<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
COMSHARE, INC.
- -------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
COMSHARE, INC.
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing
fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
COMSHARE, INCORPORATED
555 Briarwood Circle
Ann Arbor, Michigan 48108
(734) 994-4800
-------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 23, 1998
The Annual Meeting of Shareholders of Comshare, Incorporated, a Michigan
corporation, will be held at the Comshare Training Center, 555 Briarwood Circle,
Ann Arbor, Michigan 48108 on Monday, November 23, 1998 at 11:00 a.m., for the
following purposes:
1. To elect nine directors.
2. To consider and act upon a proposal to adopt the 1998 Global
Employee Stock Option Plan.
3. To vote upon such other matters as may properly come before the
meeting or any adjournment or adjournments thereof.
The determination of shareholders entitled to notice of and to vote at the
meeting was made as of the close of business on September 25, 1998, the record
date fixed by the Board of Directors for such purpose.
You are invited to attend the meeting. Whether or not you expect to be
present, please execute and return the enclosed proxy, which is solicited by the
Board of Directors of the Company. The proxy is revocable and will not affect
your right to vote in person if you attend the meeting.
By Order of the Board of Directors
MICHAEL S. KHOURY
Secretary
October 13, 1998
Ann Arbor, Michigan
<PAGE> 3
COMSHARE, INCORPORATED
-------------------------
PROXY STATEMENT
1998 ANNUAL MEETING OF SHAREHOLDERS
This Proxy Statement is provided in connection with the solicitation of
proxies by the Board of Directors of Comshare, Incorporated, a Michigan
corporation (the "Company"), to be used at the Annual Meeting of Shareholders of
the Company to be held on Monday, November 23, 1998 or at any adjournment or
adjournments thereof, for the purposes set forth in the accompanying Notice of
Annual Meeting of Shareholders and in this Proxy Statement. In addition to the
solicitation by mail, proxies may be solicited in person or by telephone,
telegraph or facsimile by officers, directors and employees. The Company's
officers, directors and employees will not be additionally compensated, but may
be reimbursed for out-of-pocket expenses in connection with such solicitation.
The cost of soliciting proxies will be borne by the Company. The principal
executive offices of the Company are located at 555 Briarwood Circle, Ann Arbor,
Michigan 48108. This Proxy Statement and the accompanying form of proxy were
first given or sent to shareholders on or about October 13, 1998.
The Company's Annual Report to Shareholders for the year ended June 30,
1998 is enclosed with this Proxy Statement.
Shareholders are urged to read this Proxy Statement carefully and vote
their shares on each matter by returning their signed proxy cards before the
close of business on November 20, 1998. This year, United States and Canadian
shareholders of record may vote their shares either by calling a toll-free
telephone number or by mailing their signed proxy cards. Shareholders who vote
by telephone do not need to mail their proxy cards. The telephone voting
procedures are designed to authenticate shareholders' identities, allow
shareholders to give their voting instructions and confirm that shareholders'
instructions have been recorded properly. Specific instructions for shareholders
of record who wish to use the telephone voting procedures are included on the
enclosed proxy card. A proxy may be revoked at any time prior to the voting at
the 1998 Annual Meeting by submitting a later-dated proxy (including a proxy by
telephone), by giving written notice of such revocation to the Corporate
Secretary of the Company, or by voting in person at the 1998 Annual Meeting.
Only holders of record of Common Stock of the Company at the close of
business on September 25, 1998 (the "Record Date") are entitled to vote at the
meeting or any adjournment or adjournments thereof. On that date, 10,075,742
shares of Common Stock were issued and outstanding. Each shareholder is entitled
to one vote for each share of Common Stock held of record on the Record Date.
Shares cannot be voted at the meeting unless the holder is present in person or
by telephone or represented by proxy. Shares may not be voted cumulatively for
the election of directors.
If no specific instructions are given and a proxy is properly given
(including a proxy by telephone), all shares covered by the proxy will be voted
by Dennis G. Ganster and Kathryn A. Jehle for the election of all of the Board's
nominees for director and for adoption of the 1998 Global Employee Stock Option
Plan. Unless otherwise indicated by the shareholder, a proxy (including a proxy
by telephone) also gives Mr. Ganster and Ms. Jehle discretionary authority to
vote all shares of Common Stock represented by the proxy on any other matter
that is properly presented for action at the meeting; however, the Board of
Directors does not intend to present any other matters at the Annual Meeting.
Abstentions, and withheld votes with respect to the election of directors,
are counted only for purposes of determining whether a quorum is present at the
1998 Annual Meeting. Broker non-votes are not counted for any purpose. Directors
are elected by a plurality of the votes cast, so that only votes cast "for"
directors are counted in determining which directors are elected. Approval of
the other matters specified in the Notice of Annual Meeting of Shareholders
requires a majority of the votes cast on the matter. For purposes of
<PAGE> 4
determining the number of votes cast with respect to such other matters, only
those cast "for" or "against" are included, and abstentions and broker non-votes
are not counted for this purpose.
MATTERS TO COME BEFORE THE MEETING
(1) ELECTION OF DIRECTORS
Nine directors will be elected, each to hold office until the next Annual
Meeting of Shareholders and until his or her successor is elected and qualified,
or until the director's resignation or removal. The individuals who will be
nominated by the Board of Directors for election at the Annual Meeting are
listed in the table below. Each of the nominees for election is presently a
director of the Company.
Shares represented by proxies in the form accompanying this Proxy Statement
or by telephone vote will be voted for the election of the nominees listed below
unless the proxy is marked (in accordance with the instructions thereon) to
indicate that authority to do so is withheld. If, as a result of circumstances
not now known or foreseen, any of the nominees shall be unavailable to serve as
a director, proxies will be voted for the election of such other person or
persons as the Board of Directors may select. Each shareholder is entitled to
one vote for each share of Common Stock held.
<TABLE>
<CAPTION>
YEAR FIRST
ELECTED OR
APPOINTED
NAME AGE PRINCIPAL OCCUPATION AND OTHER INFORMATION DIRECTOR
---- --- ------------------------------------------ ----------
<S> <C> <C> <C>
Geoffrey B. Bloom.................... 57 Chairman and Chief Executive Officer, 1995
Wolverine World Wide, Inc., a manufacturer and
seller of footwear, Rockford, Michigan
Daniel T. Carroll.................... 72 Chairman of the Board of Directors of the 1986
Company; Chairman of The Carroll Group, Inc.,
a management consulting company, Avon,
Colorado
Richard L. Crandall.................. 55 Director and Special Advisor of Giga 1968
Information Group, an information technology
advisory firm, Norwell, Massachusetts;
Managing Director of Arbor Partners, LLC, a
venture assistance firm, Ann Arbor,
Michigan
Stanley R. Day....................... 73 Retired Chairman of the Board, Champion 1967
Enterprises Inc., a manufacturer and seller of
manufactured homes and mid-sized buses,
Auburn Hills, Michigan
W. John Driscoll..................... 69 Retired President, Rock Island Company, a 1970
private investment company, St. Paul,
Minnesota
Dennis G. Ganster.................... 47 President and Chief Executive Officer of the 1997
Company
Kathryn A. Jehle..................... 46 Senior Vice President and Chief Financial 1998
Officer of the Company
Alan G. Merten....................... 56 President, George Mason University, Fairfax, 1985
Virginia
John F. Rockart...................... 66 Director and Senior Lecturer, Center for 1989
Information Systems Research, Massachusetts
Institute of Technology, Cambridge,
Massachusetts
</TABLE>
Each of the foregoing persons has been engaged in the principal occupation
shown above, or in a similar occupation with the same employer, for more than
five years, except for Messrs. Bloom, Carroll, Crandall and Ganster, Ms. Jehle
and Dr. Merten.
2
<PAGE> 5
Mr. Bloom assumed the position of Chairman and Chief Executive Officer of
Wolverine World Wide, Inc. in April 1996, after having served as its President
and Chief Executive Officer from 1993 to April 1996 and as its Chief Operating
Officer from 1987 to 1993.
Mr. Carroll assumed the position of Chairman of the Board of Directors of
the Company in March 1997. Mr. Carroll also serves as a director of the
following corporations: A.M. Castle & Co., American Woodmark Corporation, Aon
Corporation, Diebold, Inc., Oshkosh Truck Corporation, Wolverine World Wide,
Inc. and Woodhead Industries, Inc.
Mr. Crandall served as Chairman of the Board of the Company from April 1994
to March 1997. Mr. Crandall served as President and Chief Executive Officer of
the Company from 1970 to 1994. Mr. Crandall also serves as a director of Giga
Information Group, Computer Task Group, Inc. and Diebold, Inc.
Mr. Driscoll also serves as a director of the following corporations: The
John Nuveen Company, The St. Paul Companies, Inc., Northern States Power Company
and Weyerhaeuser Company.
Mr. Ganster was appointed President and Chief Executive Officer of the
Company in August 1997, after having served as Senior Vice President of the
Company since July 1994. He had previously served as Vice President and Chief
Technology Officer of the Company from April 1993 to July 1994, and Vice
President of Product Management from July 1988 to April 1993. Mr. Ganster has
been with the Company in various positions since 1972, with positions of
responsibility in sales, marketing and product development.
Ms. Jehle was appointed Senior Vice President, Chief Financial Officer,
Treasurer and Assistant Secretary of the Company in May 1994. She previously
served as Chief Financial Officer of Pharmavene, Inc., a pharmaceutical company,
from June 1993 to May 1994. Ms. Jehle was previously employed by the Company
from 1981 through 1987, most recently as Vice President and Treasurer.
Dr. Merten became the President of George Mason University on July 1, 1996.
From 1989 until accepting this position, he served as Dean of the Johnson
Graduate School of Management at Cornell University. Dr. Merten also currently
serves on the boards of BTG, Inc., INDUS International Incorporated and Concert
Investment Series.
Dr. Rockart also serves as a director of Keane, Inc.
MEETINGS AND COMMITTEES OF THE BOARD
During the Company's fiscal year ended June 30, 1998, the Board of
Directors held nine meetings. All of the Directors attended at least 75% of the
total number of meetings of the Board, and of any committees on which they
served, held during the period in which they served as Directors or members of
any such committees, except Dr. Rockart. The Company anticipates that regardless
of the schedule chosen for its regular meetings, there will be occasions on
which not all Directors are available. Furthermore, special meetings of the
Board are sometimes held on relatively short notice and Directors, particularly
those located outside the Detroit-Ann Arbor area, may sometimes be unable to
attend such meetings because of prior commitments.
The Audit Committee of the Board met five times during the Company's last
fiscal year. The Audit Committee is responsible for recommending to the full
Board the selection of independent auditors; reviewing the engagement of the
independent auditors (including the fee, scope and timing of the audit);
reviewing with the independent auditors and management the Company's policies
and procedures with respect to accounting and financial controls; reviewing with
the independent auditors, upon completion of their audit, their report or
opinion, their perception of the Company's financial and accounting personnel
and significant transactions which are not a normal part of the Company's
business, any change in accounting principles and practices, all significant
proposed adjustments and any recommendations they may have for improving
internal accounting controls, choice of accounting principles or management
systems; and meeting with the Company's financial staff to discuss internal
accounting and financial controls and the extent to which recommendations made
by
3
<PAGE> 6
the independent auditors have been implemented. The members of the Audit
Committee are Mr. Carroll and Drs. Merten and Rockart.
The Compensation Committee of the Board met six times during the Company's
last fiscal year. The Compensation Committee is responsible for determining or
approving the salaries or range of salaries, bonus compensation and other
compensation arrangements for officers of the Company, and performing such
functions as may be delegated to it under the provisions of any bonus, stock
option or other compensation plans adopted by the Company. The members of the
Compensation Committee are Messrs. Bloom, Day and Driscoll.
The Nominating Committee of the Board did not meet during the Company's
last fiscal year. This committee is responsible for identifying and recommending
to the Board qualified candidates for election as directors of the Company. In
carrying out its responsibilities, the Nominating Committee will consider
candidates suggested by other directors, employees and shareholders. Suggestions
for candidates, accompanied by biographical material for evaluation, may be sent
to the Secretary of the Company at the Company's principal executive offices.
The members of the Nominating Committee are Mr. Crandall and Drs. Merten and
Rockart.
(2) PROPOSAL TO APPROVE THE COMPANY'S 1998 GLOBAL EMPLOYEE STOCK OPTION PLAN
The Board of Directors approved the adoption of the 1998 Global Employee
Stock Option Plan (the "1998 Plan") on August 14, 1998, and directed that the
1998 Plan be submitted to the Company's shareholders for approval at the Annual
Meeting. The 1998 Plan provides for the issuance of options to purchase up to
900,000 shares of the Company's Common Stock to employees. The 1998 Plan was
adopted to provide incentives for employees to promote the success of the
Company. The Company historically has used stock option grants as part of its
compensation program for its employees. In this way, the Company has linked
compensation for its employees to the performance of the Company. In addition,
the Company believes that the use of stock option grants to its employees will
enhance the Company's ability to attract and retain the services of such persons
and otherwise more closely align their interests with those of the Company's
shareholders.
The 1998 Plan replaces the Company's 1988 Stock Option Plan, which expired
in June 1998 (the "Expired 1988 Plan") and the 1997 Global Employee Stock Option
Plan (the "1997 Plan"), which will be amended by the Company's Board of
Directors following the approval of the 1998 Plan, to prohibit future grants of
options under the 1997 Plan. There are currently 358,250 shares of Common Stock
available for grant under the 1997 Plan, most, if not all, of which would be
eliminated if the 1998 Plan is approved by shareholders. As a result of the
prohibition against future grants of options under the 1997 Plan, the adoption
of the 1998 Plan would result in approximately 541,750 new shares available for
option grants.
At the present time, the Company has no stock option plans under which
grants may be made to executives of the Company. The 1997 Plan is available only
for grants to non-officer employees of the Company. It is for this reason that
the Board of Directors adopted the 1998 Plan and is recommending its approval by
shareholders at the Annual Meeting. If the 1998 Plan is not approved by
shareholders at the Annual Meeting, the Company will not have any stock option
plans under which stock option grants can be made to attract new executives of
the Company or to provide continued long-term incentives to its existing
executive management team.
Stock option grants are of significant importance to the Company in
attracting and retaining high-quality executives and other key employees and are
an important element of a competitive recruitment process. Under the Company's
overall compensation policy, particularly for executives, a substantial portion
of an employee's
4
<PAGE> 7
compensation is linked to Company performance through stock options. The Company
has historically used stock-based compensation incentives for the following
reasons:
- Since stock options gain value only if the price of the Common Stock
increases above the exercise price of the option, stock option grants are an
effective means of closely linking employee compensation to Company performance.
- Stock options, by tying employees' economic incentives to increases in
the value of the Common Stock, further align the employee's interests to those
of the Company's shareholders.
- The Company's stock options include a vesting period before the employee
can realize the benefit of the stock option. This feature assists in the
long-term retention of employees and requires these employees to contribute to
the Company over an extended period in order to benefit from the options.
Stock option grants have been an essential part of the Company's
compensation program for executives and key employees. The approval of the 1998
Plan by the shareholders of the Company will enable the Company and the
Compensation Committee of the Board of Directors to continue to use stock
options as part of the Company's efforts to recruit and incentivize the
Company's executive management team and other key employees.
THE BOARD OF DIRECTORS RECOMMENDS THE SHAREHOLDERS VOTE FOR THE APPROVAL OF
THE COMPANY'S 1998 GLOBAL EMPLOYEE STOCK OPTION PLAN.
ELIGIBLE PARTICIPANTS
At September 30, 1998, there were 418 employees eligible to participate in
the 1998 Plan.
TERMS OF THE 1998 PLAN
The 1998 Plan is to be administered by the Compensation Committee of the
Board of Directors (the "Committee"). The Committee may adopt such rules and
regulations as are necessary to administer the 1998 Plan.
Options will be granted to such employees as the Committee may select.
Options granted under the 1998 Plan may be incentive stock options ("ISOs")
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), or non-qualified options that do not meet the requirements
of ISOs ("nonqualified stock options"). Under the terms of the 1998 Plan, the
Committee may designate a portion of an option as an ISO or a nonqualified stock
option. Stock released from option upon the termination, cancellation,
expiration, forfeiture or surrender of any option prior to complete exercise of
the option may again be subjected to options under the 1998 Plan.
Unless the exercise price for the ISO is at least 110% of the fair market
value of the shares subject to the option (measured at the time of grant), and
the option, by its terms, is not exercisable more than five years after the date
of grant, no ISO may be granted to any participant who possesses more than 10%
of the total combined voting power of all classes of stock of the Company or a
subsidiary. In addition, the Committee cannot grant an ISO if, as a result of
the grant, the optionee would have the right in any calendar year to exercise
for the first time, one or more ISOs for shares having an aggregate fair market
value (under all plans of the Company and determined for each share as of the
date the option to purchase the share was granted) in excess of $100,000.
The option price for each share of stock for which an option is granted
under the 1998 Plan shall not be less than 100% of the fair market value of the
stock on The Nasdaq Stock Market, Inc. (the "Nasdaq Stock Market") (as reported
in The Wall Street Journal) on the date the option is granted. As of the close
of business on September 25, 1998, the price per share of Common Stock as quoted
on the Nasdaq Stock Market was $3.9375.
Options granted under the 1998 Plan are exercisable at such times and on
such terms as the Committee may determine, but no options may be exercised
before one year from the date of grant nor more than 10 years
5
<PAGE> 8
after the date of grant (except in the event of a "change of control" as defined
below). Unless the option agreement between the optionee and the Company
provides otherwise, an option granted shall vest 25% annually over four
consecutive years commencing on the first anniversary of the grant date and
shall not be exercisable after the tenth anniversary of the grant date.
The 1998 Plan provides that the portion of any outstanding option
(including any option that has not been outstanding for one year) that has not
expired or been exercised, terminated, canceled, forfeited or surrendered shall
become exercisable in full in the event of a "change of control." A change in
control is generally deemed to have occurred upon the happening of any of the
following events: (i) the election of a Board of Directors of the Company, a
majority of the members of whom were nominees of a person, other than persons
who were members of the Board of Directors or officers of the Company as of
certain specified dates, following the acquisition by such person(s) of
twenty-five percent, or more, of the outstanding Common Stock, (ii) the
acquisition of ownership by a person or group of persons described in (i) above
of fifty-one percent, or more, of the Company's outstanding Common Stock, (iii)
a sale of all or substantially all of the assets of the Company to any entity
not controlled by persons who were members of the Board of Directors or officers
of the Company as of certain specified dates or any Employee Stock Ownership
Plan for the benefit of employees of the Company, or (iv) a merger,
consolidation or similar transaction between the Company and another entity if a
majority of the members of the Board of Directors of the surviving corporation
are not persons who were members of the Board of Directors of the Company as of
certain specified dates.
The option exercise price is payable in cash, by personal check (certified
or bank cashier's check), or by surrendering to the Company certain shares of
the Company's Common Stock, duly endorsed for transfer or with duly executed
stock powers attached, or in any combination of the foregoing. At the discretion
of the Committee, as set forth in an optionee's option agreement with the
Company, an option may also be exercised by delivery of an exercise notice
together with irrevocable instructions to the optionee's broker to deliver to
the Company sufficient cash to pay the exercise price and applicable taxes in
accordance with a written agreement between the Company and the brokerage firm
("cashless exercise procedure"). For purposes of the cashless exercise
procedure, the fair market value of the Company's stock on the date of exercise
shall be the per share amount actually paid to the optionee by the brokerage
house upon the sale of stock used to satisfy the option exercise price.
In the event of any dividend or subdivision or combination of shares,
reclassification or merger or consolidation in which the Company is the
surviving corporation, the aggregate number of shares of stock for which options
may be granted and the number of shares subject to each outstanding option and
the stated option price shall be proportionately adjusted. After any merger of
one or more corporations into the Company, or after any consolidation of the
Company and one or more corporations in which the Company shall be the surviving
corporation, each optionee shall, at no additional cost, be entitled upon any
exercise of his or her option, to receive, in lieu of the number of shares as to
which such option shall then be exercised, the number and class of shares or
other securities to which such optionee would have been entitled pursuant to the
terms of the agreement of merger or consolidation if at the time of such merger
or consolidation such optionee had been a holder of record of a number of shares
of stock of the Company equal to the number of shares as to which such option
shall then be so exercised. Anything to the contrary notwithstanding, upon the
dissolution or liquidation of the Company or upon any merger or consolidation in
which the Company is not the surviving corporation, any option granted under the
1998 Plan shall terminate.
Under Section 162(m) of the Code, the Company may deduct compensation paid
to the Company's chief executive officer and to each of its four most highly
compensated executive officers only to the extent that it does not exceed
$1,000,000 during any fiscal year, unless the compensation constitutes
"performance-based" compensation. In general, compensation attributable to a
stock option or stock appreciation right is deemed to be based on performance if
(i) the grant is made by the corporation's compensation committee; (ii) the plan
under which the grant is made includes a per employee limit on the number of
shares with respect to which options may be granted during a specified period;
and (iii) the amount of compensation the employee could receive under the terms
of the option is based solely on the increase in value of the stock after the
date of grant.
6
<PAGE> 9
The Board of Directors concluded that it would be advisable to establish
certain restrictions on the granting of options under the 1998 Plan to exempt
from Section 162(m) compensation realized in connection with future exercises of
options. The 1998 Plan provides that no employee shall be eligible to receive
aggregate option grants under the 1998 Plan in any one fiscal year to purchase
more than 100,000 shares of the Company's stock. The permitted size of option
awards to a single individual was established based on the Board of Directors'
determination of the maximum number of option shares which would be required to
be granted in any one-year period to retain or attract a chief executive officer
of the Company. In addition, as described above, grants under the 1998 Plan may
only be made by the Compensation Committee and the option price may not be less
than fair market value. If the 1998 Plan is approved by the shareholders,
compensation deductions available to the Company arising from the exercise of
options granted under the 1998 Plan generally should not be limited by Section
162(m). Approval of the 1998 Plan by the shareholders is also an approval of the
foregoing restrictions for purposes of Section 162(m) of the Code.
Unless previously terminated, the 1998 Plan will terminate on August 14,
2008. The Board may, at any time prior to that date, terminate or discontinue
the 1998 Plan or from time to time alter, amend or modify the 1998 Plan, but no
such amendment or modification, without the approval of the Company's
shareholders, shall (a) change the eligibility requirements to participate in
the 1998 Plan, (b) increase the amount of stock on which options may be granted
(except as provided above), (c) change the manner of determining the option
price, or (d) permit repricing transactions under the 1998 Plan. No such
amendment or modification shall affect the rights of the holder of any option
theretofore granted and then outstanding without the consent of optionee or the
consent of the transferee of the option or right.
Options granted under the 1998 Plan are not transferable except by will or
by the laws of descent and distribution, and may be exercised during an
optionee's lifetime only by such optionee.
In the event an optionee's employment with the Company is terminated, an
exercisable stock option may remain exercisable for up to ninety days after
termination of employment. The Committee may determine, however, that the option
will terminate at a time prior to the expiration of such ninety-day period.
Certain addenda have been added to the 1998 Plan to address matters
involving the Company's non-U.S. employees.
If the 1998 Plan is approved by the shareholders, the 1997 Plan will be
amended to provide that no additional options may be granted under the 1997
Plan. All options granted under the 1997 Plan prior to approval of the 1998 Plan
shall continue to be exercisable on the same terms and conditions as provided in
the 1997 Plan and in each optionee's option agreement. As of September 30, 1998,
there were options to acquire 144,750 shares of Common Stock outstanding under
the 1997 Plan and 358,250 shares of Common Stock available for future grants
under the 1997 Plan.
FEDERAL INCOME TAX CONSEQUENCES
Incentive Stock Options. The optionee generally will not be deemed to
recognize income at the time an ISO is granted or exercised. The spread between
the exercise price and the fair market value of the Company's Common Stock on
the date of exercise, however, is an item of tax preference which may subject
the optionee to the alternative minimum tax.
Upon disposition of shares acquired upon exercise of an ISO, an optionee
will be accorded long-term capital gain or loss treatment on the difference
between the option exercise price and the disposition price; provided that the
disposition occurs more than two years from the date of grant and one year from
the date of exercise. An optionee who disposes of shares acquired upon exercise
of an ISO prior to the expiration of the foregoing holding periods recognizes
ordinary income upon the disqualifying disposition equal to the difference
between the option exercise price and the lesser of the fair market value of the
shares on the date of exercise or the date of disposition. Any appreciation
between the date of exercise and the date of disposition is taxed as long- or
short-term capital gain, depending upon the holding period of the shares.
7
<PAGE> 10
The Company is generally not entitled to a compensation deduction in
connection with the grant to, or the exercise by, an optionee of an ISO. In the
event of a disqualifying disposition, the Company is entitled to a compensation
deduction to the extent ordinary income is recognized by the optionee.
Nonqualified Stock Options. An optionee recognizes ordinary income upon the
exercise of a nonqualified option equal to the spread between the option
exercise price and the fair market value of the Company's Common Stock on the
date of exercise. Upon disposition of the shares acquired upon exercise of the
option, the optionee will be accorded capital gain or loss treatment on the
difference between the fair market value of the Company's Common Stock on the
date of disposition and the fair market value of the Company's Common Stock on
the date of exercise of the option.
When an optionee exercises a nonqualified option, the Company withholds
FICA and income taxes on the spread between the option exercise price and the
fair market value of the Company's Common Stock on the date of exercise, and is
entitled to a compensation deduction in the amount of ordinary income recognized
by the optionee upon exercise of the option.
8
<PAGE> 11
FURTHER INFORMATION
PRINCIPAL SHAREHOLDERS
The Common Stock is the only voting security of the Company. The Company is
not aware of any person who beneficially owned five percent or more of such
stock as of September 25, 1998.
STOCK OWNERSHIP OF MANAGEMENT
The following table sets forth the beneficial ownership of shares of the
Company's Common Stock as of September 25, 1998 by each of the Company's
directors, Named Officers (as defined below) and by all executive officers and
directors of the Company as a group:
<TABLE>
<CAPTION>
COMMON STOCK
OF THE COMPANY
OWNED PERCENT
NAME BENEFICIALLY(1) OF CLASS(%)
---- --------------- -----------
<S> <C> <C>
Geoffrey B. Bloom(2)........................................ 9,000 0.09
Daniel T. Carroll(3)........................................ 76,125 0.76
Richard L. Crandall......................................... 56,840 0.56
Stanley R. Day(4)........................................... 10,452 0.10
W. John Driscoll(5)......................................... 23,625 0.23
Dennis G. Ganster(6)........................................ 81,853 0.81
Kathryn A. Jehle(7)......................................... 76,825 0.76
Alan G. Merten(8)........................................... 11,550 0.12
John F. Rockart(9).......................................... 19,625 0.20
Geoffrey R. Cluett(10)...................................... 27,063 0.27
David King(11).............................................. 12,375 0.12
Norman R. Neuman, Jr.(12)................................... 125,883 1.25
Stanley R. Starkey.......................................... 17,878 0.18
T. Wallace Wrathall(13)..................................... 251,915 2.49
All executive officers and directors as a group (13
persons)(14).............................................. 549,094 5.36
</TABLE>
- -------------------------
(1) To the best of the Company's knowledge, based on information reported by
such directors and officers or contained in the Company's shareholder
records. Unless otherwise indicated by any additional information included
in the footnotes to the table, each of the named persons is presumed to
have sole voting and investment power with respect to all shares shown.
(2) Includes 6,000 shares which Mr. Bloom has, or within 60 days of September
30, 1998 will have, the right to acquire pursuant to the presently
exercisable portion of options granted under the Company's Directors Stock
Option Plan (the "Directors Plan").
(3) Includes 8,625 shares which Mr. Carroll has, or within 60 days of September
30, 1998 will have, the right to acquire pursuant to the presently
exercisable portion of options granted under the Directors Plan.
(4) Includes 8,625 shares which Mr. Day has, or within 60 days of September 30,
1998 will have, the right to acquire pursuant to the presently exercisable
portion of options granted under the Directors Plan.
(5) Includes 8,625 shares which Mr. Driscoll has, or within 60 days of
September 30, 1998 will have, the right to acquire pursuant to the
presently exercisable portion of options granted under the Directors Plan.
(6) Includes 28,874 shares which Mr. Ganster has, or within 60 days of
September 30, 1998 will have, the right to acquire pursuant to the
presently exercisable portion of options granted under the Expired 1988
Plan. Mr. Ganster disclaims beneficial ownership of 1,951 shares reflected
in the table which are owned by his spouse.
9
<PAGE> 12
(7) Includes 58,135 shares which Ms. Jehle has, or within 60 days of September
30, 1998 will have, the right to acquire pursuant to the presently
exercisable portion of options granted under the Expired 1988 Plan.
(8) Includes 8,625 shares which Dr. Merten has, or within 60 days of September
30, 1998 will have, the right to acquire pursuant to the presently
exercisable portion of options granted under the Directors Plan.
(9) Includes 8,625 shares which Dr. Rockart has, or within 60 days of September
30, 1998 will have, the right to acquire pursuant to the presently
exercisable portion of options granted under the Directors Plan.
(10) Includes 8,750 shares which Mr. Cluett has, or within 60 days of September
30, 1998 will have, the right to acquire pursuant to the presently
exercisable portion of options granted under the Expired 1988 Plan.
(11) Includes 9,750 shares which Mr. King has, or within 60 days of September
30, 1998 will have, the right to acquire pursuant to the presently
exercisable portion of options granted under the Expired 1988 Plan.
(12) Includes 10,000 shares which Mr. Neuman has, or within 60 days of September
30, 1998 will have, the right to acquire pursuant to the presently
exercisable portion of options granted under the Expired 1988 Plan.
(13) Includes 40,625 shares which Mr. Wrathall has, or within 60 days of
September 30, 1998 will have, the right to acquire pursuant to the
presently exercisable portion of options granted under the Expired 1988
Plan.
(14) Includes 167,134 shares which certain directors and executive officers
have, or within 60 days of September 30, 1998 will have, the right to
acquire pursuant to the presently exercisable portion of options granted
under the Expired 1988 Plan and the Directors Plan; and 1,951 shares
referred to in Note (6) above under "Stock Ownership of Management" as to
which beneficial ownership is disclaimed. Excludes shares owned by Mr.
Wrathall, who is not currently serving as executive officer of the Company.
EXECUTIVE OFFICERS
The persons listed below currently are the executive officers of the
Company.
<TABLE>
<CAPTION>
NAME OFFICER(S) AGE
---- ---------- ---
<S> <C> <C>
Dennis G. Ganster........................... President and Chief Executive Officer 47
Geoffrey R. Cluett.......................... Senior Vice President, International Operations 52
Kathryn A. Jehle............................ Senior Vice President, Chief Financial Officer, 46
Treasurer, and Assistant Secretary
David King.................................. Senior Vice President, Product Development and 54
Chief Technology Officer
Norman R. Neuman Jr......................... Senior Vice President, Marketing 57
Stanley R. Starkey.......................... Senior Vice President, Americas Operations 51
</TABLE>
Mr. Ganster was named President and Chief Executive Officer of the Company
in August 1997. See "Election of Directors" for further information concerning
Mr. Ganster.
Mr. Cluett was named Senior Vice President, International Operations of the
Company in May 1997. Prior to joining the Company, Mr. Cluett served as
President and Chief Executive Officer, from September 1996 to April 1997, and
Vice President, from February 1996 to August 1996, for Cignal Global
Communications, a telecommunications company. From 1994 to July 1995, Mr. Cluett
served as Vice President for Sequoia Systems Inc., a computer hardware company.
Mr. Cluett was self-employed as a consultant in 1993.
10
<PAGE> 13
Ms. Jehle was named Senior Vice President, Chief Financial Officer,
Treasurer and Assistant Secretary of the Company in May 1994. See "Election of
Directors" for further information concerning Ms. Jehle.
Mr. King was named Senior Vice President, Product Development of the
Company in August 1997, after having served as Director of Research and
Innovation of the Company since July 1995. He has been with the Company in
various positions since March 1991 when the Company purchased the operating
assets of Execucom Systems Corporation. Prior to the acquisition, Mr. King held
various positions with Execucom Systems Corporation, including Director of
Research and Development, from 1982 through 1991.
Mr. Neuman was named Senior Vice President, Marketing of the Company in
August 1997. He has been with the Company in various marketing, customer support
and customer relations positions since 1969, and was Vice President of North
America Marketing from 1983 to 1993.
Mr. Starkey was named Senior Vice President, Americas Operations of the
Company on January 1, 1998. From July 1996 to January 1998, Mr. Starkey was Vice
President of Sales for Gentia Software, Inc., a client/server software company.
From 1972 through July 1996, he was employed by the Company in various positions
including Vice President of Industry Solutions Group Sales, Vice President of
Industry Service Group Marketing and Vice President Sales, Western Region.
The executive officers of the Company serve at the pleasure of the Board of
Directors.
11
<PAGE> 14
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table provides summary information concerning compensation
paid by the Company and its subsidiaries to (or accrued on behalf of) the
Company's Chief Executive Officer and the four other most highly compensated
executive officers who were serving as executive officers at the end of fiscal
year 1998 (the "Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------
------------------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
FISCAL SALARY BONUS COMPENSATION OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($)(1) ($) ($)(2) (#) ($)(3)
--------------------------- ------ ------ ----- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Dennis G. Ganster.............. 1998 $290,519 $112,500 $ -- 90,000 $14,063
President, Chief Executive 1997 210,904 -- -- 9,000 18,947
Officer and a Director of 1996 191,923 -- 2,913 8,500 17,191
the Company
Kathryn A. Jehle............... 1998 225,000 67,500 -- 24,000 10,384
Senior Vice President, Chief 1997 225,000 -- -- 9,000 10,477
Financial Officer, Treasurer, 1996 202,404 -- -- 9,000 22,851
Assistant Secretary, and a
Director of the Company
Geoffrey R. Cluett(4).......... 1998 208,000 64,350 -- 20,000 10,400
Senior Vice President, 1997 34,667 -- -- 30,000 --
International Operations
Norman R. Neuman, Jr.(5)....... 1998 193,865 60,000 -- 45,000 12,895
Senior Vice President, 1997 144,615 33,538 -- 5,000 9,724
Marketing 1996 125,000 64,783 -- -- 7,365
David King(6).................. 1998 163,406 51,000 -- 45,000 8,822
Senior Vice President,
Product Development
T. Wallace Wrathall(7)......... 1998 404,140 -- 4,605 -- 6,924
Former President and 1997 400,000 -- 4,641 15,000 16,457
Chief Executive Officer 1996 363,461 -- 4,641 40,000 55,461
</TABLE>
- -------------------------
(1) The amounts indicated for Mr. Ganster reflect compensation paid to him in
his capacity as Chief Technology Officer through August 1997 and President
and Chief Executive Officer for the remainder of fiscal year 1998.
(2) The amounts indicated for Messrs. Ganster and Wrathall represent tax
adjustment payments on income imputed for income tax purposes related to
each Named Officer's use of a Company car. While certain of the Named
Officers receive certain perquisites, such perquisites do not exceed the
lesser of $50,000 or 10% of such officer's salary and bonus.
(3) "All Other Compensation" for fiscal year 1998 is comprised of: (i)
contributions made by the Company to the accounts (or accrued by the Company
on behalf) of each of the Named Officers for each period presented under:
(1) the Company's and its subsidiaries' profit sharing plans as follows: Mr.
Ganster $9,840, Ms. Jehle $8,564, Mr. Cluett $10,400, Mr. Neuman $9,389, Mr.
King $8,423, and Mr. Wrathall $3,538, and (2) the excess benefits provision
of the Company's Benefit Adjustment Plan ("BAP") as follows: Mr. Ganster
$3,574, Ms. Jehle $1,820, Mr. Neuman $1,674, and Mr. King $399, and (ii) the
dollar value of any premiums paid by the Company during each period
presented with respect to term life insurance for the benefit of each of the
Named Officers (other than group life plans which do not discriminate in
scope, terms or operations in favor of the executive officers and that are
generally
12
<PAGE> 15
available to all salaried employees) as follows: Mr. Ganster $649, Mr.
Neuman $1,832, and Mr. Wrathall $3,386.
(4) Mr. Cluett joined the Company as Senior Vice President, International
Operations in May 1997.
(5) Mr. Neuman became Senior Vice President, Marketing in August 1997.
(6) Mr. King became Senior Vice President, Product Development in August 1997.
(7) Mr. Wrathall ceased serving as President and Chief Executive Officer of the
Company in August 1997.
OPTION GRANTS AND RELATED INFORMATION
The following table provides information with respect to options granted to
the Named Officers during fiscal year 1998.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
----------------------------- ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM(2)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION --------------------
NAME GRANTED(#)(1) FISCAL YEAR ($/SH.) DATE 5%($) 10%($)
---- ------------- ------------ ----------- ---------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Dennis G. Ganster........ 45,000 8.22 $8.25 8/14/02 $102,570 $233,477
45,000 8.22 7.75 6/26/03 96,353 219,327
Kathryn A. Jehle......... 9,000 1.64 7.00 11/06/02 17,406 39,620
15,000 2.74 7.75 6/26/03 32,118 73,109
Geoffrey R. Cluett....... 5,000 0.91 7.00 11/06/02 9,670 22,011
15,000 2.74 7.75 6/26/03 32,118 73,109
Norman R. Neuman, Jr. ... 30,000 5.48 8.25 8/14/02 68,380 155,651
15,000 2.74 7.75 6/26/03 32,118 73,109
David King............... 30,000 5.48 8.25 8/14/02 68,380 155,651
15,000 2.74 7.75 6/26/03 32,118 73,109
T. Wallace Wrathall...... -- -- -- -- -- --
</TABLE>
- -------------------------
(1) All of these options, which were granted pursuant to the Expired 1988 Plan,
were granted at market value on the date of grant, become exercisable
annually in 25% increments beginning one year after the grant date and have
a term of five years. The exercisability of certain of these options may be
accelerated in the event of a change in control of the Company. See
"Employment Agreements and Termination/Change in Control Agreements."
(2) Represents value of option at end of a five-year term, assuming the market
price of the Company's Common Stock appreciates at an annually compounded
rate of 5% or 10%. These amounts represent assumed rates of appreciation
only. Actual gains, if any, will be dependent on overall market conditions
and on future performance of the Company's Common Stock. There can be no
assurance that the amounts reflected in the table will be achieved.
13
<PAGE> 16
OPTION EXERCISES AND HOLDINGS
The following table contains information regarding options exercised by the
Named Officers during fiscal year 1998, and the value of options held by such
officers as of June 30, 1998 measured in terms of the closing price of the
Company's Common Stock on June 30, 1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
SHARES FISCAL YEAR END(#) AT FISCAL YEAR END($)(1)
ACQUIRED ON VALUE ---------------------------- ----------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Dennis G. Ganster......... 9,375 $32,063 9,937 104,437 $0 $2,813
Kathryn A. Jehle.......... 0 0 48,198 38,437 0 8,250
Geoffrey R. Cluett........ 0 0 7,500 42,500 0 5,000
Norman R. Neuman, Jr. .... 7,500 20,156 1,250 48,750 0 938
David King................ 1,125 4,269 2,250 45,750 0 938
T. Wallace Wrathall....... 0 0 40,625 36,875 0 0
</TABLE>
- -------------------------
(1) Calculated on the basis of the number of shares subject to each such option
multiplied by the excess of the fair market value of a share of Common Stock
at June 30, 1998 over the exercise price of such option.
LONG-TERM INCENTIVE PLAN AWARDS
The following table sets forth information concerning future payouts to
certain of the Named Officers under a long-term executive bonus plan in effect
during fiscal year 1998 (the "Plan"). The Plan provides for certain Named
Officers to receive a bonus payout as set forth in the following table on each
of September 1, 1998 and 1999 if he or she is employed by the Company on that
date and he or she has outstanding loans from the Company under the 1994
Executive Stock Purchase Program (the "Program"). Approximately 70% of the
payout under the Plan will be applied against the Named Officer's outstanding
loans under the Program. The amount of the bonus payout will be at the minimum
level if the Named Officer's outstanding loans under the Program are paid prior
to the date of the payout and at the maximum level if the loans are not paid
prior to the date of the payout. Ms. Jehle paid her loans under the Program
prior to the 1998 payout date and will, therefore, receive no payout under the
Plan. Mr. Cluett will receive the maximum payout under the Plan in 1998 with
$39,095 paid against the outstanding balance of his loans under the Program.
<TABLE>
<CAPTION>
FUTURE PAY-OUTS
UNDER NON-STOCK
PRICE BASED PLAN
---------------------
NAME PERIOD UNTIL PAYOUT MINIMUM MAXIMUM
---- ------------------- ------- -------
<S> <C> <C> <C>
Kathryn A. Jehle.................................... September 1, 1998 $0 $50,400
September 1, 1999 $0 $54,800
Geoffrey R. Cluett.................................. September 1, 1998 $0 $54,700
September 1, 1999 $0 $59,900
</TABLE>
COMPENSATION COMMITTEE REPORT
The responsibilities of the Compensation Committee include recommending to
the Board of Directors the compensation for the executive officers of the
Company, who during all or part of fiscal year 1998 were the Named Officers plus
Stanley R. Starkey. The Committee also considers recommendations from the Chief
Executive Officer for compensation of other officers of the Company and
recommends to the Board of Directors approval or changes in those
recommendations. The Committee also grants stock options to officers and key
employees under the Expired 1988 Plan, which expired in June 1998.
14
<PAGE> 17
The Committee met six times in fiscal year 1998. Executive officers were
not present during the Committee's consideration of their individual
compensation.
The Company's executive compensation program is designed to give executives
a balanced incentive package which encourages the achievement of both short-term
and long-term performance goals and which rewards continuous increases in
shareholder value. The Committee believes that the compensation program is
essential to the success of the Company to attract and retain key executives.
The Committee also believes that the Company's compensation program should
encourage the executive officers to align their interests with the shareholders
by conditioning a portion of executive compensation on shareholder value.
The executive compensation program consists of three main components: base
salary, performance bonuses and stock-based incentives. In addition, the
executive officers participate in the Company's employee benefit plans generally
on the same terms as other Company employees.
BASE SALARY
During the fiscal year, four of the six individuals holding executive
officer positions were replaced, either through internal promotion or external
recruitment.
T. Wallace Wrathall served as Chief Executive Officer for approximately one
month of the fiscal year, at a base annual salary of $400,000. In October 1997,
the Company entered into a release and settlement agreement with Mr. Wrathall
based on the severance provisions of his employment agreement.
Dennis G. Ganster became Chief Executive Officer in August 1997. The
Committee established his base salary at $300,000, which was an increase of 40%
from his salary as Senior Vice President, reflecting his increased role and
responsibilities. Mr. Ganster's salary was the same as Mr. Wrathall's initial
salary on becoming Chief Executive Officer in 1994.
The Committee did not increase the salaries of the two executive officers
who continued in their positions. The three new Senior Vice Presidents received
salaries that were the same as or lower than the salaries of the prior
incumbents in their positions. The Committee's actions did not reflect a
negative view of the abilities and efforts of the individual officers but rather
reflected the belief of the Committee and Mr. Ganster that the Company's
performance did not warrant salary increases for executive officers.
PERFORMANCE BONUSES
The Committee adopted an incentive plan for executive officers for fiscal
year 1998 that called for payments equal to 40% of base salary for Senior Vice
Presidents and 50% of base salary for the Chief Executive Officer if the Company
achieved the targeted breakeven earnings per share (after allowance for
nonrecurring charges and events), with additional payments at the discretion of
the Committee if the target was exceeded.
The Company's performance in fiscal year 1998 was below the target,
equaling a loss of $0.40 per share (after allowance for nonrecurring charges and
events). In recognition of the executives' important achievements in improving
the fundamentals of the business, including achieving two breakeven quarters,
settling the Company's litigation with Arbor Software Corporation, selling the
Company's retail business and improving employee morale, customer satisfaction
and sales and marketing operations, however, the Committee decided to pay 75% of
the targeted incentive amount.
As part of the Company's program to retain key officers, the Committee also
granted special long-term incentive bonus payments to executive officers who had
outstanding loans under the Program, provided that those officers remain
employed by the Company in succeeding fiscal years.
STOCK OPTION AWARDS
Stock option awards are an important means by which the Committee links
executive officers' compensation to the appreciation in value realized by all of
the Company's shareholders. Under the Expired 1988 Plan (and under the proposed
1998 Plan), options are granted at exercise prices equal to the market
15
<PAGE> 18
price on the date of the grant and therefore have no value to the executive
unless the Company's stock appreciates. In making awards, the Committee
considers the existing level of stock option held by the executives.
Upon Mr. Ganster's becoming Chief Executive Officer, the Committee awarded
him options to purchase 45,000 shares of Common Stock, which was equal to the
initial award made to the prior Chief Executive Officer. At the end of the
fiscal year, the Committee awarded Mr. Ganster additional options for 45,000
shares of Common Stock, in recognition of his efforts and as an increased
incentive to return the Company to revenue growth and profitability.
Based in part on the Committee's and Mr. Ganster's decision not to increase
executive salaries in the coming year and in part on the Committee's desire to
increase the executives' incentive to continue to work to improve the Company's
performance, the Committee awarded all of the Senior Vice Presidents options to
purchase 15,000 shares of Common Stock in June 1998. These awards were in
addition to the initial awards of 30,000 shares to Messrs. Neuman, Starkey and
King upon their appointments as executive officers in August 1997 and the awards
of 9,000 and 5,000 shares, respectively, to the continuing officers, Ms. Jehle
and Mr. Cluett in November 1997 in recognition of the contributions made by
these executives.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
The Company from time to time reviews the extent to which its executive
compensation arrangements are subject to the provisions of the Code and related
regulations limiting the deductibility of executive compensation in excess of
$1,000,000 paid to any of the five most highly compensated executive officers of
the Company in any fiscal year which does not qualify for an exemption under the
statute or proposed regulations. The Expired 1988 Plan and the proposed 1998
Plan include restrictions required by the Code to except option grants under
these plans from the limit on deductibility. The Committee does not presently
believe that the other components of the Company's compensation program are
likely to result in payments to any executive officer in any year in excess of
$1,000,000, other than the Company's severance arrangements following certain
changes in control of the Company, and therefore has concluded that no further
action with respect to qualifying such compensation for deductibility is
necessary at this time.
Dated: October 13, 1998 COMPENSATION COMMITTEE, as of June 30,1998
W. John Driscoll, Chair
Geoffrey B. Bloom
Stanley R. Day
16
<PAGE> 19
SHAREHOLDER RETURN
Set forth below is a graph comparing the cumulative total return on the
Company's Common Stock from July 1, 1993 through June 30, 1998 with the Standard
and Poor's Computer Software and Services Index (the "S&P Computer Software
Index") and the Nasdaq Stock Market -- US Index (the "Nasdaq US Index"). The
graph assumes that the value of the investment in the Company's Common Stock,
the S&P Computer Software Index and the Nasdaq US Index was $100 on July 1, 1993
and that all dividends were reinvested.
The graph displayed below is presented in accordance with Securities and
Exchange Commission requirements. Stockholders are cautioned against drawing any
conclusions from the data contained therein, as past results are not necessarily
indicative of future performance. This graph in no way reflects the Company's
forecast of future financial performance.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG COMSHARE, INCORPORATED, THE NASDAQ STOCK MARKET -- U.S. INDEX
AND THE S & P COMPUTER SOFTWARE AND SERVICES INDEX*
[LINE GRAPH]
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
6/93 6/94 6/95 6/96 6/97 6/98
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
COMSHARE, INC. 100.00 188.00 332.00 744.00 297.00 187.50
-------------------------------------------------------------------------------------------
NASDAQ STOCK MRKT-US 100.00 100.96 134.77 173.03 210.38 277.69
-------------------------------------------------------------------------------------------
S & P CMPTR SOFTWR & SVCS 100.00 113.29 176.35 234.91 390.38 605.44
-------------------------------------------------------------------------------------------
</TABLE>
* $100 invested on June 30, 1993 in Stock or Index -- including reinvestment of
dividends. Fiscal year ending June 30.
EMPLOYMENT AGREEMENTS AND TERMINATION/CHANGE IN CONTROL ARRANGEMENTS
Under the Expired 1988 Plan, incentive stock options were granted to key
employees (including the Named Officers) and such stock options become fully
exercisable, even if not otherwise exercisable, upon the dissolution or
liquidation of the Company or upon any merger or consolidation in which the
Company is not the surviving corporation, if a period of twelve months from the
date of grant has expired. No further options (or SARs) may be granted under the
Expired 1988 Plan as it expired June 1998. As of September 30, 1998, 704,509
shares of the Company's Common Stock were still subject to outstanding options
under the Expired 1988 Plan.
17
<PAGE> 20
Mr. Wrathall's position as the Company's President and Chief Executive
Officer terminated on August 3, 1997. Pursuant to a Release and Settlement
Agreement dated October 24, 1997 between Mr. Wrathall and the Company (the
"Settlement Agreement"), Mr. Wrathall will continue to be paid $400,000 annually
through April 4, 2001. He was also eligible through April 3, 1998 to participate
in health and welfare, profit sharing and automobile leasing programs of the
Company offered to other senior executives of the Company. The Company agreed to
cash out Mr. Wrathall's outstanding stock options which were granted on or
before August 1, 1994 and to continue certain other benefits. Pursuant to the
Settlement Agreement, Mr. Wrathall is subject to noncompetition and
confidentiality provisions and a release in favor of the Company.
As of June 1, 1998, the Company entered into Change in Control Severance
Agreements (the "Change in Control Agreements") with the following officers:
Dennis G. Ganster, Kathryn A. Jehle, Geoffrey R. Cluett, Norman R. Neuman, Jr.,
David King and Stanley R. Starkey.
The Change in Control Agreement between Mr. Ganster, the President and
Chief Executive Officer, and the Company generally provides that in the event of
termination of Mr. Ganster's employment within two years following a change in
control of the Company, Mr. Ganster will be entitled to a cash severance benefit
equal to three times minus $1 of his average gross income, calculated over the
five-year period immediately preceding the taxable year of the change of
control. This severance payment is to be paid in a lump sum cash payment within
ten days following Mr. Ganster's termination of employment. Payments made later
than this ten-day period will be subject to interest at the prime rate plus two
percent, which begins to accrue on the tenth day following the termination of
employment.
The Change in Control Agreements between the Company and each of Ms. Jehle
and Messrs. Cluett, Neuman, King and Starkey are substantially similar. Each
provides that in the event of termination of such officers' employment within
two years following a change in control of the Company, such officer will be
entitled to a cash severance benefit equal to two times such officer's annual
base salary as in effect at the time of the change in control. Such severance
payments are to be paid in a lump sum cash payment within ten days following
such officer's termination of employment. Payments made later than this ten-day
period will be subject to interest at the prime rate plus two percent, which
begins to accrue on the tenth day following the termination of employment.
For purposes of each of the Change in Control Agreements, the term "change
in control" means (a) the election of a Board of Directors of the Company, a
majority of the members of which were nominees of a person (including an
individual, a corporation, partnership, joint venture, trust or other entity) or
a group of persons acting together (other than persons who were members of the
Board of Directors or officers of the Company as of June 1, 1998 or certain
tax-qualified retirement plans of the Company (collectively, the "Exempted
Persons")), following the acquisition by such person of twenty-five percent, or
more, of the outstanding Common Stock of the Company, (b) the acquisition of
ownership by a person (other than Exempted Persons) of fifty-one percent or more
of the outstanding Common Stock of the Company, (c) a sale of all or
substantially all of the assets of the Company to any entity not controlled by
persons who were members of the Board of Directors or officers of the Company as
of June 1, 1998, or by any tax-qualified retirement plan for the benefit of
employees of the Company, or (d) a merger, consolidation or other similar
transaction between the Company and another entity if a majority of the members
of the Board of Directors of the surviving company were not Continuing
Directors. Continuing Directors means persons (x) who were members of the Board
of Directors of the Company immediately before the change in control, and (y)
who also were members of the Board of Directors of the Company as of June 1,
1998 or are new directors whose election by the Board of Directors, or
nomination for election by the Company's shareholder, was approved by a vote of
at least a majority of the directors in office at the time of such election or
nomination who either were directors as of June 1, 1998 or whose election or
nomination for election was previously approved as provided above.
For purposes of each of the Change in Control Agreements, the term
"termination of employment" is defined as (a) the officer's involuntary
termination by the Company for any reason other than death, disability,
retirement or cause; or (b) the officer's termination for (i) any reassignment
or change in the identity or corporate position to whom the officer reports, or
a change in title (other than a promotion); (ii) any reduction
18
<PAGE> 21
in the officer's base salary or failure by the Company to continue any bonus,
stock or incentive plans, (iii) the discontinuance or reduction in benefits to
the officer of any qualified or nonqualified retirement or welfare plan or the
discontinuance of any fringe benefits or other perquisites, (iv) the required
relocation of the officer's principal place of employment by more than fifty
miles or more frequent and/or longer required business traveling (other than a
promotion), or (v) the Company's breach of any provision of the Change in
Control Agreement.
Each of the Change in Control Agreements provides that the value of the
cash severance benefit, when aggregated with any other "golden parachute"
amounts (as defined in Section 280G of the Code) pursuant to any other plans,
agreements or policies of the Company and its subsidiaries, shall be reduced to
the highest amount permissible under the Code before the officer becomes subject
to the excess parachute payment excise tax and the Company loses all or part of
its compensation deduction for such payments.
DIRECTOR COMPENSATION
In fiscal year 1998, each director who was not an officer or employee of
the Company received for his services as such a semi-annual retainer of $4,000,
plus $1,000 for each Board or committee meeting attended. In addition, the
Chairman of each standing committee received a semi-annual retainer of $2,500
for serving as such. In November 1997, the Board of Directors, on recommendation
of the Compensation Committee, approved the payment to Mr. Carroll, the Chairman
of the Board of the Company, of an additional $5,000 per month beginning in
January 1997, for his services as Chairman of the Board and of the Executive
Committee.
Directors who are officers or employees of the Company receive no
compensation (beyond their compensation for services as an officer or employee)
for serving as directors.
The Company's Directors Plan provides for the issuance of options to
purchase up to 150,000 shares of the Company's Common Stock to non-employee
directors of the Company. Under the Directors Plan, each non-employee director
serving on the Board of Directors on November 17, 1994 was granted an option to
purchase 7,500 shares of the Company's Common Stock at an exercise price of
$8.33 per share. Any non-employee director who is first elected or appointed to
the Board of Directors after November 17, 1994 will receive an option to
purchase 7,500 shares of the Company's Common Stock on the date of the first
Board of Directors meeting following his or her election or appointment. In
addition, each non-employee director who has been a director for six months
before the January 1 following the date of each Annual Meeting of Shareholders
held during the term of the Directors Plan automatically shall be granted, as of
the January 1 following each such Annual Meeting, an option to purchase an
additional 1,500 shares of Common Stock. Options under the Directors Plan are
granted at the last sale price per share of the Company's Common Stock on the
Nasdaq Stock Market on the date of grant, are exercisable at a rate of 25% per
year beginning one year from the date of grant and have a term of five years.
Options granted under the Directors Plan become immediately exercisable, if not
otherwise exercisable, upon the dissolution or liquidation of the Company or
upon any merger or consolidation in which the Company is not the surviving
corporation, provided that a period of 12 months from the date of grant has
elapsed. On January 1, 1998, options to purchase 1,500 shares at an exercise
price of $6.19 were granted to each of Messrs. Bloom, Carroll, Crandall, Day and
Driscoll and Drs. Merten and Rockart. As of September 30, 1998, 70,500 options
were outstanding under the Directors Plan.
In addition to his director fees, Dr. Rockart earned $9,000 in fiscal year
1998 for his services as a consultant to the Company.
19
<PAGE> 22
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to the Program, certain executive officers have utilized
promissory notes to purchase shares. Mr. Cluett currently has notes outstanding
to the Company in the aggregate principal amount of $224,970, which also
represents the largest aggregate amount of indebtedness due by Mr. Cluett to the
Company since July 1, 1997; Mr. Mark E. Tapling, a former executive officer of
the Company, currently has notes outstanding to the Company in the aggregate
principal amount of $81,136, and $225,903 is the largest aggregate amount of
indebtedness due by Mr. Tapling to the Company since July 1, 1997; and Mr.
Wrathall currently has notes outstanding to the Company in the aggregate
principal amount of $341,149, which also represents the largest aggregate amount
of indebtedness due by Mr. Wrathall to the Company since July 1, 1997. The
executive officer notes described above are full recourse notes and are secured
by the purchased shares of the Company's Common Stock. Interest is accrued
semi-annually and is added to the principal amount of the notes, if permissible
under the terms of the program. During fiscal year 1997, Mr. Tapling issued an
unsecured promissory note in the principal amount of $9,545 to satisfy accrued
interest on the note he issued to purchase shares, which amount is reflected in
the aggregate amount of indebtedness due by Mr. Tapling to the Company stated
above. Principal and accrued interest on the notes is due four years from the
date of issuance. The outstanding note from Mr. Wrathall bears interest at a
rate of 8.75% per annum, the note from Mr. Cluett bears interest at a rate of
9.5% per annum, and the notes from Mr. Tapling bear interest at a rate of 9.25%
per annum. The foregoing principal amounts include accrued interest through June
30, 1998. Ms. Jehle, Mr. Dion O'Leary, a former officer of the Company, and Mr.
Steven Tonissen, also a former officer of the Company, fully repaid their loans
in fiscal year 1998. For fiscal 1998, the largest amounts outstanding under Ms.
Jehle's, Mr. O'Leary's and Mr. Tonissen's loans were $214,426, $209,870 and
$54,628, respectively.
In connection with its sale in June 1998 of certain assets associated with
the Company's applications for the retail industry, the Company engaged the
services of Arbor Partners, L.L.C. ("Arbor Partners"). Arbor Partners (i)
assisted in the production of a memorandum of sale describing the Company's
retail business unit, and (ii) acted as the Company's agent in connection with
the sale. The Company will pay to Arbor Partners an aggregate amount of
approximately $550,000, plus expenses, for its services. One of the Company's
directors, Richard Crandall, is a principal at Arbor Partners.
In February 1998, Mr. Crandall purchased directly from the Company 20,000
shares of the Company's Common Stock at a price per share of $8.25 for a total
purchase price of $165,000, payable in cash.
ACCOUNTANTS
Arthur Andersen LLP, independent public accountants, have audited the
financial statements of the Company since 1972. Representatives from Arthur
Andersen LLP will be present at the Annual Meeting, will have an opportunity to
make a statement if they wish, and will be available to respond to appropriate
questions. In accordance with the Company's past practice, the selection of
independent public accountants to audit the financial statements of the Company
for the fiscal year ending June 30, 1999 will be made by the Board of Directors
at a later date.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than 10 percent of a registered
class of the Company's equity securities, to file reports of their ownership
with the Securities and Exchange Commission (the "SEC"). Officers, directors and
greater than ten percent shareholders are required by SEC regulation to furnish
the Company with copies of all Section 16(a) reports they file. Specific due
dates for these reports have been established and the Company is required to
report in this proxy statement any delinquent filings and failures to file such
reports.
Based solely on its review of the copies of such reports received by it and
written representations of its incumbent directors and officers, the Company
believes that, during the period from July 1, 1997 to June 30, 1998, all of
these applicable requirements were complied with by each of its directors,
officers and greater than
20
<PAGE> 23
ten percent beneficial owners, except that one Form 4 report covering a February
1998 transaction was filed by Mr. Crandall in May 1998.
SHAREHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Shareholder proposals intended to be presented at the 1999 Annual Meeting
which are eligible for inclusion in the Company's Proxy Statement for that
meeting under Rule 14a promulgated under the Securities Exchange Act of 1934, as
amended, must be received by the Company not later than June 14, 1999 if they
are to be included in the Company's Proxy Statement relating to that meeting.
Such proposals should be addressed to the Secretary at the Company's principal
executive offices and should satisfy the requirements applicable to shareholder
proposals contained in the Company's bylaws.
Shareholder proposals intended to be presented at the 1999 Annual Meeting
which are not eligible for inclusion in the Company's Proxy Statement for that
meeting under Rule 14a-8 promulgated under the Securities Exchange Act of 1934,
as amended, must satisfy the requirements applicable to shareholder proposals
contained in the Company's bylaws. Such proposals must be addressed to the
Secretary at the Company's principal executive offices and must be received at
the Company's principal executive offices not less than fifty days nor more than
seventy days prior to the date of the 1999 Annual Meeting for which at least
sixty-five days' prior public disclosure has been made to the shareholders.
GENERAL
At the date of this Proxy Statement, management is not aware of any matters
to be presented for action at the Annual Meeting other than those described
above. However, if any other matters should properly come before the meeting, it
is the intention of the persons named in the accompanying proxy to vote in
accordance with their judgment on such matters.
October 13, 1998
Ann Arbor, Michigan
21
<PAGE> 24
COMSHARE, INCORPORATED
1998 GLOBAL EMPLOYEE STOCK OPTION PLAN
1. Purpose. This Stock Option Plan, which shall be known as the "1998
Global Employee Stock Option Plan" (the "Plan"), provides for the granting to
such employees of Comshare, Incorporated (the "Company") and its subsidiaries as
may be selected by the Compensation Committee of the Board of Directors of the
Company (the "Committee"), options to purchase Common Stock of the Company. The
word "Company" when used in this Plan with reference to employment shall include
subsidiaries of the Company. The word "subsidiary" when used in this Plan shall
mean any corporation a majority of the voting stock of which is owned or
controlled, directly or indirectly, by the Company.
2. Administration. The Committee shall administer the Plan. Subject to
the provisions of the Plan, the Committee may adopt rules and regulations for
the administration of the Plan and may make such interpretations of and
determinations under, and take such action in connection with, the Plan or the
options granted hereunder as it deems necessary or advisable. Each
interpretation, determination or other action made or taken pursuant to the Plan
by the Committee shall be final and conclusive for all purposes and upon all
persons.
3. Stock. The stock to be issued under the Plan shall be authorized and
unissued shares of Common Stock of the Company, par value $1.00 per share (the
"Stock"). The total amount of Stock on which options may be granted under the
Plan shall not exceed 900,000 shares, subject to adjustment as provided in
Paragraph 13 hereof. Stock released from option upon the termination,
cancellation, expiration, forfeiture or surrender of any option prior to
complete exercise of the option may again be subjected to options under the
Plan.
4. Grant of Options. The Committee, at any time and from time to time
prior to the termination of the Plan as provided in Paragraph 15 hereof, may
grant options to such employees of the Company and its subsidiaries, as the
Committee may select and for such number of shares as the Committee shall
designate, subject to the provisions of this Paragraph and Paragraphs 2 and 3
hereof. Provided, however, that no employee shall be eligible to receive
aggregate option grants under this Plan in any one fiscal year to purchase more
than 100,000 shares of Stock. The Committee may designate any option granted
hereunder as either an incentive stock option or a nonqualified stock option, or
the Committee may designate a portion of an option as an incentive stock option
or a nonqualified stock option. An incentive stock option is an option intended
to meet the requirements of Section 422 of the Internal Revenue Code of 1986
(the "Code"). A nonqualified stock option is an option granted under the Plan
other than an incentive stock option. Each option granted under the Plan shall
meet all of the terms and conditions of the Plan, except that an incentive stock
option shall comply with the additional provisions of Paragraph 5 hereof. The
date on which an option shall be granted shall be the date of the Committee's
authorization of the option or such later date as may be determined by the
Committee at the time the option is authorized. Any individual may hold more
than one (1) option under this Plan. No individual shall be ineligible for an
option under this Plan because he has received or is eligible to receive an
option under any other plan or arrangement of
<PAGE> 25
the Company. Each option shall be evidenced by a stock option agreement in such
form and containing such provisions not inconsistent with the Plan as the
Committee shall approve ("Stock Option Agreement").
5. Incentive Stock Options. Any option intended to constitute an
incentive stock option shall comply with the requirements of this Paragraph 5.
No incentive stock option shall be granted to any participant who owns (within
the meaning of Section 424(d) of the Code) stock of the Company or any
subsidiary possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or a subsidiary unless, at the date
of grant, the exercise price for the option is at least one hundred and ten
percent (110%) of the fair market value of the shares subject to the option and
the option, by its terms, is not exercisable more than five (5) years after the
date of grant. The aggregate fair market value of the underlying Stock
(determined as of the time the options are granted) to which incentive stock
options under the Plan (and a plan of a subsidiary corporation) may first be
exercised by a participant in any one (1) calendar year shall not exceed one
hundred thousand dollars ($100,000).
6. Option Price. The option price for each share of stock for which an
option is granted under the Plan shall not be less than one hundred percent
(100%) of the fair market value of the Stock on the date the option is granted.
Unless determined otherwise by the Committee, the fair market value shall be the
last sale price of the Company's Stock on the NASDAQ National Marketing System,
as reported in The Wall Street Journal for the grant date. In the absence of any
trading on the grant date, unless determined otherwise by the Committee, the
fair market value shall be the last sale price of the Company's Stock on the
NASDAQ National Market System for the immediately preceding date on which there
was trading, as reported in The Wall Street Journal. The Committee may not
reprice an outstanding option granted under the Plan or cancel an outstanding
option followed by the grant of a replacement option having the same effect as a
repricing, without the consent of shareholders.
7. Term of Options and Rights. Except in the event of a Change in
Control, as set forth in Section 10, no option granted under this Plan may be
exercised prior to the date twelve (12) months from the date of grant of such
option. The Committee may determine with respect to each option granted under
the Plan the time or times when the option may be exercised, and may require
that the exercise of an option shall be subject to the satisfaction of
conditions relating to the optionee's position and duties with the Company and
the performance thereof. Unless specified otherwise in an optionee's Stock
Option Agreement, options granted hereunder shall vest twenty-five percent (25%)
annually over four (4) consecutive years commencing on the first (1st)
anniversary of the grant date and shall not be exercisable after the tenth
(10th) anniversary of the grant date. Any provision of the Plan notwithstanding,
no option shall be exercised on or after the date ten (10) years from the date
of grant of such option.
8. Termination of Employment. Upon the expiration of a period of ninety
(90) days after the termination of the employment of an optionee for any reason
other than death or disability as defined in Section 22(e) of the Code, all
rights to purchase shares pursuant to an exercisable
2
<PAGE> 26
option shall expire and terminate. The Committee may determine, however, with
respect to any option granted under the Plan, that the option shall terminate at
a time prior to the expiration of such ninety (90) day period. Termination of
employment shall be defined as the last day on which an optionee performs
services for the Company and shall not include severance pay periods, paid
vacation periods or periods during which compensation in lieu of notice is paid
following an optionee's actual termination of employment. Absence from the
Company or a subsidiary as a result of authorized leaves of absence for military
or government service or for other special purposes approved by the Committee
shall not constitute a termination of employment under this Paragraph.
9. Death or Disability of an Option Holder. In the event of an option
holder's (a) termination of employment due to disability, as defined in Section
22(e) of the Code, or (b) the death of an option holder while an employee of the
Company or within any period not exceeding the one (1) month period following
his termination of employment during which his option may be exercised, such
option may, subject to the terms thereof and the other terms of the Plan
(specifically including Section 7 hereof), be exercised by the option holder or
the legal representative of such holder's estate (on behalf of his estate or the
person or persons to whom the option passed by will or by the laws of descent
and distribution) at any time prior to the first (1st) anniversary of the option
holder's termination of employment due to disability or the death of such
holder, but only to the extent that such holder was entitled to exercise such
option at the date of his death or termination of employment due to disability.
10. Change in Control. The portion of any outstanding option (including
any option that has not been outstanding for twelve (12) months) that has not
expired or been exercised, terminated, canceled, forfeited or surrendered shall
become exercisable in full in the event of a Change in Control. For this
purpose, Change in Control shall be defined as the occurrence of any of the
following events:
(a) the election of a Board of Directors of the Company, a majority
of the members of which were nominees of a person (including an individual, a
corporation, partnership, joint venture, trust or other entity) or a group of
persons acting together (other than persons who were members of the Board of
Directors or officers of the Company as of August 14, 1998 or a tax-qualified
retirement plan approved by the Board of Directors of the Company (including at
least a majority of the Incumbent Directors ("Exempted Persons")), following the
acquisition by such person, group of persons or plan of ownership (directly or
indirectly, beneficially or of record) of twenty-five (25%) percent, or more, of
the outstanding Common Stock of the Company;
(b) the acquisition of ownership by a person or group of persons
described in subparagraph (a) above (other than Exempted Persons) of fifty-one
(51%) percent, or more of the outstanding Common Stock of the Company;
(c) a sale of all or substantially all of the assets of the Company
to any entity not controlled by persons who were members of the Board of
Directors or officers of the Company as
3
<PAGE> 27
of August 14, 1998 or by any tax-qualified retirement plan for the benefit of
employees of the Company; or
(d) a merger, consolidation or other similar transaction between
the Company and another entity if a majority of the members of the Board of
Directors of the surviving company are not Continuing Members.
The term "Incumbent Directors" means members of the Board of Directors of the
Company as of August 14, 1998 or new directors whose election by the Board of
Directors, or nomination for election by the Company's shareholders, was
approved by a vote of at least a majority of the directors in office at the time
of such election or nomination, who either were directors as of August 14, 1998,
or whose election or nomination was previously approved as provided above. In
the event that a majority of the Incumbent Directors do not approve the
tax-qualified retirement plan or there are no Incumbent Directors, the
tax-qualified retirement plan shall not be an Exempted Person. The term
"Continuing Directors" means persons (A) who are members of the Board of
Directors immediately before the change in control and (B) who also were members
of the Board of Directors of the Company as of August 14, 1998 or are new
directors whose election by the Board of Directors, or nomination for election
by the Company's shareholders, was approved by a vote of at least a majority of
the directors in office at the time of such election or nomination who either
were directors as of August 14, 1998 or whose election or nomination for
election was previously approved as provided above.
11. Exercise of Options.
(a) Full payment for shares purchased pursuant to options granted
under the Plan shall be made at the time of exercise of the options, unless the
exercise is pursuant to the cashless exercise procedure described herein.
Options may be exercised in whole or in part.
(b) Payment for shares being purchased upon the exercise of options
granted under the Plan may be made in cash or by personal check, certified or
bank cashier's check, or by surrendering to the Company Permitted Shares, duly
endorsed for transfer (or with duly executed stock powers attached), or in any
combination of cash, personal check, certified or bank cashier's checks, or
Permitted Shares. Payment by check from an optionee who has terminated
employment with the Company shall be in the form of a certified or bank
cashier's check and not by a personal check. Permitted Shares surrendered as
payment for shares purchased pursuant to the exercise of options granted under
the Plan shall be valued, for such purpose, at the last sale price of the
Company's Stock on the NASDAQ National Market System, as reported in The Wall
Street Journal for the close of business on the last trading day preceding the
date on which the certificate(s) for such shares, duly endorsed for transfer or
accompanied by appropriate stock powers, are surrendered for such purpose to the
Company.
(c) At the discretion of the Committee, as set forth in an
optionee's Stock Option Agreement, any option granted under the Plan may be
deemed exercised by delivery to the Company
4
<PAGE> 28
of a properly executed exercise notice, acceptable to the Company, together with
irrevocable instructions to the optionee's broker to deliver to the Company
sufficient cash to pay the exercise price and any applicable income and
employment withholding taxes, in accordance with a written agreement between the
Company and the brokerage firm ("cashless exercise procedure"). For purposes of
the cashless exercise procedure, fair market value of the Company's Stock on the
date of exercise shall be the per share amount actually paid to the optionee by
the brokerage house (before application of brokerage commissions and other
applicable fees) upon the sale of the Stock used to satisfy the exercise price.
(d) A person exercising an option shall reimburse the Company for
any income or employment tax withholding requirements and provide the Company
with such information and data as the Company may deem necessary. To satisfy the
applicable withholding requirements, prior to the date on which an exercise
becomes taxable, an optionee may make a written irrevocable election to tender
Permitted Shares, provided that the shares have an aggregate fair market value
sufficient to satisfy in whole or in part the applicable withholding taxes. For
purposes of this Paragraph, the term fair market value shall mean the last sale
price of the Company's Stock on the NASDAQ National Market System, as reported
in The Wall Street Journal for the close of business on the last trading date
preceding the date on which the exercise becomes taxable. An optionee subject to
Section 16 of the Securities Exchange Act of 1934, as amended, may be subject to
special notice and timing requirements in connection with the tender of
Permitted Shares to satisfy withholding requirements.
(e) The Company may require an employee, as a condition of
exercise, to establish to the satisfaction of the Company that all shares
acquired upon the exercise of an option shall be acquired for investment and not
for resale. The Company may permit the subsequent sale or other disposition of
any Stock so acquired if it is satisfied that such sale or other disposition
would not contravene applicable securities law. Anything to the contrary herein
notwithstanding, the Company's obligation to sell and deliver Stock pursuant to
the exercise of an option is subject to such compliance with federal and state
laws, rules and regulations applying to the authorization, issuance or sale of
securities as the Company deems necessary or advisable. The Company shall not be
required to sell and deliver stock unless and until it receives satisfactory
assurance that the issuance or transfer of such shares will not violate any of
the provisions of the Securities Act of 1933 or the Securities Exchange Act of
1934, or the rules and regulations of the Securities Exchange Commission
promulgated thereunder or those of any stock exchange or nationally-recognized
trading market on which the Stock may be listed or traded, the provisions of any
state laws governing the sale of securities, or that there has been compliance
with the provisions of such acts, rules, regulations and laws. No Stock shall be
issued until counsel for the Company has determined that the Company has
complied with all requirements under applicable securities laws.
(f) "Permitted Shares" are shares of the Company's Stock to be
delivered to pay the exercise price of the option or satisfy applicable income
or employment tax withholding requirements (the "Delivered Shares"):
5
<PAGE> 29
(i) which have been owned by the optionee for at least six (6)
months prior to the date of delivery, or
(ii) if they have not been owned by the optionee for at least
six (6) months prior to the date of delivery, the optionee then owns, and has
owned for at least six months prior thereto, a number of shares of the Company's
Stock at least equal in number to the Delivered Shares.
Shares of the Company's Stock which have been treated during the prior six (6)
months as owned by the optionee for purposes of determining whether shares of
the Company's Stock constitute Delivered Shares as provided in (ii) above:
(i) may not be used as Delivered Shares, and
(ii) may not be counted as owned by the optionee in determining
whether shares of the Company's Stock are Permitted Shares.
12. Options Not Transferable. No option granted under the Plan shall be
transferable by the optionee other than by will or the laws of descent and
distribution, and an option may be exercised during an optionee's lifetime only
by the optionee.
13. Adjustments.
(a) In the event of any stock dividend on the Stock, subdivision or
combination of shares of the Stock, reclassification of the Stock, and (in
accordance with the provisions of the next Paragraph of this Paragraph 13) in
the event of a merger or consolidation in which the Company shall be the
surviving corporation, the aggregate number and class of shares available for
the granting of options under the Plan, the number and class of shares subject
to each outstanding option and the option prices shall be proportionately
adjusted.
(b) After any merger of one or more corporations into the Company,
or after any consolidation of the Company and one or more corporations in which
the Company shall be the surviving corporation, each optionee shall, at no
additional cost, be entitled upon any exercise of his option, to receive
(subject to any required action by shareholders), in lieu of the number of
shares as to which such option shall then be so exercised, the number and class
of shares of stock or other securities to which such optionee would have been
entitled pursuant to the terms of the agreement of merger or consolidation if at
the time of such merger or consolidation such optionee had been a holder of
record of a number of shares of Stock of the Company equal to the number of
shares as to which such option shall then be so exercised. Comparable rights
shall accrue to each optionee in the event of successive mergers or
consolidations of the character described above. Anything contained herein to
the contrary notwithstanding, upon the dissolution or liquidation of the Company
or upon any merger or consolidation in which the Company is not the surviving
corporation, any option granted under this Plan shall terminate.
6
<PAGE> 30
The foregoing adjustments and the manner of application of the
foregoing provisions shall be determined by the Board of Directors of the
Company (the "Board") in its sole discretion. Any such adjustment may provide
for the elimination of any fractional share which might otherwise become subject
to an option.
14. No Rights as Shareholder. The holder of an option shall not have
any rights as a shareholder of the Company with respect to any of the shares
covered by such option until issuance of a stock certificate or certificates
upon the exercise of such option in full or in part and then only with respect
to the shares represented by such certificate or certificates. No adjustment
shall be made for dividends or other rights with respect to such shares for
which the record date is prior to the date the certificate is issued.
15. Termination and Amendment of Plan. The Board may terminate the Plan
at any time, but the Plan shall in any event terminate on the date ten (10)
years after the earlier of approval by the Board or the Company's shareholders.
No option may be granted after the termination of the Plan, but the termination
of the Plan shall not affect the rights of the holders of any option theretofore
granted and then outstanding. The Board may amend or modify the Plan at any
time, but no such amendment or modification, without the approval of the
shareholders, shall (a) change the eligibility requirements to participate in
the Plan, (b) increase the amount of Stock on which options may be granted,
except as permitted under Paragraph 13, (c) change the manner of determining the
option price, or (d) permit repricing transactions under the Plan. No such
amendment or modification shall affect the rights of the holder of any option
theretofore granted and then outstanding without the optionee's consent or the
consent of the transferee of the option or right.
16. Effect of Plan on Employment. Neither the adoption of the Plan nor
the granting of any option pursuant to it shall be deemed to create any right in
any individual to be retained or continued in the employment of the Company or
any of its subsidiaries.
17. Use of Proceeds. The proceeds received from the sale of stock
pursuant to the Plan shall be used for general corporate purposes.
18. Shareholder Approval. This Plan shall be submitted to the
shareholders for their approval within twelve (12) months after the date of
adoption of the Plan by the Board. Any option granted hereunder prior to such
approval shall be subject to the condition that this Plan be approved by the
shareholders of the Company. If such approval is not obtained, options granted
hereunder shall terminate.
BOARD APPROVAL: 8/14/98
SHAREHOLDER APPROVAL: / /
--- --- ---
7
<PAGE> 31
[Updated 7/98]
ADDENDUM FOR UK EMPLOYEES
1. Purpose
This addendum to the Comshare, Incorporated 1998 Global Employee Stock
Option Plan ("the Plan") is for the benefit of United Kingdom resident employees
of Comshare, Incorporated, a Michigan corporation ("Comshare") and of companies
of which it has control (as defined in Section 187(2) of the Income and
Corporation Taxes Act 1988 ("ICTA")) including, without limitation, its United
Kingdom subsidiary, Comshare, Limited. The terms and conditions of this Addendum
are established in order to render the Plan capable of approval as an approved
share option scheme under Schedule 9 of ICTA ("Schedule 9").
This Addendum to the Plan should be read in conjunction with the Plan
and is subject to the terms and conditions of the Plan except to the extent that
the terms and conditions of the Plan differ from or conflict with the terms set
out hereunder.
The terms and conditions set out in this Addendum apply to any grant of
options under the Plan to individuals who are resident in the United Kingdom for
United Kingdom tax purposes ("U.K. Individuals") if, at the date of grant, such
options are specified as having been granted subject to the terms and conditions
of this Addendum.
2. Group Scheme and Eligibility
A U.K. Individual shall not be entitled to be granted options under the
Plan unless he is a full-time director or "qualifying employee" (as defined in
paragraph 27(4) of Schedule 9) of Comshare or a company under the control (as
defined in Section 187(2) of ICTA) of Comshare. A director is deemed to work
full time if he is employed on terms which require him to devote not less than
twenty-five hours a week (exclusive of permitted breaks) to his duties.
A U.K. Individual may not be granted and may not exercise an option if
his participation is excluded by paragraph 8 of Schedule 9.
3. Stock Subject to the Plan
No option may be granted to a U.K. Individual over Stock which does not
satisfy the requirements of paragraphs 10 to 14 of Schedule 9. Options over
Stock granted under this Addendum may not be exercised at a time when, upon
exercise, the Stock would fail to satisfy the requirements of paragraphs 10 to
14 of Schedule 9.
--
i
<PAGE> 32
4. Limitation of Rights
No U.K. Individual shall be granted options under the Plan which would,
at the time they are obtained, cause the aggregate market value (as defined in
paragraph 28 of Schedule 9) of the shares which he may acquire in pursuance of
rights obtained under the Plan or under any other plans approved under Schedule
9 (not being a savings-related share option scheme approved under Schedule 9)
and established by Comshare or by any associated company (as defined in Section
840 of ICTA) of Comshare (and not exercised) to exceed or further exceed
(pound)30,000 and for these purposes if the market values of the shares are
expressed in a currency other than pounds sterling such market values will be
converted into pounds sterling at the appropriate exchange rate for that
currency at the close of business the date on which the relevant options are
granted as published by The Wall Street Journal.
5. Share Price
The price at which an option will be exercisable will not be manifestly
less than the fair market value of the shares obtainable under the Plan at the
date of the grant of the option. For these purposes, "market value" of the
shares will be their market value as determined in accordance with the
provisions of Part VIII of the Taxation of Chargeable Gains Act 1992 and will be
agreed in advance of each grant of options with the Inland Revenue Share
Valuation Division. In any event the price will be such that the approved status
of the Plan is retained.
6. Capital Adjustments
The price at which stock may be acquired on the exercise of any option
and the number of shares thereunder may be adjusted as described under Section
13 of the Plan, entitled "Adjustments", only in the event of a variation in the
share capital of Comshare within the meaning of Paragraph 29 of Schedule 9 and
only if the prior approval of the Inland Revenue has been obtained for such
adjustment. Section 13(b) of the Plan does not apply to options granted under
this Addendum.
7. Exercise of Options
The option price may be paid by cash or cash equivalent only and,
therefore, neither by surrender of Permitted Shares as described under Section
11(b) of the Plan nor by the "cashless exercise procedure" as described in
Section 10(c) of the Plan.
8. Amendment of the Scheme
The terms of this Addendum shall not be amended, nor shall any
amendment to the Plan extend to that is governed by this Addendum, except to the
extent that such amendments have been approved by the Board of Inland Revenue.
--
ii
<PAGE> 33
9. Exercisability of Terms of Options
A U.K. Individual may exercise his option from time to time in
accordance with the terms of the option. Shares will be allotted or transferred
within thirty days after notice of exercise is given in accordance with the
procedure described under Section 11 of the Plan, entitled "Exercise of
Options".
10. Definitions
For the above purposes the following terms shall have the meaning
listed below:
a. "Individual" shall mean an employee of Comshare or any company
under the control (as defined in Clause 1) of Comshare who is
eligible to receive options under this Addendum.
b. The "Plan" shall mean the Comshare, Incorporated 1998 Global
Employee Stock Option Plan.
--
iii
<PAGE> 34
ADDENDUM FOR EMPLOYEES OF
COMSHARE SA SUBSIDIARY IN FRANCE
1. Purpose
This Addendum to the Comshare, Incorporated 1998 Global Employee Stock
Option Plan ("the Plan") applies to Comshare SA employees residing in France.
2. Effective Date
The terms and conditions set out in this Addendum apply to any grant of
options under the Plan to individuals who are residents in France and employees
of the subsidiary Comshare SA.
3. Term of Options and Rights
No option granted under this Plan may be exercised prior to the date
five (5) years from the date of grant of such option. The Committee may
determine with respect to each option granted under the Plan the time or times
when the option may be exercised, and may require that the exercise of the
option shall be subject to the satisfaction of conditions relating to the
optionee's position and duties with the Company and the performance thereof.
Unless otherwise specified in an optionee's Stock Option Agreement,
options granted to employees of the subsidiary Comshare SA residing in France
shall not vest until the satisfaction of a five (5) year period from the date of
grant. Upon the completion of the five year period from the date of grant, the
options will be 100% vested and may be exercised. The options shall not be
exercisable after the tenth (10th) anniversary of the grant date.
--
iv
<PAGE> 35
PROXY
COMSHARE, INCORPORATED
555 BRIARWOOD CIRCLE, ANN ARBOR, MICHIGAN 48108
SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF SHAREHOLDERS
ON NOVEMBER 23, 1998
The undersigned hereby appoints Dennis G. Ganster and Kathryn A. Jehle, or
any one of them, proxies with full power of substitution to vote, as designated
on the reverse side, all shares of Common Stock that the undersigned is entitled
to vote at the Annual Meeting of Shareholders of Comshare, Incorporated to be
held on Monday, November 23, 1998, or at any adjournment or adjournments
thereof.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED. IF
NO DIRECTION IS GIVEN WITH RESPECT TO A PARTICULAR PROPOSAL, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1 AND 2.
Discretionary authority is hereby conferred as to any other matters as may
properly come before the Annual Meeting. The undersigned acknowledges receipt
of the Notice of Annual Meeting, the Proxy Statement and the Annual Report of
Shareholders of Comshare, Incorporated for the year ended June 30, 1998. The
undersigned ratifies all that the proxies or any of them or their substitutes
may lawfully do or cause to be done by virtue hereof and revokes all former
proxies.
PLEASE MARK, DATE, SIGN, AND RETURN THIS PROXY CARD PROMPTLY, USING THE
ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
(change of address/comments)
____________________________
____________________________
____________________________
____________________________
(If you have written in the
above space, please mark the
corresponding box on the reverse
side of this card.)
SEE REVERSE SIDE
- -----------------------------------------------------------------------------
<PAGE> 36
<TABLE>
<S><C>
COMSHARE, INCORPORATED
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. /x/
[ ]
For Withheld For All
1. ELECTION OF DIRECTORS All All Except Vote Withheld from the following nominee(s)
Nominees: Geoffrey B. Bloom (01), Daniel T. Carroll
(02), Richard L. Crandall (03), Stanley R. Day (04), // // //
W. John Driscoll (05), Dennis G. Ganster (06),
Kathryn A. Jehle (07), Alan G. Merten (08), John F. __________________________________________
Rockart (09) For Against Abstain
2. Approve the 1998 Global Employee Stock Option Plan // // //
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2.
Change of Address //
SIGNATURE(S)________________Date__________
SIGNATURE(S)________________Date__________
NOTE: Please sign exactly as name appears
hereon. Joint owners should each sign.
When signing as attorney, executor,
administrator trustee or guardian, please
give full title as such.
THIS IS YOUR PROXY CARD, FOLD AND DETACH BELOW
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Control Number
[ ]
INSTRUCTIONS FOR VOTING BY TELEPHONE
------------------------------------
Comshare, Incorporated encourages you to take advantage of a new and
convenient way to vote your shares for proposals to be covered at the
Annual Meeting of Shareholders. Please take the opportunity to use
the following voting method outlined below to cast your ballot. We've
made it easier than ever.
Use any touch-tone telephone to vote your proxy 24 hours a day, 7 days
a week toll-free, at 1-800-678-6638. Have your proxy card (above) in
hand when you call. Please enter the 6-digit control number which is
located in the box just below your proxy card.
Option 1 To vote as the Board of Directors recommends on ALL
proposals, press 1. Your vote will be confirmed and cast as
directed and the call will end. If you wish to vote on each
proposal separately, press 0.
Option 2 If you selected 0 to vote on each proposal separately, you
will hear these instructions:
PROPOSAL 1 - To vote FOR all nominees, press 1; to WITHHOLD
for all nominees, press 9; to WITHHOLD for AN INDIVIDUAL
nominee, press 0 and enter the two digit number that appears
on the proxy card (above) next to the name of the nominee
you DO NOT wish to vote for. Once you have completed voting
for Directors, press 0.
PROPOSAL 2 - To vote FOR, press 1; to vote AGAINST, press 9;
to ABSTAIN, press 0. Your vote selection will be repeated
and you will have an opportunity to confirm it.
