<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<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 Rule 14a-11(c) or Rule 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] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which 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 8, 1998
To the Stockholders of IntelliCorp, Inc.:
The Annual Meeting of Stockholders of IntelliCorp, Inc. (the "Company")
will be held at the Sheraton Palo Alto, 625 El Camino Real, Palo Alto,
California, on December 8, 1998 at 9:00 a.m. local time for the following
purposes:
1. To elect five 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 for issuance thereunder by 1,500,000;
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, 1998
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 27, 1998
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
(650) 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 8, 1998 at
the Sheraton Palo Alto, 625 El Camino Real, Palo Alto, California. The
approximate date on which this proxy statement and the accompanying notice and
proxy are being mailed to stockholders is October 27, 1998.
Only stockholders of record at the close of business on October 15, 1998
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 15,211,307 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. In order to constitute a quorum for
the conduct of business at the Annual Meeting, a majority of the outstanding
shares of Common Stock entitled to vote at the Annual Meeting must be
represented at the Annual Meeting.
INFORMATION CONCERNING SOLICITATION AND VOTING
All shares represented by each properly executed, unrevoked proxy received
in time for the Annual Meeting will be voted in the manner specified therein. If
the manner of voting is not specified in an executed proxy received by the
Company, the proxy will be voted for the election of the directors listed in the
proxy for election to the Board and for approval of the other proposals
described in this proxy statement.
Shares represented by proxies that reflect abstentions or broker non-votes
will be counted as shares that are present and entitled to vote for purposes of
determining the presence of a quorum. Directors will be elected by a favorable
vote of a plurality of the shares of voting stock present and entitled to vote,
in person or by proxy, at the Annual Meeting. Accordingly, abstentions or broker
non-votes as to the election of directors will not affect the election of the
candidates receiving the plurality of votes. Proposal Number Two requires the
approval of a majority of the shares of Common Stock represented and voting at
the meeting at which a quorum is present. Abstentions will have the same effect
as votes against such proposal. Broker non-votes, however, will be treated as
unvoted for the purposes of determining approval of such proposal and will not
be counted as votes for or against such proposal.
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
or agents of the Company by personal interview, telephone or telegraph. Costs of
solicitation will be borne by the Company.
1
<PAGE> 4
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.
Five 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. 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........................... 47 Director and President 1993
Katharine C. Branscomb(1)................. 42 Director 1988
Joseph A. Graziano(1)(2).................. 54 Director 1985
Norman J. Wechsler(1)(2).................. 53 Director 1996
Arthur W. Berry(2)........................ 57 Director 1997
</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.
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 and CIDCO,
Inc.
2
<PAGE> 5
Norman J. Wechsler has been a Director of the Company since September 1996.
He is Chairman and President of Wechsler & Co., Inc., a broker-dealer and
investment company, which he joined in 1963. The firm is a member of the NASD
and SIPC.
Arthur W. Berry became a Director of the Company in August 1997. Since
1990, he has been Chairman of Pecks Management Partners Ltd. in New York, a
specialized, institutional investment manager focusing on public and privately
placed convertible securities. From 1985 to 1990, Mr. Berry was President of the
Alliance Capital Management, L.P. Convertible Fund. Prior to joining Alliance,
he was with the Harris Bank in Chicago, first as Senior Portfolio Manager in the
bank's individual investment group, then as Vice President and Head of the
Special Funds section and Manager of the Harris Convertible Fund. Mr. Berry, a
Chartered Financial Analyst, is a graduate of Monmouth College and holds an MBA
degree from Washington University. He is a director of Hybridon, Inc.
BOARD MEETINGS AND COMMITTEES
The Board of Directors met ten times during the last fiscal year. Other
than for Katharine Branscomb, all directors participated in more than 75% of the
total number of meetings of the Board and all committees of the Board on which
he or she served that were held during the period.
The Board of Directors has a Compensation and Stock Option Committee and an
Audit Committee. The Compensation and Stock Option Committee met four 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.
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 30,000 options were granted to nonemployee directors under
the Directors Plan during the fiscal year ended June 30, 1998.
Nonemployee directors of the Company have the right to receive an annual
fee for their services as directors. During fiscal 1998, all nonemployee
directors were entitled to receive an annual fee of $10,000 each,
3
<PAGE> 6
and they 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.
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.
Maryanne R. Stone and Arthur W. Berry each filed a late Form 5 in June 1998
reporting their respective beneficial ownership in the Company. Both late
filings were due to inadvertent administrative delays. Other than these two
instances, 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, 1998, there has been no other
failure by any of its officers, directors or 10% shareholders to file on a
timely basis any reports required by Section 16(a).
BENEFICIAL STOCK OWNERSHIP
The following table sets forth as of September 21, 1998: (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 11.41%
Postfach 1461
D-69185, Walldorf, Germany
ICS Deloitte Management............................... 1,000,000 6.57%
Chadds Ford Business Campus
Brandywine 5 Building, Suite 350
Chadds Forth, PA
Norman J. Wechsler(1)................................. 3,295,960 19.31%
105 South Bedford Road
Mt. Kisco, NY 10549
</TABLE>
- ---------------
(1) Includes 598,542 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, 26,101 shares of Common Stock held by Waco Partners,
of which Mr. Wechsler is the managing general partner, outstanding options
to purchase 16,875 shares granted to Mr. Wechsler under the 1991 Nonemployee
Directors Stock Option Plan which were exercisable as of September 21, 1998,
or within 60 days from such date, and 2,589,442 shares of Common Stock,
including 629,032 shares of Common Stock issuable upon conversion of
Convertible Notes in the outstanding principal amount of $975,000, 758,064
shares issuable upon conversion of Preferred Stock and 470,000 shares
issuable upon exercise of warrants deemed beneficially owned by Mr.
Wechsler.
4
<PAGE> 7
The following table sets forth as of September 21, 1998, 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............................................. 317,037 2.38%
Katharine C. Branscomb...................................... 196,604 1.49%
Joseph A. Graziano.......................................... 70,250 *
Norman J. Wechsler.......................................... 3,295,960(2) 19.31%
Arthur W. Berry............................................. 125,234(3) *
Colin Bodell................................................ 94,975 *
Kenneth A. Czaja............................................ 60,250 *
Adrian G. Rayner............................................ 53,750 *
Anthony A. Awaida........................................... 66,138 *
All directors and executive officers as a group (15
persons).................................................. 4,613,567(4) 25.41%(4)
</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, 1998, all options to purchase
Common Stock held by him or her and that no other person has exercised any
outstanding options.
(2) Includes 598,542 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, 26,101 shares of Common Stock held by Waco Partners,
of which Mr. Wechsler is the managing general partner, outstanding options
to purchase 16,875 shares granted to Mr. Wechsler under the 1991 Nonemployee
Directors Stock Option Plan which were exercisable as of September 21, 1998,
or within 60 days from such date, and 2,589,442 shares of Common Stock,
including 629,032 shares of Common Stock issuable upon conversion of
Convertible Notes in the outstanding principal amount of $975,000, 758,064
shares issuable upon conversion of Preferred Stock and 470,000 shares
issuable upon exercise of warrants deemed beneficially owned by Mr.
Wechsler.
(3) Includes 32,258 shares of Common Stock issuable upon conversion of
Convertible Notes in the outstanding principal amount of $50,000, 32,258
shares of Common Stock issuable upon conversion of Preferred Stock and
20,000 shares issuable upon exercise of warrants.
(4) Includes 1,007,382 shares which executive officers and directors as a group
have the right to acquire prior to October 30, 1998 through the exercise of
options and which are not subject to repurchase after that date and
1,941,612 shares issuable upon conversion of Convertible Notes, Warrants and
Preferred Stock for Mr. Wechsler and Mr. Berry.
5
<PAGE> 8
EXECUTIVE COMPENSATION
The following table sets forth compensation paid by the Company for
services rendered in all capacities during the three most recent fiscal years to
the following executive officers of the Company:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
YEAR ------------------- ---------------------
ENDED SALARY BONUS SECURITIES UNDERLYING
NAME AND PRINCIPAL POSITION JUNE 30 ($) ($) OPTIONS/SARS(#)
--------------------------- ------- -------- ------- ---------------------
<S> <C> <C> <C> <C>
Kenneth H. Haas............................. 1998 $193,750 $ -0- 75,000
Director and President 1997 $150,000 $ -0- 150,000
1996 $150,000 $ -0- -0-
Colin Bodell(2)............................. 1998 $189,500 $ -0- 30,000
Chief Operating Officer 1997 $182,000 $ -0- 50,000
1996 $ 75,000 $25,000 100,000
Kenneth A. Czaja(1)......................... 1998 $155,000 $ -0- 30,000
Chief Financial Officer and Secretary 1997 $112,500 $10,000 100,000
Adrian G. Rayner(4)......................... 1998 $238,695 $ -0- 20,000
Vice President and Managing 1997 $204,661 $ -0- 10,000
Director, Europe 1996 $150,540 $ -0- -0-
Anthony A. Awaida(3)........................ 1998 $216,173 $ 7,500 20,000
Vice President, Sales -- 1997 $225,474 $ -0- 30,000
Americas and Asia Pacific 1996 $190,194 $ -0- -0-
</TABLE>
- ---------------
(1) Mr. Czaja joined and was appointed an executive officer of the Company in
October 1996.
(2) Mr. Bodell joined and was appointed an executive officer of the Company in
January 1996.
(3) Mr. Awaida was appointed an executive officer of the Company in October 1996
and left the Company on August 25, 1998.
(4) Mr. Rayner was appointed an executive officer of the Company in August 1997.
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.
The following table shows for each executive officer named in the Summary
Compensation Table certain information regarding stock option grants during
fiscal year 1998:
OPTION/SAR GRANTS IN LAST FISCAL YEAR(1)
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
PERCENT VALUE AT
TOTAL ASSUMED RATES
NUMBER OF OPTIONS/SARS OF STOCK PRICE
SECURITIES GRANTED TO APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OR OPTION TERM(3)
OPTION/SARS IN FISCAL YEAR BASE PRICE EXPIRATION ---------------------
NAME GRANTED(2) 1998 ($/SHARES) DATE 5% 10%
---- ----------- -------------- ----------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Kenneth H. Haas............... 75,000 9% $3.0000 8/6/07 $141,501 $358,592
Colin Bodell.................. 30,000 4% $3.0000 8/6/07 $ 56,601 $143,437
Kenneth A. Czaja.............. 30,000 4% $3.0000 8/6/07 $ 56,601 $143,437
Adrian G. Rayner.............. 20,000 2% $3.0000 8/6/07 $ 37,734 $ 95,625
Anthony A. Awaida............. 20,000 2% $3.0000 8/6/07 $ 37,734 $ 95,625
</TABLE>
- ---------------
(1) No SAR grants were made to any named executive officer during the year ended
June 30, 1998.
(2) 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
6
<PAGE> 9
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.
(3) 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, 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.
The following table shows for each executive officer named in the Summary
Compensation Table certain information regarding option exercises during fiscal
year 1998 and options outstanding as of June 30, 1998:
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.......... 46,118(4) $210,429 286,250/168,750 $781,875/$262,500
Colin Bodell............. -0- -0- 81,250/98,750 $209,375/$195,625
Kenneth A. Czaja......... -0- -0- 37,500/92,500 $ 67,969/$143,281
Adrian G. Rayner......... -0- -0- 26,563/27,500 $ 61,992/$ 66,758
Anthony A. Awaida........ -0- -0- 34,688/45,313 $ 60,704/$ 34,063
</TABLE>
- ---------------
(1) No SAR grants were outstanding at June 30, 1998.
(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 $4.00 at fiscal year end.
(4) The 46,118 shares acquired on exercise by Kenneth H. Haas during fiscal year
1998 relate to expiring employee stock option that would have expired if not
exercised.
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 1,500,000.
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
7
<PAGE> 10
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 1,500,000. As of August 31, 1998, there were outstanding options to
purchase 2,295,411 shares, leaving available for future grant options to
purchase only 158,589 shares. 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 11.4% of the outstanding shares of the Common Stock of
the Company as of August 31, 1998, on a fully diluted basis.(1) If the 1991
Option Plan is amended as proposed, the number of shares reserved for issuance
would equal approximately 18.4%. 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 amendment, is 2,454,000. As
of August 31, 1998, the Company had approximately 140 employees 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.
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
- ---------------
(1) Including all converted common equivalent shares from preferred stock,
convertible debt, warrants and in the money stock options.
8
<PAGE> 11
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 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 a price
equal to 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 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.
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") is 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.
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<PAGE> 12
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, taxable income is deferred until the
risk of forfeiture lapses unless the optionee makes a so-called "Section 83(b)
election", to be taxed on the Option Spread on the date of exercise. If the
election is not made with respect to shares which are restricted, 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.
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.
10
<PAGE> 13
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, 1998.
PLAN BENEFITS
<TABLE>
<CAPTION>
NAME AND POSITION NUMBER OF SHARES
----------------- ----------------
<S> <C>
Kenneth H. Haas............................................. 75,000
Director and President
Colin Bodell................................................ 30,000
Chief Operating Officer
Kenneth A. Czaja............................................ 30,000
Chief Financial Officer and Secretary
Adrian G. Rayner............................................ 20,000
Vice President and Managing Director, Europe
Anthony A. Awaida........................................... 20,000
Vice President, Sales -- Americas and Asia Pacific
Executive Group............................................. 265,000
Non-Executive Director Group(1)............................. 0
Non-Executive Officer Employee Group........................ 295,450
</TABLE>
- ---------------
(1) Non-Employee directors did not receive option grants under the 1991 Stock
Option Plan.
PROPOSAL
At the Annual Meeting, stockholders will be asked to approve the amendment
of the 1991 Stock Option Plan to increase the number of shares available under
the 1991 Option Plan by 1,500,000. 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. The Board of Directors recommends a vote
"FOR" approval of the amendment of the 1991 Stock Option Plan.
INDEPENDENT AUDITORS
The Board of Directors of the Company has selected Ernst & Young LLP as
independent auditors to audit the financial statements of the Company for the
fiscal year ending June 30, 1999. 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, 1998, 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 1999, that proposal must be
received in writing by the Secretary of the Company at the Company's principal
executive offices no later than June 29, 1999.
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<PAGE> 14
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 contains discretionary
authority on the persons named therein and will be voted in accordance with the
judgment of the person or persons holding such proxy. In addition, if the
Company is not notified by September 8, 1999 of a proposal to be brought before
the 1999 annual meeting by a stockholder, then proxies held by management for
such meeting may provide the discretion to vote against such proposal even
though it is not discussed in the proxy statement for such meeting.
BY ORDER OF THE BOARD OF DIRECTORS
Kenneth H. Haas, Director and
President
Mountain View, California
October 27, 1998
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.
12
<PAGE> 15
IntelliCorp
PROXY
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 8, 1998, and at any
adjournments or postponements thereof.
(Continued and to be signed on the other side)
<PAGE> 16
Item 1-To elect as directors Katharine C. Branscomb, Joseph A. Graziano,
Kenneth H. Haas, Norman J. Wechsler and Arthur W. Berry.
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 provided 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 1,500,000 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.
Dated:_______________________________________, 1998
______________________________________________________________________
Signature
______________________________________________________________________
Signature
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.
PLEASE COMPLETE, DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED
POSTPAID ENVELOPE.
