SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
Timberline Software Corporation
---------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
---------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11
(1) Title of each class of securities to which
transaction applies:
------------------------------------------
(2) Aggregate number of securities to which
transaction applies:
------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:
------------------------------------------
(4) Proposed maximum aggregate value of transaction:
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(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:
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TIMBERLINE SOFTWARE CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
April 28, 1998
To our shareholders:
The Annual Meeting of Shareholders of Timberline Software
Corporation, an Oregon corporation (the "Company"), will be held at the
Company's principal offices, 9600 S.W. Nimbus Avenue, Beaverton, Oregon 97008,
on Tuesday, April 28, 1998, at 4:00 p.m., local time, for the following
purposes:
1. To elect four members of the Board of Directors for
the ensuing year;
2. To ratify the appointment of Deloitte & Touche LLP
as the Company's independent auditors for 1998;
3. To approve an increase in the number of authorized
shares of Common Stock;
4. To approve the Company's 1998 Stock Incentive Plan;
and
5. To transact such other business as may properly
come before the meeting, or any adjournments
or postponements thereof.
Shareholders of record of the Company's Common Stock at the
close of business on March 13, 1998 are entitled to notice of and to vote at the
meeting and any adjournments and postponements thereof.
A proxy statement and proxy are enclosed with this Notice. A
copy of the Company's 1997 Annual Report is also enclosed. The accompanying form
of proxy is solicited by the Board of Directors of the Company.
BY ORDER OF THE BOARD OF DIRECTORS
Thomas P. Cox, Secretary
Beaverton, Oregon
March 20, 1998
TO AVOID THE EXPENSE OF FURTHER SOLICITATION, IT IS IMPORTANT
THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, SHAREHOLDERS ARE URGED TO DATE,
SIGN AND RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED ENVELOPE WHETHER OR NOT
THEY EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON. A SHAREHOLDER WHO COMPLETES
AND RETURNS THE PROXY AND SUBSEQUENTLY ATTENDS THE ANNUAL MEETING MAY CHOOSE TO
VOTE IN PERSON BECAUSE A PROXY MAY BE REVOKED AT ANY TIME BEFORE IT IS VOTED.
<PAGE>
TIMBERLINE SOFTWARE CORPORATION
PROXY STATEMENT
1998 ANNUAL MEETING OF SHAREHOLDERS
The enclosed proxy is solicited by the Board of Directors (the
"Board") of Timberline Software Corporation, an Oregon corporation (the
"Company"), for use at the annual meeting of shareholders ("Annual Meeting") to
be held at 4:00 p.m. on Tuesday, April 28, 1998, and at any adjournments or
postponements thereof. A copy of the notice of the Annual Meeting is attached.
The Company expects to mail this proxy statement and the proxy to shareholders
on or about March 20, 1998. The Company's principal executive offices are at
9600 S.W. Nimbus Avenue, Beaverton, Oregon 97008.
The persons named in the enclosed proxy will vote in the
manner directed and, in the absence of such direction, will vote for the
election of each of the named nominees for director (Proposal One), for
ratification of Deloitte & Touche LLP as the Company's independent auditors for
1998 (Proposal Two), for the increase in share authority (Proposal Three) and
for the approval of the 1998 Stock Incentive Plan (Proposal Four). They will
vote in accordance with their best judgment as to other items of business that
may properly come before the Annual Meeting. The proxy may be revoked by a
shareholder at any time before its use by giving written notice of such
revocation to the Secretary of the Company. If a shareholder attends the meeting
and desires to vote in person, his or her proxy will not be used. The presence
in person or by proxy of the holders of a majority of the shares of common stock
of the Company ("Common Stock") issued and outstanding on the record date will
constitute a quorum for the transaction of business at the Annual Meeting.
The solicitation of proxies is being handled by the Company at
its cost, principally through the use of the mails, but proxies may also be
solicited personally or by telephone by directors and officers of the Company
without additional compensation for such services. Brokers, dealers, banks and
other nominees will be requested to forward soliciting material to the
beneficial owners of Common Stock and to obtain authorization for the execution
of proxies.
A copy of the Company's Annual Report to Shareholders for the
year ended December 31, 1997 is enclosed.
VOTING
The Common Stock (the only class of securities authorized) is
the only voting security of the Company. At the Annual Meeting, each shareholder
will be entitled to one vote for each share of Common Stock held of record by
that shareholder at the close of business on March 13, 1998. There were
_____________ shares of Common Stock outstanding as of such date. A majority, or
_____________ of such shares, will constitute a quorum for the transaction
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of business. Shareholders are not entitled to cumulative voting. Broker
non-votes will be counted in determining whether a quorum is present, but will
not be counted either for or against any proposal at issue.
PROPOSAL ONE
ELECTION OF DIRECTORS
The Bylaws of the Company provide for a Board consisting of
not less than two nor more than nine members, as determined from time to time by
the Board. A Board of four directors will be elected at the Annual Meeting.
Three of the current members of the Board (Messrs. Peltz, Meyer and Tisdel) have
been nominated to continue in office until the 1999 annual meeting of
shareholders, and until their successors have been elected and qualified. Thomas
P. Cox has been nominated to serve as a director for the first time. Current
directors John Gorman and Leslie F. Clarke, II have been officers and directors
of the Company since its inception. Both will be retiring from all Company
positions at the end of April 1998. Mr. Clarke plans to consult on technical
projects for the Company on an as needed basis. The many contributions of these
two individuals to the Company's success are gratefully acknowledged.
The four nominees receiving a plurality vote of the shares
present in person or by proxy at the Annual Meeting at which a quorum is present
will be elected as directors. Directors hold office until the next annual
meeting of shareholders and until their successors are duly elected and
qualified. All nominees have agreed to serve if elected. If any nominee should
become unavailable to serve as a director prior to the Annual Meeting, the
persons named in the enclosed proxy will vote for such substitute nominee as may
be designated by the Board.
Unless marked otherwise, proxies received will be voted for
the election of each of the nominees hereinbelow named. Votes withheld will be
counted toward the quorum requirement for the Annual Meeting but will not be
counted for or against the election of the nominee or nominees with respect to
whom the votes are withheld and thus have no effect on whether a plurality
exists for a particular nominee.
Background information on each director nominee is as follows:
Thomas P. Cox, age 63, is the Chief Financial Officer of the
Company. Mr. Cox joined the Company in April 1982 as Vice President -- Finance.
He became Senior Vice President -- Finance in 1986. Mr. Cox has also served as
Secretary and Treasurer since 1990.
James A. Meyer, age 61, has been a director of the Company
since 1980. He is a private business investor.
Curtis L. Peltz, age 45, was appointed President in April
1997. He has been with the Company or its predecessors since 1978. He has held
various programming and management positions. Mr. Peltz was promoted to Vice
President--Operations in 1986. In 1989 he was named Vice President--Computer
Integrated Construction Technology and in 1990, Vice President--Estimating and
CIC Technology and manager of the Estimating Business Unit. In 1996 he was named
Vice President -- Chief Operating Officer.
<PAGE>
Donald L. Tisdel, age 63, has been a director of the Company
since 1983. Since March 1992, he has been Managing Director of Northwest
Capital, Inc., a merchant banking firm facilitating financing and acquisitions
of intermediate-size businesses. Since June 1996, Mr. Tisdel has been involved
in the management of Northwest Capital Partners I, L.P., a partnership formed to
acquire equity and equity-linked interests in privately held companies or
divisions of companies.
The Board met 12 times during 1997. The Board has a standing
audit committee which meets with the Company's auditors to review the planning
for and the reports of the annual audit of the Company. The audit committee
members are Messrs. Meyer and Tisdel. The audit committee met twice in 1997.
The Board has a standing compensation committee for the
purpose of making recommendations to the Board regarding executive officers'
compensation, including salaries and other forms of compensation and fringe
benefits. This committee also administers the Company's stock option program.
The compensation committee, the members of which are Messrs. Meyer and Tisdel,
met six times during 1997.
Each director attended in 1997 at least 75 percent of all
meetings of the Board and committees on which such director served.
The Board recommends a vote FOR all nominees.
---------------------------------------------
The executive officers and significant employees of the
Company as of the date of this proxy statement are:
Name Age Office
---- --- ------
Executive Officers
------------------
John Gorman 63 Chairman of the Board of
Directors and Chief Executive
Officer
Leslie F. Clarke, II 54 Executive Vice President
Curtis L. Peltz 45 President-- Chief Operating Officer
Thomas P. Cox 63 Senior Vice President-- Finance,
Secretary and Treasurer
Significant Employees
---------------------
John M. Meek 41 Vice President-- Research &
Development
Dennis J. Stejskal 42 Vice President-- Director of
Accounting Products
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Name Age Office
---- --- ------
Nicolette D. Johnston 55 Vice President-- Technical
Publications
James O. Campbell 41 Vice President--Sales, Accounting
Products
John M. Geffel 45 Vice President-- Marketing
Carol A. Vega 40 Vice President-- Customer Support
Ann C. Kenkel 50 Vice President-- Operations
See Proposal One, "Election of Directors", for biographical
information concerning Messrs. Peltz and Cox.
As noted above, Messrs. Gorman and Clarke are retiring from
the Company at the end of April 1998. Mr. Gorman is currently Chairman of the
Board of Directors and the Company's Chief Executive Officer. He also served as
President until April 1997, when Mr. Peltz was appointed to that position. Mr.
Gorman has served in these senior executive positions and as a Director since
the Company's incorporation in 1979. Mr. Clarke has been Executive Vice
President and a Director since the Company's incorporation in 1979.
Mr. Meek joined the Company's predecessor in 1978 as a
programmer. He established the Company's Product Research Department, which he
has managed since its inception. He was named Vice President--Product Research
in 1986 and Vice President--Research & Development in 1993.
Mr. Stejskal joined the Company's predecessor in 1979. He has
held various positions in sales and customer support and management positions in
the quality assurance and product development areas. He was promoted to Vice
President--Product Development in December 1990 and Vice President--Construction
Accounting in 1992. He was appointed Vice President--Director of Accounting
Products in 1996.
Ms. Johnston joined the Company in 1986 to manage the
Publications group. She was named Vice President--Operations in 1993. She was
appointed Vice President--Technical Publications in 1996.
Mr. Campbell joined the Company in January 1989. He has held
various sales management positions for the construction accounting product line.
In 1995, he was named sales manager for all accounting products. He was promoted
to Vice President--Sales, Accounting Products in January 1996.
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Mr. Geffel joined the Company in 1983 as a product marketing
specialist for the construction accounting product line. He has held various
marketing management positions and was named Vice President--Marketing in
January 1996.
Ms. Vega joined the Company's predecessor in 1978. She has
held various positions in customer support, quality assurance and publications.
In 1995, she was promoted to support manager for construction accounting. In
January 1996, she was named Vice President--Customer Support, Accounting
Products and in October 1996 was named Vice President--Customer Support.
Ms. Kenkel joined the Company in 1991 as administrative
manager for the Estimating Business Unit. In June 1994, she was promoted to
operations manager and in October 1996 was named Vice President--Operations.
EXECUTIVE COMPENSATION
Cash and Non-cash Compensation Paid to Certain Executive Officers
- -----------------------------------------------------------------
The following table sets forth, for the years ended December
31, 1997, 1996 and 1995, the compensation earned by the Company's Chief
Executive Officer and the other executive officers whose aggregate salary and
bonus exceeded $100,000 for services rendered to the Company in 1997.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
<S> <C> <C> <C> <C> <C>
Annual Compensation
----------------------
Other Annual All Other
Name and Principal Salary(1) Bonus Compensation(2) Compensation(3)
Compensation(3)
Position Year ($) ($) ($) ($)
John Gorman 1997 117,154 -- 349 5,036
Chairman of the Board and 1996 152,579 -- 6,238 6,000
Chief Executive Officer 1995 146,480 5,000 5,427 6,000
Curtis L. Peltz 1997 127,182 -- 902 5,370
President-- Chief 1996 101,377 -- 10,781 4,783
Operating Officer 1995 90,848 -- 5,731 4,159
Leslie F. Clarke, II 1997 127,269 -- 288 5,444
Executive Vice President 1996 121,377 -- 7,299 5,443
1995 116,642 3,000 4,529 5,253
Thomas P. Cox 1997 117,854 -- 226 5,221
Senior Vice President-- 1996 103,207 -- 6,041 4,796
Finance 1995 98,010 -- 3,509 4,475
- -----------------
(1) Includes amounts deferred by executive officers under the Company's 401(k) plan.
(2) Represents payments made during the fiscal year from the Company's profit sharing plan.
(3) Represents matching contributions accrued by the Company during the fiscal year to its 401(k) plan for
such executive officer and paid in the following year.
</TABLE>
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Compensation Pursuant to Stock Options
- --------------------------------------
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information on option grants for the year
ended December 31, 1997 to the Named Executive Officers.
<S> <C> <C> <C> <C> <C>
IndividualGrants
------------------------------------------------------------------------
Percent of Total Potential Realizable Value at Assumed
Number of Securities Options Granted to Annual Rates of Stock Price
Underlying Options Employees in Fiscal Exercise Expiration Appreciation for Option Term
Granted (1) Year Price ($/Share) Date -------------------------------------
Name 5% 10%
- ------------------------------------------------------------------------------------------------------------------------------------
John Gorman -- -- -- -- -- --
Curtis L. Peltz 62,500 34.0% 6.20 April 2007 $243,697 $617,575
Leslie F. Clarke, II -- -- -- -- -- --
Thomas P. Cox 25,000 13.6% 6.20 April 2007 $ 97,479 $247,030
(1) All options listed are non-qualified stock options granted under the
Company's 1993 Stock Incentive Plan. Option exercise prices were at the
market price when granted. The options become exercisable in part at date of
grant and vest over a 4 years.
</TABLE>
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<TABLE>
<CAPTION>
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Shares Number of unexercised Value of unexercised in-the-
acquired options at FY-End(1) money options at
on Value ---------------------------- FY-End($)(1) (2)
exercise realized -----------------------------
Name (1) ($) Exercisable Unexercisable Exercisable Unexercisable
- ----------------------- --------- ---------- ----------- ------------- ------------- -------------
John Gorman -- -- -- -- -- --
Curtis L. Peltz 13,500 52,500 23,750 50,000 189,103 305,500
Leslie F. Clarke, II -- -- -- -- -- --
Thomas P. Cox 24,375 99,666 27,500 20,000 257,225 122,200
- ---------------------
(1) Adjusted for 5 for 4 stock split paid November 21, 1997.
(2) On December 31, 1997, the closing price of the Company's Common Stock
was $12.31. For purposes of the foregoing table, stock options with an
exercise price less than that amount are considered to be
"in-the-money" and are considered to have a value equal to the
difference between that amount and the exercise price of the stock
option multiplied by the number of shares covered by the stock option.
</TABLE>
Compensation of Directors
- -------------------------
Directors who are not employees of the Company were paid $500
for attendance at each meeting of the Board during 1997. Pursuant to the
Company's 1993 Stock Incentive Plan, immediately following the 1993 annual
meeting of the shareholders of the Company, Messrs. Meyer and Tisdel, who were
not employees of the Company or of any parent or subsidiary corporation of the
Company at the time ("Non-employee Directors"), were each automatically granted
nonstatutory stock options to purchase 14,063 shares of the Company's Common
Stock at an exercise price equal to the fair market value of the Common Stock on
the date of grant (as adjusted for stock splits). If the Company's 1998 Stock
Incentive Plan (see discussion below under Proposal Four) is approved by the
shareholders at this Annual Meeting, Messrs. Meyer and Tisdel, who continue to
be the only Non-Employee Directors, will each be automatically granted a
nonstatutory stock option to purchase 5,000 shares of the Company's Common Stock
at an exercise price equal to the fair market value of the Common Stock on such
date of grant.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The following table shows, as of March 13, 1998, the number
and percentage of outstanding shares of Common Stock (the only class of shares
authorized) beneficially owned by each person known by the Company to
beneficially own more than 5% of the Common Stock, by each director of the
Company, by each executive officer named in the Summary Compensation Table, and
by all directors and executive officers of the Company as a group. Unless
otherwise indicated, voting and investment power relating to the identified
shares is exercised solely by the beneficial owner.
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Name and Address Number of Shares Percentage of
of Beneficial Owner(1) Beneficially Owned Common Stock
---------------------- ----------------- --------------
John Gorman (2) _____________ __________
Leslie F. Clarke, II (3) _____________ __________
Curtis L. Peltz (4) 49,750 *
Thomas P. Cox (6) 129,812 __________
James A. Meyer (5) 108,688 __________
Donald L. Tisdel (5) 21,094 *
All directors and
executive officers as
a group (six persons)(7) ____________ __________
- -------------------------
* Less than 1 percent.
(1) Address for all individuals is 9600 S.W. Nimbus Avenue, Beaverton, Oregon
97008.
(2) Includes _________ shares as to which Mr. Gorman shares voting and
investment power with his wife. Does not include 20,312 shares owned by
certain of Mr. Gorman's children, as to which Mr. Gorman disclaims
beneficial ownership.
(3) Does not include 78,750 shares owned by Mr. Clarke's wife, as to which
Mr. Clarke disclaims beneficial ownership.
(4) Includes 36,250 shares which Mr. Peltz has the right to acquire upon
exercise of stock options exercisable within 60 days after March 13,
1998.
(5) Includes 14,063 shares for Mr. Meyer and 14,063 shares for Mr. Tisdel
which such persons have the right to acquire upon exercise of stock
options exercisable within 60 days after March 13, 1998.
(6) Includes 25,750 shares which Mr. Cox has the right to acquire upon
exercise of stock options exercisable within 60 days after March 13,
1998.
(7) Does not include 99,062 shares owned by members of the families of
certain directors as to which such directors disclaim beneficial
ownership. Includes 90,126 shares which members of the group have the
right to acquire upon exercise of stock options exercisable within 60
days after March 13, 1998.
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COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires
the Company's executive officers and directors, and persons who own more than
10% of a registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
(the "Commission"). Officers, directors and greater than 10% beneficial owners
are required by Commission regulations to furnish the Company with all Section
16(a) forms they file.
Based solely upon the Company's review of the copies of such
forms it received and written representations from certain reporting persons,
the Company believes that all Section 16(a) forms required to be filed in or
with respect to 1997 were timely filed, except that two reports covering the
transfer of shares by gift were filed late by director James A. Meyer.
PROPOSAL TWO
RATIFICATION OF APPOINTMENT OF ACCOUNTANTS
The Board has appointed Deloitte & Touche LLP as its
independent auditors for the year ending December 31, 1998, subject to
shareholders ratification. Deloitte & Touche LLP served as the Company's
independent public auditors in 1997. Representatives of Deloitte & Touche LLP
are expected to be present at the Annual Meeting and will be given the
opportunity to make a statement if they desire to do so, and are expected to be
available to respond to appropriate questions.
Ratification of the appointment of auditors requires the
presence of a quorum and a majority approval from the votes cast thereon. Unless
marked otherwise, proxies received will be voted for ratification of the
appointment of Deloitte & Touche LLP as the Company's independent auditors for
1998. Abstentions and broker non-votes for this proposal will be counted for
quorum purposes, but will not be counted for or against the proposal. If the
shareholders should fail to ratify the selection of these auditors as proposed,
auditors will be appointed by the Board.
The Board recommends a vote FOR ratification of the
--------------------------------------------------------------
appointment of Deloitte & Touche LLP as the Company's independent auditors for
- --------------------------------------------------------------------------------
1998.
- ----
PROPOSAL THREE
INCREASE IN THE NUMBER OF AUTHORIZED SHARES
In February 1998, the Company's Board unanimously adopted a
resolution authorizing amendment to the Company's Restated Articles of
Incorporation to increase the number of authorized shares of Common Stock from
8,000,000 to 20,000,000 shares, subject to approval by the shareholders. The
form of proposed amendment is attached as Appendix A.
Management believes that this proposed amendment is in the
best interests of the Company and its shareholders, to maintain the Company's
flexibility in responding to future business and financing needs and
opportunities. These additional shares will be used for general corporate
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purposes, including, without limitation, uses for additional stock splits,
financing transactions, acquisitions, stock dividends and Company-sponsored
stock option, stock ownership and other stock-based plans.
The Company has benefited from the availability of authorized
shares to carry out various corporate transactions, but the available pool of
authorized shares is now growing smaller. The Company has three stock-based
compensation plans. Only 40,005 shares remain available for future issue under
these plans, and it is the proposal of the Board to allocate 500,000 shares of
Common Stock to the proposed 1998 Stock Incentive Plan (see Proposal Four
hereinbelow discussed). The Board in each of the years 1995, 1996 and 1997
issued shares pursuant to stock splits (approved in the form of stock
dividends). If the proposed amendment to the Company's Restated Articles is
approved, the additional shares of Common Stock would be available for issuance
without further shareholder action, unless shareholder action would otherwise be
required by Oregon law or the rules of any stock exchange or automated quotation
system on which the Common Stock may then be listed or quoted. If the
shareholders do not approve the increase in share authority, the proposed
allocation of 500,000 shares to the new 1998 Stock Incentive Plan would be
reduced to 300,000 shares so as not to exceed the current 8,000,000 share
authority.
Management has no plans at the present time for the issuance
or use of the additional shares of Common Stock to be authorized by this
proposal, other than the proposal (discussed hereinbelow under Proposal Four) to
allocate up to 500,000 shares of Common Stock for the purposes of the proposed
1998 Stock Incentive Plan.
The affirmative vote of a majority of all outstanding shares
will be required to approve the authorization of additional shares of Common
Stock. As a result, abstentions and broker non-votes will have the same effect
as a negative vote.
The Board recommends that shareholders vote FOR the proposal
--------------------------------------------------------------
to increase the number of authorized shares of Common Stock to 20,000,000
- --------------------------------------------------------------------------------
shares.
- -------
PROPOSAL FOUR
APPROVAL OF 1998 STOCK INCENTIVE PLAN
In February 1998 the Board adopted, subject to shareholder
approval, the 1998 Stock Incentive Plan ("Plan"). The purpose of the Plan is to
attract and retain the services of key employees, officers and directors, as
well as other persons who are integral to the ongoing success of the Company.
The Plan is nearly identical to the Company's 1993 Stock Incentive Plan ("1993
Plan") and will become effective April 28, 1998, if it is approved by the
shareholders. No award would be granted pursuant to the Plan after April 27,
2008.
The Company currently maintains the 1989 Non-Qualified Stock
Option Plan ("1989 Plan") and the 1993 Plan which, together, are referred to as
the "Prior Plans". The Company's 1987 Non-Qualified Stock Option Plan has now
terminated by its terms. The Prior Plans were previously approved by the
shareholders. 618 shares remain available for grant under the 1989 Plan, which
expires by its terms in 1999 and 39,387 shares remain available in connection
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<PAGE>
with awards available for grant under the 1993 Plan. The 1989 Plan authorizes
only the grants of stock options and only to officers and other key management
employees of the Company. The Prior Plans are administered by the Compensation
Committee of the Board and options granted under the Prior Plans are at the
market price of Common Stock on the date of grant.
The 1993 Plan is nearly identical to the Proposed 1998 Plan,
except that the range of awards under the proposed 1998 Plan has been expanded
to authorize the issuance of stock bonus awards in connection with employee
stock ownership plans if such plans are approved by the Board and the issuance
of other awards that involve, in whole or part, Common Stock.
The complete text of the 1998 Plan is attached to this Proxy
Statement as Appendix B and is incorporated herein by this reference. The
following description of the 1998 Plan is a summary of certain provisions and is
qualified in its entirety by reference to Appendix B.
Plan Benefits
- -------------
Because the Plan is discretionary and based on Company
financial and business performance, it is not possible to determine or estimate
the benefits or amounts that will be received in the future, or that would have
been received in 1997 had the Plan been in effect in 1997, by individual
employees or groups of employees and others participating in the Plan.
Plan Administration
- -------------------
The Plan will be administered by the Compensation Committee of
the Board ("Committee"). The Committee may promulgate rules for the operation of
the Plan and will interpret the Plan and related agreements and will generally
supervise the administration of the Plan. The Committee will generally determine
the persons to whom awards will be made, the amount of the awards and the other
terms and conditions thereof.
Eligibility
- -----------
The Plan authorizes the granting of awards to employees,
officers and directors of the Company or any of its parents or subsidiaries and
to selected nonemployee agents, consultants, advisors and independent
contractors. Directors who are not employees of the Company will only receive
automatic grants as hereinbelow discussed and will not be eligible to receive
any other awards under the Plan. All persons selected by the Committee to
receive awards must be persons the Committee believes have made or will make an
important contribution to the Company's ongoing success.
Automatic Grants of Awards
- --------------------------
As was the case under the 1993 Plan, each nonemployee director
elected at the 1998 Annual Meeting will automatically receive a nonstatutory
stock option covering 5,000 shares of Common Stock if the 1998 Plan is approved.
Each additional or substitute nonemployee director elected at subsequent annual
shareholder meetings will also automatically receive at that time a nonstatutory
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stock option covering 5,000 shares. Such options will have a term of 10 years
and the exercise price will be the fair market value of the underlying shares on
the date of grant. These options are exercisable annually in 20% increments.
Shares Reserved
- ---------------
The Company may issue up to 500,000 shares of Common Stock;
provided, however, if the shareholders do not approve the increase in share
authority (see discussion above under Proposal Three) but do approve the 1998
Plan, the total share allocation will be reduced to 300,000 shares.
Term of the Plan
- ----------------
Subject to shareholder approval, the Plan was adopted by the
Board of Directors on February 11, 1998, and will continue until all shares
available for awards under the Plan have been issued; provided, however, no
awards may be made under the Plan after April 27, 2008. The Board has the power
to amend, suspend, terminate or modify the Plan at any time except that awards
already granted may not be changed without the written consent of the holder of
the award, unless the Plan permits any change without the necessity of such
consent (as, for example, in the case of conversion of incentive stock options
into nonstatutory stock options or the making of option grants to nonemployee
directors, wherein the holder's consent is not necessary).
Types of Awards
- ---------------
The Plan would permit the granting of any and all of the
following types of awards: (1) stock options, including incentive stock options
as defined in Section 422 of the Internal Revenue Code of 1986, as amended
("Code"), or nonstatutory stock options, (2) stock appreciation rights ("SARs")
in tandem with stock options or freestanding, (3) bonuses issued for stock,
including stock bonuses issued in connection with employee stock ownership
plans, (4) sales of stock and (5) other awards of stock or awards valued in
whole or in part by reference to, or otherwise based on, stock or other property
of the Company.
(a) Stock Options: The Committee will determine whether the
option grant is an incentive stock option or a nonstatutory stock option, except
that the automatic grant for nonemployee directors is for a nonstatutory stock
option. The Committee will determine the number of shares subject to option, the
option price, the period of the option and the terms of exercise. In the case of
incentive stock options, the option price must equal fair market value of the
underlying shares determined at the time of grant (except that optionees owning
more than 10% of the Common Stock are subject to an exercise price of at least
110% of fair market value on the date of grant). Nonstatutory stock options may
include an exercise price that is not less than 85% of fair market value
determined on the date of grant. Incentive stock options cannot be exercisable
for a period of more than 10 years from the date of grant while nonstatutory
stock option maturities are determined by the Committee. The purchase price for
shares purchased under either form of stock option can be paid for in cash or a
combination of cash and delivery of the Company's Common Stock.
12
<PAGE>
(b) Stock Appreciation Rights: SARs may be granted
freestanding or in tandem with a stock option. SARs are subject to the rules,
terms and conditions as prescribed by the Committee. If a SAR is granted in
connection with an option, the SAR is exercisable only to the extent, and on the
same conditions, that the related option could be exercised. Upon exercise of a
SAR, any option or portion thereof to which the SAR relates terminates. If a SAR
is granted in connection with an option, upon exercise of the option, the
related SAR or portion thereof to which the option relates terminates. No SAR
granted to an officer or director may be exercised during the first six months
following the date of grant. A SAR gives the holder the right to payment from
the Company of an amount equal in value to the excess of the fair market value
on the date of exercise of one share of Common Stock over its fair market value
on the date of grant, multiplied by the number of shares covered by the portion
of the SAR that is surrendered. An employee will not pay the Company any cash
consideration upon either the grant or exercise of a SAR, except for tax
withholding amounts upon exercise. Payment by the Company upon exercise of a SAR
may be made in shares of Common Stock valued at fair market value, or in cash,
or any combination thereof, all as determined by the Committee. The Committee
may withdraw any SAR granted under the Plan at any time and may impose any
conditions upon the exercise of a SAR or adopt rules from time to time affecting
the rights of holders of SARs.
(c) Stock Bonuses: Awards may include Common Stock issued as
bonuses. The Committee will determine the recipients of these bonuses, the
number of shares to be awarded as well as all other terms and conditions and
restrictions imposed upon bonus shares received. No cash consideration (other
than tax withholding amounts) will be paid by persons receiving these bonuses.
In addition, the Committee may also authorize the issuance of bonus shares in
connection with the Board's establishment of an employee stock ownership plan.
Any employee stock ownership plan approved by the Board would necessarily
require compliance with all applicable provisions of the Code and all other
governing laws.
(d) Stock Sales: The Committee may sell Common Stock under the
Plan to persons in such amounts for such consideration subject to such
restrictions and on such terms as the Committee may determine, including
restrictions relating to transferability, repurchase by the Company and
forfeiture of shares issued. No shares may be issued for consideration that is
less than 85% of the fair market value of such shares at the time of issuance.
(e) Other Stock Unit Awards: The Committee may also issue
awards to participants, either standing alone or in tandem with other awards
granted under the Plan. Such other awards may include only Common Stock or
awards that are valued in whole or in part by reference to or otherwise based on
Common Stock or other property. The Committee shall determine which recipients
shall be entitled to these awards, the number of shares to be granted in
connection with such awards, as well as all other conditions of such awards. The
provisions of these awards need not be the same with respect to each recipient.
The Committee may issue these awards subject to the recipient's payment of a
consideration. If these other awards include purchase rights to underlying
shares of Common Stock, the Committee shall determine that purchase price, which
shall not be less than the fair market value of such shares on the date the
award is made. The purpose of including authority for these other awards is to
enable the Committee to respond quickly to significant developments in
applicable tax and other legislation, and to trends in incentive compensation
practices.
13
<PAGE>
Adjustments
- -----------
In the event of any change affecting the shares of Common
Stock by reason of any stock dividend or split, recapitalization,
reclassification and the like, the Committee shall make appropriate adjustments
in the number and kind of shares available for awards, the price and other
relevant terms. These adjustment terms, however, do not apply with respect to
certain transactions, the effects of which are addressed separately under the
Plan and hereinafter discussed. If a merger, consolidation, reorganization, plan
of exchange or liquidation results in the Company's shareholders receiving cash,
stock or other property in exchange for their Common Stock, such transaction
triggers an automatic acceleration of the vesting of options, SARs or other
stock unit awards. Because options and SARs and other stock-based awards granted
to officers or directors may not be exercised for the first six-month period
following the grant date, the Plan is designed to protect these holders of
awards by requiring, as a result of any such triggering transaction, the
purchase of their awards following the expiration of the required six-month
holding period. If any of the aforementioned transactions result in the
Company's shareholders receiving stock of another corporation in exchange for
Common Stock, then the holder of the stock-based award may receive equivalent
awards on an exchange basis all as provided under the terms of the Plan.
Federal Income Tax Consequences
- -------------------------------
(a) General: The following is only a summary of the effect of
federal income taxation upon the participant and the Company with respect to
awards made under the Plan. Reference should be made to the applicable
provisions of the Code. In addition, the following summary does not discuss the
tax consequences of a Plan participant's death or the income tax laws of any
state or other jurisdiction in which the Plan participant may reside.
(b) Incentive Stock Options: The Committee may from time to
time issue to employees options intended to qualify as incentive stock options
under the provisions of the Code. Under federal income tax law currently in
effect, an optionee will recognize no income upon the grant or exercise of an
incentive stock option. The amount by which the fair market value of the stock
at the time of exercise exceeds the exercise price, however, is includible in
the optionee's alternative minimum taxable income and may, under certain
conditions, result in alternative minimum tax liability. If an optionee
exercises this type of option and does not dispose of any of the shares thereby
acquired within two years following the date of grant and within one year
following the date of exercise, any gain realized on subsequent disposition of
the shares will be treated as income from the sale or exchange of a capital
asset. If, however, the employee disposes of the shares acquired upon exercise
before the expiration of either the one-year or the two-year holding period
(known as a "disqualifying disposition"), the optionee realizes taxable ordinary
compensation income in the year of such disqualifying disposition to the extent
that the lesser of the fair market value of the shares on the exercise date or
the fair market value of the shares on the date of disposition exceeds the
exercise price. Any additional gain realized upon the disqualifying disposition
will be treated as income from the sale or exchange of a capital asset.
14
<PAGE>
The Company will not be allowed any deduction for federal
income tax purposes at either the time of grant or the time of exercise of an
incentive stock option. Upon any disqualifying disposition, however, the Company
will be entitled to a deduction to the extent the optionee realizes ordinary
income.
(c) Nonstatutory Stock Options: The Committee may also from
time to time award to employees or others nonstatutory stock options. Under
federal income tax law currently in effect, no income is realized by the holder
of a nonstatutory stock option until the option is exercised. At the time of
exercise, the optionee will realize income, and the Company will be entitled to
a deduction, in the amount by which the fair market value of the shares subject
to option at the time of exercise exceeds the exercise price. The Company is
required to withhold on the income amount. Upon the sale of shares acquired upon
exercise of a nonstatutory stock option, the excess of the amount realized from
the sale over the market value of the shares on the date of exercise will be
taxable.
(d) SAR Awards: Under federal income tax law currently in
effect, no income is realized by the holder of a SAR until the SAR is exercised.
At the time of exercise the holder will realize ordinary compensation income,
and the Company generally will be entitled to a deduction, in an amount equal to
the fair market value of the shares or cash received. The Company is required to
withhold on the income amount. The award recipient's tax basis for any shares
received is the market value thereof at the time of exercise.
(e) Bonus Share Awards, Share Sales and Other Awards: Bonus
shares awarded under the Plan and shares sold outright, or other shares awarded,
which are transferable and not subject to a substantial risk of forfeiture, will
be taxable as ordinary income equal to the excess of the fair market value of
the shares received over the amount, if any, paid for the shares by the Plan
participant. The Company will generally be entitled to a deduction in the amount
includeable as income by the award recipient at the same time as the recognition
of income occurs. The Company is required to withhold on income amounts.
If, however, shares received in this type of award are not
transferable or are subject to a substantial risk of forfeiture on the date of
issuance, the participant will generally recognize ordinary income equal to the
excess of the fair market value of shares received (determined as of the date on
which the shares either become transferable or are not subject to a substantial
risk of forfeiture) over the amount, if any, paid for the shares. In this
instance, the Plan participant may elect to recognize income when the shares are
received, rather than upon the expiration of the transfer restriction or risk of
forfeiture and in such case the amount of ordinary income will be determined as
of the date of issuance, rather than upon the expiration of the applicable
restriction. This election and the rules regarding restricted stock treated as
being received as compensation are governed by Section 83 of the Code. The
Company is generally entitled to a deduction equal to the income amount
recognized by the participant and the timing of the deduction follows the timing
of taxation of the income to the participant.
15
<PAGE>
Adoption of this proposal requires an affirmative vote by the
holders of a majority of the shares represented at the Annual Meeting at which a
quorum is present. Abstentions have the effect of a "no" vote in determining
whether the proposal is approved. Broker non-votes are counted for purposes of
determining whether a quorum exists at the Annual Meeting but are not counted
and have no effect on the results of the vote.
The Board of Directors recommends a vote FOR approval of the
1998 Stock Incentive Plan.
SHAREHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
A proposal by a shareholder for inclusion in the Company's
proxy statement and form of proxy for the 1999 annual meeting of shareholders
must be received by the Company at 9600 S.W. Nimbus Avenue, Beaverton, Oregon
97008, Attention: Thomas P. Cox, Secretary, on or before November 21, 1998 in
order to be eligible for such inclusion.
OTHER BUSINESS
Management knows of no other matters to be brought before the Annual
Meeting. However, if any other business properly comes before the Annual
Meeting, or any adjournments or postponements thereof, the persons named in the
proxy will vote or refrain from voting thereon in accordance with their best
judgment pursuant to the discretionary authority given them in the proxy.
By Order of the Board of Directors
Thomas P. Cox, Secretary
Beaverton, Oregon
March 20, 1998
<PAGE>
APPENDIX A
TIMBERLINE SOFTWARE CORPORATION
Section 4.1 of Article 4 of the Company's Restated Articles of
Incorporation is amended in its entirety to read as follows:
"4.1 Authorized Capital. The corporation is authorized to
------------------
issue one class of stock to be designated "Common
Stock". The total number of shares of Common Stock
which the corporation shall have authority to issue
shall be Twenty Million (20,000,000) shares."
Appendix A-1
<PAGE>
APPENDIX B
TIMBERLINE SOFTWARE CORPORATION
1998 STOCK INCENTIVE PLAN
l. Purpose. The purpose of this 1998 Stock Incentive Plan
(the "Plan") is to enable Timberline Software Corporation, an Oregon corporation
(the "Company " ), to attract and retain the services of (a) selected employees,
officers and directors of the Company or of any parent or subsidiary corporation
of the Company, and (b) selected nonemployee agents, consultants, advisers and
independent contractors of the Company or any parent or subsidiary of the
Company.
2. Shares Subject to the Plan. Subject to adjustment as
provided below and in paragraph 11, up to 500,000 shares of Common Stock of the
Company (the "Shares") may be offered and issued under the Plan. If an option or
a stock appreciation right granted under the Plan expires, terminates or is
cancelled, the unissued Shares subject to such option or stock appreciation
right shall again be available under the Plan. If Shares sold or awarded as a
bonus under the Plan are forfeited to the Company or repurchased by the Company,
the number of Shares forfeited or repurchased shall again be available under the
Plan.
3. Effective Date and Duration of Plan.
(a) Effective Date. The Plan shall become effective when
adopted by the Board of Directors of the Company (the "Board") and approved by
the shareholders at the 1998 Annual Meeting of Shareholders. However, no option
granted under the Plan shall become exercisable until the Plan is approved by
the affirmative vote of the holders of a majority of the Common Stock of the
Company represented at a shareholder meeting at which a quorum is present, and
any such awards under the Plan prior to such approval shall be conditioned upon
and subject to such approval. Subject to this limitation, options and stock
appreciation rights may be granted and Shares may be awarded as bonuses or sold
under the Plan at any time after the effective date and before termination of
the Plan.
(b) Duration. No options or stock appreciation rights or
awards may be granted under the Plan, no stock bonuses may be awarded under the
Plan, and no Shares may be sold under the Plan after April 27, 2008. However,
the Plan shall continue in effect until all Shares available for issuance under
the Plan have been issued and all restrictions on such Shares have lapsed. The
Board may suspend or terminate the Plan at any time, except with respect to
options, stock appreciation rights and Shares subject to restrictions then
outstanding under the Plan. Termination shall not affect any outstanding
options, stock appreciation rights, any right of the Company to repurchase
Shares or the forfeitability of Shares issued under the Plan.
Appendix B-1
<PAGE>
4. Administration.
(a) The Committee. The Plan shall be administered by a
committee appointed by the Board consisting of not less than two directors (the
"Committee"). The Committee shall determine and designate from time to time the
individuals to whom awards shall be made, the amount of the awards, and the
other terms and conditions of the awards; provided, however, that only the Board
may amend or terminate the Plan as provided in paragraphs 3 and 14. At any time
when the officers and directors of the Company are subject to Section 16(b) of
the Securities Exchange Act of 1934 (the "Exchange Act"), the Committee shall
consist solely of "disinterested" directors as such term is defined from time to
time in Rule 16b-3 under the Exchange Act. No member of the Committee shall be
eligible to receive any award under the Plan while such person serves as a
Committee member, except pursuant to paragraph 10.
(b) Regulations; Interpretation. Subject to the
provisions of the Plan, the Committee may from time to time adopt and amend
rules and regulations relating to administration of the Plan, advance the lapse
of any waiting period, accelerate any exercise date, waive or modify any
restriction applicable to Shares (except those restrictions imposed by law) and
make all other determinations in the judgment of the Committee necessary or
desirable for the administration of the Plan. The interpretation and
construction of the provisions of the Plan and related agreements by the
Committee shall be final and conclusive. The Committee may correct any defect or
supply any omission or reconcile any inconsistency in the Plan or in any related
agreement in the manner and to the extent it shall deem expedient to carry the
Plan into effect, and it shall be the sole and final judge of such expediency.
5. Types of Awards; Eligibility. The Committee may from time
to time, take the following actions under the Plan: (i) grant Incentive Stock
Options, as defined in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), as provided in paragraph 6(b); (ii) grant options other
than Incentive Stock Options ("Nonstatutory Stock Options") as provided in
paragraph 6(c); (iii) award stock bonuses as provided in paragraph 7; (iv) sell
Shares as provided in paragraph 8; and (v) grant stock appreciation rights or
other awards of stock or awards valued in whole or in part by reference to, or
otherwise based on, stock or other property of the Company ("Other Stock Unit
Awards") as provided in paragraph 9. Any such awards may be made to employees
(including employees who are officers or directors) of the Company or of any
parent or subsidiary corporation of the Company, and to other individuals
described in paragraph 1 who the Committee believes have made or will make an
important contribution to the Company or its parent or subsidiaries; provided,
however, that only employees of the Company or a parent or subsidiary shall be
eligible to receive Incentive Stock Options under the Plan; and, provided
further, that directors who are not employees shall receive awards only pursuant
to paragraph 10. The Committee shall select the individuals to whom awards shall
be made and shall specify the action taken with respect to each individual to
whom an award is made under the Plan. At the discretion of the Committee, an
individual may be given an election to surrender an award in exchange for the
grant of a new award.
Appendix B-2
<PAGE>
6. Option Grants
(a) Grant. Each option granted under the Plan shall be
evidenced by a stock option agreement in such form as the Committee shall
prescribe from time to time in accordance with the Plan. With respect to each
option grant, the Committee shall determine the number of Shares subject to the
option, the option price, the period of the option, and the time or times at
which the option may be exercised and whether the option is an Incentive Stock
Option or a Nonstatutory Stock Option.
(b) Incentive Stock Options. Incentive Stock Options
granted under the Plan shall be subject to the following terms and conditions:
(i) No employee may be granted Incentive Stock
Options under the Plan such that the aggregate fair market
value, on the date of grant, of the Shares with respect to
which Incentive Stock Options are exercisable for the first
time by that employee during any calendar year under the Plan
and under any other incentive stock option plan (within the
meaning of Section 422 of the Code) of the Company or of any
parent or subsidiary corporation of the Company exceeds
$100,000.
(ii) An Incentive Stock Option may be granted under
the Plan to an employee possessing more than 10 percent of the
total combined voting power of all classes of stock of the
Company or of any parent or subsidiary corporation of the
Company only if the option price is at least 110 percent of
the fair market value, as described in paragraph 6(b) (iv), of
the Shares subject to the option on the date it is granted,
and the option by its terms is not exercisable more than five
years from the date of grant.
(iii) Subject to paragraphs 6(b)(ii) and 6(d),
Incentive Stock Options granted under the Plan shall continue
in effect for the period fixed by the Committee, except that
no Incentive Stock Option shall be exercisable more than 10
years from the date of grant.
(iv) The option price per share shall be determined
by the Committee at the time of grant.
Subject to paragraph 6(b)(ii), the option price shall not be
less than 100 percent of the fair market value of the Shares
covered by the Incentive Stock Option at the date the option
is granted. The fair market value shall be deemed to be the
closing price for the Common Stock of the Company as reported
on the National Association of Securities Dealers, Inc.
Automated Quotation System on the day the option is granted,
or if there has been no sale on that date, on the last
preceding date on which a sale occurred, or such other
reported fair market value of the Common Stock of the Company
as shall be properly relied upon by the Committee.
Appendix B-3
<PAGE>
(v) The Committee may at any time without the
consent of the optionee convert an Incentive Stock Option into
a Nonstatutory Stock Option.
(c) Nonstatutory Stock Options. Nonstatutory Stock
Options shall be subject to the following terms and conditions, in addition to
the above terms (which are not inconsistent with the following):
(i) The option price for Nonstatutory Stock Options
shall be determined by the Committee at the time of grant. The
option price may not be less than 85 percent of the fair
market value of the Shares covered by the Nonstatutory Stock
Option on the date of grant. The fair market value of the
Shares covered by a Nonstatutory Stock Option shall be
determined pursuant to paragraph (b)(iv).
(ii) Nonstatutory Stock Options granted under the
Plan shall continue in effect for the period fixed by the
Committee.
(d) Exercise of Options. Except as provided in paragraph
6(f) or as determined by the Committee, no option granted under the Plan may
be exercised unless at the time of such exercise the optionee is employed by
or in the service of the Company or any parent or subsidiary corporation of
the Company and shall have been so employed or have provided such service
continuously since the date such option was granted. Absence on leave or on
account of illness or disability under rules established by the Committee
shall not, however, be deemed an interruption of employment for purposes of
the Plan. Unless otherwise determined by the Committee, vesting of options
shall not continue during an absence on leave (including an extended illness)
or on account of disability. No option may be exercised by an officer or
director of the Company within six months of the date of grant. Except as
provided in paragraphs 6(f), 11 and 12, options granted under the Plan may be
exercised from time to time over the period stated in each option in such
amounts and at such times as shall be prescribed by the Committee; provided,
however, that options shall not be exercised for fractional shares. Unless
otherwise determined by the Committee, if the optionee does not exercise an
option in any one year with respect to the full number of Shares to which the
optionee is entitled in that year, the optionee's rights shall be cumulative
and the optionee may purchase those Shares in any subsequent year during the
term of the option.
(e) Nontransferability. Each option granted under the
Plan by its terms shall be nonassignable and nontransferable by the optionee,
either voluntarily or by operation of law, except by will or by the laws of
descent and distribution of the state or country of the optionee's domicile at
the time of death; provided, however, that with the consent of the Committee,
Nonstatutory Stock Options may be assigned or transferred pursuant to a
qualified domestic relations order as defined by the Code or Title I of the
Employee Retirement Income Security Act, as amended ("ERISA"), or the rules
thereunder. Each option granted under the Plan by its terms shall be exercisable
during the optionee' s lifetime only by the optionee, or his or her permitted
assignee or transferee pursuant to such a qualified domestic relations order.
Appendix B-4
<PAGE>
(f) Termination of Employment or Service.
(i) In the event the employment or service of the
optionee by the Company or a parent or subsidiary corporation
of the Company terminates for any reason other than because of
death or physical disability, the option may be exercised at
any time prior to the expiration date of the option or the
expiration of three months after the date of such termination,
whichever is the shorter period, but only if and to the extent
the optionee was entitled to exercise the option at the date
of such termination.
(ii) In the event of the termination of the
optionee's employment or service with the Company or a parent
or subsidiary corporation of the Company because the optionee
becomes disabled (within the meaning of Section 22(e) (3) of
the Code), the option may be exercised at any time prior to
the expiration date of the option or the expiration of one
year after the date of such termination, whichever is the
shorter period, but only if and to the extent the optionee was
entitled to exercise the option at the date of such
termination.
(iii) In the event of the death of an optionee while
employed by or providing service to the Company or a parent or
subsidiary corporation of the Company, the option may be
exercised at any time prior to the expiration date of the
option or the expiration of one year after the date of such
death, whichever is the shorter period, but only if and to the
extent the optionee was entitled to exercise the option on the
date of death, and only by the person or persons to whom such
optionee's rights under the option shall pass by the
optionee's will or by the laws of descent and distribution of
the state or country of domicile at the time of death.
(iv) The Committee, at the time of grant or at any
time thereafter, may extend the three-month and one-year
expiration periods to any length of time not later than the
original expiration date of the option, and may increase the
portion of an option that is exercisable, subject to such
terms and conditions as the Committee may determine.
(v) To the extent that the option of any deceased
optionee or of any optionee whose employment or service
terminates is not exercised within the applicable period, all
further rights to purchase Shares pursuant to such option
shall cease and terminate.
(g) Purchase of Shares. Unless the Committee determines
otherwise, Shares may be acquired pursuant to an option only upon receipt by the
Company of notice in writing from the optionee of the optionee' s intention to
exercise, specifying the number of Shares as to which the optionee desires to
exercise the option and the date on which the optionee desires to complete the
transaction, and, if required to comply with the Securities Act of 1933, as
amended, or state securities laws, the notice shall include a representation
that it is the optionee's intention to acquire the Shares for investment and not
with a view to distribution. The certificates representing the Shares shall bear
any legends required by the Committee. Unless the Committee determines
otherwise, on or before the date specified for completion of the purchase of
Appendix B-5
<PAGE>
Shares pursuant to an option, the optionee must have paid the Company the full
purchase price of such Shares in cash (including, with the consent of the
Committee, cash that may be the proceeds of a loan from the Company), or, with
the consent of the Committee, in whole or in part, in Shares valued at fair
market value, as determined pursuant to paragraph 6(b)(iv). Unless the Committee
determines otherwise, all payments made to the Company in connection with the
exercise of an option must be made by cashier's bank check or by the transfer of
immediately available federal funds. No Shares shall be issued until full
payment therefor has been made. With the consent of the Committee, an optionee
may request the Company to apply automatically the Shares to be received upon
the exercise of a portion of a stock option (even though stock certificates have
not yet been issued) to satisfy the purchase price for additional portions of
the stock option. Each optionee who has exercised an option shall immediately
upon notification of the amount due, if any, pay to the Company in cash amounts
necessary to satisfy any applicable federal, state and local tax withholding
requirements. If additional withholding is or becomes required beyond any amount
deposited before delivery of the certificates, the optionee shall pay such
amount to the Company on demand. If the optionee fails to pay the amount
demanded, the Company or any parent or subsidiary corporation of the Company may
withhold that amount from other amounts or property payable to the optionee by
the Company or by the parent or subsidiary corporation, including salary and
Shares issuable upon exercise of any option under this Plan, subject to
applicable law. With the consent of the Committee, an optionee may deliver
Shares to the Company to satisfy the withholding obligation.
7. Stock Bonuses. The Committee may award Shares under the
Plan as stock bonuses. Shares awarded as a stock bonus shall be subject to such
terms, conditions, and restrictions as shall be determined by the Committee. The
restrictions may include restrictions concerning transferability, repurchase by
the Company and forfeiture of the Shares issued, together with such other
restrictions as may be determined by the Committee. The Committee may not
require the recipient to pay any monetary consideration other than amounts
necessary to satisfy tax withholding requirements. The certificates representing
the Shares awarded shall bear any legends required by the Committee. The Company
may require any recipient of a stock bonus to pay to the Company in cash upon
demand amounts necessary to satisfy any applicable federal, state or local tax
withholding requirements. If the recipient fails to pay the amount demanded, the
Company or any parent or subsidiary corporation of the Company may withhold that
amount from other amounts payable to the recipient by the Company or the parent
or subsidiary corporation, including salary, subject to applicable law. With the
consent of the Committee, a recipient may deliver Shares to the Company to
satisfy the withholding obligation. In addition to stock bonus awards
hereinabove authorized in this paragraph 7, the Committee may also authorize the
issuance of stock bonus Shares in connection with an employee stock ownership
plan ("ESOP"), in which case the Shares so authorized shall be issued to and
held by the employee stock ownership trust established in connection with the
ESOP and approved by the Board. The Committee may only exercise its authority in
this regard upon the Board's approval of an ESOP that complies with all
applicable provisions of the Code and all other governing laws and the Board's
delegation of authority to the Committee to administer the ESOP.
8. Stock Sales. The Committee may issue Shares under the Plan
for such consideration (including promissory notes and services) as determined
by the Committee; provided, however, that in no event shall the consideration be
less than 85 percent of the fair market value of the Shares at the time of
issuance, determined pursuant to paragraph 6(b)(iv). Shares issued under this
Appendix B-6
<PAGE>
paragraph 8 shall be subject to the terms, conditions and restrictions
determined by the Committee. The restrictions may include restrictions
concerning transferability, repurchase by the Company and forfeiture of the
Shares issued, together with such other restrictions as may be determined by the
Committee. The certificates representing the Shares shall bear any legends
required by the Committee. The Company may require any purchaser of Shares
issued under this paragraph 8 to pay to the Company in cash upon demand amounts
necessary to satisfy any applicable federal, state or local tax withholding
requirements. If the purchaser fails to pay the amount demanded, the Company or
any parent or subsidiary corporation of the Company may withhold that amount
from other amounts payable to the purchaser by the Company or any parent or
subsidiary corporation, including salary, subject to applicable law. With the
consent of the Committee, a purchaser say deliver Shares to the Company to
satisfy the withholding obligation.
9. Stock Appreciation Rights and Other Stock Unit Awards.
(a) Stock Appreciation Rights.
(i) Grant. Stock appreciation rights may be granted
under the Plan by the Committee, subject to such rules,
terms, and conditions as the Committee prescribes.
(ii) Exercise.
(A) A stock appreciation right shall be
exercisable only at the time or times established by the
Committee. If a stock appreciation right is granted in
connection with an option, the stock appreciation right
shall be exercisable only to the extent and on the same
conditions that the related option could be exercised. Upon
exercise of a stock appreciation right, any option or
portion thereof to which the stock appreciation right
relates terminates. If a stock appreciation right is
granted in connection with an option, upon exercise of the
option, the stock appreciation right or portion thereof to
which the option relates terminates. No stock appreciation
right granted to an officer or director may be exercised
during the first six months following the date of grant.
(B) The Committee may withdraw any stock
appreciation right granted under the Plan at any time and
may impose any conditions upon the exercise of a stock
appreciation right or adopt rules and regulations from time
to time affecting the rights of holders of stock
appreciation rights. Such rules and regulations may govern
the right to exercise stock appreciation rights granted
before adoption or amendment of such rules and regulations
as well as stock appreciation rights granted thereafter.
(C) Each stock appreciation right shall entitle
the holder, upon exercise, to receive from the Company in
exchange therefor an amount equal in value to the excess of
the fair market value on the date of exercise of one Share
over its fair market value on the date of grant (or, in the
case of a stock appreciation right granted in connection
with an option, the option price per Share under the option
to which the stock appreciation right relates), multiplied
Appendix B-7
<PAGE>
by the number of Shares covered by the stock appreciation
right or the option, or portion thereof, that is
surrendered. No stock appreciation right shall be
exercisable at a time that the amount determined under this
subparagraph is negative. Payment by the Company upon
exercise of a stock appreciation right may be made in
Shares valued at fair market value, in cash, or partly in
Shares and partly in cash, all as determined by the
Committee.
(D) For purposes of this paragraph 9, the fair
market value of the Shares shall be determined pursuant to
paragraph 6(b)(iv), as of the trading day preceding the
date the stock appreciation right is exercised.
(E) No fractional Shares shall be issued upon
exercise of a stock appreciation right. In lieu thereof,
cash may be paid in an amount equal to the value of the
fraction or, if the Committee shall determine, the number
of Shares may be rounded downward to the next whole Share.
(F) Each participant who has exercised a stock
appreciation right shall, upon notification of the amount
due, pay to the Company in cash amounts necessary to
satisfy any applicable federal, state or local tax
withholding requirements. If the participant fails to pay
the amount demanded, the Company or any parent or
subsidiary corporation of the Company may withhold that
amount from other amounts payable to the participant by the
Company or any parent or subsidiary corporation, including
salary, subject to applicable law. With the consent of the
Committee, a participant may satisfy this obligation, in
whole or in part, by having the Company withhold from any
Shares to be issued upon the exercise that number of Shares
that would satisfy the withholding amount due or by
delivering Shares to the Company to satisfy the withholding
amount.
(G) Upon the exercise of a stock appreciation
right for Shares, the number of Shares reserved for
issuance under the Plan shall be reduced by the number of
Shares issued. Cash payments of stock appreciation rights
shall not reduce the number of Shares reserved for issuance
under the Plan.
(b) Other Stock Unit Awards. The Committee shall also be
authorized to grant to participants, either alone or in addition to other awards
granted under the Plan, awards of Shares and other awards that are valued in
whole or in part by reference to, or otherwise based on, Common Stock or other
property. These Other Stock Unit Awards may be paid in Common Stock of the
Company, cash, or any other form of property as the Committee shall determine.
The Committee shall determine the participants to whom Other Stock Unit Awards
are to be made, the times at which such awards are to made, the number of Shares
to be granted pursuant to such awards, and all other conditions of such awards.
The provisions of Other Stock Unit Awards need not be the same with respect to
each recipient. The participant shall not be permitted to sell, assign,
transfer, pledge or otherwise encumber the Shares so awarded prior to the later
of the date on which the Shares are issued, or the date on which any applicable
restriction, performance or deferral period lapses. For any such award or Shares
subject to any such award, the transferability of which is conditional only on
the passage of time, such restriction period shall be a minimum of one (1) year.
Shares (including securities convertible into Shares) granted pursuant to Other
Appendix B-8
<PAGE>
Stock Unit Awards may be issued for no cash consideration or for such minimum
consideration as may be required by applicable law. Shares (including securities
convertible into Shares) purchased pursuant to purchase rights granted pursuant
to Other Stock Unit Awards may be purchased for such consideration as the
Committee shall determine, which price shall not be less than the fair market
value of such Shares or other securities on the date of grant.
10. Option Grants to Non-Employee Directors.
(a) Automatic Grants. Immediately upon the
adjournment of the 1998 annual shareholder meeting, each Non-Employee Director
shall automatically be granted a Nonstatutory Stock Option to purchase 5,000
Shares. Immediately upon the adjournment of each annual shareholder meeting
thereafter at which additional or substitute Non-Employee Directors are elected,
each such additional or substitute Non-Employee Director shall automatically be
granted a Nonstatutory Stock Option to purchase 5,000 Shares. A "Non-Employee
Director" is a director of the Company who is not an employee of the Company or
of any parent or subsidiary corporation of the Company on the date the option is
granted.
(b) Terms of Options. The exercise price for options
granted under this paragraph 10 shall be the fair market value of the Shares on
the date of grant, determined pursuant to paragraph 6(b)(iv). Each such option
shall have a 10-year term from the date of grant, unless earlier terminated as
provided in paragraph 6(f). Each such option shall become exercisable with
respect to 20 percent of its underlying Shares six months after the date of
grant and with respect to the remaining Shares in 20 percent annual increments
(measured from the date of grant) so that the option is fully exercisable on and
after the fourth anniversary date of grant thereof.
11. Changes in Capital Structure. If the outstanding shares of
Common Stock of the Company are hereafter increased or decreased or changed into
or exchanged for a different number or kind of shares or other securities of the
Company or of another corporation by reason of any recapitalization,
reclassification, stock split, combination of shares or dividend payable in
shares, the Committee shall make appropriate adjustments (i) in the number and
kind of shares available for awards under the Plan; and (ii) in the price and
number and kind of shares as to which outstanding options and stock appreciation
rights, or portions thereof then unexercised, shall be exercisable, so that the
participant's proportionate interest before and after the occurrence of the
event is maintained; provided, however, that this paragraph 11 shall not apply
with respect to transactions referred to in paragraph 12. The Committee may also
require that any securities issued in respect of or exchanged for Shares issued
hereunder that are subject to restrictions be subject to similar restrictions.
Notwithstanding the foregoing, the Committee shall have no obligation to effect
any adjustment that would or might result in the issuance of fractional shares,
and any fractional shares resulting from any adjustment may be disregarded or
provided for in any manner determined by the Committee. Any such adjustment made
by the Committee shall be conclusive.
Appendix B-9
<PAGE>
12. Effect of Reorganization or Liquidation.
(a) Cash, Stock or Other Property for Stock. Except as
provided in paragraph 12(b), upon a merger, consolidation, reorganization, plan
of exchange or liquidation involving the Company, as a result of which the
shareholders of the Company receive cash, stock or other property in exchange
for or in connection with their Common Stock (any such transaction to be
referred to in this paragraph 12 as an "Accelerating Event"), any option or
stock appreciation right or other stock unit award granted hereunder shall
terminate, except as specified in the following sentence, but the optionee shall
have the right during the 30-day period immediately prior to any such
Accelerating Event to elect to exercise his or her option or stock appreciation
right or award, in whole or in part, without any limitation on exercisability;
provided, however, that such exercise shall be deemed to occur immediately prior
to such Accelerating Event and shall be contingent upon the occurrence of such
Accelerating Event. With respect to an option or stock appreciation right or
other stock unit award granted to an officer or director less than six months
prior to any Accelerating Event, such officer or director shall have the right
to require the Company to purchase such option or stock appreciation right or
award, at a purchase price computed pursuant to paragraph 12(c) during the
30-day period following the expiration of six months following the date of such
grant, and this right shall apply even if the option or stock appreciation right
or other award has otherwise terminated pursuant to paragraph 6(f) following
such Accelerating Event.
(b) Stock for Stock. If the shareholders of the Company
receive capital stock of another corporation ("Exchange Stock") in exchange for
their Common Stock in any transaction involving a merger, consolidation,
reorganization, or plan of exchange, all options granted hereunder shall be
converted into options to purchase shares of Exchange Stock and all stock
appreciation rights and other stock unit awards granted hereunder shall be
converted into stock appreciation rights and awards measured by the Exchange
Stock, unless the Committee, in its sole discretion, determines that any or all
such options or stock appreciation rights or other stock unit awards granted
hereunder shall not be converted, but instead shall terminate in accordance with
the provisions of paragraph 12(a). The amount and price of converted options,
stock appreciation rights and other stock unit awards shall be determined by
adjusting the amount and price of the options or stock appreciation rights or
other awards granted hereunder to take into account the relative values of the
Exchange Stock and the Common Stock in the transaction.
(c) Purchase Price for Certain Officers and Directors.
With respect to an option, right or other award granted to an officer or
director less than six months prior to an Accelerating Event, the purchase price
payable pursuant to paragraph 12(a) shall be the product of (A) the excess, if
any, of the purchase price paid for each Share in the Accelerating Event over
the award price, multiplied by (B) the number of Shares covered by the option,
stock appreciation right or other stock unit award. However, no right to require
the purchase of any option or stock appreciation right or other stock unit award
may be exercised in connection with an Accelerating Event if the purchase price
determined under this paragraph 12(c) is negative.
(d) Transferability. The rights set forth in this
paragraph 12 shall be transferable only to the extent the related option or
stock appreciation right or other stock unit award is transferable.
Appendix B-10
<PAGE>
13. Corporate Mergers, Acquisitions, Etc. The Committee may
also grant options, stock appreciation rights, or other stock unit awards, award
stock bonuses and sell stock under the Plan having terms, conditions and
provisions that vary from those specified in the Plan; provided, however, that
-------- -------
any such awards are granted in substitution for, or in connection with the
assumption of, existing options, stock appreciation rights, other awards, stock
bonuses and stock sold or awarded by another corporation and assumed or
otherwise agreed to be provided for by the Company pursuant to or by reason of a
transaction involving a corporate merger, consolidation, acquisition of property
or stock, separation, reorganization or liquidation to which the Company or a
parent or subsidiary corporation of the Company is a party.
14. Amendment of Plan.
(a) Amendment by Board. The Board may at any time and
from time to time, modify or amend the Plan in such respects as it shall deem
advisable because of changes in the law while the Plan is in effect or for any
other reason. Except as provided in paragraphs 6(b)(v), 10, 11 and 12, however,
no change in an award already granted shall be made without the written consent
of the holder of such award.
(b) Paragraph 10 Amendment. Notwithstanding any other
provision in the Plan, paragraph 10 may be amended or modified by the Board or
the shareholders of the Company only once in any six-month period, except as may
be required to comport with changes in the Code, or ERISA, or the rules
promulgated thereunder.
15. Approvals. The obligations of the Company under the Plan
are subject to the approval of state and federal authorities or agencies with
jurisdiction in the matter. The Company shall not be obligated to issue or
deliver Shares under the Plan if such issuance or delivery would violate
applicable state or federal securities laws, or if compliance with such laws
would, in the opinion of the Company, be unduly burdensome or require the
disclosure of information which would not be in the Company's best interests.
16. Employment and Service Rights. Nothing in the Plan or any
award pursuant to the Plan shall (i) confer upon any employee any right to be
continued in the employment of the Company or any parent or subsidiary
corporation of the Company or interfere in any way with the right of the Company
or any parent or subsidiary corporation of the Company by whom such employee is
employed to terminate such employee's employment at any time, for any reason,
with or without cause, or increase or decrease such employee's compensation or
benefits; or (ii) confer upon any person engaged by the Company or any parent or
subsidiary corporation of the Company any right to be retained or employed by
the Company or any parent or subsidiary corporation of the Company or to the
continuation, extension, renewal, or modification of any compensation, contract,
or arrangement with or by the Company or any parent or subsidiary corporation of
the Company.
17. Rights as a Shareholder. The recipient of any award under
the Plan shall have no rights as a shareholder with respect to any Shares until
the date of issue to the recipient of such Shares. Except as otherwise expressly
provided in the Plan, no adjustment shall be made for dividends or other rights
for which the record date is prior to the date such Shares are issued.
Appendix B-11
<PAGE>
TIMBERLINE SOFTWARE CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE 1998 ANNUAL MEETING OF SHAREHOLDERS -- APRIL 28, 1998
The undersigned hereby appoints Curtis L. Peltz and Thomas P.
Cox, and each of them, proxies with full power of substitution, and authorizes
them to represent and to vote on behalf of the undersigned all shares which the
undersigned would be entitled to vote if personally present at the 1998 Annual
Meeting of Shareholders of TIMBERLINE SOFTWARE CORPORATION to be held on April
28, 1998 and any adjournments thereof, with respect to the following:
(Continued, and to be marked, dated and signed on the other side)
Please mark your vote as indicated in this example | X |
1. PROPOSAL to elect Directors
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL, WRITE THE
NAME OF THAT INDIVIDUAL ON THE LINE SET FORTH BELOW THE LISTING OF
NOMINEES.)
Curtis L. Peltz, Thomas P. Cox, James A. Meyer, Donald L. Tisdel
-------------------------------------------------------------------------
| | FOR all nominees listed (except as marked to the
contrary)
| | WITHHOLD AUTHORITY to vote for all nominees listed
2. PROPOSAL to ratify selection of Deloitte & Touche LLP as
independent auditors
| | FOR
| | AGAINST
| | ABSTAIN
3. PROPOSAL to increase the number of authorized shares
| | FOR
| | AGAINST
| | ABSTAIN
<PAGE>
4. PROPOSAL to approve the Company's 1998 Stock Incentive Plan
| | FOR
| | AGAINST
| | ABSTAIN
Either or both of the proxies (or substitutes) present at the meeting may
exercise all powers granted hereby.
THIS PROXY, WHEN PROPERTY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE
NOMINEES FOR DIRECTORS AND FOR PROPOSAL 2, 3 and 4. IN ADDITION, THE PROXIES MAY
VOTE IN THEIR DISCRETION ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE
MEETING.
Signature(s) -------------------------- Date ---------------
Signature(s) --------------------------
NOTE: PLEASE DATE AND SIGN ABOVE EXACTLY AS YOUR NAME OR NAMES APPEAR HEREIN. IF
MORE THAN ONE NAME APPEARS ABOVE, ALL SHOULD SIGN. JOINT OWNERS SHOULD EACH SIGN
PERSONALLY. CORPORATE PROXIES SHOULD BE SIGNED IN FULL CORPORATE NAME BY AN
AUTHORIZED OFFICER AND ATTESTED. PERSONS SIGNING IN A FIDUCIARY CAPACITY SHOULD
INDICATE THEIR FULL TITLE AND AUTHORITY.
<PAGE>
