Company to be the beneficial owner
of more than 5% of the Company's voting securities. Except as otherwise
indicated, the Company believes, based on information furnished by such owners,
that the beneficial owners of the Common Stock have sole investment and voting
power with respect to such shares, subject to applicable community property
laws.
<TABLE>
<CAPTION>
Amount and Nature of Beneficial
Name and Address of Beneficial Owners Ownership(1) Percent
- ------------------------------------------------- -------------------------------- --------------
<S> <C> <C>
Aspen Venture Partners(2)........................ 690,596 13.13%
1000 Fremont Avenue, Suite V
Los Altos, CA 94024
Sigma Partners
Sigma Associates(3)......................... 355,086 6.75
2884 Sand Hill Road, Suite 121
Menlo Park, CA 94025
Wellington Management Company, LLP............... 520,000 9.88
75 State Street
Boston, Massachusetts 02109
William E. Drobish(4)(5)......................... 122,500 2.33
David S. Silver.................................. 350,000 6.65
3 Jenner Street
Irvine, CA 92618
Dean A. Hough.................................... 360,137 6.84
3 Jenner Street
Irvine, CA 92618
David C. Seigle(4)............................... 12,500 *
Ronald J. Fikert(6).............................. 41,250 *
Kevin Drum....................................... 32,500 *
Richard Murphy................................... 50,000 *
Alexander P. Cilento(4)(7)....................... 693,096 13.17
c/o Aspen Venture Partners, L.P.
1000 Fremont Avenue, Suite V
Los Altos, CA 94024
Clifford L. Haas(4)(8)........................... 357,586 6.8
c/o Sigma Partners
Sigma Associates
2884 Sand Hill Road, Suite 121
Menlo Park, CA 94025
B. Allen Lay(4)(9)............................... 92,407 1.76
c/o Southern California Ventures
406 Amapola Avenue, Suite 205
Torrance, CA 90501
All executive officers and directors as a group (10
persons)(10)(11)............................ 2,111,976 40.14
</TABLE>
* Less than 1%
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of Common Stock subject
to options currently exercisable, or exercisable within 60 days of the date
hereof, are deemed outstanding for computing the percentage of the person
holding such options but are not deemed outstanding for computing the
percentage of any other person. Except as indicated by footnote and subject
to community property laws where
-7-
<PAGE> 9
applicable, the persons 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) Alexander P. Cilento is a General Partner of Aspen Venture Partners, L.P.
and, accordingly, may be deemed to beneficially own such shares. Mr.
Cilento disclaims beneficial ownership of the shares owned by Aspen Venture
Partners, L.P., except to the extent of his pecuniary interest therein.
(3) Includes shares beneficially owned by Sigma Partners and Sigma Associates.
Each such entity disclaims beneficial ownership of the shares held by the
other entity.
(4) Includes 2,500 shares of Common Stock subject to options exercisable within
60 days from the date hereof.
(5) Consists of shares held by the Drobish Family Trust, dated November 12,
1980. Mr. Drobish disclaims beneficial ownership of the shares owned by the
Drobish Family Trust, dated November 12, 1980, except to the extent of his
pecuniary interest therein.
(6) Includes 3,750 shares of Common Stock subject to options exercisable within
60 days from the date hereof. Also includes 37,500 shares held by the
Fikert Family Trust, dated June 30, 1986. Mr. Fikert disclaims beneficial
ownership of the shares owned by the Fikert Family Trust, dated June 30,
1986, except to the extent of his pecuniary interest therein.
(7) Includes 690,596 shares owned by Aspen Venture Partners, L.P., of which Mr.
Cilento is a General Partner. Mr. Cilento disclaims beneficial ownership of
the shares held by Aspen Venture Partners, L.P. except to the extent of his
pecuniary interest arising from this partnership interest in Aspen Venture
Partners, L.P.
(8) Includes 355,086 shares owned by Sigma Partners and Sigma Associates, of
which Mr. Haas is a General Partner. Mr. Haas disclaims beneficial
ownership of the shares held by Sigma Partners and Sigma Associates except
to the extent of his pecuniary interest arising from this partnership
interest in each entity.
(9) Includes 42,806 shares owned by Southern California Ventures, 45,101 shares
owned by Lay Ventures and 2,000 shares owned by the Lay Charitable
Remainder Trust. Mr. Lay, a director of the Company, is a General Partner
of Southern California Ventures, a limited partner of Lay Ventures and a
trustee of Lay Charitable Remainder Trust. Mr. Lay disclaims beneficial
ownership of the shares held by Southern California Ventures and Lay
Ventures except to the extent of his pecuniary interest arising from this
partnership interest in Southern California Ventures and his limited
partnership interest in Lay Ventures.
(10) Includes all shares owned of record by Aspen Venture Partners, L.P., Sigma
Partners, Sigma Associates, Southern California Ventures and Lay Ventures,
as to which the respective affiliated directors disclaim beneficial
ownership.
(11) Includes 12,500 shares of Common Stock subject to options exercisable
within 60 days from the date hereof.
-8-
<PAGE> 10
REPORT OF THE COMPENSATION COMMITTEE
The following report is submitted by the Compensation Committee of the
Board of Directors with respect to the executive compensation policies
established by the Compensation Committee and recommended to the Board of
Directors and compensation paid or awarded to executive officers for the fiscal
year ended June 30, 1998.
The Compensation Committee determines the annual salary, bonus and
other benefits, including incentive compensation awards, of the Company's senior
management and recommends new employee benefit plans and changes to existing
plans to the Company's Board of Directors. The Compensation Committee met one
(1) time in the fiscal year ended June 30, 1998 and is presently comprised
entirely of directors who are not, and were not formerly, officers or employees
of the Company.
COMPENSATION POLICIES AND OBJECTIVES
In establishing and evaluating the effectiveness of compensation
programs for executive officers, as well as other employees of the Company, the
Compensation Committee is guided by three basic principles:
- The Company must offer competitive salaries to be able to
attract and retain highly-qualified and experienced executives
and other management personnel.
- Annual executive compensation in excess of base salaries
should be tied to individual and Company performance.
- The financial interests of the Company's executive officers
should be aligned with the financial interest of the
stockholders, primarily through stock option grants which
reward executives for improvements in the market performance
of the Company's Common Stock.
Salaries and Employee Benefit Programs. In order to retain executives
and other key employees, and to be able to attract additional well-qualified
executives when the need arises, the Company strives to offer salaries, and
health care and other employee benefit programs, to its executives and other key
employees that are comparable to those offered to persons with similar skills
and responsibilities by competing businesses in the local geographic area.
In recommending salaries for executive officers, the Compensation
Committee (i) reviews the historical performance of the executives and (ii)
informally reviews available information, including information published in
secondary sources, regarding prevailing salaries and compensation programs
offered by competing businesses that are comparable to the Company in terms of
size, revenue, financial performance and industry group. Some, though not all,
of these competing businesses, that have securities which are publicly traded,
are included in the Peer Group Index used in the Stock Performance Graph on page
12 of this Proxy Statement. Another factor which is considered in recommending
salaries of executive officers is the cost of living in Southern California
where the Company is headquartered, as such cost generally is higher than in
other parts of the country.
Performance-Based Compensation. The Board of Directors believes that
the motivation of executives and key employees increases as the market value of
the Company's Common Stock increases. Nevertheless, the Company provides a merit
bonus in cash or stock options to executives and key employees which is
dependent on the Company's achievements and the direct contributions made by
each executive and other key employees. Accordingly, at the beginning of each
fiscal year, the Company establishes short term and long term plans, and at the
end of the fiscal year, the collective and individual contributions of the
executives to the Company's achievements are evaluated. Cash bonuses are awarded
based on revenue and earnings performance for the fiscal year, and achievement
of management's business objectives.
The earnings goal is established on the basis of the annual operating
plan developed by management and approved by the Board of Directors. The annual
operating plan, which is designed to maximize profitability within the
constraints of economic and competitive conditions, some of which are outside
the control of the Company, is developed on the basis of (i) the Company's
performance for the prior fiscal year; (ii) estimates of sales revenue for the
plan year based upon recent market conditions, trends and competition and other
factors which, based on historical experience, are expected to affect the level
of sales that can be achieved; (iii) historical operating costs and cost savings
that management believes can be realized; (iv) competitive conditions faced by
the Company; and (v) additional expenditures beyond prior fiscal years in
expansion or research and development toward growth of the Company's
-9-
<PAGE> 11
business in future fiscal years. By taking all of these factors into account,
including market conditions, the revenue and earnings goals in the annual
operating plan are determined.
In certain instances, bonuses are awarded not only on the basis of the
Company's overall profitability, but also on the achievement by an executive of
specific objectives within his or her area of responsibility. For example, a
bonus may be awarded for any executive's efforts in achieving greater than
anticipated cost savings, or completing a new product on target.
As a result of this performance-based merit bonus program, executive
compensation, and the proportion of each executive's total cash compensation
that is represented by incentive or bonus income, may increase in those years in
which the Company's profitability increases.
Stock Options and Equity-Based Programs. In order to align the
financial interests of executive officers and other key employees with those of
the stockholders, the Company grants stock options to its executive officers and
other key employees on a periodic basis, taking into account the size and terms
of previous grants of equity-based compensation and stock holdings in
determining awards. Stock option grants, in particular, reward executive
officers and other key employees for performance that results in increases in
the market price of the Company's Common Stock, which directly benefit all
stockholders. Moreover, the Compensation Committee generally has followed the
practice of granting options on terms which provide that the options become
exercisable in cumulative annual installments, generally over a three to
five-year period. The Compensation Committee believes that this feature of the
option grants not only provides an incentive for executive officers to remain in
the employ of the Company, but also makes longer term growth in share prices
important for the executives who receive stock options.
FISCAL YEAR ENDED JUNE 30, 1998 COMPENSATION
The salaries of the Named Executive Officers increased slightly over
the salaries paid in the fiscal year ended June 30, 1997 as a result of cost of
living increases.
The Company is required to disclose its policy regarding qualifying
executive compensation deductibility under Section 162(m) of the Internal
Revenue Code of 1986, as amended, which provides that, for purposes of the
regular income tax and the alternative minimum tax, the otherwise allowable
deduction for compensation paid or accrued with respect to a covered employee of
a public corporation is limited to no more than $1 million per year. It is not
expected that the compensation to be paid to the Company's executive officers
for the fiscal year June 30, 1999 will exceed the $1 million limit per officer.
The Company's 1992 Amended and Restated Stock Option, Nonqualified Stock Option
and Restricted Stock Purchase Plan and the Company's 1996 Incentive Stock
Option, Nonqualified Stock Option and Restricted Stock Purchase Plan are
structured so that any compensation deemed paid to an executive officer when he
exercises an outstanding option under the plan, with an exercise price equal to
the fair market value of the option shares on the grant date, will qualify as
performance-based compensation that will not be subject to the $1 million
limitation.
The Compensation Committee of the
Board of Directors
Clifford L. Haas
B. Allen Lay
David C. Seigle
Notwithstanding anything to the contrary set forth in the Company's
previous filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, that might incorporate future filings,
including this Proxy Statement, in whole or in part, the foregoing Report and
the performance graph on page 12 shall not be incorporated by reference into any
such filings.
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<PAGE> 12
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended June 30, 1998, the Company's Board of
Directors, based upon recommendations of the Compensation Committee, established
the levels of compensation for the Company's executive officers. David S.
Silver, the Chairman of the Board, President and Chief Executive Officer of the
Company participated in the deliberations of the Board regarding executive
compensation, but did not participate in the process or decisions of the Board
of Directors regarding his compensation.
-11-
<PAGE> 13
PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative stockholder
return on the Company's Common Stock with the cumulative total return of the
Russell 2000 Index and an industry peer group index for the period commencing
October 10, 1997, the date on which the Company's Common Stock first began
trading and was first registered under the Securities and Exchange Act of 1934,
as amended, and ended on June 30, 1998.
COMPARISON OF CUMULATIVE TOTAL RETURN*
AMONG KOFAX IMAGE PRODUCTS, INC.,
THE RUSSELL 2000 INDEX
AND AN INDUSTRY PEER GROUP INDEX
<TABLE>
<CAPTION>
10/10/97 6/30/98
-------- -------
<S> <C> <C>
KOFAX IMAGE PRODUCTS, INC. 100.00 58.52
PEER GROUP 100.00 119.98
RUSSELL 2000 100.00 103.38
</TABLE>
- ----------
* $100 INVESTED ON 10/10/97 IN STOCK OR ON 8/30/97 IN INDEX - INCLUDING
REINVESTMENT OF DIVIDENDS. FISCAL YEAR ENDING JUNE 30.
-12-
<PAGE> 14
PROPOSAL TWO
RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors has selected Deloitte & Touche LLP, independent
auditors, to audit the financial statements of the Company for the fiscal year
ending June 30, 1999, and recommends that stockholders vote for ratification of
such appointment. In the event of a negative vote on such ratification, the
Board of Directors will reconsider its selection.
Deloitte & Touche LLP has audited the Company's financial statements
annually since the fiscal year ended June 30, 1988. Its representatives are
expected to be present at the meeting with the opportunity to make a statement
if they desire to do so and are expected to be available to respond to
appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPOINTMENT OF
DELOITTE & TOUCHE LLP AS THE COMPANY'S AUDITORS.
STOCKHOLDER PROPOSALS
Any Stockholder desiring to submit a proposal for action at the 1999
Annual Meeting of Stockholders which is desired to be presented in the Company's
Proxy Statement with respect to such meeting should arrange for such proposal to
be delivered to the Company at its principal place of business no later than
July 20, 1999 in order to be considered for inclusion in the Company's proxy
statement relating to that meeting. Matters pertaining to such proposals,
including the number and length thereof, the eligibility of persons entitled to
have such proposals included and other aspects are regulated by the Securities
Exchange Act of 1934, Rules and Regulations of the Commission and other laws and
regulations to which interested persons should refer.
On May 21, 1998 the Securities and Exchange Commission adopted an
amendment to Rule 14a-4, as promulgated under the Securities and Exchange Act of
1934, as amended. The amendment to Rule 14a-4(c)(1) governs the Company's use of
its discretionary proxy voting authority with respect to a stockholder proposal
which is not addressed in the Company's proxy statement. The new amendment
provides that if a proponent of a proposal fails to notify the Company at least
45 days prior to the month and day of mailing of the prior year's proxy
statement, then the Company will be allowed to use its discretionary voting
authority when the proposal is raised at the meeting, without any discussion of
the matter in the proxy statement.
With respect to the Company's 1999 Annual Meeting of Stockholders, if
the Company is not provided notice of a stockholder proposal, which the
stockholder has not previously sought to include in the Company's proxy
statement, by August 31, 1999, the Company will be allowed to use its voting
authority as outlined.
-13-
<PAGE> 15
OTHER MATTERS
Management is not aware of any other matters to come before the
meeting. If any other matter not mentioned in this Proxy Statement is brought
before the meeting, the persons named in the enclosed form of proxy will have
discretionary authority to vote all proxies with respect thereto in accordance
with their judgment.
By Order of the Board of Directors
David S. Silver
Chairman of the Board, President and
Chief Executive Officer
October 15, 1998
The Annual Report to Stockholders of the Company for the fiscal year
ended June 30, 1998 is being mailed on October 15, 1998, concurrently with this
Proxy Statement to all Stockholders of record on October 2, 1998. The Annual
Report is not to be regarded as proxy soliciting material or as a communication
by means of which any solicitation is to be made.
COPIES OF THE COMPANY'S ANNUAL REPORT TO THE COMMISSION ON FORM 10-K
FOR THE FISCAL YEAR ENDED JUNE 30, 1998, WILL BE PROVIDED TO STOCKHOLDERS
WITHOUT CHARGE UPON WRITTEN REQUEST TO THE CHIEF FINANCIAL OFFICER, KOFAX IMAGE
PRODUCTS, INC., 3 JENNER STREET, IRVINE, CALIFORNIA 92618.
-14-
<PAGE> 16
PROXY KOFAX IMAGE PRODUCTS, INC. PROXY
PROXY SOLICITED BY THE BOARD OF DIRECTORS
ANNUAL MEETING OF THE STOCKHOLDERS -- NOVEMBER 17, 1998
The undersigned hereby nominates, constitutes and appoints David S. Silver
and Dean A. Hough, and each of them individually, the attorney, agent and proxy
of the undersigned, with full power of substitution, to vote all stock of KOFAX
IMAGE PRODUCTS, INC. which the undersigned is entitled to represent and vote at
the 1998 Annual Meeting of Stockholders of the Company to be held at the
headquarters of Kofax Image Products, Inc., 3 Jenner Street, Irvine, California,
on November 17, 1998, at 10:00 a.m., and at any and all adjournments or
postponements thereof, as fully as if the undersigned were present and voting at
the meeting, as follows:
THE DIRECTORS RECOMMEND A VOTE "FOR" ITEMS 1 AND 2
1. Election of Directors
<TABLE>
<S> <C>
[ ] FOR ALL nominees listed below [ ] WITHHOLD AUTHORITY to vote
(except as marked to the contrary below) for all nominees listed below
</TABLE>
Election of the following nominees as directors: David S. Silver, Dean A. Hough,
Alexander P. Cilento, B. Allen Lay, William E. Drobish and David C. Seigle.
(INSTRUCTIONS: To withhold authority to vote for any nominee, print that
nominee's name in the space provided below.)
- --------------------------------------------------------------------------------
2. Ratification of Deloitte & Touche LLP as independent auditors:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, on such other business as may properly come before the
meeting or any adjournment thereof.
IMPORTANT -- PLEASE SIGN AND DATE ON OTHER SIDE AND RETURN PROMPTLY
<PAGE> 17
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
STOCKHOLDER. WHERE NO DIRECTION IS GIVEN, SUCH SHARES WILL BE VOTED "FOR" THE
ELECTION OF THE DIRECTORS NAMED ON THE REVERSE SIDE OF THIS PROXY AND "FOR"
RATIFICATION OF DELOITTE & TOUCHE LLP AS INDEPENDENT AUDITORS.
Dated: , 1998
---------------------------
(Signature)
---------------------------
(Signature)
Please sign your name
exactly as it appears
hereon. Executors,
administrators, guardians,
officers of corporations
and others signing in a
fiduciary capacity should
state their full titles as
such.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE URGED TO SIGN AND RETURN
THIS PROXY, WHICH MAY BE REVOKED AT ANY TIME PRIOR TO ITS USE.
