<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
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 Rule 14a-11(c) or Rule 14a-12
NUKO INFORMATION SYSTEMS, INC.
(Name of Registrant as Specified in its Charter)
NUKO INFORMATION SYSTEMS, INC.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/ X / No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11:
(1) Title of each class of securities to which the 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:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
NUKO INFORMATION SYSTEMS, INC.
2931 QUME DRIVE
SAN JOSE, CALIFORNIA 92121
NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS AND PROXY STATEMENT
TO THE STOCKHOLDERS OF
NUKO INFORMATION SYSTEMS, INC.
Notice is hereby given that the Annual Meeting of Stockholders of NUKO
INFORMATION SYSTEMS, INC. (the "Company") will be held at the principal
facilities of the Company, located at 2391 Qume Drive, San Jose, California on
May 28, 1997, at 10:00 a.m., for the following purposes:
1. TO ELECT DIRECTORS FOR THE ENSUING YEAR TO SERVE UNTIL THE NEXT ANNUAL
MEETING OF STOCKHOLDERS AND UNTIL THEIR SUCCESSORS HAVE BEEN ELECTED
AND QUALIFIED. THE PRESENT BOARD OF DIRECTORS OF THE COMPANY HAS
NOMINATED AND RECOMMENDS FOR ELECTION THE FOLLOWING FIVE PERSONS:
PRATAP K. KONDAMOORI
RAM KEDLAYA
ANDERS O. FIELD, JR.
MARC DUMONT
ROBERT C. MARSHALL
2. TO TRANSACT SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE
MEETING OR ANY ADJOURNMENT THEREOF.
The Board of Directors has fixed the close of business on April 14, 1997 as
the record date for the determination of stockholders entitled to notice of and
to vote at the meeting.
Accompanying this Notice of Annual Meeting is a proxy. WHETHER OR NOT YOU
EXPECT TO BE AT THE MEETING, PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY
AND RETURN IT PROMPTLY.
BY ORDER OF THE BOARD OF DIRECTORS,
John H. Gorman, Secretary
San Jose, California
April 30, 1997
<PAGE> 3
NUKO INFORMATION SYSTEMS, INC.
2391 QUME DRIVE
SAN JOSE, CALIFORNIA 95131
PROXY STATEMENT
The Board of Directors of the Company is soliciting the enclosed proxy for
use at the Annual Meeting of Stockholders of the Company to be held at 10:00
a.m. on May 28, 1997, at the principal facilities of the Company, located at
2391 Qume Drive, San Jose, California. This Proxy Statement was first mailed to
stockholders on or about May 1, 1997.
All stockholders who find it convenient to do so are cordially invited to
attend the meeting in person. In any event, please complete, sign, date and
return the proxy in the enclosed envelope.
A proxy may be revoked by written notice to the Secretary of the Company at
any time prior to the voting of the proxy, or by executing a later proxy or by
attending the meeting and voting in person. Unrevoked proxies will be voted in
accordance with the instructions indicated in the proxies, or if there are no
such instructions, such proxies will be voted for the election of the Board's
nominees for director and for all other matters described in this Proxy
Statement. Shares represented by proxies that reflect abstentions or include
"broker non-votes" will be treated as present and entitled to vote for purposes
of determining the presence of a quorum. Abstentions or "broker non-votes" do
not constitute a vote "for" or "against" any matter and thus will be disregarded
in the calculation of "votes cast."
Stockholders of record at the close of business on April 14, 1997 will be
entitled to vote at the meeting. As of that date, 10,604,417 shares of common
stock, par value $.001 per share ("Common Stock"), of the Company were
outstanding. Each share of Common Stock is entitled to one vote. A majority of
the outstanding shares of the Company, represented in person or by proxy at the
meeting, constitutes a quorum. A plurality of the votes cast at the meeting is
required to elect directors.
The costs of preparing, assembling and mailing the Notice of Annual
Meeting, Proxy Statement and proxy will be borne by the Company. In addition to
the use of the mail, proxies may be solicited by personal interview, telephone
or telegraph, by officers, directors and other employees of the Company.
PROPOSAL 1:
ELECTION OF DIRECTORS
The Board of Directors currently consists of five members. The Board of
Directors of the Company has nominated and recommends for election as directors
of the five persons named below, all of whom are currently serving as directors
of the Company. The enclosed Proxy will be voted in favor of the persons
nominated unless otherwise indicated. If any of the nominees should be unable to
serve or should decline to do so, the discretionary authority provided in the
Proxy will be exercised by the present Board of Directors to vote for a
substitute or substitutes to be designated by the Board of Directors. The Board
of Directors has no reason to believe that any substitute nominee or nominees
will be required.
INFORMATION REGARDING DIRECTORS
Set forth below is certain information concerning the nominees to the Board
of Directors.
1
<PAGE> 4
<TABLE>
<CAPTION>
Name Age Present Position With The Company
---- --- ---------------------------------
<S> <C> <C>
Pratap K. Kondamoori 36 Chairman, President and Chief Executive Officer
Ram Kedlaya 37 Vice President, Strategic Planning and Director
Anders O. Field, Jr. 67 Director
Marc Dumont 53 Director
Robert C. Marshall 66 Director
</TABLE>
PRATAP K. KONDAMOORI has served as the Company's President, Chief Executive
Officer and Chairman of the Board since its inception. From May of 1991 until
August of 1992, Mr. Kondamoori served as the data and video systems product line
manager for NEC America. Mr. Kondamoori holds a Bachelor's degree in Engineering
from Clemson University.
RAM KEDLAYA has served as Vice President of Strategic Planning and
director since the Company's inception. Before co-founding the Company in 1991,
Mr. Kedlaya worked in the area of pen based computing, telecommunications,
TCP/IP local area and wide area inter-networking at AT&T Bell Labs, Tandem
Computers, Hitachi Computers and GO Corporation. He has a Masters degree in
Computer Science from the University of Texas at Austin and a Masters degree
in Materials Science from University of Florida in Gainesville.
ANDERS O. FIELD, JR. has served as a director since May 1994. He has served
as a consultant to the Company and has been associated with his Nevada business
consulting firm, the Lowell Corporation, for the past eleven years. He
specializes in high-tech start-up companies. Mr. Field holds a B.A. in
Economics, an MBA from Stanford University and is certified in International
Economics from the University of Lund, Sweden.
MARC DUMONT has served as a director of the Company since November 1995. He
works as a consultant, investment banker and serves on the boards of directors
of a number of companies, including FinterBank Zurich, Banque Internationale a
Luxembourg, Novalog/Winslow Corporation and Irvine Sensors Corporation located
in Costa Mesa, California. From January 1980 to March 1995, he served as
President of (PSA) Peugeot Citroen Group, Geneva, Switzerland.
ROBERT C. MARSHALL has served as a Director of the Company since June 1996.
Mr. Marshall currently is President, Chief Executive Officer and a director of
Infogear Technology Corporation. Mr. Marshall previously served as Senior Vice
President and Chief Operating Officer of Tandem Computer from 1979 to 1995.
CERTAIN COMMITTEES OF THE BOARD; MEETINGS
The Board of Directors held six meetings during the fiscal year ended
December 31, 1997. In that year, each director attended at least 75% of the
aggregate of all meetings held by the Board of Directors and all meetings held
by all committees of the Board on which such director served.
The Company has an Audit Committee currently consisting of Messrs. Kedlaya,
Field and Dumont. The Audit Committee held one meeting in fiscal 1996. The Audit
Committee's responsibilities include, among other things, recommending the
selection of the Company's independent certified public accountants and meeting
with the accountants regarding their management letters and the annual audit.
The Company has a Compensation Committee currently consisting of Messrs.
Dumont and Marshall. The Compensation Committee held one meeting in fiscal 1996.
The responsibilities of the Compensation Committee include, among other things,
reviewing, approving and reporting to the Board the Company's compensation
policies with respect to its executive officers, reviewing the Company's overall
compensation policy and making recommendations with respect thereto, and
administering the Company's stock option plans.
The Board of Directors has not designated a nominating committee.
2
<PAGE> 5
COMPENSATION OF DIRECTORS
Compensation for non-employee directors is fixed at $12,000 per year. In
addition, all non-employee directors of the Company are eligible to
participate in the Directors Option Plan. The Company is currently authorized
by resolution of the Board of Directors to grant 10,000 options per year to
existing non-employee directors and 25,000 options to any new non-employee
director under the Directors Option Plan.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors unanimously recommends a vote FOR the nominees set
forth above. Proxies solicited by the Company will be so voted unless
stockholders specify otherwise on their proxy cards.
3
<PAGE> 6
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the shares of Common Stock as of April 30, 1997 by (i) each of the
Company's directors, (ii) the Named Executive Officers (as defined below) of the
Company, (iii) the Company's executive officers and directors as a group and
(iii) all other stockholders known by the Company to beneficially own more than
five percent of the Common Stock. Unless otherwise indicated, the address for
each of the stockholders listed below is c/o NUKO Information Systems, Inc.,
2391 Qume Drive, San Jose, California 95131.
<TABLE>
<CAPTION>
Amount and Nature Percent
Name of Beneficial Ownership(1) Beneficially Owned
- ------------------------------------------------- -------------------------- ------------------
<S> <C> <C>
Pratap Kesav Kondamoori 1,323,696(2) 11.7
Ram Kedlaya 1,195,390(3) 10.6
Dawson-Samberg Capital Management, Inc.(12) 591,500 5.3
354 Pequot Avenue
Southport, Connecticut 06490
Anders O. Field, Jr. 519,931(4) 4.6
Marc Dumont 46,039(5) 0.4
37 Chemin Jean-Achard
CH-1231 Conches (Geneva)
Robert C. Marshall 8,750(6) *
255 Selby Lane
Atherton, CA 94027
John H.Gorman 166,666(7) 1.5
Bruce Young 100,000(8) 0.9
579 Giant Way
San Jose, CA 95127
John Glass 32,500(9) 0.3
99 Wood Ranch Circle
Danville, CA 94506
Chad Rao 97,270(10) 0.9
All executive officers and directors as a group (10 3,633,267(11) 32.2
persons)
</TABLE>
- -----------
* Less than 0.1%.
(1) Beneficial ownership of directors, officers and 5% or more shareholders
includes both outstanding Common Stock and shares issuable upon exercise of
warrants or options that are currently exercisable or will become
exercisable within 60 days after the date of this table. Except as
indicated in the footnotes to this table and pursuant to applicable
community property laws, the persons named in the table have sole voting
and investment power with respect to all shares of Common Stock
beneficially owned by them.
(2) Includes 122,844 shares issuable upon exercise of options that are
currently exercisable or will become exercisable within 60 days after the
date of this table.
(3) Includes 33,100 shares issuable upon exercise of options that are currently
exercisable or will become exercisable within 60 days after the date of
this table.
4
<PAGE> 7
(4) Includes 115,559 shares issuable upon exercise of options that are
currently exercisable or will become exercisable within 60 days after the
date of this table.
(5) Includes 12,639 shares issuable upon exercise of options that are currently
exercisable or will become exercisable within 60 days after the date of
this table plus 33,400 shares issuable upon exercise of currently
exercisable Common Stock Purchase Warrants.
(6) Includes 8,750 shares issuable upon exercise of options that are currently
exercisable or will become exercisable within 60 days after the date of
this table.
(7) Includes 166,666 shares issuable upon exercise of options that are
currently exercisable or will become exercisable within 60 days after the
date of this table.
(8) Includes 100,000 shares issuable upon exercise of options that are
currently exercisable or will become exercisable within 60 days after the
date of this table.
(9) Includes 32,500 shares issuable upon exercise of options that are currently
exercisable or will become exercisable within 60 days after the date of
this table.
(10) Includes 81,770 shares issuable upon exercise of options that are currently
exercisable or will become exercisable within 60 days after the date of
this table.
(11) Includes 673,828 shares issuable upon exercise of options that are
currently exercisable or will become exercisable within 60 days after the
date of this table.
(12) As reported on Schedule 13G filed by Dawson-Samberg Capital Management,
Inc. on January 30, 1997.
5
<PAGE> 8
EXECUTIVE COMPENSATION AND OTHER INFORMATION
EXECUTIVE OFFICERS
The information set forth below is submitted with respect to each of the
Company's executive officers and key employees.
<TABLE>
<CAPTION>
Name Age Present Position With the Company
- ---- --- ---------------------------------
<S> <C> <C>
John H. Gorman 59 Vice President, Finance, Chief Financial Officer, Secretary and
Treasurer
Chad Rao 43 Vice President, Digital Broadcast Video Networking
Paul Gulati 49 Vice President, Sales and Marketing
Nabil Damouny 47 Vice President, Interactive Video Networking
Ashok S. Kanagal 39 Vice President, Operations
Neil Mammen 34 Chief Technical Officer
</TABLE>
JOHN H. GORMAN has served as Vice President and Chief Financial Officer of
the Company since April 1996 and as Secretary and Treasurer of the Company since
July 1996. From March 1992 to April 1996, he served as Vice President and Chief
Financial Officer of Broadband Technologies, Inc., a manufacturer of
telecommunications equipment. Prior to March 1992, Mr. Gorman served as
President and Corporate Controller of Telco Systems, Inc. another manufacturer
of telecommunications equipment. Mr. Gorman holds a B.S. degree from
Elizabethtown College and an MBA from Penn State (Shippensburg) University.
CHAD RAO has served as the Company's Vice President of Digital Broadcast
Video Networking since March 1996. From 1982 to 1997, Mr. Rao worked at Sun
Microsystems, Inc., where he last served as Engineering Manager for Sun
Workstations. Mr. Rao holds a M.S. in Computer Engineering from Oakland
University and a M.S. in Chemical Engineering from Ohio University.
PAUL GULATI has served as NUKO's Vice President of Marketing and Sales
since March 1997. Mr. Gulati joined the Company in December 1995 as Director of
Program Management to aid the company in implementation of the Highlander
program. From 1986 to 1988, Mr. Gulati served as director of marketing for
Scientific Micro Systems. Mr. Gulati holds a BEE from Jabalpur Engineering
College, University of Jabalpur, India and an MSIE from San Jose State
University.
NABIL DAMOUNY has served as the Vice President of Interactive Video
Networking since November 1996. Mr. Domouny served as Director of Product
Management for NEC America from 1995 to 1996 and Director of Engineering for NEC
America from 1991 to 1995. Mr. Damouny holds a Bachelors degree in Electrical
Engineering (BSEE) from Illinois Institute of Technology, and a Masters degree
in Electrical and Computer Engineering (MSECE) from the University of California
at Santa Barbara. He is a member of IEEE, and holds two patents.
ASHOK S. KANAGAL will begin work as the Company's Vice President of
Operations in May 1997. He previously served in various management capacities
at Intel from 1984 to 1997. He holds a graduate degree in engineering from the
University of Texas and an MBA from Arizona State University.
NEIL MAMMEN has served as the Company's Chief Technical Officer since March
1996. He joined the Company after working at C-Cube Microsystems where he was
Manager of the Applications group and a Senior Staff Systems Engineer from 1992
to 1994. Mr. Mammen has a BSEE in Electrical and Computer Engineering and a MSEE
in Computers and Solid State Physics both from Oregon State University.
6
<PAGE> 9
EXECUTIVE COMPENSATION
The following table sets forth certain summary information concerning
compensation paid by the Company to or on behalf of the Company's Chief
Executive Officer and each of the Company's four other most highly compensated
executive officers (collectively, the "Named Executive Officers") for the fiscal
year ended December 31, 1996, the eight months ended December 31, 1995 and the
fiscal year ended April 30, 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
FISCAL YEAR COMPENSATION
COMPENSATION AWARDS
-------------------------------------- ------------
NUMBER OF
OTHER SECURITIES
NAME AND FISCAL ANNUAL UNDERLYING
PRINCIPAL POSITION(S) YEAR(1) SALARY BONUS COMPENSATION OPTIONS
- ----------------------------------- ------- ------ ----- ------------ -----------
<S> <C> <C> <C> <C> <C>
Pratap K. Kondamoori 1996 $112,500 -- -- 165,500
Chairman, President and CEO 1995 66,150 -- -- 43,379
1994 5,410 -- 27,748(2) --
John H. Gorman 1996 100,000 -- 20,079(3) 250,000
Vice President, Finance, Chief 1995 -- -- -- --
Financial Officer, Treasurer 1994 -- -- -- --
and Secretary
Chad Rao 1996 127,583 -- 6,000(4) 75,000
Vice President, Engineering 1995 2,000 -- 29,340(5) --
1994 -- -- 23,160(6) --
Bruce Young 1996 125,000 -- 82,000(7) 300,000
Chief Operating Officer 1995 -- -- 36,750(8) --
1994 -- -- -- --
John Glass 1996 125,000 -- 50,000(9) 90,000
Vice President, Marketing 1995 -- -- 18,750(10) --
1994 -- -- -- --
</TABLE>
- -----------------------------------
(1) Fiscal years shown are year ended December 31, 1996 ("1996"), eight months
ended December 31, 1995 ("1995") and year ended April 30, 1995 ("1994").
(2) Represents $27,748 as advances in the fiscal year ended April 30, 1995.
(3) Includes $4,000 car allowance and $16,079 for reimbursement of relocation
expenses.
(4) Includes $6,000 car allowance.
(5) Includes $23,340 paid as consulting fees.
(6) Includes $23,100 paid as consulting fees.
(7) Includes $5,000 car allowance, $25,000 for reimbursement of relocation
expenses and $52,000 paid as consulting fees.
(8) Includes $36,750 paid as consulting fees.
(9) Includes $25,000 for reimbursement of relocation expenses and $25,000 paid
as consulting fees.
(10) Includes $18,750 paid as consulting fees.
7
<PAGE> 10
The following table sets forth certain summary information concerning
individual grants of stock options made during the last completed fiscal year to
each of the Company's executive officers named in the Summary Compensation
Table.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(1)
--------------------------------------------- ---------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS EXERCISE OR
UNDERLYING GRANTED TO BASE
OPTIONS EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED FISCAL 1996 PER SHARE(2) DATE 5% 10%
- -------------------------- ---------- ------------ ------------ ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Pratap K. Kondamoori 165,500(2) 8.3% $6.50 02/02/06 792,825 887,577
John H. Gorman 250,000(3) 12.6 6.875 03/09/01 1,201,250 1,340,750
Chad Rao 75,000(4) 3.8 6.875 03/09/01 360,375 402,225
Bruce Young 300,000(3) 15.1 6.875 03/09/01 1,441,500 1,608,900
John Glass 90,000(4) 4.5 6.875 03/09/01 432,450 482,670
</TABLE>
- -----------------------------
(1) These amounts represent assumed rates of appreciation in the price of the
Common Stock during the terms of the options in accordance with rates
specified in applicable federal securities regulations. Actual gains, if
any, on stock option exercises will depend on the future price of the
Common Stock and overall stock market conditions. There is no
representation that the rates of appreciation reflected in this table will
be achieved.
(2) The terms of such options, all of which are nonstatutory stock options,
are consistent with those of options granted to other employees under the
Company's 1995 Stock Option Plan. Of the options granted, one fourth vested
immediately, with the remainder vesting monthly over a 36 month period.
(3) The terms of such options, all of which are nonstatutory stock options, are
consistent with those of options granted to other employees under the
Company's 1996 Stock Option Plan. Of the options granted, one third vests
on September 9, 1996, the second one third vests on March 9, 1997 and the
last one third vests on March 9, 1998.
(4) The terms of such options, all of which are non-statutory stock options are
consistent with those options granted to other employees under the
Company's 1996 Stock Option Plan. Such options vest ratably over a
three-year period.
The following table sets forth at December 31, 1997 the number of options
and the value of unexercised options held by each of the executive officers
named in the Summary Compensation Table:
8
<PAGE> 11
AGGREGATED FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT YEAR END OPTIONS AT YEAR END(1)
------------------- ----------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Pratap K. Kondamoori......................... 105,920 102,959 $1,178,360 $1,145,419
John H. Gorman............................... 83,333 166,667 927,080 1,854,170
Chad Rao..................................... 69,271 80,729 770,640 898,110
Bruce Young.................................. 164,583 235,417 1,830,986 2,619,014
John Glass................................... 57,292 83,708 637,374 920,127
</TABLE>
- -------------------------------------------
(1) The dollar values have been calculated by determining the difference
between the fair market value of the securities underlying the options and
the exercise price of the options at December 31, 1996.
9
<PAGE> 12
EMPLOYMENT AGREEMENT
The Company has no formal employment agreement with its Chief Executive
Officer. The Company has, however, entered into an employment agreement with
John H. Gorman, its Vice President, Chief Financial Officer, Treasurer and
Secretary. Pursuant to his employment agreement, which has a three-year term,
Mr. Gorman will receive an annual salary of $150,000 and a one-time grant of
options to acquire 250,000 shares of the Company's Common Stock. Twenty-five
percent of such options vest six months after the date of the agreement, with
one thirty-sixth (1/36) of the remainder vesting each month thereafter until all
options are vested. All of such options become immediately exercisable upon a
change of control of the Company. Mr. Gorman's employment agreement also
contains a relocation clause, pursuant to which the Company will reimburse up to
$100,000 of expenses incurred by Mr. Gorman in moving to California from North
Carolina, and a severance clause, which requires the Company to pay to Mr.
Gorman an amount equal to his yearly salary if he is terminated without cause.
The Company and Mr. Gorman also have entered into a loan agreement which calls
for the Company to make an interest-free loan of $300,000 to Mr. Gorman. The
loan agreement provides that one-third of the amount borrowed will be forgiven
at the end of each year for three years.
COMPENSATION PLANS
401(k) Plan. The Company has established a tax-qualified employee savings
and retirement plan (the "401(k) Plan") covering all of the Company's eligible
full-time employees. The Company adopted the 401(k) Plan effective August 31,
1996. Pursuant to the 401(k) Plan, participants may elect to contribute, through
salary reductions, up to 15% of their annual compensation. The Company does
not currently provide additional matching contributions to the 401(k) Plan, but
may do so in the future. The 401(k) Plan is designed to qualify under Section
401 of the Internal Revenue Code of 1986, as amended (the "Code"), so that
contributions by employees or by the Company to the 401(k) Plan, and income
earned on plan contributions, are not taxable to employees until withdrawn from
the 401(k) Plan, and so that contributions by the Company, if any, will be
deductible by the Company when made. The trustee under the 401(k) Plan, at the
direction of each participant, invests the assets of the 401(k) Plan in any of
five investment options.
1995 Stock Option Plan. The NUKO Information Systems, Inc. 1995 Stock
Option Plan (the "1995 Option Plan") was adopted by the Board of Directors in
May 1995. The Company had not previously had a stock option plan. The Board of
Directors reserved 1,400,000 shares of Common Stock for issuance under the 1995
Option Plan. Options granted under the 1995 Option Plan may be either "incentive
stock options" within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), or nonstatutory stock options at the discretion
of the Board of Directors and as reflected in the terms of the written option
agreement. The Board of Directors, at its discretion, may also grant rights to
purchase Common Stock directly, rather than pursuant to stock options. The 1995
Option Plan is not a qualified deferred compensation plan under Section 401(a)
of the Code, and is not subject to the provisions of the Employee Retirement
Income Security Act of 1974, as amended.
1996 Stock Option Plan. In December 1995, the Board of Directors adopted
the 1996 Stock Option Plan (the "1996 Option Plan"), which it amended and
restated on November 7, 1997. The shareholders of the Company approved the 1996
Option Plan as amended and restated at a special meeting of shareholders on
December 11, 1997. The Board of Directors reserved 2,500,000 shares of Common
Stock for issuance under the 1996 Option Plan. All options granted under the
1996 will be nonstatutory stock options. The Board of Directors, at its
discretion, may also grant rights to purchase Common Stock directly, rather than
pursuant to stock options. The 1996 Option Plan is not a qualified deferred
compensation plan under Section 401(a) of the Code, and is not subject to the
provisions of the Employee Retirement Income Security Act of 1974, as amended.
Directors' Stock Option Plan. On December 11, 1996, the Company's
stockholders approved the Company's 1996 Director Option Plan, as amended and
restated November 7, 1996 (the "Director Plan"). All directors of the Company
who are not employees of the Company may participate in the Director Plan. The
Director Plan is administered by the Compensation Committee of the Board of
Directors and provides for the granting of stock options with respect to up to
200,000 shares of Common Stock to non-employee directors of the Company. The
Director Plan is a "formula" plan which provides that each participating
director will be entitled to receive options to purchase 25,000 shares of Common
Stock on the date on which such director is first elected as a director. All
10
<PAGE> 13
non-employee directors, including those serving at the time of adoption of the
Director Plan, are entitled to receive options to purchase 10,000 shares for
each year they serve as directors of the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
From January 1,1997 to November 7, 1997, the Compensation Committee
consisted of Messrs. Kedlaya, Field and Dumont. On November 7, 1997, Mr. Kedlaya
resigned from the Compensation Committee. During the period he served on the
Compensation Committee, Mr. Kedlaya was Vice President of Strategic Planning of
the Company. Mr. Field has entered into a consulting agreement with the Company.
Under the terms of this agreement, Mr. Field receives $6,000 per month to serve
as Consultant to the Office of the President. During the fiscal year ended
December 31, 1996, Mr. Field was paid a total of $72,000 for his services.
During the eight-month fiscal period ended December 31, 1995, Mr. Field was paid
a total of $88,200 which included fees owed from prior years. Mr. Field received
less than $60,000 in the fiscal year ended April 30, 1995. He continues in this
capacity in the current fiscal year at the same monthly rate. Mr. Dumont
received a commission of $203,845 in connection with the private placement of
Common Stock to various accredited investors in February 1996.
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee (the "Committee") is responsible for
administering the Company's compensation policies and practices and approves all
elements of compensation for executive officers. The Committee reports regularly
to the Board of Directors on its activities.
Compensation Philosophy and Practices
The Company's executive compensation program is based on the belief that
the interests of executives should be closely aligned with those of the
Company's stockholders. To support this philosophy, the following principles
provide a framework for the compensation program:
- offer compensation opportunities that attract the best talent to the
Company; motivate individuals to perform at their highest levels; reward
outstanding achievement; and retain the leadership and skills necessary for
building long-term stockholder value;
- maintain a significant portion of executives' total compensation at risk,
tied to both the annual and long-term financial performance of the Company,
as well as to the creation of stockholder value; and
- encourage executives to manage from the perspective of owners with an
equity stake in the Company.
The Company's compensation program for executive officers is designed to
provide a total compensation level (including both annual and long-term
incentives) that is competitive with survey companies. For executive officers
recently recruited by the Company, annual compensation rates and long-term
incentive awards reflect amounts necessary to attract them to the Company. The
compensation program is benchmarked by using surveys of companies in the video
networking industry with similar revenues and/or prospects. These companies,
which are representative of the firms the Company competes with for executive
talent and have jobs similar to those at the Company in magnitude, complexity
and scope of responsibility, form the basis for the survey group used by the
Committee.
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Components of Executive Compensation
The compensation program for executive officers consists of the following
components:
ANNUAL CASH COMPENSATION includes base salary and an annual cash incentive
(bonus). Salaries are established by the Committee based on an executive's job
responsibilities, level of experience, individual performance and contribution
to the business, and information obtained from surveys. The annual incentive
component of pay is at risk and tied to specific performance measures. The
Company did not achieve its 1996 Business Plan. As a result, the Committee did
not award any bonuses to executive officers for fiscal 1996.
LONG-TERM INCENTIVES consist of awards of stock options. The objective for
these awards is to align closely executive interests with the longer term
interests of stockholders. These awards, which are at risk and dependent on the
creation of incremental stockholder value or the attainment of cumulative
financial targets over several years, represent a significant portion of the
total compensation opportunity provided for the executive officers. Award sizes
are based on individual performance, level of responsibility, the individual's
potential to make significant contributions to the Company, and award levels at
companies in the survey group. Long-term incentives granted in prior years are
also taken into consideration.
Compensation for the Chairman and Chief Executive Officer
The Committee considers increases in the chief executive officer's
compensation on an annual basis. In establishing the compensation for Mr.
Kondamoori for 1996, the Committee applied the same factors applicable to all
executive officers, including consideration of the contribution by Mr.
Kondamoori to the success of the Company and the degree of responsibility vested
in him. The Committee made a subjective determination regarding the level of Mr.
Kondamoori's compensation and considered, among other factors, the increase in
the Company's revenues from 1995 to 1996, the Company's entering into production
of its products, the corresponding increase in Mr. Kondamoori's management
duties, Mr. Kondamoori's existing compensation and ownership interest in the
Company, and Mr. Kondamoori's recommendations regarding his compensation. Based
upon these considerations, the Committee decided to increase Mr. Kondamoori's
base salary to $150,000 effective June 1996 and to award him options to purchase
165,500 shares of Common Stock under the Company's 1995 Stock Option Plan.
Deductibility of Compensation in Excess of $1 Million Per Year
Section 162(m) of the Code, enacted in 1993, generally disallows a tax
deduction to public companies for compensation in excess of $1 million paid to a
company's Chief Executive Officer and any of its four other most highly
compensated executive officers. Qualifying performance-based compensation is not
subject to the deduction limit if certain requirements are met. For 1996 and
1995, the Company does not anticipate that there will be nondeductible
compensation for the four Company positions in question. The Committee plans to
continue to review this matter for 1997 and future years in order to determine
the extent of possible modification to the Company's compensation arrangements.
Compensation Committee
Marc Dumont
Robert C. Marshall
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<PAGE> 15
PERFORMANCE GRAPH
The graph below compares the cumulative total stockholder return on the
shares of Common Stock for the last fiscal year with the cumulative total return
on the Nasdaq Stock Market Index and a peer group comprised of Nasdaq
Electronics Components stocks over the same period (assuming the investment of
$100 in the Common Stock, the Nasdaq Stock Market Index and the peer group on
January 1, 1997 and the reinvestment of all dividends).
<TABLE>
<CAPTION>
NASDAQ
NASDAQ STOCK ELECTRONIC
NUKO MARKET(US) COMPONENTS
------- ------------ ----------
<S> <C> <C> <C>
3/29/96 $100.00 $100.00 $100.00
5/31/96 $161.58 $113.27 $124.34
12/21/96 $139.06 $117.60 $173.91
3/31/97 $92.19 $111.23 $175.32
</TABLE>
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<PAGE> 16
CERTAIN TRANSACTIONS
During the fiscal year ended December 31, 1996, the eight month fiscal
period ended December 31, 1995 and the fiscal year ended April 30, 1995, there
were no transactions exceeding $60,000 to which the Company was a party in which
any director or executive officer, principal shareholder or member of any such
person's immediate family had a direct or indirect material interest except as
follows:
Marc Dumont, a member of the Board of Directors, received a commission of
$203,845 in connection with the private placement of Common Stock to various
accredited investors in February 1996.
Anders O. Field, Jr., a member of the Board of Directors, has entered into
a consulting agreement with the Company. Under the terms of this agreement, Mr.
Field receives $6,000 per month to serve as Consultant to the Office of the
President. During the fiscal year ended December 31, 1996, Mr. Field was paid a
total of $72,000 for his services. During the eight-month fiscal period ended
December 31, 1995, Mr. Field was paid a total of $88,200 which included fees
owed from prior years. Mr. Field received less than $60,000 in the fiscal year
ended April 30, 1995. He continues in this capacity in the current fiscal year
at the same monthly rate.
Pursuant to Mr. Gorman's employment agreement, the Company and Mr. Gorman
also have entered into a loan agreement which calls for the Company to make an
interest-free loan of $300,000 to Mr. Gorman. The loan agreement provides that
one-third of the amount borrowed will be forgiven at the end of each year for
three years.
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
The Company's financial statements for the year ended December 31, 1996
have been examined by Coopers & Lybrand L.L.P. Representatives of Cooper &
Lybrand L.L.P. are expected to be available at the meeting to respond to
appropriate questions and to make a statement if they desire to do so. The
Company's Board of Directors will select independent accountants for the current
year sometime after the meeting.
SECTION 16(a) REPORTING
Under Section 16(a) of the Exchange Act, directors, executive officers and
beneficial owners of 10% or more of the Common Stock ("Reporting Persons") are
required to report to the Securities and Exchange Commission on a timely basis
the initiation of their status as a Reporting Person and any changes with
respect to their beneficial ownership of the Common Stock. Based solely on its
review of such forms received by it, or written representations from certain
Reporting Persons that no such forms were required, the Company believes that
all filing requirements applicable to its directors, executive officers and
beneficial owners of 10% or more of the Common Stock were complied with during
fiscal 1996.
STOCKHOLDER PROPOSALS
Any proposal of a stockholder of the Company intended to be presented at
the next Annual Meeting of Stockholders of the Company must be received by the
Secretary of the Company not later than December 28, 1997 to be considered for
inclusion in the Company's proxy statement and form of proxy relating to that
meeting.
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OTHER MATTERS
The Company does not know of any business other than that described herein
which will be presented for consideration or action by the stockholders at the
meeting. If, however, any other business shall properly come before the meeting,
shares represented by proxies will be voted in accordance with the best judgment
of the persons named therein or their substitutes.
ANNUAL REPORT TO STOCKHOLDERS
The Company's Annual Report to Stockholders is being mailed with the Proxy
Statement to stockholders of record on April 14, 1997. Upon request, the Company
will furnish the Annual Report to any stockholder.
BY ORDER OF THE BOARD OF DIRECTORS,
John H. Gorman, Secretary
San Jose, California
April 30, 1997
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[front of proxy card]
The undersigned shareholder(s) of NUKO Information Systems, Inc. (the
"Company") hereby constitutes and appoints Pratap Kesav Kondamoori and John H.
Gorman, and each of them, attorneys and proxies of the undersigned, each with
power of substitution, to attend, vote and act for the undersigned at the Annual
Meeting of Stockholders of the Company to be held on May 28, 1997, and at any
adjournment or postponement thereof, according to the number of shares of Common
Stock of the Company which the undersigned may be entitled to vote, and with all
powers which the undersigned would possess if personally present, as follows:
1. ELECTION OF DIRECTORS: ___ FOR all ___ WITHHOLD
nominees listed AUTHORITY to vote
below (except as for all nominees
marked to the listed below
contrary below)
Pratap Kesav Kondamoori
Ram Kedlaya
Anders O. Field, Jr.
Marc Dumont
Robert C. Marshall
(INSTRUCTION: To vote for all nominees listed above, mark the "FOR" box; to
withhold authority for all nominees listed above, mark the "WITHHOLD AUTHORITY"
box; and to withhold authority to vote for any individual nominee listed above,
mark the "FOR" box and write the nominee's name in the space provided below.)
THIS PROXY WILL BE VOTED FOR THE ELECTION AS DIRECTOR OF ALL NOMINEES SET
FORTH IN THE NOTICE OF ANNUAL MEETING AND PROXY STATEMENT, UNLESS THE CONTRARY
IS INDICATED IN THE APPROPRIATE PLACE.
(Continued on reverse side)
<PAGE> 19
[reverse of proxy card]
In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
The undersigned revokes any prior proxy at such meeting and ratifies all
that said attorneys and proxies, or any of them, may lawfully do by virtue
hereof. Receipt of the Notice of Annual Meeting of Stockholders and Proxy
Statement is hereby acknowledged.
Dated:___________________, 1997
_______________________________
_______________________________
_______________________________
(Signature(s) of stockholders)
Please sign exactly as name
appears herein. When shares
are held by joint tenants,
both should sign; when signing
as an attorney, executor,
administrator, trustee or
guardian, give full title as
such. If a corporation, sign
in full corporate name by
President or other authorized
officer. If a partnership,
sign in partnership name by
authorized partner.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
NUKO INFORMATION SYSTEMS, INC.
PLEASE COMPLETE, SIGN, DATE AND MAIL PROMPTLY IN THE POSTAGE-PAID
ENVELOPE ENCLOSED
