<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED
BY RULE 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
SOFTWARE AG SYSTEMS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
SOFTWARE AG SYSTEMS, 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
[LOGO OF SOFTWARE AG APPEARS HERE]
11190 SUNRISE VALLEY DRIVE
RESTON, VIRGINIA 20191
April 12, 1999
Dear Stockholder,
You are cordially invited to attend the annual meeting of stockholders (the
"Meeting") of Software AG Systems, Inc. (the "Company"). The Meeting will be
held on Thursday, May 20, 1999, at 10:00 a.m., local time, in the Regency
Ballroom B of the Hyatt Regency Reston, located at 1800 Presidents Street,
Reston, Virginia.
The actions expected to be taken at the Meeting are described in detail in
the attached proxy statement for the Meeting ("Proxy Statement") and Notice of
Meeting of Stockholders.
Included with the Proxy Statement is a copy of the Company's Annual Report
to Stockholders for fiscal year 1998. We encourage you to read the Annual
Report. It includes information on the Company's operations, markets, products
and services, as well as the Company's audited financial statements.
In our first complete year as a publicly traded company, we achieved
tremendous results and had an exciting year and look forward to reviewing our
accomplishments with our stockholders. Please use this opportunity to take
part in the affairs of the Company by voting on the business to come before
this Meeting.
Whether or not you plan to attend the Meeting, please complete, sign, date
and return the accompanying proxy in the enclosed postage-paid envelope. This
will ensure your proper representation at the Meeting.
We look forward to seeing you at the Meeting.
Sincerely,
/s/ DANIEL F. GILLIS
DANIEL F. GILLIS
President and Chief Executive Officer
YOUR VOTE IS VERY IMPORTANT. PLEASE REMEMBER PROMPTLY TO COMPLETE, SIGN,
DATE AND RETURN YOUR PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
<PAGE>
SOFTWARE AG SYSTEMS, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on May 20, 1999
To the Stockholders of Software AG Systems, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Meeting") of Software AG Systems, Inc. (the "Company") will be held on
Thursday, May 20, 1999, at 10:00 a.m., local time, in the Regency Ballroom B
of the Hyatt Regency Reston, located at 1800 Presidents Street, Reston,
Virginia for the following purposes:
1. To elect four directors of the Company, three directors to serve a
term of three years and one director to serve until the annual
meeting of stockholders to be held in 2000.
2. To amend the Company's Certificate of Incorporation, as amended, to
change the Company's name to SAGA SYSTEMS, Inc.
3. To consider and ratify the appointment of KPMG LLP as independent
public accountants for the Company for the current fiscal year.
4. To transact any other business that may properly come before the
Meeting.
A proxy card and proxy statement for the Meeting is enclosed.
Any action may be taken on the foregoing proposals at the Meeting on the
date specified above or on any date or dates to which, by original or later
adjournment, the Meeting may be adjourned. Only stockholders of record at the
close of business on March 26, 1999 are entitled to notice of and to vote at
the Meeting or any continuation or adjournment thereof.
You are requested to complete and sign the enclosed proxy that is solicited
by the Board of Directors and to return it promptly in the enclosed envelope.
The proxy will not be used if you attend and vote at the Meeting in person.
By Order of the Board of Directors,
/s/ KATHERINE E. BUTLER
KATHERINE E. BUTLER
Vice President, General Counsel & Secretary
Reston, Virginia
April 12, 1999
<PAGE>
SOFTWARE AG SYSTEMS, INC.
11190 SUNRISE VALLEY DRIVE
RESTON, VIRGINIA 20191
(703) 860-5050
---------------------------------------
PROXY STATEMENT
---------------------------------------
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of Software AG Systems, Inc. (the "Board"), a Delaware
corporation (the "Company"), of proxies, in the accompanying form, to be used
at the Annual Meeting of Stockholders to be held on May 20, 1999, at 10:00
a.m., local time, in the Regency Ballroom B of the Hyatt Regency Reston,
located at 1800 Presidents Street, Reston Virginia, and any adjournments
thereof (the "Meeting").
Only holders of record of shares of the Company's common stock, par value
$0.01 per share ("Common Stock"), at the close of business on March 26, 1999
(the "Record Date"), will be entitled to vote at the Meeting. At the close of
business on the Record Date, there were 30,599,721 shares of Common Stock
outstanding ("Outstanding Shares") and entitled to vote. The presence in
person or by proxy at the Meeting of the holders of a majority of the
Outstanding Shares (i.e., at least 15,299,861 shares) will constitute a quorum
for the transaction of business at the Meeting. With respect to the tabulation
of proxies for purposes of constituting a quorum, abstentions and broker non-
votes will be treated as being present. For purposes of the proposal to amend
the Company's Certificate of Incorporation, as amended ("Certificate of
Incorporation") to change the Company's name (Item 2), abstentions and broker
non-votes will have the effect of a negative vote. For purposes of the
election of directors (Item 1), abstentions and broker non-votes will have no
effect on the vote. With respect to any other matter coming before the
Meeting, an abstention will have the effect of a negative vote; broker non-
votes will not have any effect on the vote. Stockholders are entitled to one
vote for each share of Common Stock held. Shares of Common Stock may not be
voted cumulatively.
Any person signing a proxy in the form accompanying this Proxy Statement has
the power to revoke it before it is exercised. Unless revoked, the shares
represented by a properly executed proxy will be voted at the Meeting and all
adjournments thereof. A proxy may be revoked by giving written notice to the
Secretary of the Company at the Company's address (set forth at the top of
this page) prior to the Meeting, by delivery of a later dated proxy that is
signed by the person who signed the earlier proxy to the Secretary of the
Company at the Meeting prior to a vote being taken on a particular proposal at
the Meeting, or by attendance at the Meeting and voting in person.
<PAGE>
If the enclosed proxy form is properly executed and returned to the Company
in time to be voted at the Meeting, the shares of Common Stock represented
thereby will be voted in accordance with the instructions marked thereon.
Executed but unmarked proxies will be voted "FOR" each nominee proposed by the
Board of Directors, "FOR" the amendment of the Company's Certificate of
Incorporation to change the Company's name and "FOR" the ratification of the
selection of independent public accountants. The duly appointed proxies may,
at their discretion, vote upon such other matters as may properly come before
the Meeting.
The expenses of soliciting your proxy, including the expenses of printing
and mailing proxy material will be borne by the Company. In addition to the
solicitation of proxies by mail, solicitation may be made by the Company
through certain directors, officers, and other employees of the Company by
personal interview, telephone, or facsimile. The Company will pay no
additional compensation to such persons for such solicitation. The Company
will request persons, firms, corporations, brokers and nominees who hold
shares of Common Stock in their names or in the names of their nominees which
shares are beneficially owned by others, to furnish proxy material to and
obtain proxies from the beneficial owners of the shares and will reimburse
such holders for their reasonable expenses incurred in forwarding solicitation
materials to such beneficial owners.
This Proxy Statement, the accompanying form of proxy and the Company's 1998
Annual Report to Stockholders are first being mailed to stockholders on or
about April 12, 1999.
SHARE OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth certain information, as known to the Company
as of March 19, 1999, with respect to the beneficial ownership of the
Company's Common Stock by: (i) each stockholder known by the Company to be the
beneficial owner of more than 5% of the Outstanding Shares of the Company's
Common Stock, (ii) each director, (iii) the Company's Chief Executive Officer
and each of the four other most highly compensated executive officers of the
Company whose annual salary and bonus compensation determined as of December
31, 1998 exceeded $100,000 (collectively, the "Named Executive Officers" and
individually, the "Named Executive Officer"), and (iv) all current executive
officers and directors of the Company as a group. Unless otherwise indicated,
each person listed had sole voting and sole investment power with respect to
all shares beneficially owned, subject to community property laws where
applicable.
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<TABLE>
<CAPTION>
Shares
Beneficially Owned
---------------------
Percent
Name and Address of Beneficial Owner (1) Number of Class(2)
---------------------------------------- ---------- ----------
<S> <C> <C>
5% Stockholders:
Thayer Equity Investors III, L.P......................... 10,736,953 35.1%
1455 Pennsylvania Avenue, N.W.
Washington, DC 20004
Software AG.............................................. 2,750,000 9.0%
Uhlandstrasse 12
64297 Darmstadt-Eberstadt, Germany
Pilgrim Baxter & Associates, Ltd. (3)(4)................. 1,740,600 5.7%
825 Duportail Road
Wayne, Pennsylvania 19087
American Express Financial Corporation (3)(5)............ 1,530,000 5.0%
IDS Tower 10
Minneapolis, Minnesota 55440
Volker Dawedeit (6) ..................................... 2,750,247 9.0%
Current Directors and Nominees:
Carl J. Rickertsen (7) .................................. 10,823,244 35.4%
Paul A. Brands........................................... 0 *
Dr. Philip S. Dauber (8) ................................ 88,151 *
Daniel F. Gillis (9)..................................... 1,246,356 3.9%
Dr. Erwin Koenigs (10) .................................. 2,779,025 9.1%
Edward E. Lucente (11) .................................. 27,226 *
Frederic V. Malek (7) ................................... 10,795,244 35.3%
Dr. Paul G. Stern (7) ................................... 10,795,244 35.3%
Named Executive Officers who are not Directors:
Derek M. Brigden (12).................................... 96,744 *
Timothy L. Hill (13)..................................... 170,813 *
David S. Linthicum (14).................................. 13,701 *
Harry K. McCreery (15)................................... 719,296 2.3%
All current executive officers and directors
as a group (12 persons)(16) ........................... 15,868,559 49.2%
</TABLE>
- ---------
* Less than 1% of the outstanding Common Stock
(1) The business address for Messrs. Gillis, McCreery, Hill, and Linthicum
is 11190 Sunrise Valley Drive, Reston, Virginia 20191. The address for
Mr. Brigden is 11317 Bright Pond Lane, Reston, Virginia 20194. The
business address for Messrs. Rickertsen and Malek and Dr. Stern is c/o
Thayer Equity Investors III, L.P. ("Thayer"), 1455 Pennsylvania Avenue,
N.W., Washington, DC 20004. The business address for Dr. Koenigs and
Mr. Dawedeit is c/o Software AG, Uhlandstrasse 12, 64297 Darmstadt-
Eberstadt, Germany. The business address for Dr. Dauber is 27930 Roble
Alto Road, Los Altos Hills, California 94022. The business address for
Mr. Lucente is 1 Magnum Pass,
3
<PAGE>
Mobile, Alabama 36618. The business address for Mr. Brands is c/o American
Management Systems, Inc., 4050 Legato Road, Fairfax, Virginia 22033.
(2) Based on (i) 30,599,721 shares of Common Stock outstanding as of March
19, 1999 and (ii) with respect to each person, the shares of Common Stock
issuable by the Company pursuant to options held by such persons which
may be exercised within 60 days following March 19, 1999 ("Presently
Exercisable Options"). Beneficial ownership is determined in accordance
with the rules of the Securities and Exchange Commission (the
"Commission") that deem shares to be beneficially owned by any person or
group who has or shares voting and investment power with respect to such
shares. Presently Exercisable Options are deemed to be outstanding and to
be beneficially owned by the person holding such options for the purpose
of computing the percentage ownership of such person, but are not treated
as outstanding for the purpose of computing the percentage ownership of
any other person or group.
(3) Based solely upon information filed with the Commission.
(4) Pilgrim Baxter & Associates, Ltd. reported that it is an investment
advisor and it is deemed to beneficially own such securities.
(5) American Express Financial Corporation reported that it is an investment
advisor and a subsidiary of American Express Company. American Express
Company reported that it disclaims beneficial ownership of such
securities. The business address for American Express Company is American
Express Tower, 200 Vesey Street, New York, New York 10285.
(6) 2,750,000 of the reported shares are held of record by Software AG, a
German software company ("SAG"). Mr. Dawedeit is a director and the Chief
Financial Officer of SAG and may be deemed to have or share voting and
investment power with respect to all shares held of record by SAG. Mr.
Dawedeit disclaims beneficial ownership of all shares held of record by
SAG.
(7) Includes 10,736,953 shares held of record by Thayer and 58,291 shares
held of record by TC Co-Investors, LLC ("TC Co-Investors"). Thayer is a
Delaware limited partnership whose sole general partner is TC Equity
Partners, L.L.C. ("TC Equity Partners"), a Delaware limited liability
company, and whose managing agent is TC Management Partners, L.L.C. ("TC
Management"). TC Equity Partners beneficially owns, and has sole voting
and investment power with respect to, the shares of Common Stock held of
record by Thayer. TC Co-Investors is a Delaware limited liability company
whose managing member is TC Management. TC Management beneficially owns,
and has sole voting and investment power with respect to, the shares of
Common Stock held of record by TC Co-Investors. Frederic V. Malek, Dr.
Paul G. Stern and Carl J. Rickertsen are the members of TC Management and
the principal members of TC Equity Partners. Dr. Stern and Messrs.
Rickertsen and Malek may be deemed to be the beneficial owners of the
shares of Common Stock held by each of Thayer and TC Co-Investors.
Messrs. Rickertsen and Malek and Dr. Stern disclaim beneficial ownership
of all shares held of record by Thayer and TC Co-Investors.
4
<PAGE>
(8) Includes (i) 67,925 shares held of record by PSERD Trust, of which Dr.
Dauber is a trustee, and (ii) 13,613 shares subject to Presently
Exercisable Options. Dr. Dauber shares voting and investment power with
respect to all shares held by PSERD Trust and may be deemed to be the
beneficial owner of all such shares.
(9) Includes 1,042,011 shares subject to Presently Exercisable Options.
(10) 2,750,000 of the reported shares are held of record by SAG. Dr. Koenigs,
a director of the Company, is the Chairman of the Board and Chief
Executive Officer of SAG and may be deemed to have or share voting and
investment power with respect to all shares held of record by SAG. Dr.
Koenigs disclaims beneficial ownership of all shares held of record by
SAG.
(11) Includes 27,226 shares subject to Presently Exercisable Options.
(12) Includes 43,819 shares subject to Presently Exercisable Options. Mr.
Brigden's employment with the Company terminated effective April 2, 1999.
(13) Includes 21,313 shares subject to Presently Exercisable Options.
(14) Includes 12,513 shares subject to Presently Exercisable Options.
(15) Includes 514,367 shares subject to Presently Exercisable Options.
(16) Includes (i) 10,736,953 shares held of record by Thayer, (ii) 2,750,000
shares held of record by SAG, (iii) 58,291 shares held of record by TC
Co-Investors, (iv) 67,925 shares held of record by PSERD Trust, and (v)
1,631,043 shares subject to Presently Exercisable Options. See footnotes
(6) through (15).
ELECTION OF DIRECTORS
(Item 1)
The Company's Third Amended and Restated Bylaws (the "Bylaws"), provide for
the Company's Board to be comprised of six directors, which number of
directors may be increased or decreased by the Board. In March 1999, the Board
created two additional directorships bringing the total number of directors of
the Board to eight. Pursuant to the Company's Certificate of Incorporation,
the Board is divided into three classes, as nearly equal in number as
reasonably possible, with terms currently expiring at this Meeting ("Class
II"), the annual meeting of stockholders to be held in 2000 ("Class III") and
the annual meeting of stockholders to be held in 2001 ("Class I").
The Board has nominated each of Dr. Erwin Koenigs and Edward E. Lucente, the
incumbent Class II directors, and Frederic V. Malek to serve as a Class II
director for a three-year term expiring at the annual meeting of stockholders
to be held in 2002 and until the election and qualification of his successor.
The Board has also nominated Paul A. Brands to serve as a Class III director
for a term expiring at the annual meeting of stockholders to be held in 2000
and until the election and qualification of his successor.
The proxies solicited hereby will be voted for the election of the four
nominees recommended by the Board, unless the proxy is marked in such a manner
as to withhold
5
<PAGE>
authority to vote or as to vote for one or more alternate candidates. Each of
the nominees has consented to being named in this Proxy Statement and to serve
if elected. The Board has no reason to believe that any of the nominees for
election as a director will not be a candidate or will be unable to serve if
elected. However, if any nominee for any reason is unable to serve or will not
serve, the shares of Common Stock represented by proxies may be voted for such
substitute nominee as the Board, in its discretion, may designate unless the
proxy is marked in such a manner as to withhold authority to vote or as to
vote for one or more alternate candidates.
Directors
The following sets forth certain information regarding the nominees for
election to the Board and the other directors who will continue in office for
the remainder of their terms. Mr. Gillis and Dr. Dauber are Class I directors,
Dr. Koenigs and Mr. Lucente are Class II directors and Mr. Rickertsen and Dr.
Stern are Class III directors. If elected, Messrs. Malek and Brands will be a
Class II and Class III director, respectively. Commencing with the Meeting,
except for Mr. Brands who is expected to be nominated for election as a Class
III director at the annual meeting of stockholders to be held in 2000,
directors elected to succeed those directors whose terms have expired at an
annual meeting of stockholders shall be elected for a term of office to expire
at the third succeeding annual meeting of stockholders after their election.
All ages and positions set forth below are as of April 12, 1999.
<TABLE>
<CAPTION>
Name Age Positions with the Company
- ---- --- --------------------------
<S> <C> <C>
Carl J. Rickertsen.......... 39 Chairman of the Board
Paul A. Brands.............. 57 Nominee for election to the Board
Dr. Philip S. Dauber........ 58 Director
Daniel F. Gillis............ 52 Director, President and Chief Executive Officer
Dr. Erwin Koenigs........... 49 Director
Edward E. Lucente........... 59 Director
Frederic V. Malek........... 62 Nominee for election to the Board
Dr. Paul G. Stern........... 60 Director
</TABLE>
The Board has nominated Paul A. Brands for election as a director of the
Company. If elected, Mr. Brands will be placed in Class III and his term as a
director of the Company will expire at the annual meeting of stockholders to
be held in 2000. Mr. Brands is the Chairman of the Board and Chief Executive
Officer of American Management Systems, Incorporated ("AMS"), an international
business and information technology consulting firm. Mr. Brands joined AMS in
1977 and has served as a member of the Board of Directors since 1992, Chief
Executive Officer since 1993, and Chairman of the Board since 1997. Prior to
joining AMS, Mr. Brands served the U.S. Environmental Protection Agency's
Office of Planning and Evaluation from 1973 to 1977 where he was the Deputy
Assistant Administrator for the years. From 1967 to 1973, Mr. Brands managed
the Asian Division of the Office of the Assistant
6
<PAGE>
Secretary of Defense for Systems Analysis. In 1967, Mr. Brands completed
Officer Candidate School and was commissioned as an Officer of the U.S. Army
Corps of Engineers. Mr. Brands is a member of the Board of Directors of the
Professional Services Council, the Executive Advisory Committee of the
University of Rochester William E. Simon School of Business Administration,
and the Dean's Council of the University of Virginia School of Engineering and
Applied Science.
Dr. Philip S. Dauber has served as a director of the Company since April
1997. Dr. Dauber's term as a director of the Company expires at the annual
meeting of stockholders to be held in 2001. Dr. Dauber is an independent
consultant providing services to several companies including IQI, Inc., a
telemarketing firm, where he served as acting President from February 1997
through August 1997. Before becoming an independent consultant, Dr. Dauber
served as a Senior Vice President of Unisys Corporation from 1981 to 1987
during which time he was also Chairman and Chief Executive Officer of Memorex,
Inc., a wholly owned subsidiary of Unisys Corporation. Before joining Unisys
Corporation, Dr. Dauber was employed by IBM from 1965 to 1981 and served as
secretary of its Corporate Management Committee from 1980 to 1981.
Daniel F. Gillis has served as President and Chief Executive Officer of the
Company and SAGA since May 1996. He also has served as a director of the
Company since February 1997. Mr. Gillis' term as director of the Company
expires at the annual meeting of stockholders to be held in 2001. Previously,
Mr. Gillis served as Senior Vice President of U.S. Sales of SAGA from April
1995 to May 1996 and as Vice President of Federal Systems Sales of SAGA from
January 1995 to March 1995. From August 1994 to January 1995, he was a private
consultant. From May 1987 through August 1994, he was Executive Vice President
at Falcon Microsystems Inc., a computer products reseller and systems
integrator.
Dr. Erwin Koenigs has served as a director of the Company since December
1996 and was Chairman of the Board of the Company from December 1996 through
March 1997. Dr. Koenigs' term as a director of the Company expires at the
Meeting. Dr. Koenigs has served as Chairman of the Board of SAG since
September 1996 and Chief Executive Officer of SAG since November 1996. Until
March 31, 1997, the Company was a wholly owned subsidiary of SAG. From April
1989 to November 1996, Dr. Koenigs was Chief Executive Officer of Linotype-
Hell AG in Eschborn, Germany, a supplier of prepress and publishing
technology.
Edward E. Lucente has served as a director of the Company since April 1997.
Mr. Lucente's term as a director of the Company expires at the Meeting. Since
January 1998, Mr. Lucente has served as President and Chief Executive Officer
of QMS, Inc. From May 1995 through January 1998, Mr. Lucente served as
President and Chief Executive Officer of Liant Software Corporation.
Previously, from May 1994 until April 1995, he was a marketing consultant and
Executive Vice President of World Wide Sales and Marketing of Digital
Equipment Corporation from March 1993 through April 1994. From February 1991
until March 1993, Mr. Lucente was Executive Vice President of Northern Telecom
Ltd., Mr.
7
<PAGE>
Lucente was employed by IBM from 1961 through 1991 when he retired as a
corporate vice president. Mr. Lucente currently serves as a director of QMS,
Inc. and Information Resources, Inc. He also serves as a director of the
Mobile Area Chamber of Commerce and is a life trustee of Carnegie Mellon
University.
The Board has nominated Frederic V. Malek for election as a director of the
Company. If elected, Mr. Malek will be placed in Class II and his term as a
director of the Company will expire at the annual meeting of stockholders to
be held in 2002. Mr. Malek is Chairman of Thayer Capital Partners and is a
member of TC Equity Partners and TC Management, who are, respectively, the
sole general partner and the managing agent of Thayer. Thayer is a private
equity fund based in Washington, D.C. that targets investments in the
information technology and services industries and its investors include
corporations, pension funds and financial institutions. Prior to that, Mr.
Malek served as President of Marriott Hotels and Resorts from 1980 to 1988 and
as President and Vice Chairman of Northwest Airlines from 1989 to 1991, and as
Campaign Manager for Bush/Quayle '92 in 1992. Mr. Malek is a director of Aegis
Communications Group, Inc., American Management Systems, Inc., Automatic Data
Processing, Inc., CB Richard Ellis, Inc., FPL Group, Inc., Global Vacation
Group, HCR Manor Care, Inc., Northwest Airlines, Inc. and Paine Webber Mutual
Funds.
Carl J. Rickertsen has served as Chairman of the Board of the Company since
April 1997. Mr. Rickertsen's term as a director of the Company expires at the
annual meeting of stockholders to be held in 2000. Mr. Rickertsen is also a
member of TC Equity Partners and TC Management. From September 1994 to April
1996, Mr. Rickertsen was a partner with Thayer Capital Partners. Prior to
that, Mr. Rickertsen acted as a private financial consultant from 1993 through
August 1994, and was a partner at Hancock Park Associates, a private equity
investment firm based in Los Angeles, from 1989 to 1993. Before joining
Hancock Park Associates, Mr. Rickertsen was an associate at Brentwood
Associates from 1987 to 1989, and worked in the high technology group at
Morgan Stanley & Co., Inc. from 1983 to 1985. Mr. Rickertsen currently serves
as a director of MLC Holdings, Inc. and Global Vacation Group, Inc.
Dr. Paul G. Stern has served as a director of the Company since April 1997.
Dr. Stern's term as a director of the Company expires at the annual meeting of
stockholders to be held in 2000. Dr. Stern is also a member of TC Equity
Partners and TC Management. In 1995, Dr. Stern joined Thayer as a co-founder.
Prior to that, Dr. Stern was a Special Limited Partner at Forstmann Little &
Co., a private investment firm, from June 1993 to June 1995. From March 1989
until June 1993, Dr. Stern served as Chief Executive Officer and Chairman of
the Board of Northern Telecom Limited. Dr. Stern currently serves as a
director of the Dow Chemical Company, Whirlpool Corporation, Aegis
Communications, Inc. and MLC Holdings, Inc.
8
<PAGE>
Directors' Compensation
Except for grants of stock options under the Company's 1997 Stock Option
Plan (the "Option Plan"), the Company's directors were not compensated during
1998 for any services provided as directors and did not receive during such
fiscal year any benefits or other forms of compensation, cash or otherwise,
from the Company for their service as directors. Beginning in 1999, however,
the Company intends to pay each director who is not an employee of the Company
or an affiliate of Thayer $2,000 per Board meeting attended. In addition, the
Company reimburses directors for certain out-of-pocket expenses incurred in
connection with attendance at Board of Directors and committee meetings.
Both employee and non-employee directors are eligible to be granted stock
options pursuant to the Option Plan. Under the Option Plan, Dr. Dauber and Mr.
Lucente were each granted options to purchase 54,450 shares of the Company's
Common Stock at an exercise price of $1.47 per share. The options vest in
equal annual installments of 25%, with the first installment vesting March 31,
1998, and each of the subsequent installments vesting on the first, second and
third anniversaries of March 31, 1998. The Company intends to grant Mr. Brands
options to purchase 20,000 shares of the Company's Common Stock effective upon
his election at the Meeting to be held on May 20, 1999. The options will
become immediately exercisable in full upon a change in control of the Company
and may be partially accelerated in connection with the termination of the
director's service as a director of the Company. Mr. Gillis is the President
and Chief Executive Officer of the Company and is not separately compensated
as a director of the Company. In fiscal year 1998, Mr. Gillis was not granted
stock options under the Option Plan. See "Executive Compensation--Option
Grants in Last Fiscal Year."
Board of Directors' Meetings and Committees
The Board met six times at regularly scheduled meetings during fiscal year
1998. The committees of the Board consist of an Audit Committee, a
Compensation Committee and an Employee Stock Option Committee ("Stock Option
Committee"). No director attended fewer than at least 75% of all meetings of
the Board and its committees on which he served during the fiscal year.
Dr. Dauber and Mr. Lucente (Chair) are currently the members of the Audit
Committee. The Audit Committee met four times during fiscal year 1998. The
Audit Committee has certain duties relating to the year-end audit, the
Company's accounting methods and internal accounting controls and the
Company's relationship with its independent public accountants, including
making recommendations concerning the engagement of independent public
accountants, reviewing the plans and results of the audit engagement with the
Company's independent public accountants and approving professional services
provided by the Company's independent public accountants.
9
<PAGE>
Mr. Rickertsen (Chair) and Drs. Stern and Dauber are currently the members
of the Compensation Committee. The Compensation Committee met five times
during fiscal year 1998. The Compensation Committee is responsible for
determining the compensation of the Company's Chief Executive Officer and
other executive officers and establishing policies and guidelines regarding
the compensation of other officers and employees of the Company and its
subsidiaries. The Compensation Committee is also authorized to administer the
Company's Option Plan, including the power to grant stock options and the
Company's Employee Stock Purchase Plan.
The Stock Option Committee consists of Mr. Gillis. The Stock Option
Committee is not authorized to grant any stock option under the Option Plan to
any person who reports directly to any member of the Stock Option Committee
and/or to grant any stock option under the Option Plan that covers more than
10,000 shares of Common Stock without the prior consent and approval of the
Compensation Committee. In addition, the Board has provided the Stock Option
Committee with specific guidance concerning stock option grants to employees
other than those described in the previous sentence. The Board created the
Stock Option Committee for the purpose of granting stock options under the
Option Plan to persons who are not (or who will not be) at the time of such
grant subject to the requirements of Section 16 of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). The Stock Option Committee acted 11
times during fiscal year 1998 by written consent. All grants of stock options
made by the Stock Option Committee are reported to the Compensation Committee
on a regular basis.
The Company does not have a standing nominating committee or other committee
performing similar functions. The Board will consider stockholder nominations
for directors submitted in accordance with the procedure set forth in Section
2.9 of the Company's Bylaws. The procedure provides that a notice relating to
the nomination must be timely given in writing to the Secretary of the Company
prior to a meeting. To be timely, the notice must be delivered not later than
the time for submission of a stockholder proposal as described under
"Stockholder Proposals." Such notice must be accompanied by the nominee's
written consent and contain information relating to the business experience
and background of the nominee, and information with respect to the nominating
stockholder and persons acting in concert with the nominating stockholder.
Required Vote
A plurality of the votes cast at the Meeting in person or by proxy is
required to elect each nominee as a director.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE
ELECTION OF PAUL A. BRANDS, DR. ERWIN KOENIGS, EDWARD E. LUCENTE AND FREDERIC
V. MALEK AS DIRECTORS OF THE COMPANY.
10
<PAGE>
EXECUTIVE OFFICERS
The names of, and certain information regarding, executive officers of the
Company who are not directors of the Company are set forth below. The
executive officers serve at the pleasure of the Board and the Chief Executive
Officer.
<TABLE>
<CAPTION>
Name Age Positions with the Company
---- --- ------------------------------------------------------
<S> <C> <C>
Katherine E.
Butler............ 47 Vice President, General Counsel and Secretary
Alan I. Croll....... 51 Vice President, Services
Timothy L. Hill..... 40 Vice President, Marketing and International Operations
David S. Linthicum.. 36 Vice President and Chief Technology Officer
Harry K. McCreery... 52 Vice President, Treasurer and Chief Financial Officer
Gary M. Voight...... 46 Vice President, Sales
</TABLE>
Katherine E. Butler has served as Vice President, General Counsel and
Secretary of the Company and SAGA SOFTWARE, Inc., a wholly owned subsidiary of
the Company ("SAGA"), since June 1998. Prior to joining the Company, Ms.
Butler served as legal counsel for the General Electric Company ("GE"). Her
positions with GE included serving as Senior European Counsel for GE
Information Services ("GEIS") from November 1988 to February 1997 based in
Paris, Milan and then London, and subsequently as Senior Transactions Counsel
from February 1997 through May 1998 based in Rockville, Maryland. Ms. Butler
also served as Counsel for GEIS in Rockville, Maryland from 1986 to November
1988. Prior to this, Ms. Butler served as lead legal counsel for Software
International Corporation in Andover, Massachusetts from 1981 until 1986.
Alan I. Croll has served as Vice President, Professional Services of the
Company since January 1999. Previously, Mr. Croll served from December 1994
through December 1998 as Vice President for Nichols Research Corporation, a
diversified professional services firm. From September 1996 through August
1998, Mr. Croll also served as President of CSSi, a wholly owned subsidiary of
Nichols. From September 1991 through July 1994, Mr. Croll served as Vice
President, Digital Services and Multivendor Customer Services for Digital
Equipment Corporation's Mid-Atlantic and Southern States Region. From January
1989 through September 1991, Mr. Croll was Vice President, U.S. Government
Enterprise Integration Services for Digital Equipment Corporation.
Timothy L. Hill has served as Vice President, Marketing and International
Operations of the Company since August 1997. Previously, Mr. Hill served from
July 1994 through July 1997 as Vice President, Worldwide Marketing & Sales for
Iomega Corporation, a manufacturer of computer storage products. From August
1993 through July 1994, Mr. Hill served as Vice President, Marketing for
Falcon Microsystems Inc. From January 1988 to August 1993, Mr. Hill was
Director of Marketing & Sales, Consumer Business Division, at Gates Energy
Products, a manufacturer of consumer and commercial rechargeable battery
products.
11
<PAGE>
David S. Linthicum has served as Vice President and Chief Technology Officer
of the Company since December 1997. Prior to joining the Company, Mr.
Linthicum served from June 1997 to December 1997 as Senior Manager in the
Center of Technology Enablement for Ernst & Young LLP. From April 1995 to June
1997, Mr. Linthicum served as Senior Manager, Systems Integration Practice at
AT&T. From December 1990 to April 1995, Mr. Linthicum was Technical Director,
Treasury Department for Mobil Oil Corporation.
Harry K. McCreery has served as Vice President, Treasurer and Chief
Financial Officer of the Company since April 1997. He has also served as
Treasurer of SAGA since May 1991, Chief Financial Officer of SAGA since June
1989 and Chief Information Officer of SAGA from June 1989 to December 1990.
Gary M. Voight joined the Company in December 1998 as Vice President, Sales.
Previously, Mr. Voight had served as Vice President, Worldwide Transaction
Systems for IBM Software Group beginning in January 1997, and as Vice
President, Sales for Transarc Corporation, a wholly owned subsidiary of IBM,
beginning in November 1995. From November 1982 through November 1995, Mr.
Voight was employed by Stratus Computer, Inc., a provider of fault tolerant
computers, and Isis Distributed Systems, a leader in distributed computing
software and a wholly owned subsidiary of Stratus Computer, Inc., in a variety
of sales management, operations, marketing and consumer support positions.
Before joining Stratus Computer, Inc., Mr. Voight worked for Datapoint
Corporation, a leader in dispersed data processing, from September 1977
through November 1982 in sales and sales management positions. Mr. Voight
began his career as a salesman for Burroughs Corporation in 1975.
Executive officers of the Company are elected by the Board on an annual
basis and serve until the first meeting of the Board following the next annual
meeting of stockholders following their election and until their successors
have been duly elected and qualified or until their earlier death, resignation
or removal. There are no family relationships among any of the executive
officers or directors of the Company.
12
<PAGE>
Executive Compensation
Summary Compensation Table
The following table sets forth certain information concerning compensation
paid to the Named Executive Officers for the fiscal years ended December 31,
1996, 1997 and 1998.
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
---------------------------------- ------------
Securities
Name and Principal Other Annual Underlying All Other
Position Year Salary Bonus Compensation (1) Options (2) Compensation (3)
------------------ ---- -------- -------- ---------------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
Daniel F. Gillis........ 1998 $324,423 $325,000 -- -- $227,678
Director, President and
Chief 1997 275,002 340,500 -- 2,392,500 194,461
Executive Officer 1996 249,039 240,500 $24,000 -- 179,671
Timothy L. Hill (5)..... 1998 $228,615 $ 65,000 -- -- --
Vice President,
Marketing 1997 82,212 65,000 -- 85,250 $71,916(6)
and International
Operations
Harry K. McCreery....... 1998 $189,827 $148,200 -- -- $272,730
Vice President,
Treasurer 1997 174,711 236,500 -- 1,288,100 242,317
and Chief Financial
Officer 1996 170,000 132,600 -- -- 235,933
David S. Linthicum (7).. 1998 $176,154 $ 90,000 -- 10,000 $ 8,000
Vice President and 1997 13,462 -- -- 50,050 --
Chief Technology
Officer
Derek M. Brigden (4).... 1998 $169,815 $110,500 -- 10,000 $ 8,000
Vice President
Operations 1997 153,969 100,100 -- 114,125 7,500
and Chief Information
Officer 1996 150,000 101,346 -- -- 7,500
</TABLE>
- ---------
(1) Consists of sales commissions paid to the Named Executive Officer. In
accordance with the rules of the Commission, other compensation in the
form of perquisites and other personal benefits has been omitted because
such perquisites and other personal benefits constituted in the aggregate
less than the lesser of $50,000 or 10% of the total annual salary and
bonus reported for the Named Executive Officer during each of 1996, 1997
and 1998.
(2) All figures in this column reflect shares of Common Stock subject to
options granted under the Option Plan.
(3) Unless otherwise indicated, consists of (i) amounts of deferred
compensation earned and credited to deferred compensation accounts of the
Named Executive Officer during 1996, 1997 and 1998, and (ii) $7,500 and
$8,000 of matching contributions made under the Company's 401(k) Plan
during 1996 and 1997 and 1998, respectively. See "--Deferred Compensation
Agreements."
(4) During 1998, Mr. Brigden served as Vice President, Services and Operations
and Chief Information Officer of the Company. His employment with the
Company and SAGA terminated effective April 2, 1999.
(5) Mr. Hill's employment with the Company and SAGA commenced in August 1997.
(6) Consists of $52,399 of moving expenses incurred and reimbursed by the
Company and $15,183 of moving expenses paid by the Company, both of which
are taxable. Also includes $4,334 of non-taxable moving expenses paid by
the Company.
(7) Mr. Linthicum's employment with the Company and SAGA commenced in December
1997.
13
<PAGE>
Option Grants in Last Fiscal Year
The following table sets forth information concerning the grant of stock
options to each of the Named Executive Officers in fiscal year 1998.
<TABLE>
<CAPTION>
Potential
Realizable Value
at Assumed
Annual Rate of
Stock Price
Appreciation for
Individual Grants Option Term (2)
----------------------------------------------------------------- ----------------
Number of Shares % of Total Options
Underlying Options Granted To Employees Exercise Price Expiration
Name Granted (1) in Fiscal Year 1998 (per share) Date 5% 10%
---- ------------------ -------------------- -------------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Derek M. Brigden........ 10,000(3) 2.2% $18.6250 3/10/05 $75,822 $176,699
David S. Linthicum...... 10,000(4) 2.2% $17.6875 9/01/05 $72,006 $167,804
</TABLE>
- ---------
(1) Unless otherwise indicated, each option granted vests at a rate of 25% per
annum on each of the first, second, third and fourth anniversaries of the
grant date. No option granted under the Option Plan is exercisable after
the seventh anniversary of the option's date of grant. Options will become
immediately exercisable if (i) 51% of the voting stock of the Company is
beneficially owned, directly or indirectly, by any person or group of
person(s) (as defined in Section 13(d) and 14(d) of the Exchange Act)
together with its affiliates, excluding employee benefit plans of the
Company, (ii) the stockholders of the Company approve a merger or
consolidation of the Company and another entity unless the merger or
consolidation results in the voting securities of the Company outstanding
immediately prior thereto continuing to represent at least 50% of the
combined voting stock of the surviving entity immediately after the merger
or consolidation, or (iii) the stockholders of the Company approve a plan
of complete liquidation or winding-up of the Company or an agreement for
the sale or disposition by the Company of all or substantially all of the
Company's assets. Options may be partially accelerated in connection with
the termination of employment with the Company of any Named Executive
Officers. Each option was granted under the Option Plan and has an
exercise price equal to the fair market value of the Common Stock on the
date of grant.
(2) Amounts represented hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock price appreciation of 5% and 10%
compounded annually from the date the respective options were granted to
their expiration date. The gains shown are net of the option exercise
price, but do not include deductions for taxes or other expenses
associated with the exercise of the option or the sale of the underlying
shares. The actual gains, if any, on the exercise of stock options will
depend on the future performance of the Common Stock, the option holder's
continued employment throughout the option period, and the date on which
the options are exercised.
(3) Each of the indicated options was granted on March 10, 1998. Due to Mr.
Brigden's termination of employment with the Company, 7,500 of the
indicated options expired prior to vesting.
(4) Each of the indicated options was granted on September 1, 1998.
14
<PAGE>
Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-End Values
The following table sets forth information regarding the aggregate exercises
of options by each of the Named Executive Officers. In addition, this table
includes the number of shares covered by both exercisable and unexercisable
stock options as of December 31, 1998 and the values of "in-the-money"
options.
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of the Unexercised
Options at Fiscal Year- In-The-Money Options
End at Fiscal Year-End
Shares Acquired Value ------------------------- -------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- --------------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Daniel F. Gillis........ 390,195 $8,397,928 645,638 1,356,667 $5,723,081 $18,348,183
Harry K. McCreery....... 300,000 $6,080,920 257,700 730,400 $1,936,415 $ 9,879,100
Derek M. Brigden........ 34,100 $ 594,460 7,219 82,806 $ 44,215 $ 984,548
Timothy L. Hill......... 0 $ 0 21,313 63,938 $ 320,306 $ 960,917
David S. Linthicum...... 0 $ 0 0 60,050 $ 0 $ 411,031
</TABLE>
Deferred Compensation Agreements
The Company has entered into deferred compensation agreements with Messrs.
Gillis and McCreery (the "Deferred Compensation Agreements"). Pursuant to
these agreements, each of Messrs. Gillis and McCreery annually receive a
credit of $41,838 and $46,000, respectively, to his deferred compensation
account plus an additional credit to such account equal to 53% and 100%,
respectively, of his bonus for such year. The deferred compensation accounts
earn interest at an annual rate of 6%. Under the Deferred Compensation
Agreements, no additional credits, other than interest, will be made to any of
the deferred compensation accounts after December 31, 1998. The deferred
compensation accounts of Messrs. Gillis and McCreery are fully vested. On
January 1, 1999, Messrs. Gillis and McCreery exercised their right to receive
the balance in their deferred compensation accounts. Accordingly, Messrs.
Gillis and McCreery received payment of the balance in their respective
deferred compensation accounts on January 1, 1999 and the deferred
compensation accounts were closed.
Severance Agreements
Mr. Gillis has entered into a memorandum of understanding with the Company
with respect to the termination of his employment as President and Chief
Executive Officer of the Company. Under this agreement, the Company is
required to pay Mr. Gillis a severance benefit equal to 12 months of his then-
current salary plus annual bonus ($460,000 minimum payment), and, for a period
not to exceed twelve months, to continue to make available his health and
other fringe benefits if (i) the Company terminates his employment other than
for cause, or (ii) he resigns within ninety days of a substantial change in
his title or a substantial reduction in his compensation and benefits or job
responsibilities.
Each of Messrs. McCreery and Brigden, has entered into a memorandum of
understanding with the Company with respect to the termination of his
employment on terms and conditions substantially similar to Mr. Gillis'
memorandum of understanding with the Company, provided,
15
<PAGE>
however, that (i) the severance benefit due each such executive officer upon
termination under his respective memorandum of understanding is equal to
twelve months of his then-current salary plus a pro-rated bonus payment, and
(ii) no severance or other benefits are due under these agreements if the
executive officer resigns within 90 days of a substantial reduction in his
compensation and benefits related to a Company-wide reduction or a substantial
reduction in his job responsibilities that is deemed to be in the best
business interests of the Company.
Mr. Brigden's employment terminated effective April 2, 1999. The payments
due Mr. Brigden from the Company totaled $187,565, including a severance
payment of $170,000, a car allowance payment of $9,000 and vacation pay of
$8,565. Mr. Brigden received a net payment from the Company of $131,500 after
repayment of a note made by Mr. Brigden to the Company in the face amount of
$50,000 plus $6,065 of accrued interest which was deducted from the gross
amount due Mr. Brigden.
Pursuant to the terms of a Shareholders Agreement dated as of April 1, 1997,
each of Messrs. Gillis, McCreery, and Brigden has agreed that (i) prior to the
fifth anniversary of the termination of his employment with the Company, he
will not influence any employee to leave the Company, and (ii) prior to the
third anniversary of the termination of his employment with the Company
(unless such termination is by the Company without cause), he will not
directly or indirectly compete with the Company by soliciting any of its
customers, clients or suppliers. Mr. Hill has agreed to similar restrictions
pursuant to a subscription agreement between Mr. Hill and the Company dated as
of August 22, 1997, as amended.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the Company's Board is currently and during
the last fiscal year was comprised of Mr. Rickertsen and Drs. Stern and
Dauber, none of whom is or was an officer or employee of the Company or any of
its subsidiaries. Mr. Rickertsen and Dr. Stern are members of TC Management
and TC Equity Partners, which are, respectively, the managing agent and the
sole general partner of Thayer, a stockholder of the Company. TC Management is
also the managing member of TC Co-Investors, a stockholder of the Company. The
Company pays an annual fee of $300,000 on a quarterly basis plus out-of-pocket
expenses to TC Management for management and consulting services. In fiscal
year 1998, the Company paid a total of approximately $338,000 for services
provided by TC Management. TC Management and TC Equity Partners beneficially
own and have sole investment and voting power with respect to the shares of
Common Stock held of record by TC Co-Investors and Thayer, respectively.
In May 1998, Thayer, TC Co-Investors, whose managing member is controlled by
the principal members of Thayer's general partner, and certain senior
management of the Company and SAG sold 5,460,212 shares and an over-allotment
of 819,031 shares of the Company's Common Stock in a secondary offering at a
per share price to the public of $24.25 ("Secondary Offering"). See "Certain
Relationships and Transactions."
16
<PAGE>
No member of the Compensation Committee was an officer or employee of the
Company or any of its subsidiaries prior to or during fiscal year 1998. None
of the executive officers of the Company has served on the board of directors
or on the compensation committee of any other entity, any of whose officers
served either on the Board or on the Compensation Committee of the Company.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION
The Compensation Committee is responsible for determining compensation for
the executive officers of Software AG Systems, Inc. (the "Company") and for
granting awards under and administering the Company's 1997 Stock Option Plan
(the "Option Plan") and the Company's Employee Stock Purchase Plan ("ESPP")
(collectively, the "Plans"). The Compensation Committee has since its
inception consisted, and currently consists, of Mr. Rickertsen and Drs. Stern
and Dauber, each of whom is neither an officer nor an employee of the Company.
Chief Executive Officer and Executive Compensation
A key objective of the Company is to attract, develop and maintain strong
executive officers that are capable of maximizing the Company's performance
for the benefit of its stockholders. In furtherance of this objective, the
Compensation Committee has adopted a compensation strategy for executive
officers which utilizes reasonable salaries, while emphasizing the use of
variable incentives such as awards of cash bonuses and grants of stock options
in order to reward longer-term contributions to the Company's success. The
Company periodically compares its compensation levels, practices and financial
performance to a select group of technology companies of similar size,
geographic market and business makeup to the Company (the "Comparative
Companies"). The companies comprising this group of Comparative Companies may
differ from those included in the Peer Group Index appearing on page 25.
Base salaries of the Company's Chief Executive Officer ("CEO") and executive
officers are determined by competitive, market-based pay practices,
performance evaluations and expected future contributions. In line with its
strategy of emphasizing variable pay, the Compensation Committee generally
targets the salaries of the Company's CEO and executive officers at or above
the median of the Comparative Companies, while also considering the unique
responsibilities and performance of the CEO and each executive officer.
Overall, the Compensation Committee targets the total cash compensation of the
Company's executive officers at or above the median of the Comparative
Companies.
In determining the compensation package for the CEO, the Compensation
Committee believes that it must provide a compensation package that will
motivate and retain a CEO of
17
<PAGE>
outstanding ability who is capable of directing the strategic focus of the
Company. Compensation of the Company's President and CEO, Mr. Gillis, is
determined by the Compensation Committee and has five primary compensation
components: a base salary, an annual bonus linked to the Company's growth in
revenue and pre-tax profit, non-qualified deferred compensation, stock option
grants and a car allowance of $10,800 per year. In 1997, prior to consummation
of the Company's initial public offering, the Company decided to terminate its
deferred compensation plan at the end of 1998 and adopted, pursuant to Board
approval, the Option Plan. Mr. Gillis participates in the Option Plan. The
components of Mr. Gillis' compensation package reflect the determination of
the principal stockholders and the Board as to the total compensation package
necessary to retain a CEO of Mr. Gillis' qualifications and experience. The
linkage of Mr. Gillis' 1998 bonus to the Company's growth in revenue and pre-
tax profit reflect their efforts to align the CEO's compensation with
stockholder interests and to encourage long-term performance. Mr. Gillis did
not receive any stock option grants in 1998 due to the stock option grants
awarded to Mr. Gillis in 1997 in connection with the Company's
recapitalization. See "Compensation Philosophy."
The Board reviewed the Company's compensation policies and adopted a
philosophy of compensation and certain implementation guidelines.
Compensation Philosophy
The compensation program for the executive officers of the Company and its
subsidiaries is developed and administered by the Board and its Compensation
Committee. General overall compensation policies regarding other officers of
the Company are established by the Compensation Committee, but their specific
compensation program is developed and administered by management. The key
goals of the Company's compensation program are to attract, retain and reward
the most capable executives who can contribute (both short and long-term) to
the success of the Company and to align compensation with the attainment of
the business objectives of the Company.
The following principles guide the Company's compensation strategy:
. To attract and retain the most highly qualified management team;
. To pay competitively compared to similar organizations and to provide
reward opportunities consistent with performance compared to similar
organizations in the marketplace;
. To align compensation programs with the stockholders' interests and the
Company's annual and long-term business objectives and focus executives'
attention on the fulfillment of those objectives; and
. To strive for fairness while giving appropriate weight to individual
performance contributions as the basis of executive pay decisions.
18
<PAGE>
Implementation Guidelines
To implement the compensation philosophy described above, the Company's
executive compensation program has three primary components: (i) a base salary
(ii) incentive bonus awards and (iii) long-term incentive awards. The factors
and criteria to be considered with respect to each of these components are set
forth below.
Base Salary. The first component of the Company's compensation program is
base salary. The range of the base salary for an executive position will be
established primarily based on competitive salaries for positions with a
similar scope of responsibilities and job complexities at the Comparative
Companies. The level of base salary within the range of competitive salaries
will be determined on the basis of individual performance, experience and
other relevant factors, such as demonstrated leadership, job knowledge and
management skills. Such determination will be made by the Compensation
Committee with regard to the Company's executive officers, and by management
with regard to all other officers consistent with the general overall
compensation policies established by the Compensation Committee.
For the purpose of determining competitive compensation practices and
identifying the Comparative Companies, the Compensation Committee will gather
data from companies with the following characteristics:
. Direct competitors for the Company's management talent; and
. Similar high quality, software and systems development organizations.
Accordingly, the Company will use both a defined peer group of Comparative
Companies and a general industry group consisting of technology companies of
similar size, geographic makeup and business makeup as its benchmarks to
determine competitive compensation practices.
Base salaries will be targeted within the appropriate competitive range,
although higher compensation may be paid if necessary or appropriate to
attract or retain unusually qualified executives. Annual or other base salary
adjustments will be based on individual performance as well as other market
factors.
Corporate Incentive Plan. The second component of the Company's compensation
program is incentive bonus awards, referred to internally as the Corporate
Incentive Plan. The Corporate Incentive Plan is intended to focus the efforts
of executives on the attainment of annual financial performance objectives.
The performance objectives are proposed by management and approved by both the
Board and Compensation Committee thereby providing the basis for calculation
of the incentive bonus award. If such performance goals are achieved, a pool
of bonus funds will be available for incentive bonus awards. In establishing
this fund, the Compensation Committee considers both revenue and pre-tax
profits. The size of the pool will depend on the Company's success in meeting
such objectives.
19
<PAGE>
The Corporate Incentive Plan also provides for discretionary grants of cash
awards to executive officers by the Compensation Committee. The Company's
revenue and pre-tax profit for 1998 exceeded the minimum threshold of
profitability which had been previously established by the Compensation
Committee, thereby initiating the payment of cash bonuses to its executive
officers under the Corporate Incentive Plan.
In determining its evaluation of the Chief Executive Officer's performance,
the Compensation Committee considered, but did not formally weight, the
following performance factors: the Company's earnings growth, net income
growth and market share in key markets and service niches.
In 1998, incentive bonuses totaling approximately $902,000 were awarded to
the executive officers of the Company as a group. For information regarding
the bonuses awarded in 1998 to each of the Company's five most highly
compensated executive officers, see "Executive Compensation--Summary
Compensation Table," above.
Long-Term Incentive Award. The third component of the Company's compensation
program will be provided through the Company's Option Plan and Employee Stock
Purchase Plan ("Employee Stock Purchase Plan") (collectively, the "Plans"),
which are also designed to align the interests of the officers of the Company
and certain subsidiaries with those of stockholders. The Plans also serve to
focus the efforts of officers on performance in an effort to increase the
value of the Company for its stockholders.
Pursuant to the Option Plan, the Compensation Committee and such other
committees as may from time to time be designated by the Board, may grant
incentive stock options within the meaning of the Internal Revenue Code of
1986, as amended, and may grant non-statutory stock options to purchase shares
of common stock. No incentive stock options were granted in 1998. Subject to
the terms of the Option Plan, the Compensation Committee and such other
committees as may from time to time be designated by the Board, will have
discretion in making grants under the Plan. The Compensation Committee and
such other committees as may from time to time be designated by the Board,
may, however, consider the recommendations of management with respect to such
grants. The competitive environment for human resources will be taken into
consideration when options are granted under the Option Plan. For information
regarding grants and awards made under the Option Plan in 1998, see "Executive
Compensation--Option Grants in Last Fiscal Year," above.
In 1998, the Compensation Committee considered, but did not formally weight,
the following factors in connection with the number of options granted to each
executive officer: the competitive practices within the technology industry;
the individual executive officer's position and potential within the Company;
and the level of past awards of stock options made to each executive officer.
The 1998 performance factors considered by the Compensation Committee in its
salary determinations and its annual incentive and stock option awards made to
the Company's
20
<PAGE>
executive officers exceeded predetermined objectives or, where no
predetermined level had been set, otherwise exceeded the Compensation
Committee's expectations. The Compensation Committee believes that the total
compensation provided to the Company's executive officers is competitive and
reflects the Company's performance. Also, the Compensation Committee believes
that the Company's compensation programs have helped to focus the Company's
executive officers on increasing the Company's performance and stockholder
value.
The Employee Stock Purchase Plan is intended to align the interests of all
employees with the shareholders of the Company in order to maximize the value
of the Company. The Employee Stock Purchase Program provides that all full-
time employees and part-time employees of the Company and certain subsidiaries
working at least 20 hours per week are eligible to purchase the Company's
common stock on the last day of two designated six-month periods in a year,
and that participating employees are able to purchase the Company's common
stock at a discount from the average price reported by the New York Stock
Exchange on either the first or the last day of the six-month period,
whichever is lower.
The Board, with the advice of the Compensation Committee, will re-examine
the Company's compensation philosophy and objectives each year and determine
if changes should be considered.
COMPENSATION COMMITTEE
Dr. Philip S. Dauber
Carl J. Rickertsen
Dr. Paul G. Stern
CERTAIN RELATIONSHIPS AND TRANSACTIONS
In May 1998, Thayer, TC Co-Investors, whose managing member is controlled by
the principal members of Thayer's general partner, and certain senior
management of the Company and SAG sold 5,460,212 shares and an over-allotment
of 819,031 shares of the Company's Common Stock in the Secondary Offering at a
per share price to the public of $24.25.
Of the 5,460,212 shares sold in the Secondary Offering, 5,000,000 shares
were sold by Thayer, 27,150 shares were sold by TC Co-Investors and 433,062
shares were sold by certain senior managers of the Company and SAG. Of the
819,031 shares purchased by the underwriters on the same terms as the
Secondary Offering, 814,606 shares were sold by Thayer and 4,425 shares were
sold by TC Co-Investors. The proceeds, net of underwriting discounts and
commissions and taxes, as applicable, to Thayer, TC Co-Investors and the
certain senior managers of the Company and SAG were approximately $134.0
million, $0.7 million and $6.2 million, respectively. The Company received no
proceeds from the Secondary Offering. As of March 19, 1999, Thayer, TC Co-
Investors and SAG beneficially own, directly or
21
<PAGE>
indirectly, approximately 35%, 0.2% and 9%, respectively, of the Company's
then outstanding Common Stock. See "Share Ownership of Principal Stockholders
and Management," above.
Dr. Stern and Mr. Rickertsen, directors of the Company, and Mr. Malek, a
nominee for election as a director of the Company, are the principal members
of TC Equity Partners, the sole general partner of Thayer. TC Equity Partners
beneficially owns, and has sole voting and investment power with respect to,
the shares of Common Stock held of record by Thayer. TC Management is the
managing member of TC Co-Investors and beneficially owns and has sole voting
and investment power with respect to the shares of Common Stock held of record
by TC Co-Investors. Dr. Stern and Messrs. Rickertsen and Malek are members of
TC Management. Dr. Stern and Messrs. Rickertsen and Malek may be deemed to be
the beneficial owners of the shares of Common Stock held by each of Thayer and
TC Co-Investors. Dr. Stern and Messrs. Rickertsen and Malek disclaim
beneficial ownership of all shares of Common Stock held of record by Thayer
and TC Co-Investors. In addition, Mr. Gillis is currently, and was at the time
of the Secondary Offering, a director of the Company. Dr. Koenigs is currently
and was at the time of the Secondary Offering, the Chairman of the Board and
Chief Executive Officer of SAG and a director of the Company. Dr. Koenigs may
be deemed to be the beneficial owner of the shares of Common Stock held of
record by SAG. Dr. Koenigs disclaims beneficial ownership of all shares of
Common Stock held of record by SAG.
On April 1, 1997, the Company agreed to pay on a quarterly basis an annual
fee of $300,000 to TC Management for management and consulting services to be
provided by TC Management to the Company in connection with the operation and
conduct of the Company's business. In fiscal years 1997 and 1998, the Company
paid a total of $225,000 and $300,000, respectively, of such fees plus out-of-
pocket expenses, and as of March 19, 1999, the Company has paid approximately
$75,500 of such fees plus out-of-pocket expenses for services provided in
fiscal year 1999. TC Management is the managing agent of and provides
management services to Thayer.
On March 31, 1997, senior management of the Company and Thayer acquired
approximately 89% of the then outstanding common stock of the Company (the
"Recapitalization") pursuant to an agreement among the Company, SAG, Thayer
and senior management of the Company. Certain managers issued a promissory
note to the Company the proceeds of which were used by the respective manager
to purchase the Company's Common Stock in its Recapitalization. Messrs. Gillis
and McCreery, James Daly, formerly the Vice President, General Counsel and
Secretary of the Company, and Thomas Gorley, formerly the Vice President,
Professional Services of the Company, borrowed $250,000, $250,000, $182,605
and $75,000, respectively, from the Company under these promissory notes, each
of which is dated March 24, 1997, and Messrs. McCreery and Daly borrowed
$363,000 and $120,740, respectively, from the Company under individual
promissory notes, each of which is dated August 9, 1996. Each of the
promissory notes accrues interest at the rate of 6% per annum and is due and
payable upon termination of its maker's employment with the Company.
22
<PAGE>
None of the promissory notes require periodic interest or principal payments.
The principal and accrued interest for both of Mr. Daly's promissory notes
were paid in full satisfaction of the notes by Mr. Daly upon his termination
of employment with the Company in April 1998. The principal and accrued
interest for Mr. Gorley's promissory note were paid in full satisfaction of
the note by Mr. Gorley upon his termination of employment with the Company in
January 1998. Mr. McCreery paid the principal and accrued interest in full
satisfaction of the promissory note dated March 24, 1997 with a face amount of
$250,000 in November 1998. As of December 31, 1998, the amount outstanding
under Mr. McCreery's remaining unpaid promissory note equaled the entire
amount borrowed plus accrued interest, however, Mr. McCreery paid the
principal and accrued interest in full satisfaction of this promissory note in
January 1999. Mr. Gillis paid the principal and accrued interest in full
satisfaction of his promissory note in November 1998.
The Company and SAG entered into a Cooperation Agreement dated March 31,
1997, as amended (the "Cooperation Agreement") which terminated and superseded
a license agreement previously executed by the Company and SAG. The
Cooperation Agreement generally (i) provides the Company the exclusive and
perpetual right to license and service in North America, South America, Japan
and Israel (the "Territory") both existing and future products developed or
acquired by SAG, and (ii) provides SAG the exclusive and perpetual right to
license and service outside the Territory both existing and future products
developed or acquired by the Company. Each of the Company and SAG must pay the
other 24% of the net revenues derived from such licenses. Except in certain
circumstances, the Company's minimum annual royalty payment to SAG through the
year 2000 must at least equal $21 million. This 24% royalty rate is fixed for
20 years. In 1996, 1997 and 1998, the Company's royalty payments to SAG were
approximately $26.1 million, $29.3 million and $39.6 million, respectively. In
the same periods, SAG's royalty payments to the Company were approximately
$0.3 million, $0.6 million and $1.0 million, respectively. As consideration
for the Cooperation Agreement, the Company paid SAG DM38.0 million
(approximately $22.6 million) on March 31, 1997. Dr. Erwin Koenigs, the
Chairman of the Board and Chief Executive Officer of SAG, is currently a
director of the Company.
On December 5, 1993, the Company and SAG entered into a Products and
Research & Development Operations Transfer Agreement (the "R&D Agreement")
which required the Company to provide certain services relating to certain SAG
employees who utilized the Company's facilities. In connection with the
Recapitalization, on March 31, 1997, the Company entered into an
Administrative Services Agreement (the "ASA") with SAG, terminating the R&D
Agreement and requiring that the Company provide services similar to those
required under the R&D Agreement. SAG is required under the ASA to reimburse
the Company for its costs incurred in connection with the ASA and to pay the
Company during the years 1997, 1998 and 1999 for the use of certain machinery
leased by the Company. In 1996, 1997 and 1998, the payments to the Company
under the R&D Agreement and the ASA were approximately $15.9 million, $10.8
million and $8.5 million, respectively.
23
<PAGE>
On August 22, 1997, the Company entered into a subscription agreement with
Timothy L. Hill, the Company's Vice President, Marketing, pursuant to which
the Company issued and sold to Mr. Hill 137,500 shares of Common Stock for an
aggregate purchase price of $202,095 (the "Subscription Agreement"). Pursuant
to the Subscription Agreement, the Company has the right to repurchase Mr.
Hill's shares at $1.47 per share if Mr. Hill's employment with the Company is
terminated for cause or if Mr. Hill voluntarily terminates his employment
prior to August 17, 1999. The Company's repurchase right terminates in the
event of change of control of the Company. In addition, the Company has issued
options to purchase an aggregate of 94,325 shares of Common Stock at an
exercise price of $1.47 to the members of Thayer's Advisory Board.
The Company and Thayer have entered into a registration rights agreement for
the benefit of all holders as of September 26, 1997 of "restricted securities"
of the Company within the meaning of Rule 144 of the Commission, and certain
transferees of such holders. Pursuant to this agreement, a majority-in-
interest of such holders has the right to require the Company to register
their restricted securities for resale under the Securities Act on up to five
occasions (only one of which may be on Form S-1) and such holders have been
granted certain "piggy-back" registration rights with regard to certain
securities offerings initiated by the Company. The Company has agreed to pay
certain expenses in connection with such registrations. Thayer exercised its
only Form S-1 registration right during the Secondary Offering.
24
<PAGE>
STOCK PERFORMANCE GRAPH
The graph below compares the cumulative total stockholder return on the
Company's Common Stock with the cumulative total return on the Standard &
Poor's 500 Index and the Standard and Poor's Computers (Software & Services)
("S&P Technology Index"), a published industry index, for the period
commencing November 19, 1997 and ending December 31, 1998, the approximate
period for which the Common Stock has been registered under Section 12 of the
Exchange Act. The graph assumes an investment of $100 and the reinvestment of
any dividends. The points marked on the horizontal axis of the graph
correspond to the last day of the applicable month.
The comparisons in the graph below are based upon historical data and are
not indicative of, nor intended to forecast, future performance of the
Company's Common Stock.
COMPARISON OF 13 MONTH CUMULATIVE TOTAL RETURN* AMONG SOFTWARE AG SYSTEMS,
INC., THE S & P 500 INDEX AND THE S & P COMPUTERS (SOFTWARE & SERVICES) INDEX
* $100 invested on 11/19/97 in stock or on 10/31/97 in Index - including
reinvestment of dividends. Fiscal year ending December 31.
[PERFORMANCE CHART APPEARS HERE]
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11/19/97 11/97 12/97 1/98 2/98 3/98 4/98 5/98 6/98 7/98 8/98 9/98 10/98 11/98 12/98
- ------------------------------------------------------------------------------------------------------------
SOFTWARE AG SYSTEMS,
INC. 100 102 145 135 194 265 248 244 293 240 169 170 150 193 181
- ------------------------------------------------------------------------------------------------------------
S & P 500 100 105 106 108 115 121 122 120 125 124 106 113 122 129 137
- ------------------------------------------------------------------------------------------------------------
S & P COMPUTERS
(SOFTWARE & SERVICES) 100 106 96 106 118 128 127 119 145 139 118 140 136 154 173
- ------------------------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE>
AMENDMENT OF THE COMPANY'S CERTIFICATE OF INCORPORATION TO CHANGE THE
COMPANY'S NAME TO SAGA SYSTEMS, INC.
(Item 2)
The Board of Directors has approved and recommends that the Company's
stockholders approve and adopt an amendment to the Company's Certificate of
Incorporation to provide for a change in the Company's name from "Software AG
Systems, Inc." to "SAGA SYSTEMS, Inc." If approved by the stockholders,
Article I of the Company's Certificate of Incorporation would be amended in
its entirety to read as follows:
"The name of the corporation is SAGA SYSTEMS, Inc. (the "Corporation")."
Prior to the Recapitalization in 1997, SAG owned all of the Company's
27,500,000 then outstanding shares of common stock. After the
Recapitalization, SAG owned approximately 11% of the Company's then
outstanding Common Stock.
The Company's initial public offering, pursuant to which 8,855,000 shares of
the Company's Common Stock including an over-allotment option of 1,155,000
shares were sold by the Company, Thayer and TC Co-Investors, was declared
effective by the Commission on November 17, 1997 for trading which began on
November 18, 1997. In May 1998, 6,279,243 shares, including 819,031 shares
purchased by the underwriters pursuant to an over-allotment option, of the
Company's Common Stock was sold by Thayer, TC Co-Investors and certain senior
managers of the Company and SAG in the Secondary Offering. After the Secondary
Offering, SAG owned approximately 9% of the Company's then outstanding Common
Stock. As of March 19, 1999, SAG owned approximately 9% of the Company's then
outstanding Common Stock.
Effective December 1, 1998, Software AG Americas, Inc., a wholly owned
subsidiary and operating corporation of the Company, changed its name to SAGA
SOFTWARE, Inc. Since that date, SAGA has been engaged in a comprehensive
campaign to rebrand its corporate identity. In order to eliminate confusion in
the marketplace and with customers, the Company wishes to change its name to
SAGA SYSTEMS, Inc., consistent with SAGA's name change and rebranding effort
and recent corporate developments.
The Board believes that the SAGA name already has market recognition and
will continue to be well received in the marketplace. The choice of SAGA
SYSTEMS, Inc. as the Company's new name is intended to eliminate any confusion
in the marketplace between SAGA and SAG, better allow for further expansion
into the Company's targeted markets and help the Company compete more
effectively in the industry. The name change will not affect or change the
business of the Company or the services offered to the Company's customers in
the markets presently served by the Company. If the name change is not
approved by the stockholders, the Company will be obligated to identify an
alternative name.
26
<PAGE>
The Company's trading symbol on the New York Stock Exchange, "AGS", will not
change.
If approved, the amendment would become effective upon filing with the
Delaware Secretary of State, which would take place as soon as practicable
following the Meeting.
Required Vote
Approval of the amendment to the Company's Certificate of Incorporation to
change the Company's name to SAGA SYSTEMS, Inc. requires the affirmative vote
of the holders of a majority of shares of Common Stock.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSED
AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION TO CHANGE THE
COMPANY'S NAME TO SAGA SYSTEMS, INC.
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
(Item 3)
On July 11, 1997, the Company retained KPMG LLP (then known as KPMG Peat
Marwick LLP) ("KPMG") to act as its independent public accountants for fiscal
year 1997 and informed the prior auditors, Gocial & Company, P.C., the
Company's independent accountants since January 1992, of its decision. In
connection with the prior auditors' audit of the consolidated financial
statements for the years ended December 31, 1995 and 1996, there were no
disagreements with the Company on any matters of accounting principles or
practices, financial statement disclosure or auditing scope or procedures. The
prior auditors' report on the Company's consolidated financial statements for
the years ended December 31, 1995 and 1996 contained no adverse opinion or
disclaimer of opinion and was not modified or qualified as to uncertainty,
audit scope, or accounting principles. The decision to change auditors was
approved by the Board of Directors of the Company. The Company has provided
the prior auditors with a copy of this disclosure.
KPMG has audited the Company's financial statements for the fiscal years
ended December 31, 1998, 1997, 1996, 1995 and 1994. On January 14, 1999, the
Board appointed KPMG as the Company's independent public accountants for the
current fiscal year ended December 31, 1999. KPMG has no direct or indirect
financial interest in the Company.
Although not required to do so, the Board is submitting the appointment of
KPMG as the Company's independent public accountants for fiscal year 1999 for
ratification by the stockholders. If a majority of the shares of Common Stock
represented in person or by proxy at the Meeting is not voted for
ratification, the Board will reconsider its appointment of KPMG.
27
<PAGE>
The Board expects that representatives of KPMG will be present at the
Meeting, will be given an opportunity to make a statement at the Meeting if
they desire to do so, and will be available to respond to appropriate
questions from stockholders.
Required Vote
The ratification of the appointment of KPMG requires the affirmative vote of
the holders of a majority of shares of Common Stock present or represented by
proxy and entitled to vote at the Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE
RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS THE COMPANY'S
INDEPENDENT PUBLIC ACCOUNTANTS FOR FISCAL YEAR 1999.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act, requires the Company's officers and
directors and persons who beneficially own more than 10% of the Company's
Common Stock (collectively, "Reporting Persons") to file reports of ownership
and changes in ownership with the Commission and the New York Stock Exchange.
Reporting Persons are required by the Commission regulations to furnish the
Company with copies of all filings made under Section 16(a) .
Based solely on its review of copies of such filings furnished to the
Company and written representations from Reporting Persons, to the Company's
knowledge, all the Reporting Persons filed all reports relating to the Common
Stock required under Section 16(a) of the Exchange Act during the Company's
fiscal year ended December 31, 1998 on a timely basis.
STOCKHOLDER PROPOSALS
Stockholder proposals for inclusion in the Company's Proxy Statement and
form of proxy relating to the Company's annual meeting of stockholders to be
held in 2000, whether submitted pursuant to Commission Rule 14a-8 or
otherwise, must be received at the Company's executive offices by December 13,
1999. Stockholder proposals should be addressed to the Company in care of
Katherine E. Butler, Vice President, General Counsel and Secretary, 11190
Sunrise Valley Drive, Reston, Virginia 20191. Stockholder proposals not
submitted in accordance with these procedures will not be considered to be
properly brought before the meeting and will not be voted upon.
28
<PAGE>
OTHER BUSINESS
The Board does not presently intend to bring any other business before the
Meeting, and the Board does not presently know of any matters to be brought
before the Meeting for action other than those set forth herein. As to any
business that may properly come before the Meeting, however, it is intended
that proxies submitted in the form enclosed will be voted by the persons named
therein in respect thereof in accordance with such persons' best judgment.
By Order of the Board of Directors,
/s/ KATHERINE E. BUTLER
KATHERINE E. BUTLER
Vice President, General Counsel & Secretary
ALL STOCKHOLDERS ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE ACCOMPANYING
PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE. THANK YOU FOR YOUR PROMPT
ATTENTION TO THIS MATTER.
29
<PAGE>
[RECYCLED PAPER LOGO APPEARS AT BOTTOM OF PAGE]
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF
SOFTWARE AG SYSTEMS, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
MAY 20, 1999
The undersigned hereby appoints DANIEL F. GILLIS, HARRY K. McCREERY and
KATHERINE E. BUTLER, or any of them, each with power of substitution, as proxies
to represent the undersigned at the Annual Meeting of Stockholders of SOFTWARE
AG SYSTEMS, INC. (the "Company"), to be held on Thursday, May 20, 1999, at
10:00 a.m., local time, in the Regency Ballroom B of the Hyatt Regency Reston,
located at 1800 Presidents Street, Reston, Virginia, and any adjournment
thereof, and to vote all of the shares of Common Stock of the Company the
undersigned is entitled to vote at such Annual Meeting, and at any adjournments
thereof, with all the powers the undersigned would possess if personally
present, on the following matters as set forth on the reverse side of this
proxy card.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF SOFTWARE AG
SYSTEMS, INC. THIS PROXY WILL BE VOTED AS DIRECTED. IN THE ABSENCE OF
DIRECTION, THIS PROXY WILL BE VOTED FOR THE FOUR NOMINEES FOR ELECTION, FOR THE
AMENDMENT TO THE CERTIFICATE OF INCORPORATION, AS AMENDED, OF SOFTWARE AG
SYSTEMS, INC. AND FOR THE RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS THE
COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS FOR FISCAL YEAR 1999. THE ABOVE
PROXIES CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD. THE BOARD
OF DIRECTORS RECOMMENDS A VOTE FOR EACH PROPOSAL LISTED ON THE REVERSE SIDE OF
THIS CARD.
(Continued on other side)
Please mark your votes as in this example: [X]
1. ELECTION OF DIRECTORS
FOR all nominees listed below (except as marked to the contrary
below): [_}
WITHHOLD AUTHORITY to vote for all nominees listed below: [_]
Nominees: Class II -- Dr. Erwin Koenigs, Frederic V. Malek and Edward E.
Lucente
Class III -- Paul A. Brands
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name on the space provided below)
_________________________________
1
<PAGE>
2. PROPOSAL TO APPROVE THE AMENDMENT OF THE COMPANY'S CERTIFICATE OF
INCORPORATION, AS AMENDED
[_] FOR [_] AGAINST [_] ABSTAIN
3. PROPOSAL TO RATIFY THE APPOINTMENT OF KPMG LLP AS THE COMPANY'S INDEPENDENT
PUBLIC ACCOUNTANTS FOR FISCAL YEAR 1999
[_] FOR [_] AGAINST [_] ABSTAIN
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting or any adjournment
thereof.
Please sign exactly as your name appears on the stock certificate (as indicated
hereon). If the shares are issued in the names of two or more persons, all such
persons should sign the proxy. A proxy executed by a corporation should be
signed in its name by its authorized officers. Executors, administrators,
trustees, and partners should indicate their positions when signing.
Dated: ___________________, 1999
_________________________________
_________________________________
Signatures
STOCKHOLDERS ARE URGED TO DATE, MARK, SIGN, AND RETURN THIS PROXY IN THE
ENVELOPE PROVIDED, WHICH REQUIRES NO POSTAGE IF MAILED WITHIN THE UNITED STATES.
2
