<PAGE>
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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
VITRIA TECHNOLOGY, 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:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
VITRIA TECHNOLOGY, INC.
945 Stewart Drive
Sunnyvale, California 94086
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held on July 21, 2000
TO THE STOCKHOLDERS OF VITRIA TECHNOLOGY, INC.:
Notice Is Hereby Given that the 2000 Annual Meeting of Stockholders of
Vitria Technology, Inc., a Delaware corporation, will be held on Friday, July
21, 2000, at 2:00 p.m. local time at our principal executive offices at 945
Stewart Drive, Sunnyvale, California 94086, for the following purposes:
1. To elect two directors to hold office until the 2003 Annual Meeting of
Stockholders;
2. To approve an amendment to our amended and restated certificate of
incorporation to increase the authorized number of shares of Common
Stock from 250,000,000 shares to 600,000,000 shares;
3. To ratify the selection of Ernst & Young LLP as our independent
accountants for our fiscal year ending December 31, 2000; and
4. 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.
The board of directors has fixed the close of business on June 6, 2000, as
the record date for the determination of stockholders entitled to notice of
and to vote at this Annual Meeting and at any adjournment or postponement
thereof.
By Order of the board of directors
/s/ Paul R. Auvil, III
Paul R. Auvil, III
Chief Financial Officer and
Secretary
Sunnyvale, California
June 26, 2000
All stockholders are cordially invited to attend the meeting in person.
Whether or not you expect to attend the meeting, please complete, date, sign
and return the enclosed proxy as promptly as possible in order to ensure your
representation at the meeting. A return envelope (which is postage prepaid if
mailed in the United States) is enclosed for that purpose. Even if you have
given your proxy, you may still vote in person if you attend the meeting.
Please note, however, that if your shares are held of record by a broker, bank
or other nominee and you wish to vote at the meeting, you must obtain from the
record holder a proxy issued in your name.
<PAGE>
VITRIA TECHNOLOGY, INC.
945 Stewart Drive
Sunnyvale, California 94086
----------------
PROXY STATEMENT
----------------
FOR 2000 ANNUAL MEETING OF STOCKHOLDERS
July 21, 2000
INFORMATION CONCERNING SOLICITATION & VOTING
General
The enclosed proxy is solicited on behalf of the board of directors of
Vitria Technology, Inc., a Delaware corporation, for use at the Annual Meeting
of Stockholders to be held on Friday, July 21, 2000 at 2:00 p.m. local time,
or at any adjournment or postponement thereof, for the purposes set forth
herein and in the accompanying Notice of Annual Meeting. The Annual Meeting
will be held at our principal executive offices at 945 Stewart Drive,
Sunnyvale, California 94086. We intend to mail this proxy statement and
accompanying proxy card on or about June 26, 2000, to all stockholders
entitled to vote at the Annual Meeting.
Solicitation
We will bear the entire cost of solicitation of proxies, including
preparation, assembly, printing and mailing of this proxy statement, the proxy
and any additional information furnished to stockholders. Copies of
solicitation materials will be furnished to banks, brokerage houses,
fiduciaries and custodians holding in their names shares of common stock
beneficially owned by others to forward to such beneficial owners. We may
reimburse persons representing beneficial owners of Common Stock for their
costs of forwarding solicitation materials to such beneficial owners. Original
solicitation of proxies by mail may be supplemented by telephone, telegram or
personal solicitation by our directors, officers or other regular employees.
No additional compensation will be paid to our directors, officers or other
regular employees for such services.
Voting Rights and Outstanding Shares
Only holders of record of Common Stock at the close of business on June 6,
2000 will be entitled to notice of and to vote at the Annual Meeting. At the
close of business on June 6, 2000, we had outstanding and entitled to vote
127,429,068 shares of Common Stock.
Each holder of Common Stock on such date will be entitled to one vote for
each share held on all matters to be voted upon at the Annual Meeting.
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. Abstentions will be counted towards the
tabulation of votes cast on proposals presented to the stockholders and will
have the same effect as negative votes. Broker non-votes are counted towards a
quorum, but are not counted for any purpose in determining whether a matter
has been approved.
<PAGE>
Revocability of Proxies
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with our
Secretary at our principal executive offices at 945 Stewart Drive, Sunnyvale,
California 94086, a written notice of revocation or a duly executed proxy
bearing a later date, or it may be revoked by attending the meeting and voting
in person. Attendance at the meeting will not, by itself, revoke a proxy.
Stockholder Proposals
Pursuant to Rule 14a-8 of the Securities and Exchange Commission the
deadline for submitting a stockholder proposal for inclusion in our proxy
statement and form of proxy for our 2001 Annual Meeting of Stockholders is
January 17, 2001. Pursuant to our bylaws, stockholders who wish to bring
matters or propose nominees for director at our 2001 Annual Meeting of
Stockholders must provide specified information to us between February 17,
2001 and March 19, 2001. Stockholders are also advised to review our bylaws,
which contain additional requirements with respect to advance notice of
stockholder proposals and director nominations.
2
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
Our amended and restated certificate of incorporation and bylaws provide
that the board of directors shall be divided into three classes, each class
consisting, as nearly as possible, of one-third of the total number of
directors, with each class having a three-year term. Vacancies on the board
may be filled only by persons elected by a majority of the remaining
directors. A director elected by the board to fill a vacancy (including a
vacancy created by an increase in the board) shall serve for the remainder of
the full term of the class of directors in which the vacancy occurred and
until the director's successor is elected and qualified.
The board of directors is presently composed of five members. There are two
directors in the class whose term of office expires in 2000, of which both are
standing for re-election. The nominees for election to this class, M. Dale
Skeen, Ph.D. and William H. Younger, Jr., are currently members of our board
of directors. If elected at the Annual Meeting, each of Dr. Skeen and Mr.
Younger would serve until the 2003 Annual Meeting and until his successor is
elected and qualified, or until the earlier of his death, resignation or
removal.
Directors are elected by a plurality of the votes present in person or
represented by proxy and entitled to vote. Shares represented by executed
proxies will be voted, if authority to do so is not withheld, for the election
of the nominees named below. In the event that the nominee should be
unavailable for election as a result of an unexpected occurrence, such shares
will be voted for the election of such substitute nominee as management may
propose. Dr. Skeen and Mr. Younger have agreed to serve if elected, and we
have no reason to believe that they will be unable to serve.
Set forth below is biographical information for the nominees and each person
whose term of office as a director will continue after the Annual Meeting.
Nominees for Election for a Three-Year Term Expiring at the 2003 Annual
Meeting
M. Dale Skeen, Ph. D., co-founded Vitria in 1994 and has been our Chief
Technology Officer and a director since Vitria's inception. Prior to founding
Vitria, Dr. Skeen worked at TIBCO where he served as Chief Scientist from 1986
to 1994. Dr. Skeen was a research scientist at IBM's Almaden Research Center
from 1984 to 1986. Dr. Skeen was on the faculty at Cornell University from
1981 to 1984. Dr. Skeen holds a B.S. in Computer Science from North Carolina
State University and a Ph.D. in Computer Science on Distributed Database
Systems from the University of California, Berkeley.
William H. Younger, Jr., has been a Director since 1997. Mr. Younger is a
managing director and a general partner of Sutter Hill Ventures, a California
Limited Partnership, a venture capital firm, where he has been employed since
1981. Mr. Younger currently serves as a director of several privately-held
companies. Mr. Younger holds a B.S.E.E. degree from the University of Michigan
and an M.B.A. from Stanford University.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF EACH NAMED NOMINEE
3
<PAGE>
Directors Continuing in Office Until the 2001 Annual Meeting
Robert M. Halperin, has been a director since 1994. Mr. Halperin has been an
advisor to Greylock Management, a venture capital firm, since 1990. Mr.
Halperin was also Vice Chairman of the board of Raychem Corporation, a
materials science company, from 1990 to 1994, and previous to that served as
its President. Mr. Halperin is also a director of Avid Technology Inc., a
digital media systems company, theGlobe.com, an online community website
operator, as well as several privately-held companies. In addition, Mr.
Halperin serves on the board of directors of the Associates of Harvard
Business School, the Harvard Business School Publishing Co. and Stanford
Health Services and also is a Life Trustee of the University of Chicago. Mr.
Halperin holds a Ph.B. in Liberal Arts from the University of Chicago, a
Bachelor of Mechanical Engineering from Cornell University and an M.B.A. from
Harvard Business School.
John L. Walecka, has been a director since 1997. He is a founding partner of
Redpoint Ventures, a venture capital firm. Prior to founding Redpoint, Mr.
Walecka was a general partner with Brentwood Venture Capital, a venture
capital firm, since 1990 and was an associate there since 1984. Mr. Walecka is
also a director of Rhythms NetConnections, Inc., a provider of high speed
internet access. He holds a B.S. and M.S. in Engineering and an M.B.A. from
Stanford University.
Director Continuing in Office Until the 2002 Annual Meeting
JoMei Chang, Ph.D., co-founded Vitria in 1994 and has been our President,
Chief Executive Officer and a director since Vitria's inception. Prior to
founding Vitria, Dr. Chang was Vice President and General Manager, Trader
Workstation and General Manager, Emerging Technologies from 1986 to 1994 at
Teknekron Software Systems, now TIBCO, Inc., a software company. From 1984 to
1986 she served as a senior engineer in the Network File System group at Sun
Microsystems. Dr. Chang holds a B.S. in Computer Science from National
ChiaoTung University, Taiwan and a Ph.D. in Electrical Engineering on Database
Management Systems from Purdue University.
Board Committees and Meetings
During the fiscal year ended December 31, 1999, the board of directors held
nine meetings. The board has an Audit Committee and a Compensation Committee.
The Audit Committee reviews our internal accounting procedures and consults
with and reviews our internal accounting procedures and consults with and
reviews the services provided by our independent accountants. The Audit
Committee consists of our three directors: Messrs. Halperin, Walecka and
Younger. The Audit Committee was formed upon the effectiveness of our initial
public offering on September 16, 1999, and met once during 1999.
The Compensation Committee administers our stock option plans, reviews and
approves the compensation and benefits of all our officers, and establishes
and reviews general policies relating to compensation and benefits of our
employees. During 1999, the Compensation Committee consisted of two non-
employee directors: Messrs. Halperin and Younger. It met once during 1999.
During the fiscal year ended December 31, 1999, each board member attended
75% or more of the aggregate meetings of the board and of the committees on
which he or she served that were held during the period for which he or she
was a director or committee member, respectively.
4
<PAGE>
PROPOSAL 2
APPROVAL OF INCREASE IN NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The board of directors has adopted, subject to stockholder approval, an
amendment to our amended and restated certificate of incorporation to increase
our authorized number of shares of Common Stock from 250,000,000 shares to
600,000,000 shares. As amended, Article IV, Paragraph 1 of our amended and
restated certificate of incorporation shall read in its entirety as follows:
"This corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total
number of shares which the corporation is authorized to issue is six
hundred five million (605,000,000) shares. Six hundred million
(600,000,000) shares shall be Common Stock, each having a par value of one-
tenth of one cent ($.001). Five million (5,000,000) shares shall be
Preferred Stock, each having a par value of one-tenth of one cent ($.001)."
The additional Common Stock to be authorized by adoption of the amendment
would have rights identical to the currently outstanding Common Stock of
Vitria. Adoption of the amendment and issuance of the Common Stock would not
affect the rights of the holders of currently outstanding Common Stock, except
for effects incidental to increasing the number of shares of our Common Stock
outstanding, such as dilution of the earnings per share and voting rights of
current holders of Common Stock. If the amendment is adopted, it will become
effective upon filing of a certificate of amendment to our amended and
restated certificate of incorporation with the Secretary of State of the State
of Delaware.
In addition to the 127,429,068 shares of Common Stock outstanding at June 6,
2000, as of June 6, 2000, we have currently reserved 27,683,419 shares for
issuance upon exercise of options and rights under our stock option and stock
purchase plans.
Although at present the board of directors has no other plans to issue the
additional shares of Common Stock, it desires to have such shares available to
provide additional flexibility to use our capital stock for future business
and financial purposes. The additional shares may be used, without further
stockholder approval, for various purposes including, without limitation,
stock dividends to existing stockholders, raising capital, providing equity
incentives to employees, officers or directors, establishing certain strategic
relationships with other companies and expanding our business or product lines
through certain acquisitions of other businesses or products.
The additional shares of Common Stock that would become available for
issuance if this proposal were adopted could also be used by us to oppose a
hostile takeover attempt or delay or prevent changes in control of management.
For example, without further stockholder approval, the board could (1) adopt a
"poison pill" which would allow stockholders (other than the hostile parties)
to purchase our Common Stock at a discount to the then current market price,
which would have a dilutive effect on the hostile parties, or (2) sell shares
of Common Stock in a private transaction to purchasers who would oppose a
takeover or favor the current board. Although this proposal to increase the
authorized Common Stock has been prompted by business and financial
considerations and not by the threat of any known or threatened hostile
takeover attempt, stockholders should be aware that approval of this proposal
could facilitate future efforts by us to deter or prevent changes in our
control, including transactions in which the stockholders might otherwise
receive a premium for their shares over then current market prices.
The affirmative vote of the holders of a majority of the outstanding shares
of the Common Stock will be required to approve this amendment to our amended
and restated certificate of incorporation. As a result, abstentions and broker
non-votes will have the same effect as negative votes.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 2
5
<PAGE>
PROPOSAL 3
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The board has selected Ernst & Young LLP as our independent auditors for the
fiscal year ending December 31, 2000, and has further directed that management
submit the selection of independent auditors for ratification by the
stockholders at the Annual Meeting. PricewaterhouseCoopers LLP audited our
financial statements from our inception in October 1994 until the fiscal year
ended December 31, 1999. Representatives of PricewaterhouseCoopers LLP and
Ernst & Young LLP are expected to be present at the Annual Meeting, will have
an opportunity to make a statement if they so desire and will be available to
respond to appropriate questions.
Stockholder ratification of the selection of Ernst & Young LLP as our
independent auditors is not required by our bylaws or otherwise. However, the
board is submitting the selection of Ernst & Young LLP to the stockholders for
ratification as a matter of good corporate practice. If the stockholders fail
to ratify the selection, the Audit Committee and the board will reconsider
whether or not to retain that firm. Even if the selection is ratified, the
Audit Committee and the board in their discretion may direct the appointment
of different independent auditors at any time during the year if they
determine that such a change would be in our best interests and our
stockholders.
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy and entitled to vote at the Annual Meeting will
be required to ratify the selection of Ernst & Young LLP.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 3
6
<PAGE>
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table presents information regarding the beneficial ownership
of our common stock as of May 31, 2000 by:
. each director and nominee for director;
. each of the executive officers named in the Summary Compensation Table;
. all executive officers, directors and nominees as a group; and
. all those known by us to be beneficial owners of more than five percent
of our common stock.
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. Beneficial ownership also includes shares of
Common Stock subject to options currently exercisable within 60 days of May
31, 2000. These shares are not deemed outstanding for purposes of computing
the percentage ownership of each other person. Percentage of beneficial
ownership is based on 127,429,068 shares of our Common Stock outstanding as of
May 31, 2000. Unless otherwise indicated, the address of each of the
individuals and entities listed below is c/o Vitria Technology, Inc., 945
Stewart Drive, Sunnyvale, California 94086.
<TABLE>
<CAPTION>
Shares Beneficially Owned
(Including the Number of
Shares Issuable Shares Subject to Shares Shown in the First
Pursuant to Options Repurchase by Column)
Exercisable Within Vitria Within -----------------------------
Name and Address of 60 days of 60 days of
Beneficial Owner May 31, 2000 May 31, 2000 Number Percent
------------------- ------------------- ----------------- --------------- -------------
<S> <C> <C> <C> <C>
Directors and Executive
Officers
JoMei Chang, Ph.D.(1)... 340,000 -- 18,422,348 14.42%
M. Dale Skeen,
Ph.D.(1)............... 300,000 -- 23,111,340 18.09
William H. Younger,
Jr.(2)................. 80,000 -- 2,285,614 1.79
John L. Walecka(3)...... 80,000 -- 10,555,940 8.28
Robert M. Halperin(4)... 80,000 -- 5,304,540 4.16
Jay W. Shiveley, III.... 1,600,000 -- 3,057,857 2.37
Paul R. Auvil, III...... 180,000 586,617 1,187,826 *
Aleksander E.
Osadzinski............. 890,000 93,000 1,313,400 1.02
All directors and
executive officers as a
group (10 persons)..... 4,750,000 679,617 66,438,865 50.26
5% Stockholders
The Chang Family trust,
Michael W. Taylor,
Trustee(5)............. -- -- 8,979,740 7.05
Entities affiliated with
Brentwood Venture
Capital................ -- -- 10,475,940 8.22%
</TABLE>
--------
* Represents beneficial ownership of less than 1% of the outstanding shares
of our commons stock.
(1) Includes 1,666,676 shares held by Skeen/Chang Investments, L.P., of which
Drs. JoMei Chang and M. Dale Skeen are general partners.
(2) Includes 1,107,590 shares held by Sutter Hill Ventures, a California
Limited Partnership, 34,004 shares held by Sutter Hill Ventures
Entrepreneurs Fund (AI), L.P., 86,104 shares held by Sutter Hill Ventures
Entrepreneurs Fund (QP), L.P., and 977,916 shares held by William H.
Younger, Jr., Trustee, The Younger Living Trust. Mr. Younger is a general
partner of Sutter Hill Ventures and disclaims beneficial ownership of the
shares held by Sutter Hill Ventures, Sutter Hill Entrepreneurs Fund (AI),
L.P., and Sutter Hill Entrepreneurs Fund (QP), L.P., except to the extent
of his proportionate partnership interest therein. Entities affiliated
with Sutter Hill Ventures are located at 755 Page Mill Road, Suite A-200,
Palo Alto, CA 94304.
(3) Includes 10,056,902 shares held by Brentwood Associates VIII, L.P. and
419,038 shares held by Brentwood Affiliates Fund, L.P. Mr. Walecka is a
general partner of Brentwood Venture Capital and disclaims beneficial
ownership of the shares held by these entities except to the extent of his
proportionate partnership interest therein. Entities affiliated with
Brentwood Venture Capital are located at 3000 Sand Hill Road, Building 2,
Suite 290, Menlo Park, CA 94025.
(4) Includes 1,982,808 shares held by Mr. Halperin's children for which he has
power of attorney but as to which he does not have dispositive power over
and disclaims beneficial ownership of the shares held by his children.
Excludes 660,928 shares held in trust for Mr. Halperin's grandchildren.
Mr. Halperin does not have voting or dispositive power over and disclaims
beneficial ownership of the shares held by his grandchildren's trust.
(5) The Chang Family Trust is a trust for the benefit of family members of Dr.
JoMei Chang. Dr. Chang does not have voting or dispositive power over and
disclaims beneficial ownership of the shares held by the trust.
7
<PAGE>
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires our directors
and executive officers, and persons who own more than ten percent of a
registered class of our equity securities, to file with the SEC initial
reports of ownership and reports of changes in ownership of Common Stock and
other of our equity securities. Officers, directors and greater than ten
percent stockholders are required by SEC regulation to furnish us with copies
of all Section 16(a) forms they file.
To our knowledge, based solely on a review of the copies of such reports
furnished to us and written representations that no other reports were
required, during the fiscal year ended December 31, 1999, all Section 16(a)
filing requirements applicable to directors, our executive officers, and
greater than ten percent beneficial owners were complied with; except that one
report, covering one transaction for the purchase of 1,000 shares of Common
Stock, was filed late by Mr. Frank Yu, our Vice President, Engineering.
EXECUTIVE COMPENSATION
Compensation of Directors
Directors do not receive any cash compensation for their services as members
of the board of directors, although they are reimbursed for expenses incurred
in connection with attendance at board and committee meetings. From time to
time, non-employee directors of ours have received grants of nonstatutory
stock options under our 1999 Equity Incentive Plan. In August 1999, each of
Messrs. Halperin, Walecka and Younger were granted an option to purchase
80,000 shares of our Common Stock at an exercise price of $2.50 per share.
As of June 6, 2000, the 1999 Equity Incentive Plan includes 22,050,718
shares reserved for issuance, less shares issued or issuable under Vitria's
1998 Executive Incentive Plan. On December 31 of each year for 10 years,
starting with the year 1999, the number of shares in this reserve shared by
the incentive plan and the executive plan will automatically increase by 6.5%
of the outstanding Common Stock on a fully-diluted basis. However, no more
than 16,000,000 shares may be used for incentive stock options under both the
executive plan and the incentive plan. The board may grant incentive stock
options that qualify under Section 422 of the Internal Revenue Code, to
employees, including officers, of Vitria or an affiliate of Vitria. The board
may grant nonstatutory stock options, stock bonuses, restricted stock purchase
awards and stock appreciation rights to employees, including officers,
directors of and consultants to Vitria or an affiliate of Vitria. The maximum
option term is 10 years. The board may provide for exercise periods of any
length in individual option grants, subject to limitations. However, generally
an option terminates three months after the optionholder's service terminates.
If the termination is due to the optionholder's disability, the exercise
period generally is extended to 12 months. If the termination is due to the
optionholder's death or if the optionholder dies within three months after his
or her service terminates, the exercise period generally is extended to 18
months following death. Upon a change in control of Vitria, the surviving
entity will either assume or substitute outstanding awards under the incentive
plan. Otherwise, the vesting and exercisability of awards generally will
accelerate.
8
<PAGE>
Compensation of Executive Officers
The following table sets forth summary information concerning the
compensation earned by our Chief Executive Officer and four most highly
compensated executive officers during the years ended December 31, 1998 and
December 31, 1999.
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
------------------------ ------------
Securities
Fiscal Underlying Other
Name and Principal Position Year Salary Bonus Options Compensation
--------------------------- ------ -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
JoMei Chang, Ph.D.(1)....... 1999 $225,338 $200,000 1,700,000 --
President and Chief
Executive Officer 1998 175,000 75,000 -- --
M. Dale Skeen, Ph.D.(2)..... 1999 200,272 175,000 1,500,000 --
Chief Technology Officer 1998 150,000 60,000 -- --
Jay W. Shiveley, III(3)..... 1999 150,147 450,000 200,000 --
Senior Vice President,
Worldwide Sales 1998 140,000 210,000 600,000 --
Aleksander E.
Osadzinski(4).............. 1999 185,219 25,000 140,000 --
Vice President, Marketing 1998 39,965 5,400 1,200,000 --
Paul R. Auvil, III(5)....... 1999 185,960 52,500 200,000 --
Vice President, Finance, 1998 130,517 37,500 1,000,000 --
Chief Financial Officer and
Secretary
</TABLE>
--------
(1) Dr. Chang's 1999 salary figure includes $90,000 in non-qualified deferred
compensation. Dr. Chang's 1998 salary figure includes $9,798 in non-
qualified deferred compensation. Dr. Chang's 1999 bonus figure represents
$200,000 paid in 2000.
(2) Dr. Skeen's 1999 salary figure includes $80,109 in non-qualified deferred
compensation. Dr. Skeen's 1998 salary figure includes $8,592 in non-
qualified deferred compensation. Dr. Skeen's 1999 bonus figure represents
$175,000 paid in 2000.
(3) Mr. Shiveley's 1999 bonus figure represents $450,000 paid in 1999 and 2000
for overall performance and sales revenue growth.
(4) Mr. Osadzinski joined Vitria in October 1998. His annualized 1998 salary
was $185,000. Mr. Osadzinski's 1999 bonus figure represents $25,000 paid
in 2000.
(5) Mr. Auvil joined Vitria in April 1998. His annualized 1998 salary was
$160,000. Mr. Auvil's 1998 salary figure includes a $4,302 payment for
reimbursement of relocation expenses. Mr. Auvil's 1999 bonus figure
represents $52,500 paid in 2000.
9
<PAGE>
Stock Option Grants and Exercises
Option Grants in 1999
The following table presents each grant of stock options during 1999 to each
of the individuals listed in the Summary Compensation Table. The exercise
price of each option was equal to the fair market value of our Common Stock as
valued by the board of directors on the date of grant. The exercise price may
be paid in cash, in shares of our Common Stock valued at fair market value on
the exercise date or through a cashless exercise procedure involving a same-
day sale of the purchased shares.
The potential realizable value is calculated based on the ten-year term of
the option at the time of grant. Stock price appreciation of 5% and 10% is
assumed pursuant to rules promulgated by the Securities and Exchange
Commission and does not represent our prediction of our stock price
performance. The potential realizable values at 5% and 10% appreciation are
calculated by:
. multiplying the number of shares of common stock subject to a given
option by the initial public offering price of $4.00 per share.
. assuming that the aggregate stock value derived from that calculation
compounds at the annual 5% or 10% rate shown in the table until the
expiration of the options; and
. subtracting from that result the aggregate option exercise price.
The shares listed in the following table under "Number of Securities
Underlying Options Granted" are subject to vesting. Upon completion of 12
months of service from the vesting start date, 20% of the option shares vest
and the balance vest in a series of equal monthly installments over the next
four years of service. Each of the options has a ten-year term, subject to
earlier termination if the optionee's service with us ceases. See the
description of the 1999 Equity Incentive Plan under "Compensation of
Directors" above for a description of the material terms of these options.
Percentages shown under "Percent of Total Options Granted to Employees in
Fiscal 1999" are based on an aggregate of 13,090,400 options granted to
employees of Vitria under our stock option plans during the fiscal year ended
December 31, 1999.
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation for
Individual Grants Option Term
-------------------------------------------- ----------------------
Percent of
Number of Total
Securities Options
Underlying Granted to Exercise
Options Employees in Price Per Expiration
Name Granted Fiscal 1999 Share Date 5% 10%
---- ---------- ------------ --------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
JoMei Chang, Ph.D. ..... 1,500,000 11.46% $2.00 7/11/09 $6,540,668 $13,355,070
200,000 1.53 2.50 7/11/09 772,089 1,480,676
M. Dale Skeen, Ph.D. ... 1,300,000 9.93 2.00 7/11/09 5,668,574 10,274,394
200,000 1.53 2.50 7/11/09 772,089 1,480,676
Jay W. Shiveley, III.... 200,000 1.53 2.50 7/11/09 772,089 1,480,676
Aleksander E.
Osadzinski............. 140,000 1.07 2.50 7/11/09 540,462 1,036,473
Paul R. Auvil, III...... 200,000 1.53 2.50 7/11/09 772,089 1,480,676
</TABLE>
10
<PAGE>
Aggregated Option Exercises During 1999 and Option Values at December 31, 1999
The following table presents the aggregate option exercises during 1999, and
the number and value of securities underlying unexercised options that are
held by each of the individuals listed in the Summary Compensation Table as of
December 31, 1999.
Amounts shown under the columns "Value Realized" and "Value of Unexercised
In-the-Money Options at December 31, 1999" are based on $58.50 per share which
was the last reported sale price of our stock on December 31, 1999, on the
Nasdaq National Market without taking into account any taxes that may be
payable in connection with the transaction, multiplied by the number of shares
underlying the option, less the exercise price payable for these shares. Our
stock option plans allow for the early exercise of options granted to
employees. All options exercised early are subject to repurchase by us at the
original exercise price, upon the optionee's cessation of service prior to the
vesting of the shares.
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options at In-the-Money Options at
Shares December 31, 1999 December 31, 1999
Acquired on Value ------------------------- -------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
JoMei Chang, Ph.D. ..... -- -- -- 1,700,000 $ -- $95,950,000
M. Dale Skeen, Ph.D. ... -- -- -- 1,500,000 -- 84,650,000
Jay W. Shiveley, III.... 800,000(1) $46,750,000 1,440,000 160,000 84,240,000 9,360,000
Aleksander E.
Osadzinski............. -- -- 790,000 100,000 46,215,000 5,850,000
Paul R. Auvil, III...... -- -- 40,000 160,000 2,340,000 9,360,000
</TABLE>
--------
(1) Includes 250,000 shares subject to repurchase as of December 31, 1999.
Employment and Change of Control Agreements
In March 1998, we entered into an employment agreement with Paul R. Auvil,
III, our Vice President, Finance, Chief Financial Officer and Secretary. The
agreement provides that Mr. Auvil is employed "at-will," and the employment
relationship may be terminated for any reason at any time, but if after a
change of control due to a merger or acquisition, Mr. Auvil is not offered a
position with the successor company, Mr. Auvil will be entitled to severance
pay equal to six months of his base salary at the time of termination.
11
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION/1/
Introduction
Our executive compensation policies and practices are established and
administered by the Compensation Committee of the board. During 1999, the
Compensation Committee consisted of two non-employee directors: Robert M.
Halperin and William H. Younger. The Compensation Committee's determinations
regarding compensation of our Chief Executive Officer and other executive
officers are reviewed with all the non-employee directors.
Philosophy
The Compensation Committee has implemented compensation policies, plans and
programs that seek to enhance stockholder value by aligning the financial
interests of the executive officers with those of the stockholders. The
overall goal of the Compensation Committee is to develop compensation
practices that will allow us to attract and retain the people needed to
define, create, and market industry-leading products and services. We also
provide significant equity-based compensation pursuant to our 1999 Equity
Incentive Plan, 1998 Executive Incentive Plan and 1999 Employee Stock Purchase
Plan. The plans are designed to provide a longer-term incentive to management
to grow revenues, provide quality returns on investment, enhance stockholder
value and contribute to our long-term growth. Vitria has also paid cash
bonuses to executive officers based on meeting performance goals.
Compensation Plans
Our executive compensation is based on three components, each of which is
intended to support the overall compensation philosophy.
Base Salary. The Compensation Committee recognizes the importance of
maintaining compensation levels competitive with other leading technology
companies with which Vitria competes for personnel. Base salary is targeted at
the median level for emerging companies in similar businesses of similar
characteristics such as sales volume, capitalization and financial
performance. The Compensation Committee reviews with the Chief Executive
Officer an annual salary plan for Vitria's executive officers, other than the
Chief Executive Officer. The salary plan is modified as deemed appropriate and
approved by the Compensation Committee. The annual salary plan is developed
based on an annual review of executive salaries at comparable technology
companies. The annual plan also takes into account past performance and
expected future contributions of the individual executive.
Equity Incentives. Long-term equity incentives are provided through grants
of stock options to executive officers and other employees pursuant to our
1999 Equity Incentive Plan. This component of compensation is intended to
retain and motivate employees to improve the performance of our stock. The
Compensation Committee believes this element of the total compensation program
directly links the participant's interests with those of the stockholders and
our long-term value. Stock options are granted at not less than fair market
value and have value only if our stock price increases. Stock options granted
generally become exercisable at a rate of 20% beginning on the first
anniversary of the vesting commencement date, with the remainder vesting on a
monthly basis over the following four years. Options terminate 10 years after
the date of grant. The vesting provisions of the options are intended to
insure that employees are provided with an incentive to increase value over
the long term.
--------
(1) Notwithstanding anything to the contrary set forth in any of our 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 following report
and performance graph shall not be incorporated by reference into any such
filings.
12
<PAGE>
Executive officers are also eligible to participate in our 1999 Employee
Stock Purchase Plan. Participation levels in such plan are at the discretion
of each executive.
Prior to fiscal 1998, cash compensation for our executive officers was
targeted to be in the lower range for comparable companies, and we used stock
compensation as the primary incentive to attract and motivate our executive
officers. In fiscal 1999, the Compensation Committee adjusted the base salary
component of executive compensation to bring it in line with industry medians.
The Compensation Committee seeks to provide equity compensation for executive
officers, including the Chief Executive Officer, that is equal to levels at
comparable companies.
After considering the criteria above, the Compensation Committee determined
that all executive officers, including the Chief Executive Officer, should
receive option grants in the last fiscal year. Out of a total of 13,090,400
options granted in fiscal 1999, our executive officers received grants for
4,740,000 shares, or approximately 36.21% of the total options granted in
fiscal 1999. The Compensation Committee believes that the programs described
above provide compensation that is competitive with comparable emerging
technology companies, link executive and stockholder interests and provide the
basis to attract and retain qualified executives. The Compensation Committee
will continue to monitor the relationship among executive compensation, our
performance and stockholder value.
Bonus Payments
Vitria maintains annual cash incentive bonus programs to reward executive
officers and other key employees for attaining defined performance goals. For
executive officers, in determining bonus amounts, consideration is given to
Vitria's performance and individual performance.
Chief Executive Officer Compensation
The Compensation Committee uses the procedures described above in setting
the annual salary and equity awards for JoMei Chang, Ph.D., our President,
Chief Executive Officer and a director. The Compensation Committee reviews and
establishes the base salary of Dr. Chang based on compensation data for
comparable companies and the Compensation Committee's assessment of her past
performance and its expectation as to her future contributions in directing
our long-term success. Dr. Chang's base salary was increased from $120,000 in
fiscal 1997 to $175,000 in fiscal 1998. In fiscal 1999, the Compensation
Committee elected to increase Dr. Chang's base salary to $225,338, after
reviewing comparable data and concluding that her salary was below the average
for chief executive officers at comparable companies.
In fiscal 1999, the Compensation Committee reviewed the performance of Dr.
Chang and her equity compensation package. In July 1999, Dr. Chang was granted
an option to acquire 1,500,000 shares of common stock at 100% of the fair
market value of the stock on such date. In July 1999, Dr. Chang was granted an
option to acquire 200,000 shares of Common Stock at 110% of the fair market
value of the stock on such date. The options vest as to 20% on the one year
anniversary from the vesting start date with the balance vesting in a series
of equal monthly installments over the next four years of service. This grant
was intended to continue to maintain the overall competitiveness of Dr.
Chang's compensation package and strengthen the alignment of Dr. Chang's
interest with those of Vitria's stockholders. The Compensation Committee
intends to continue to monitor Dr. Chang's compensation level in light of her
performance and the compensation levels of executives at comparable companies.
Federal Tax Considerations
Section 162(m) of the Internal Revenue Code limits Vitria to a deduction for
federal income tax purposes of no more than $1 million of compensation paid to
certain executive officers in a taxable year. Compensation above $1 million
may be deducted if it is "performance-based compensation" within the meaning
of the code.
13
<PAGE>
The statute containing this law and the applicable Treasury regulations
offer a number of transitional exceptions to this deduction limit for pre-
existing compensation plans, arrangements and binding contracts. As a result,
the committee believes that at the present time it is quite unlikely that the
compensation paid to any executive officer in a taxable year that is subject
to the deduction limit will exceed $1 million. Therefore, the Compensation
Committee has not yet established a policy for determining which forms of
incentive compensation awarded to its executive officers shall be designed to
qualify as "performance-based compensation." The Compensation Committee
intends to continue to evaluate the effects of the statute and any applicable
Treasury regulations and to comply with code section 162(m) in the future to
the extent consistent with Vitria's best interests.
COMPENSATION COMMITTEE
Robert M. Halperin
William H. Younger
Compensation Committee Interlocks and Insider Participation
Prior to October 1997, we did not have a Compensation Committee and the
entire board participated in all compensation decisions, except that Dr. Chang
and Dr. Skeen did not participate in decisions relating to their compensation.
In October 1997, the board formed the Compensation Committee to review and
recommend to the board the compensation and benefits for our executive
officers and administer our stock purchase and stock option plans. No current
member of the Compensation Committee is an officer or employee of Vitria and
no executive officer of ours serves as a member of a compensation committee of
any entity that has one or more executive officers serving as a member of the
Compensation Committee. Each of our directors, or their affiliated entities,
have purchased and hold securities of Vitria.
14
<PAGE>
PERFORMANCE MEASUREMENT COMPARISON
The following graph shows a comparison of total stockholder return of an
investment of $100 in cash on September 17, 1999 for:
.our Common Stock;
.the Hambrecht & Quist Technology Index; and
.the Nasdaq Stock Market (U.S.).
Historic stock price performance is not necessarily indicative of future
stock price performance. All values assume reinvestment of the full amount of
all dividends.
<TABLE>
<CAPTION>
Plot Points for Plot Points for
Measurement Period Vitria Plot H&Q Technology Nasdaq Stock
(Fiscal Year Covered) Points Index Market (U.S.)
--------------------- ----------- --------------- ---------------
<S> <C> <C> <C>
09/17/99....................... $100.00 $100.00 $100.00
09/30/99....................... $114.84 $102.28 $ 99.84
10/31/99....................... $206.05 $113.01 $107.09
11/30/99....................... $311.92 $132.10 $118.52
12/31/99....................... $731.25 $167.40 $144.09
</TABLE>
This section is not "soliciting material," is not deemed "filed" with the
SEC, and is not to be incorporated by reference into any of our filings under
the Securities Act of 1933, or the Securities Exchange Act of 1934, whether
made before or after the date hereof and irrespective of any general
incorporation language contained in such filing.
15
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We have entered into indemnification agreements with our directors and
officers for the indemnification of and advancement of expenses to these
persons to the full extent permitted by Delaware law. We also intend to
execute these agreements with our future directors and officers.
We have entered into an employment agreement with Paul R. Auvil, III, our
Vice President, Finance, Chief Financial Officer and Secretary. See the
section above entitled "Executive Compensation--Employment and Change in
Control Agreements" for a description of this agreement.
We believe that all of the transactions set forth above were made on terms
no less favorable to Vitria than could have been obtained from unaffiliated
third parties. All future transactions between Vitria and its officers,
directors, principal stockholders and their affiliates will be approved by a
majority of the board of directors, including a majority of the independent
and disinterested directors, and will continue to be on terms no less
favorable to Vitria than could be obtained from unaffiliated third parties.
OTHER MATTERS
The board of directors knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters are properly brought
before the meeting, it is the intention of the persons named in the
accompanying proxy to vote on such matters in accordance with their best
judgment.
By Order of the board of directors
/s/ Paul R. Auvil, III
Paul R. Auvil, III
Chief Financial Officer and
Secretary
June 23, 2000
Our Annual Report on Form 10-K, as amended, for the year ended December 31,
1999, as filed with the SEC, is available without charge upon written request
to: Corporate Secretary, Vitria Technology, Inc., 945 Stewart Drive,
Sunnyvale, California 94086.
16
<PAGE>
DETACH HERE
VITRIA TECHNOLOGY, INC.
945 STEWART DRIVE
SUNNYVALE, CALIFORNIA 94086-3913
SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 21, 2000
The undersigned revokes all previous proxies, acknowledges receipt of the
Notice of the Annual Meeting of Stockholders to be held on July 21, 2000 and the
Proxy Statement and hereby appoints JoMei Chang, Ph.D. and Paul R. Auvil, III,
each with the power to appoint his or her substitute, and hereby authorizes
them to represent and to vote, as designated on the reverse side, all shares
of common stock of Vitria Technology, Inc. (the "Company") held of record by
the undersigned on June 6, 2000 at the Annual Meeting of Stockholders to be
held at 945 Stewart Drive, Sunnyvale, California 94086-3913 on July 21, 2000 at
2:00 p.m. local time, and any adjournments or postponement thereof. The shares
represented by this Proxy shall be voted in the manner set forth on the
reverse side.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE DIRECTORS LISTED ON THE
REVERSE SIDE AND A VOTE "FOR" THE OTHER PROPOSALS. THIS PROXY, WHEN PROPERLY
EXECUTED, WILL BE VOTED AS DIRECTED. IF NO DIRECTION IS GIVEN WITH RESPECT TO A
PARTICULAR PROPOSAL, THIS PROXY WILL BE VOTED FOR SUCH PROPOSAL.
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY CARD PROMPTLY, USING THE
ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
----------- -----------
SEE REVERSE SEE REVERSE
SIDE SIDE
----------- -----------
<PAGE>
Dear Stockholder:
Please take note of the important information enclosed with this Proxy. There
are a number of issues related to the operation of the Company that require your
immediate attention.
Your vote counts, and you are strongly encouraged to exercise your right to vote
your shares.
Please mark the boxes on the proxy card to indicate how your shares will be
voted. Then sign the card, detach it and return your proxy in the enclosed
postage paid envelope.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
Vitria Technology, Inc.
DETACH HERE
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
1. Election of two Directors.
Nominees: (01) M. Dale Skeen, Ph.D., (02) William H. Younger, Jr.
FOR WITHHELD
[_] [_]
[_]
_________________
For all nominees except as noted above
FOR AGAINST ABSTAIN
2. To approve an amendment to the Company's [_] [_] [_]
Certificate of Incorporation to increase the
authorized number of shares of Common Stock
from 250,000,000 shares to 600,000,000 shares.
3. To ratify the selection of Ernst & Young
LLP as independent auditors of the Company FOR AGAINST ABSTAIN
for the fiscal year ending December 31, 2000. [_] [_] [_]
4. To transact such other business as may
properly come before the meeting or any
adjournment or postponement thereof.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [_]
MARK HERE IF YOU PLAN TO ATTEND THE MEETING [_]
Please sign exactly as name appears hereon. Joint owners should each sign.
Executors, administrators, trustees, guardians or other fiduciaries should give
full title as such. If signing for a corporation, please sign in full corporate
name by a duly authorized officer.
Signature: ________________ Date: _____ Signature: _______________ Date: _____
