<PAGE> 1
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:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
IntelliCorp Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
INTELLICORP
INTELLICORP, INC.
------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 6, 1996
To the Stockholders of IntelliCorp, Inc.:
The Annual Meeting of Stockholders of IntelliCorp, Inc. (the "Company")
will be held at the offices of the Company, 1975 El Camino Real West, Mountain
View, California, on December 6, 1996 at 9:00 a.m. local time for the following
purposes:
1. To elect four directors to hold office until the next annual
meeting of stockholders and until their successors are elected.
2. To approve an amendment to the Company's 1991 Stock Option Plan
to increase the number of shares available for issuance
thereunder by 1,000,000.
3. To transact such other business as properly may come before the
meeting, or any adjournment or postponements of the meeting.
Only stockholders of record at the close of business on October 15, 1996
are entitled to notice of, and to vote at, the meeting and any adjournments or
postponements of the meeting.
BY ORDER OF THE BOARD OF DIRECTORS,
Kenneth H. Haas, Director and President
Mountain View, California
October 21, 1996
IMPORTANT
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING IN
PERSON, PLEASE SIGN AND RETURN THE ENCLOSED PROXY AS
SOON AS POSSIBLE IN THE ENCLOSED POST-PAID ENVELOPE.
THANK YOU FOR ACTING PROMPTLY.
<PAGE> 3
INTELLICORP
INTELLICORP, INC.
1975 El Camino Real West
Mountain View, California 94040-2216
(415) 965-5500
To the Stockholders of IntelliCorp, Inc.:
The enclosed proxy is solicited on behalf of the Board of Directors (the
"Board") of IntelliCorp, Inc., a Delaware corporation ("IntelliCorp" or the
"Company"). The proxy is solicited for use at the annual meeting of stockholders
(the "Annual Meeting") to be held at 9:00 a.m. local time on December 6, 1996 at
the offices of the Company, 1975 El Camino Real West, Mountain View, California.
The approximate date on which this proxy statement and the accompanying notice
and proxy are being mailed to stockholders is October 21, 1996.
Only stockholders of record at the close of business on October 15, 1996
are entitled to notice of, and to vote at, the Annual Meeting and any
adjournments or postponements thereof. At the close of business on that date,
the Company had outstanding 12,396,512 shares of its Common Stock, par value
$.001 per share ("Common Stock"). Holders of Common Stock are entitled to one
vote for each share of Common Stock held.
Any stockholder giving a proxy in the form accompanying this proxy
statement has the power to revoke the proxy prior to its exercise. A proxy can
be revoked by an instrument of revocation delivered prior to the Annual Meeting
to the Secretary of the Company, by a duly executed proxy bearing a later date
or time than the date or time of the proxy being revoked, or at the Annual
Meeting if the stockholder is present and elects to vote in person. Mere
attendance at the Annual Meeting will not serve to revoke a proxy.
Solicitation of proxies may be by directors, officers and other employees
of the Company by personal interview, telephone or telegraph. Costs of
solicitation will be borne by the Company.
PROPOSAL NUMBER ONE
NOMINATION AND ELECTION OF DIRECTORS
NOMINATION OF DIRECTORS
The Bylaws of the Company provide for a Board consisting of not fewer than
five nor more than nine directors. The size of the Board is presently set at
five. Proxies cannot be voted for more than five directors at the Annual
Meeting. The present term of office of all directors will expire at the Annual
Meeting.
2
<PAGE> 4
Four directors are nominated to be elected at the Annual Meeting to serve
until the next annual meeting and until their respective successors are elected.
All of the nominees are currently directors of the Company. The Company proposes
to operate with one vacancy on the Board. It is intended that proxies received
will be voted FOR the election of the nominees named below unless marked to the
contrary. In the event any such person is unable or unwilling to serve as a
director, proxies may be voted for substitute nominees designated by the present
Board. The Board has no reason to believe that any of the persons named below
will be unable or unwilling to serve as a director if elected.
The following table indicates the name and age of each nominee, all
positions with the Company held by the nominee, and the year during which the
nominee first was elected a director.
<TABLE>
<CAPTION>
Name Age Position with Company Director Since
---- --- --------------------- --------------
<S> <C> <C> <C>
Kenneth H. Haas 45 Director and President 1993
Katharine C. Branscomb (2) 40 Director 1988
Joseph A. Graziano (1)(2) 52 Director 1985
Norman J. Wechsler (1)(2) 51 Director 1996
</TABLE>
- --------------------
(1) Compensation and Stock Option Committee Member
(2) Audit Committee Member
BUSINESS EXPERIENCE OF NOMINEES
Kenneth H. Haas has been a Director of the Company since 1993. Mr. Haas was
appointed President of IntelliCorp in October 1992. He joined the Company in
1983 as General Counsel, became Vice President and Secretary in March 1984 and
was appointed Vice President, Finance and Chief Financial Officer in January
1990. Mr. Haas received his B.A. from Harvard College in 1972, his J.D. from
Harvard Law School in 1976, and attended the Harvard Business School Advanced
Management Program in 1989.
Katharine C. Branscomb has been a Director of the Company since 1988. She
is currently a consultant and Senior Business Advisor to Interval Research in
Palo Alto, California and a director of Ariat Corporation. From October 1992 to
November 1995, she was Senior Vice President of Business Development for Lotus
Development Corporation and, in that capacity, served a principal role in the
sale of Lotus to IBM in June 1995. From November 1991 until joining Lotus, Ms.
Branscomb was the Chief Executive Officer of IntelliCorp, Inc. She had
previously held the position of Chief Operating Officer since late 1988. Prior
to joining IntelliCorp, Ms. Branscomb was Senior Vice President of Sales and
Marketing at Aion Corporation, founding principal and Vice President of Metaphor
Computer Systems and a consultant with the Boston Consulting Group, Inc.
3
<PAGE> 5
Joseph A. Graziano has been a Director of the Company since 1985. In 1981,
Mr. Graziano joined Apple Computer, Inc. as Chief Financial Officer and served
in that position until 1985. After a two-year sabbatical, followed by two years
as CFO at Sun Microsystems, he rejoined Apple in 1989 as Senior Vice President
and Chief Financial Officer. Later, Mr. Graziano was appointed Executive Vice
President and was elected to Apple's Board of Directors in 1993. Mr. Graziano
resigned from Apple's Board in October 1995 and left Apple at the end of 1995.
Mr. Graziano was Treasurer at ROLM Corporation from 1976 until joining Apple in
1981, and held accounting positions with other technology companies in Silicon
Valley. Mr. Graziano is also a Director of Pixar Animation Studios.
Norman J. Wechsler has been a Director of the Company since September 1996.
Since 1963 he has been Chairman and President of Wechsler & Co., Inc., a
broker-dealer specializing in convertible and related securities. The firm is a
member of the NASD and SIPC.
BOARD MEETINGS AND COMMITTEES
The Board of Directors has a Compensation and Stock Option Committee and an
Audit Committee. The Compensation and Stock Option Committee met three times
during the last fiscal year. The functions of this Committee are to review and
approve management compensation and to administer the Company's stock option
plans.
The Audit Committee met four times during the last fiscal year. The
functions of the Audit Committee are to recommend to the Board the firm of
independent auditors to serve the Company, to review the scope, fees and results
of the audit by the independent auditors and to review the internal control
procedures of the Company.
The Board of Directors does not have a nominating committee.
The Board of Directors met six times and acted one time by unanimous
written consent during the last fiscal year. No director participated in fewer
than 75% of the total number of meetings of the Board and all committees of the
Board on which he served that were held during the period, other than Mr.
Landry, who participated in 62% of the total number of meetings of the Board and
all committees of the Board on which he served that were held during the period.
4
<PAGE> 6
COMPENSATION OF DIRECTORS
The Company's 1991 Nonemployee Directors Stock Option Plan (the "Directors
Plan") provides that if a person who is neither an officer nor an employee of
the Company is elected or appointed a director, the Company is required to grant
that person an initial nonqualified stock option ("NQO") to purchase 15,000
shares of the Company's Common Stock at an exercise price equal to the fair
market value of Common Stock on the date of grant. Generally, each such option
will be exercisable in full six months after the date of grant. The shares
issuable upon exercise of an option are subject to a right of repurchase by the
Company at the exercise price per share. Such repurchase right expires as to
twenty-five percent (25%) of the total number of shares subject to the option
six months after the date of grant, and expires as to an additional twelve and
one-half percent (12.5%) per quarter, with full vesting over two years. Under
the Directors Plan, at the first meeting of the Board following each annual
meeting of the stockholders of the Company, the Company is required to grant to
each director of the Company who is neither an officer nor an employee of the
Company an NQO to purchase 5,000 shares of the Company's Common Stock, at an
exercise price equal to the fair market value of Common Stock on the date of the
grant. Generally, each such option will be exercisable in full six months after
the date of grant. These options will fully vest two years after the date of
grant in the same manner described above. The Directors Plan also permits the
Board to elect to waive the payment of all or any part of director fees and to
credit an amount not greater than such waived fees to reduce the exercise price
of options granted under the Directors Plan. The term of any option granted
under the Directors Plan is ten years.
An aggregate of 10,000 options were granted to nonemployee directors under
the Directors Plan during the fiscal year ended June 30, 1996. Pursuant to an
agreement with the Company regarding options granted while she was an executive
officer of the Company, Katharine C. Branscomb did not receive options under the
Directors Plan in fiscal year 1996.
All nonemployee directors of the Company have the right to receive an
annual fee of $15,000 for their services as directors. During fiscal 1996, all
nonemployee directors elected to waive payment of such fees and to credit a
portion of such waived fees to reduce the exercise price of options granted
under the Directors Plan except Katharine C. Branscomb who is not eligible
pursuant to the agreement mentioned above.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and executive officers, and
persons who own more than ten percent of the Common Stock, to file reports of
ownership on Form 3 and changes in ownership on Form 4 or 5 with the Securities
and Exchange Commission and the National Association of Securities Dealers. Such
officers, directors and ten percent shareholders are also required by Securities
and Exchange Commission rules to furnish the Company with copies of all Section
16(a) forms that they file.
Based solely on its review of copies of such reports received or written
representations from certain reporting persons, the Company believes that,
during the fiscal year ended June 30, 1996, there has been no failure by any of
its officers, directors or 10 percent shareholders to file on a timely basis any
reports required by Section 16(a).
5
<PAGE> 7
BENEFICIAL STOCK OWNERSHIP
The following table sets forth as of August 30, 1996: (i) the name and
address of each person who, to the knowledge of the Company, beneficially owned
more than five percent (5%) of the outstanding Common Stock; (ii) the total
number of shares beneficially owned by such person; and (iii) the percentage of
the outstanding Common Stock so owned. The information relating to ownership of
shares is based upon information furnished by the beneficial owner.
<TABLE>
<CAPTION>
Name and Address Number of Shares Percent of Class
---------------- ---------------- ----------------
<S> <C> <C>
SAP AG 1,736,263 14.0%
Postfach 1461
D-69185, Walldorf, Germany
James T. Martin (1) 846,000 6.8%
Tuppeny House
Tuckerstown, Bermuda
Norman J. Wechsler(2) 2,776.738 19.5%
105 South Bedford Road
Mt. Kisco, NY 10549
</TABLE>
- -----------------
(1) Includes warrants to purchase 350,000 shares of Common Stock.
(2) Includes 573,342 shares of Common Stock held by Wechsler & Company, Inc.,
of which Mr. Wechsler is the Chairman of the Board, President, and
principal shareholder, 60,000 shares of Common Stock held by Mr. Wechsler's
spouse, 5,000 shares of Common Stock held by a trust for the benefit of Mr.
Wechsler's minor son, 29,000 shares of Common Stock held by Waco Partners,
of which Mr. Wechsler is the managing general partner, and 2,109,396 shares
of Common Stock, including 629,032 shares of Common Stock issuable upon
conversion of Convertible Notes in the outstanding principal amount of
$1,175,000, 758,064 shares issuable upon conversion of Preferred Stock and
470,000 shares issuable upon exercise of warrants.
6
<PAGE> 8
The following table sets forth as of August 30, 1996, beneficial Common
Stock ownership information concerning: (i) all current directors and nominees;
(ii) each executive officer named in the Summary Compensation Table; and (iii)
all directors and executive officers as a group. Each person has sole investment
and voting power with respect to the shares indicated, except as otherwise set
forth in the footnotes to the table.
<TABLE>
<CAPTION>
Number of Percent of
Name Shares (1) Class (1)
---- ---------- ---------
<S> <C> <C>
Kenneth H. Haas 278,780 2.20%
Katharine C. Branscomb 165,347 1.32%
Joseph A. Graziano 56,908 *
John B. Landry 52,625 *
Norman J. Wechsler 2,776,738(2) 19.5%
Gary Fine 157,987 1.26%
Nancy J. Hilker 32,375 *
Martin N. Hollander 79,869 *
Colin Bodell 1,100 *
David J. Loeb 18,500 *
All executive officers as a group (8 persons) 575,705(3) 4.44%(3)
</TABLE>
* Less than 1%
(1) Assumes that the person has exercised, to the extent exercisable and not
subject to repurchase on or after October 30, 1996, all options to purchase
Common Stock held by him or her and that no other person has exercised any
outstanding options.
(2) Includes 573,342 shares of Common Stock held by Wechsler & Company, Inc.,
of which Mr. Wechsler is the Chairman of the Board, President, and
principal shareholder, 60,000 shares of Common Stock held by Mr. Wechsler's
spouse, 5,000 shares of Common Stock held by a trust for the benefit of Mr.
Wechsler's minor son, 29,000 shares of Common Stock held by Waco Partners,
of which Mr. Wechsler is the managing general partner, and 2,109,396 shares
of Common Stock, including 629,032 shares of Common Stock issuable upon
conversion of Convertible Notes of the outstanding principal amount of
$1,175,000, 758,064 shares issuable upon conversion of Preferred Stock and
470,000 shares issuable upon exercise of warrants.
(3) Based on the number of shares outstanding as of August 30, 1996, plus
519,962 shares which executive officers as a group have the right to
acquire prior to October 30, 1996 through the exercise of options which
were granted pursuant to the Amended and Restated 1982 Stock Option Plan
and the 1991 Stock Option Plan and which are not subject to repurchase
after that date.
7
<PAGE> 9
EXECUTIVE COMPENSATION
The following table sets forth compensation paid by the Company for
services rendered in all capacities during the three most recent fiscal years to
the following executive officers of the Company:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ------------
Name and Year Salary Bonus Securities Underlying
Principal Ended $ $ Options/SARs (#)
Position June 30 --- --- ----------------------
-------- -------
<S> <C> <C> <C> <C>
Kenneth H. Haas 1996 $150,000 -0- -0-
Director and President 1995 $143,333 $ 75,000 -0-
1994 $130,000 -0- -0-
Nancy J. Hilker 1996(1) $117,500 $ 2,500 20,000
Chief Financial Officer 1995 $101,449
Martin N. Hollander 1996(2) $118,394 $ 15,000 125,000
Vice President, Marketing and
Business Development
Colin Bodell 1996(4) $ 75,000 $ 25,000 100,000
Vice President, Product
Development and Engineering
Services
David J. Loeb 1996(2) $105,000 $ 19,250 40,000
Managing Director, Consulting
and Training Services
Paul Sutton 1996(3) $ 83,655 $ 49,761 -0-
Former Vice President 1995 $150,000 $224,134 -0-
Worldwide Sales 1994 $150,000 $135,000 -0-
Gary Fine 1996(4) $130,000 -0- -0-
Managing Director, 1995 $126,666 $ 65,000 -0-
Product Development and
Engineering Services
</TABLE>
- --------------------
(1) Ms. Hilker was appointed an executive officer of the Company in August 1994
and left the Company on September 3, 1996.
(2) Mr. Hollander and Mr. Loeb were appointed executive officers of the Company
in 1996.
(3) Mr. Sutton left the Company in January 1996.
(4) Mr. Fine was appointed an executive officer of the Company in August 1994.
Mr. Fine remains an employee of the Company but was replaced as executive
officer by Mr. Bodell in January, 1996.
In October 1991, the Company executed an agreement with Mr. Haas which
provides for a severance payment equal to one year's salary if his employment is
terminated without cause. In August 1992, the Company executed an agreement with
Mr. Sutton which provides for a severance payment of $50,000 if his employment
is terminated without cause. No payment was made to Mr. Sutton in respect to
this agreement in 1996. In October 1992, the Company executed an agreement with
Mr. Fine which provides for a severance payment equal to one year's salary if
his employment is terminated without cause.
8
<PAGE> 10
The following table shows for each executive officer named in the Summary
Compensation Table certain information regarding stock option grants during
fiscal year 1996:
OPTION/SAR GRANTS IN LAST FISCAL YEAR(1)
<TABLE>
<CAPTION>
PERCENT POTENTIAL REALIZABLE
TOTAL VALUE AT
NUMBER OF OPTIONS/SARS ASSUMED RATES
SECURITIES GRANTED TO OF STOCK PRICE
UNDERLYING EMPLOYEES EXERCISE OR APPRECIATION FOR
OPTION/SARS IN FISCAL YEAR BASE PRICE EXPIRATION OPTION TERM(5)
NAME(2) GRANTED(4) 1996 ($/SHARES) DATE 5% 10%
------- ---------- ---- ---------- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Nancy J. Hilker 20,000 3% $2.750 12/3/96(3) $ 34,613 $ 87,730
Martin N. Hollander 100,000 16% $2.375 7/29/05 $149,466 $378,836
25,000 4% $1.250 12/30/05 $ 19,667 $ 49,847
Colin Bodell 100,000 16% $1.250 12/30/05 $ 78,666 $199,387
David J. Loeb 40,000 7% $2.750 8/12/05 $ 69,226 $175,461
</TABLE>
(1) No SAR grants were made to any named executive officer during the
year ended June 30, 1996.
(2) Messrs. Haas, Sutton, and Fine received no option grants during the
year ended June 30, 1996.
(3) Ms. Hilker resigned September 3, 1996 and, in accordance with the
1991 Stock Option Plan, all unexercised options expire 90 days
thereafter.
(4) The options have a term of 10 years and are immediately exercisable
upon issuance but are subject to a right of repurchase which expires
ratably over a period of 4 years. Payment by the optionee on exercise
of options may be in cash, by a full recourse promissory note, or by
tender of shares. All options are granted at the fair market value of
the Company's Common Stock on the date of grant.
(5) The potential realizable value is based on the term of the option at
the date of the grant (10 years). It is calculated by assuming that
the stock price on the date of grant appreciates at the indicated
annual rate, compounded annually for the entire term, and that the
option is exercised and sold on the last day of the option term for
the appreciated stock price. These amounts represent certain assumed
rates of appreciation only, in accordance with the rules of the SEC,
and do not reflect the Company's estimate or projection of the future
stock price performance. Actual gains, if any, are dependent on the
actual future performance of the Company's Common Stock. There can be
no assurance that the amounts reflected in this table will be
achieved.
9
<PAGE> 11
The following table shows for each executive officer named in the Summary
Compensation Table certain information regarding option exercises during fiscal
year 1996 and options outstanding as of June 30, 1996:
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES (1)
<TABLE>
<CAPTION>
SHARES NUMBER OF VALUE OF UNEXERCISED
ACQUIRED SECURITIES UNDERLYING IN-THE-MONEY
ON VALUE UNEXERCISED OPTIONS OPTIONS AT FISCAL YEAR-END
NAME EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE (2) EXERCISABLE/UNEXERCISABLE(2)(3)
---- -------- -------- ----------------------------- -------------------------------
<S> <C> <C> <C> <C>
Kenneth H. Haas -0- $ -0- 276,118 / -0- $583,420/ -0-
Nancy J. Hilker -0- -0- 25,500/31,250 $38,906/ $16,719
Martin J. Hollander -0- -0- -0- /125,000 -0- / $121,875
Colin Bodell -0- -0- -0- /100,000 -0- / $187,500
David J. Loeb -0- -0- 7,375/46,625 $7,594/ $26,402
Paul Sutton 103,573 $69,026 -0- / -0- -0- / -0-
Gary Fine -0- $ -0- 155,000 / 15,000 $280,625/ $33,750
</TABLE>
- --------------------
(1) No SAR grants were outstanding at June 30, 1996.
(2) All options included in the table are immediately exercisable at the
exercise price upon issuance, but the shares issuable upon option exercise
are subject to a right of repurchase by the Company upon employment
termination, which right of repurchase expires over a period of time or
upon achievement of certain milestones. Options identified as
"Unexercisable" in the table were subject to a right of repurchase as of
fiscal year end.
(3) Based on a closing share price of $3.125 at fiscal year end.
10
<PAGE> 12
PROPOSAL NUMBER TWO
APPROVAL OF AMENDMENT OF THE 1991 STOCK OPTION PLAN
BACKGROUND
At the Annual Meeting, the stockholders are being asked to approve an
amendment to the Company's 1991 Stock Option Plan (the "1991 Option Plan") to
increase the number of shares available under the 1991 Option Plan by 1,000,000.
DESCRIPTION OF THE AMENDMENT
The proposed amendment to the 1991 Option Plan was approved by the Board of
Directors, subject to stockholder approval, to increase the number of shares
available for grant under the 1991 Option Plan and thereby strengthen the
Company by providing added incentive to officers, employees, and consultants for
high levels of performance and unusual efforts required to increase the earnings
of the Company. Stock options are generally used by technology companies to
create such incentives, particularly technology companies in Silicon Valley with
which the Company competes directly for employees and consultants. The Company
believes that the ability to grant stock options is extremely important to
attract, retain, and motivate the individuals essential to the Company's
long-term growth and financial success.
The Board of Directors believes that it is in the best interests of the
Company to amend the 1991 Option Plan to increase the number of shares available
for grant by one million. As of August 30, 1996, there were outstanding options
to purchase 1,337,776 shares, leaving available for future grant options to
purchase only 307,082 shares for a total of 1,644,858 common shares reserved for
exercise of stock options granted under the 1991 Option Plan(1). If the
amendment to the Plan as proposed is not adopted, the Company will not have a
sufficient number of options available for grant to current and anticipated
future employees. Currently, the number of shares reserved for issuance under
the 1991 Plan constitutes approximately 9.8% of the outstanding shares of the
Common Stock of the Company as of August 30, 1996, on a fully dilutive basis(2).
If the 1991 Option Plan is amended as proposed, the number of shares reserved
for issuance would equal approximately 15.8%. This percentage is in line with
historical levels for the Company.
DESCRIPTION OF THE 1991 OPTION PLAN
In December 1991, the Board of Directors adopted the 1991 Option Plan. The
1991 Option Plan was approved by stockholders in February 1992. The 1991 Option
Plan authorizes the granting of incentive stock options ("ISOs") to employees
(including employees who are officers and directors) and nonqualified options
("NQOs") to officers, employees, and consultants to purchase authorized, but
unissued, shares of the Company's Common Stock. The number of shares reserved
for issuance on exercise of options granted or to be granted under the 1991
Option Plan, without giving effect to the proposed amendments, is 1,644,858. As
of August 30, 1996, the Company had approximately 95 employees and 10
consultants eligible to participate in the 1991 Option Plan.
The 1991 Option Plan is administered by the Compensation and Stock Option
Committee (the "Option Committee"), which determines the number of shares for
which each option shall be granted, whether the option is an ISO or an NQO, the
exercise price of the option, the time and amounts in which the option is
exercisable, and the option's other terms and conditions. The President of the
Company has been authorized to grant options to purchase not to exceed 10,000
shares to persons who are not executive officers of the Company. No option may
be granted under the 1991 Option Plan after December 2001, but outstanding
options may extend beyond that date.
- -------------------
(1) In addition to the 1991 Option Plan, there are also, 720,994 and 97,500
common shares reserved for the exercise of stock options granted under the 1982
Option Plan and the 1991 Directors Plan, respectively.
(2) Including all converted common equivalent shares from preferred stock,
convertible debt, warrants and in the money stock options.
11
<PAGE> 13
The exercise price of all ISOs granted under the 1991 Option Plan must be
at least equal to the fair market value of the shares covered by the ISO on the
date of grant. NQOs may be issued with exercise prices below the fair market
value of the Company's Common Stock on the date of grant. The 1991 Option Plan
provides that the maximum term of an ISO is ten years and the maximum term of an
NQO is ten years plus two days. The exercise price of an ISO granted to an
individual then owning stock possessing more than ten percent (10%) of the
voting power of the Company's outstanding capital stock must be at least equal
to one hundred ten percent (110%) of the fair market value on the date of grant,
and the maximum term of such an ISO may not exceed five years. The 1991 Option
Plan permits the exercise of options for cash, tender to the Company of shares
of Common Stock owned by the optionee and having a fair market value not less
than the option exercise price, or such other consideration including, without
limitation, full recourse promissory notes, as the Option Committee may approve
at the time the option is granted.
No portion of an ISO shall become exercisable ("vest") if, and to the
extent that, such vesting would, together with vesting under all ISOs granted to
the optionee after 1986 to acquire stock of the Company (or a parent or
subsidiary of the Company, as defined in Section 424 of the Code), occur at a
rate in excess of more than $100,000 worth of stock (measured on the grant
date(s)) in any calendar year. To the extent this limitation would be exceeded,
the vesting of ISOs (or portions thereof) having the highest per share exercise
prices will be deferred until the earliest time at which their vesting would not
cause the limitation to be exceeded.
Certain optionees are required to exercise options having an aggregate
exercise price of at least $1,000 upon any exercise of an option except the
final exercise. There is no limit on the maximum number of options that can be
exercised in any year. At the time an option is exercised, in whole or in part,
or at any time thereafter as requested by the Company, the optionee is required
to make adequate provision for federal and state income and employment tax
withholding obligations of the Company, if any, resulting from the exercise. Any
optionee who is an officer or director of the Company may elect, subject to the
terms of the 1991 Option Plan and the approval of the Option Committee, to have
shares of Common Stock withheld or to tender shares to provide for these taxes.
The aggregate cash outlay by the Company in connection with this election for
all officers is currently limited to $500,000.
Each option is exercisable at such times as the Option Committee specifies,
as set forth in an option agreement signed by the optionee. Options may be
exercised for three months after the optionee leaves the Company and, if the
optionee's employment is terminated by reason of death, for one year after the
optionee's death, but in either case not beyond the original term of the option.
No option granted under the 1991 Option Plan is transferable by the
optionee other than by will or under the laws of descent and distribution, and
each option is exercisable, during the lifetime of the optionee, only by the
optionee. In the event of a merger of the Company, sale of substantially all of
its assets or similar transaction, the Company's repurchase rights with respect
to all outstanding options shall expire with respect to twice the number of
shares otherwise indicated pursuant to the terms of the options (up to a maximum
of 100%), at such time as the Option Committee determines.
Generally, each Option is exercisable in full immediately upon grant,
although options granted to officers or directors are subject to Section 16(b)
of the Securities and Exchange Act of 1934 and are not exercisable until six
months after the date of grant. The shares of Common Stock issued upon exercise
of an option are subject to a right of repurchase by the Company at the exercise
price per share. Unless otherwise provided by the Option Committee, such
repurchase right expires as to twenty-five percent (25%) of the total number of
shares subject to the option on the first anniversary of the grant date and
expires as to an additional six and one-quarter percent (6.25%) of such shares
at the end of each subsequent three-month period.
12
<PAGE> 14
FEDERAL INCOME TAX CONSEQUENCES OF STOCK OPTIONS
The following description of federal income tax consequences is based upon
current statutes, regulations, and interpretations thereof. Because the
applicable rules are complex and because income tax consequences vary depending
upon the individual circumstances of each optionee, optionees should consult
their personal tax advisors concerning federal, state, local, and foreign income
tax consequences associated with their participation in the 1991 Option Plan.
ISOs granted under the 1991 Option Plan are intended to constitute
"incentive stock options" within the meaning of Section 422 of the Code. ISOs
may be granted only to employees of the Company (including directors who are
also employees). An optionee does not recognize taxable income upon either the
grant or exercise of an ISO. However, the excess of the fair market value of the
shares purchased upon exercise over the option exercise price (the "Option
Spread") in includible in the optionee's "alternative minimum taxable income"
("AMTI") for purposes of the alternative minimum tax ("AMT").
The Option Spread is measured on the date of exercise and includible in
AMTI in the year of exercise unless the shares are subject to the repurchase
right or other "substantial risk of forfeiture" (including, in the case of
directors and certain officers, any limitations on resale of shares imposed
under Section 16(b) of the Securities Exchange Act of 1934) and the optionee
does not make an election under Section 83(b) of the Internal Revenue Code with
respect to the shares within thirty days after the date of exercise, in which
event the Option Spread will be measured on the date of lapse of the substantial
risk of forfeiture and will be includible in AMTI at that time.
Furthermore, if an optionee holds the shares for at least two years from
the date of the ISO was granted, and for at least one year from the date the ISO
was exercised, any long-term gain for a sale of the shares should be taxable as
capital gain. Under these circumstances, the Company would not be entitled to a
tax deduction at the time the ISO is exercised or at the time the stock is sold.
If an optionee were to dispose of stock acquired pursuant to an ISO before the
end of the required holding periods (a "Disqualifying Disposition"), the amount
by which the market value of the stock at the time the ISO was exercised exceeds
the exercise price (or, if less, the amount of gain realized on the sale) would
be taxable as ordinary income, and the Company should be entitled to a
corresponding tax deduction. Gain on a Disqualifying Disposition, in excess of
the amount required to be recognized as ordinary income, if any, would be
capital gain.
If an optionee pays for option shares with shares of the Company acquired
under an ISO or other qualified stock option ("statutory option stock") the
tender of shares is a disqualifying disposition of the statutory option stock if
the above described (or other applicable) holding periods respecting those
shares have not been satisfied. If the holding periods with respect to the
statutory option stock are satisfied, or the shares were not acquired under an
ISO or other qualified stock option of the Company, then any appreciation in
value of the surrendered shares is not taxed upon surrender.
An optionee is not taxed upon the grant of an NQO. The consequences upon
exercise depend upon whether the shares received are subject to a substantial
risk of forfeiture ("restricted stock"), including, for example, the Company's
repurchase right and, in the case of directors and certain officers, any
limitations or resale of shares imposed under Section 16(b) of the Securities
Exchange Act of 1934.
If the shares are not subject to a substantial risk of forfeiture, the
optionee will recognize as ordinary income the Option Spread on the date of
exercise. If the shares are restricted stock, taxable income is deferred until
the risk of forfeiture lapses unless the optionee elects the so-called "Section
83(b) election", to be taxable on the Option Spread on the date of exercise. If
the election is not made with respect to restricted stock, any excess of the
fair market value of the stock on the date the risk of forfeiture lapses over
the exercise price is taxable as ordinary income on that date. The Company is
entitled to a deduction equal to the amount of ordinary income recognized by an
optionee. Such income is subject to income tax withholding by the Company.
13
<PAGE> 15
If shares of Common Stock are delivered in payment of the exercise price of
an NQO, the appreciation in value of the surrendered shares is not then taxed.
The use of shares previously acquired by exercise of an ISO or other statutory
stock option may be a disqualifying disposition of those shares, although the
IRS has announced that it is studying this point. It is possible, although the
Company believes it unlikely, that election by an optionee to have shares of
Common Stock withheld in satisfaction of the optionee's withholding tax
obligations upon exercise of an NQO or disqualifying disposition of ISO shares
may result in dividend income to the optionee.
The 1991 Option Plan expires in December 2001, unless earlier terminated by
the Board of Directors. The Board may at any time terminate or amend the 1991
Option Plan, provided that without approval of stockholders, there will be: (i)
no increase in the total number of shares covered by the 1991 Option Plan; and
(ii) no change in the class of persons eligible to receive options. In any case,
no amendment may adversely affect any then-outstanding options or unexercised
portion thereof without the optionee's consent unless such amendment is required
to enable the option to qualify as an ISO.
The following table shows for each executive officer named in the Summary
Compensation Table options granted under the 1991 Stock Option Plan for the year
ended June 30, 1996.
PLAN BENEFITS
<TABLE>
<CAPTION>
Name and Position(1) NUMBER OF SHARES
-------------------- ----------------
<S> <C>
Nancy J. Hilker 20,000
Chief Financial Officer
Martin J. Hollander 125,000
Vice President, Marketing and
Business Development
Colin Bodell 100,000
Vice President, Product
Development and Engineering
Services
David J. Loeb 40,000
Managing Director, Consulting
and Training Services
Executive Group: 290,000
Non-Executive Director Group(2) 0
Non-Executive Officer Employee
Group 333,800
</TABLE>
(1) Messrs. Haas, Sutton, and Fine received no option grants during the
year ended June 30, 1996.
(2) Nonemployee directors are not eligble to receive option grants under
the 1991 Stock Option Plan.
14
<PAGE> 16
PROPOSAL
At the Annual Meeting, stockholders will be asked to approve the amendment
of the 1991 Option Plan to increase the number of shares of Common Stock
available for issuance by 1,000,000. Such approval will require the affirmative
vote of a majority of the shares of Common Stock represented and voting at the
meeting at which a quorum is present. Copies of the 1991 Option Plan are
available by writing to the Company to the attention of Dan Menudier. The Board
of Directors recommends a vote "FOR" approval of the amendment of the 1991
Option Plan.
INDEPENDENT PUBLIC AUDITORS
The Board of Directors of the Company has selected Ernst & Young LLP as
independent public auditors to audit the financial statements of the Company for
the fiscal year ending June 30, 1997. Ernst & Young LLP has acted in such
capacity since its appointment in March 1987. Representatives of Ernst & Young
LLP will be present at the Annual Meeting and will have an opportunity to make a
statement if they desire to do so. The representatives of Ernst & Young LLP also
will be available to respond to appropriate questions raised during the Annual
Meeting.
FINANCIAL STATEMENTS
The Company's annual report to stockholders for the fiscal year ended June
30, 1996, containing audited consolidated balance sheets as of the end of each
of the past two fiscal years and audited consolidated statements of operations,
stockholders' equity and cash flows for each of the past three fiscal years is
being mailed with this proxy statement to stockholders entitled to notice of the
Annual Meeting.
STOCKHOLDER PROPOSALS
The Company will, in future proxy statements of the Board, include
stockholder proposals complying with the applicable rules of the Securities and
Exchange Commission and any applicable state laws. In order for a proposal by a
stockholder to be included in the proxy statement of the Board relating to the
Annual Meeting of Stockholders to be held in fall 1997, that proposal must be
received in writing by the Secretary of the Company at the Company's principal
executive offices no later than June 14, 1997.
OTHER MATTERS
The Board knows of no other matters which will be presented to the Annual
Meeting. If, however, any other matter is properly presented at the Annual
Meeting, the proxy solicited by this Proxy Statement will be voted in accordance
with the judgment of the person or persons holding such proxy.
BY ORDER OF THE BOARD OF DIRECTORS
Kenneth H. Haas, Director and President
Mountain View, California
October 21, 1996
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. WHETHER OR NOT
YOU PLAN TO ATTEND THE MEETING, YOU ARE REQUESTED TO SIGN AND RETURN
THE ACCOMPANYING PROXY IN THE ENCLOSED POSTPAID ENVELOPE.
15
<PAGE> 17
1991 STOCK OPTION PLAN
OF
INTELLICORP, INC.
1. PURPOSES OF THE PLAN
The purposes of the 1991 Stock Option Plan (the "Plan") of
Intellicorp, Inc., a Delaware corporation (the "Company"), are to:
(a) Encourage selected employees, directors and consultants to
improve operations and increase profits of the Company;
(b) Encourage selected employees, directors and consultants to
accept or continue employment or association with the Company or any Affiliate
(as defined below); and
(c) Increase the interest of selected employees, directors and
consultants in the Company's welfare through participation in the growth in
value of the common stock of the Company (the "Common Stock").
Options granted under this Plan ("Options") may be "incentive
stock options" ("ISOs") intended to satisfy the requirements of Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code"), or "nonqualified
options" ("NQOs").
2. ELIGIBLE PERSONS
Every person who at the date of grant of an option is an employee
of the Company or of any Affiliate of the Company is eligible to receive NQOs or
ISOs under this Plan. Every person who at the date of grant is a director of or
consultant to the Company or to any Affiliate of the Company is eligible to
receive NQOs under this Plan. The term "Affiliate" as used in the Plan means a
parent or subsidiary corporation as defined in the applicable provisions
(currently Sections 425(e) and (f), respectively) of the Code. The term
"employee" includes an officer or director who is an employee, of the Company.
The term "consultant" includes persons employed by, or otherwise affiliated
with, a consultant.
3. STOCK SUBJECT TO THIS PLAN
Subject to the provisions of Section 6.1.1 of the Plan, the
maximum aggregate number of shares of stock which may be issued on exercise of
options granted pursuant to this Plan is 3,004,778 shares of Common Stock, as
set forth on the last page of this Plan. The shares covered by the portion of
any grant under the Plan which expires unexercised shall become available again
for grants under the Plan.
<PAGE> 18
4. ADMINISTRATION
(a) This Plan shall be administered by the Board of Directors of
the Company (the "Board"), or by a committee (the "Committee") of at least two
(2) Board members to which administration of the Plan is delegated (in either
case, the "Administrator"), in accordance with the provisions of Rule 16b-3
promulgated by the Securities and Exchange Commission ("Rule 16b- 3"), or by any
successor rule thereto.
(b) Subject to the other provisions of this Plan, the
Administrator shall have the authority, in its discretion: (i) to grant Options;
(ii) to determine the fair market value of the Common Stock subject to Options;
(iii) to determine the exercise price of Options granted; (iv) to determine the
persons to whom, and the time or times at which, Options shall be granted, and
the number of shares subject to each Option; (v) to interpret this Plan; (vi) to
prescribe, amend and rescind rules and regulations relating to this Plan; (vii)
to determine the terms and provisions of each Option granted (which need not be
identical), including, but not limited to, the time or times at which Options
shall be exercisable; (viii) with the consent of the optionee, to modify or
amend any Option; (ix) to defer (with the consent of the optionee) the exercise
date of any Option or to defer (with the consent of the optionee) or to
accelerate the expiration of any right of repurchase which the Company may have
with respect to shares issued or issuable upon exercise of any Option; (x) to
authorize any person to execute on behalf of the Company any instrument
evidencing the grant of an Option; and (xi) to make all other determinations
deemed necessary or advisable for the administration of this Plan. The
Administrator (A) may delegate to one or more officers of this corporation the
authority to grant Options in an amount not to exceed 10,000 shares of Common
Stock to persons other than "executive officers" as defined in the Securities
Exchange Act and the rules and regulations thereunder and to determine the fair
market value of Common Stock subject to such Options, to determine the exercise
price of such Options granted (which need not be identical), including, but not
limited to, the time or times at which such Options shall be exercisable, and to
determine the terms and provisions of each such Option granted and (B) may
delegate nondiscretionary administrative duties to such employees of the Company
as it deems proper.
(c) All questions of interpretation, implementation and
application of this Plan shall be determined by the Administrator. Such
determination shall be final and binding on all persons.
5. GRANTING OF OPTIONS; OPTION AGREEMENT
(a) No Options shall be granted under this Plan after ten (10)
years from the date of adoption of this Plan by the Board.
-2-
<PAGE> 19
(b) Each Option shall be evidenced by a written stock option
agreement, in form satisfactory to the Company, executed by the Company and the
person to whom such Option is granted; provided, however, that the failure by
the Company, the optionee or both to execute such an agreement shall not
invalidate the granting of an Option.
(c) The agreement shall specify whether each Option it evidences
is a NQO or an ISO. However, notwithstanding such designations, if the aggregate
fair market value of the shares under Options designated as ISOs would become
exercisable for the first time by any optionee at a rate in excess of $100,000
in any calendar year (under all plans of the Company), then unless otherwise
provided in the stock option agreement or by the Administrator, the
exercisability of ISOs (or portions thereof) having the highest per share
exercise price shall be delayed until the earliest time at which their
exercisability would not cause the $100,000 limitation to be exceeded. For
purposes of this Section 5(c), Options shall be taken into account in the order
in which they were granted, and the fair market value of the shares shall be
determined as of the time the Option with respect to such shares is granted.
(d) The Administrator may approve the grant of Options under this
Plan to persons who are expected to become employees, directors or consultants
of the Company, but are not employees, directors or consultant at the date of
approval. In such cases, the Option shall be deemed granted, without further
approval, on the date the grantee assumes the employment or consulting
relationship forming the basis for such grant, and, in addition, satisfies all
requirements of this Plan for Options granted on that date.
6. TERMS AND CONDITIONS OF OPTIONS
Each Option granted under this Plan shall be designated as an NQO
or an ISO. Each Option shall be subject to the terms and conditions set forth in
Section 6.1. NQOs shall also be subject to the terms and conditions set forth in
Section 6.2, but not those set forth in Section 6.3. ISOs shall also be subject
to the terms and conditions set forth in Section 6.3, but not those set forth in
Section 6.2.
6.1 Terms and Conditions to Which All Options Are Subject. All
Options granted under this Plan shall be subject to the following terms and
conditions:
6.1.1 Changes in Capital Structure. Subject to Section 6.1.2,
if the Common Stock of the Company is changed by reason of a stock split,
reverse stock split, stock dividend or re-capitalization, or converted into or
exchanged for other securities as a result of a merger, consolidation or
reorganization, appropriate adjustments shall be made in: (a) the number and
class of shares of Common Stock subject to this Plan and each Option outstanding
under this Plan; and (b) the
-3-
<PAGE> 20
exercise price of each outstanding Option; provided, however, that the Company
shall not be required to issue fractional shares as a result of any such
adjustments. Each such adjustment shall be subject to approval by the
Administrator in its sole discretion.
6.1.2 Corporate Transactions. In connection with an
acquisition of the Company affected by a merger, consolidation, sale of all or
substantially all of the Company's assets, acquisition of shares, or any like
occurrence in which the Company is involved, the repurchase rights of the
Company with respect to the shares issued or issuable upon exercise of
outstanding Options shall expire with respect to twice the number of shares
otherwise indicated pursuant to the terms of the Option (up to a maximum of
100%); provided that if Options have been held less than one year the length of
time between the date of grant and the date determined by the Administrator in
accordance with the next sentence shall be doubled to determine the number of
shares as to which repurchase rights shall expire. The Administrator shall have
the authority, in its sole discretion to: (i) determine the time prior to
consummation of such acquisition when such increased expiration of repurchase
rights shall become effective; and (ii) grant more favorable terms regarding
expiration of repurchase rights in connection with the occurrence of any such
acquisition.
6.1.3 Time of Option Exercise. Except as necessary to satisfy
the requirements of Section 422 of the Code and subject to Section 5, Options
granted under this Plan shall be exercisable: (a) immediately as of the
effective date of the stock option agreement granting the Option; or (b) at such
other times as are specified in the written stock option agreement relating to
such Option; provided, however, that if the optionee is a director or officer,
as those terms are used in Section 16 of the Securities and Exchange Act of
1934, as amended (the "Exchange Act"), such Option may not be exercisable, in
whole or in part, at any time prior to the six (6) month anniversary of the date
of Option grant. No Option shall be exercisable, however, until a written stock
option agreement in form satisfactory to the Company is executed by the Company
and the optionee.
6.1.4 Option Grant Date. Except in the case of advance
approvals described in Section 5(d), the date of grant of an Option under this
Plan shall be the date as of which the Administrator approves the grant.
6.1.5 Nonassignability of Option Rights. No Option granted
under this Plan shall be assignable or otherwise transferable by the optionee
except by will or by the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Code. During the life of
the optionee, an Option shall be exercisable only by the optionee.
-4-
<PAGE> 21
6.1.6 Payment. Except as provided below, payment in full, in
cash, shall be made for all stock purchased at the time written notice of
exercise of an Option is given to the Company, and proceeds of any payment shall
constitute general funds of the Company. At the time an Option is granted or
exercised, the Administrator, in the exercise of its absolute discretion, may
authorize any one or more of the following additional methods of payment: (a)
acceptance of the optionee's full recourse promissory note for all or part of
the Option price, less the par value per share, which must be paid in cash,
payable on such terms and bearing such interest rate as determined by the
Administrator (but in no event less than the minimum interest rate specified
under the Code at which no additional interest on debt instruments of such type
would be imputed), which promissory note may be either secured or unsecured in
such manner as the Administrator shall approve (including, without limitation,
by a security interest in the shares of the Company). In making its
determination to accept a promissory note from an employee of the Company, the
Board shall consider if acceptance of such consideration may be reasonably
expected to benefit the Company; (b) delivery by the optionee of Common Stock
already owned by the optionee for all or part of the Option price, provided the
value (determined as set forth in Section 6.1.11) of such Common Stock is equal
on the date of exercise to the Option price, or such portion thereof as the
optionee is authorized to pay by delivery of such stock; provided, however, that
if an optionee has exercised any portion of any option granted by the Company by
delivery of Common Stock, the optionee may not, within six (6) months following
such exercise, exercise any Option granted under this Plan by delivery of Common
Stock; and (c) any other consideration and method of payment to the extent
permitted under Sections 152 and 153 of the Delaware General Corporation Law.
6.1.7 Termination of Employment. Unless determined otherwise
by the Administrator in its absolute discretion, to the extent not already
expired or exercised, an Option shall terminate at the earlier of: (a) the
Expiration Date (as defined in Section 6.1.11); or (b) three (3) months after
termination of employment with the Company or any Affiliate (with respect to
employees) or three (3) months after the last day served as a consultant to the
Company or any Affiliate (with respect to consultants); provided, that an Option
shall be exercisable after the date of termination of employment or service as a
consultant only to the extent exercisable on the date of termination; and
provided further, that if termination of employment or service as a consultant
is due to the optionee's death or "disability" (as determined in accordance with
Section 22(e)(3) of the Code), the optionee, or the optionee's personal
representative (or any other person who acquires the Option from the optionee by
will or the applicable laws of descent and distribution), may at any time within
twelve (12) months after the termination of employment or service as a
consultant (or such lesser period as is specified in the option agreement but in
no event after the Expiration Date of the Option), exercise the
-5-
<PAGE> 22
rights to the extent they were exercisable on the date of the termination. A
transfer of an optionee from the Company to an Affiliate or vice versa, or from
one Affiliate to another, or a leave of absence due to sickness, military
service or other cause duly approved by the Company, shall not be deemed a
termination of employment or the consulting relationship for purposes of this
Plan.
6.1.8 Repurchase of Stock. Unless otherwise provided for by
the Administrator in the option agreement, the Common Stock to be delivered
pursuant to the exercise of any Option granted to an employee or consultant
under this Plan may be subject to a right of repurchase in favor of the Company,
with respect to any employee or consultant whose employment or consulting
relationship with the Company is terminated, at the Option exercise price per
share, and such shares shall be held by the Company in escrow to facilitate the
Company's repurchase right. Unless otherwise provided for by the Administrator
in the option agreement, the Company's repurchase right shall expire as to 25%
of the total amount of the shares subject to the Option on the first anniversary
date of the Option grant and shall expire as to an additional 6.25% of such
shares on a quarterly basis thereafter. For purposes of the immediately
preceding provision, the percentages set forth therein are applicable to
full-time employees and the percentage applicable to part-time employees shall
be adjusted proportionately to the percentage of full-time employment that such
employee is working during the relevant period. Determination of the number of
shares subject to such right of repurchase shall be made as of the date the
employee's employment by or consultant's consulting relationship with, the
Company terminates, not as of the date that any Option granted to such employee
or consultant is thereafter exercised.
6.1.9 Withholding and Employment Taxes. At the time of
exercise of an Option (or at such later time(s) as the Company may prescribe),
the optionee shall remit to the Company in cash all applicable federal and state
withholding and employment taxes. If authorized by the Administrator in its sole
discretion, an optionee subject to Section 16(b) of the Exchange Act shall be
permitted to elect, by means of a form of election to be prescribed by the
Administrator, to have shares of Common Stock which are acquired upon exercise
of the Option withheld by the Company or to tender to the Company other shares
of Common Stock or other securities of the Company owned by the optionee on the
date of determination of the amount of tax to be withheld as a result of the
exercise of such Option (the "Tax Date") to pay the amount of tax that is
required by law to be withheld by the Company as a result of the exercise of
such Option, provided that such election satisfies the following requirements:
(a) such election shall be irrevocable; (b) such election shall be subject to
the disapproval of the Administrator at any time; (c) such election may not be
made within six (6) months of the grant date of the Option the exercise of which
resulted in the tax withholding obligation (the "Related Option"), except that
this limitation shall not apply in the event of death or disability of
-6-
<PAGE> 23
the optionee occurring prior to the expiration of the six (6) month period; and
(d) such election must be made either: (x) at least six (6) months prior to the
Tax Date; or (y) prior to or coincident with the date of exercise of the Related
Option and within any ten (10) business day period beginning on the third
business day following the date of release by the Company for publication of
quarterly or annual summary statements of sales or earnings of the Company. Any
securities so withheld or tendered shall be valued by the Company as of the Tax
Date.
6.1.10 Other Provisions. Each Option granted under this Plan
may contain such other terms, provisions and conditions not inconsistent with
this Plan as may be determined by the Administrator, and each ISO granted under
this Plan shall include such provisions and conditions as are necessary to
qualify the Option as an "incentive stock option" within the meaning of Section
422 of the Code.
6.1.11 Option Term. No ISO shall be exercisable more than ten
(10) years after the date of grant, or such lesser period of time as is set
forth in the option agreement, and each NQO granted hereunder shall expire ten
(10) years and two (2) days after the date of grant (the end of the exercise
period stated in the option agreement is referred to in this Plan as the
"Expiration Date"). Notwithstanding the foregoing, no ISO granted to a Ten
Percent Stockholder (as defined in Section 6.3.1) shall be exercisable more than
five (5) years after the date of grant.
6.1.12 Limitation on Option Grants. The Company may not grant
options under the Plan for more than 500,000 shares to any one participant in
any fiscal year.
6.2 Terms and Conditions to Which Only NQOs Are Subject. The
exercise price of a NQO shall be determined by the Administrator and may be less
than the fair market value of the Common Stock subject to the Option on the date
of grant.
6.3 Terms and Conditions to Which Only ISOs Are Subject. Options
granted under this Plan which are designated as ISOs shall be subject to the
following terms and conditions:
6.3.1 Exercise Price. The exercise price of an ISO shall be
determined in accordance with the applicable provisions of the Code and shall in
no event be less than the fair market value of the Common Stock subject to the
Option on the date of grant, except that the exercise price of an ISO granted to
any person who owns, directly or by attribution, shares possessing more than 10%
of the total combined voting power of all classes of stock of the Company or of
any Affiliate (a "Ten Percent Stockholder") shall in no event be less than 110%
of such fair market value.
6.3.2 Disqualifying Dispositions. If stock acquired upon
exercise of an ISO is disposed of in a
-7-
<PAGE> 24
"disqualifying disposition" within the meaning of Section 422 of the Code, the
holder of the stock immediately before the disposition shall notify the Company
in writing of the date and terms of the disposition and comply with any other
requirements imposed by the Company in order to enable the Company to secure any
related income tax deduction to which it is entitled.
7. MANNER OF EXERCISE
(a) An optionee wishing to exercise an Option shall give written
notice to the Company at its principal executive office, to the attention of the
officer of the Company designated by the Administrator, accompanied by payment
of the exercise price as provided in Section 6.1.6 and, if required, by payment
of any federal or state withholding or employment taxes required to be withheld
by virtue of exercise of the Option. The date the Company receives written
notice of an exercise hereunder accompanied by payment of the exercise price and
any required federal or state withholding or employment taxes will be considered
as the date such Option was exercised. There is no limit on the number of times
Options may be exercised in any calendar year, unless the President of the
Company or the Board prescribes such a limit.
(b) Promptly after the date an Option is exercised, the Company
shall, without stock issue or transfer taxes to the optionee or other person
entitled to exercise the Option, deliver to the optionee or such other person a
certificate or certificates for the requisite number of shares of Common Stock.
An optionee or transferee of an optionee shall not have any privileges as a
stockholder with respect to any Common Stock covered by the Option until the
date of issuance of a stock certificate.
8. EMPLOYMENT OR CONSULTING RELATIONSHIP
Nothing in this Plan or any Option granted thereunder shall
interfere with or limit in any way the right of the Company or of any of its
Affiliates to terminate any optionee's employment or consulting at any time, nor
confer upon any optionee any right to continue in the employ of, or consult
with, the Company or any of its Affiliates.
9. FINANCIAL INFORMATION
The Company shall provide to each optionee during the period such
optionee holds an outstanding Option a copy of the financial statements of the
Company as prepared either by the Company or independent certified public
accountants of the Company. Such financial statements shall be delivered as soon
as practicable following the end of the Company's fiscal year during the period
Options are outstanding.
10. LEGAL REQUIREMENTS
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<PAGE> 25
The Company shall not be obligated to offer or sell any shares
upon exercise of any Option unless the shares are at that time effectively
registered or exempt from registration under the federal securities laws and the
offer and sale of the shares are otherwise in compliance with all applicable
securities laws and the regulations of any stock exchange on which the Company's
securities may then be listed. The Company shall have no obligation to register
the shares of Common Stock covered by this Plan under the federal securities
laws or take any other steps as may be necessary to enable the shares of Common
Stock covered by this Plan to be offered and sold under federal or other
securities laws. Upon exercising all or any portion of an Option, an optionee
may be required to furnish representations or undertaking deemed appropriate by
the Company to enable the offer and sale of the shares or subsequent transfers
of any interest in the shares to comply with applicable securities laws.
Certificates evidencing shares acquired upon exercise of Options shall bear any
legend required by, or useful for purposes of compliance with, applicable
securities laws, this Plan or the option agreements.
11. AMENDMENTS TO PLAN
The Board may amend this Plan at any time. Without the consent of
an optionee, no amendment may adversely affect outstanding Options except to
conform this Plan and ISOs granted under this Plan to federal or other tax laws
relating to incentive stock options. No amendment shall require stockholder
approval unless:
(a) stockholder approval is required to preserve incentive stock
option treatment for federal income tax purposes;
(b) stockholder approval is required to meet the exemptions
provided by Rule 16b-3, or any successor rule thereto; or
(c) the Board otherwise concludes that stockholder approval is
advisable.
12. STOCKHOLDER APPROVAL; TERM
This Plan shall become effective upon adoption by the Board of
Directors; provided, however, that no Option shall be exercisable unless and
until written consent of holders of a majority of the outstanding shares of
capital stock of the Company, or approval by holders of a majority of shares of
capital stock of the Company present, or represented, and entitled to vote at a
validly called stockholders' meeting (or such greater number as may be required
by law or applicable governmental regulations or orders) is obtained within
twelve (12) months after adoption by the Board. This Plan shall terminate ten
(10) years after adoption by the Board unless terminated earlier by the Board.
The Board may terminate this Plan at any time without stockholder approval. No
Options shall
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<PAGE> 26
be granted after termination of this Plan, but termination shall not affect
rights and obligations under then outstanding Options.
Plan adopted by the Board of Directors on December 19, 1991.
Plan approved by Stockholders on February 3, 1992.
Amendment to the Plan increasing the number of shares covered to 1,304,778
adopted by the Board of Directors on May 3, 1993 and approved by the
Stockholders on November 30, 1993.
Further amendments (not requiring Stockholder approval) approved by the Board of
Directors on January 31, 1994 and February 16, 1994.
Amendment to the Plan increasing the number of shares covered to 2,004,778
adopted by the Board of Directors on September 13, 1994 and approved by the
stockholders on November 29, 1994.
Amendment to the Plan increasing the number of shares covered to 3,004,778
adopted by the Board of Directors on __________, 1996 [and approved by the
stockholders on _____________, 1996].
Total number of shares covered by the Plan: [3,004,778].
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<PAGE> 27
PROXY
INTELLICORP
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoint(s) Kenneth H. Haas and Kenneth A. Czaja, and
each of them, with full power of substitution, the lawful attorney and proxy of
the undersigned to vote as designated on the reverse side, and, in their
discretion, upon such other business as may properly be presented to the
meeting, all of the shares of INTELLICORP, INC. which the undersigned shall be
entitled to vote at the Annual Meeting of Stockholders to be held on December
6, 1996, and at any adjournments or postponements thereof.
(Continued and to be signed on the other side)
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<PAGE> 28
PLEASE MARK
YOUR PROXY
AS INDICATED
IN THIS EXAMPLE /X/
Item 1 - To elect as directors Katharine C. Branscomb,
Joseph A. Graziano, Kenneth H. Haas and Norman J. Wechsler.
/ / FOR all nominees listed (except as indicated below)
/ / WITHHOLD AUTHORITY to vote (as to all nominees)
TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE THAT
NOMINEE'S NAME ON THE LINE INDICATED BELOW:
___________________________________________________________________________
Item 2 - To approve an amendment to the Company's 1991 Stock Option Plan to
increase the aggregate number of shares authorized for issuance
under such Plan by 1,000,000 shares.
/ / FOR / / AGAINST / / ABSTAIN
This proxy, when properly executed, will be
voted in the manner directed by the undersigned
stockholders. WHEN NO CHOICE IS INDICATED,
THIS PROXY WILL BE VOTED FOR THE NOMINEES
LISTED ABOVE. This proxy may be revoked at any
time prior to the time it is voted by any means
described in the accompanying Proxy Statement
PLEASE COMPLETE, DATE AND SIGN THIS PROXY AND
RETURN IT PROMPTLY IN THE ENCLOSED POSTPAID
ENVELOPE.
Signature(s)_____________________________________Dated:_______________, 1996
Please date and sign exactly as name(s) appear(s) hereon. If shares are held
jointly, each holder should sign. Please give full title and capacity in which
signing if not signing as an individual.
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FOLD AND DETACH HERE
