<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 7, 1999
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 7, 1999 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 Nonemployee Directors
Stock Option Plan to increase the number of options automatically
granted to nonemployee directors under the Plan and to provide that such
options will be fully vested and exercisable on grant.
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, 1999
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 Chief Executive Officer
Mountain View, California
October 22, 1999
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 7, 1999 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 29, 1999.
Only stockholders of record at the close of business on October 15, 1999
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 17,093,076 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.
<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...................................... 48 Director and Chief 1993
Executive Officer
Katharine C. Branscomb(1)(2)......................... 43 Director 1988
Norman J. Wechsler(1)(2)............................. 54 Director 1996
Arthur W. Berry(1)(2)................................ 58 Director 1997
Robert A. Lauridsen(1)(2)............................ 51 Director 1999
</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 and Chief Executive Officer
in August 1999. 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.
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
2
<PAGE> 5
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.
Robert A. Lauridsen has been a Director of the Company since April 1999. He
is a Partner with R.B. Webber & Company in Palo Alto, California, a management
consulting firm focused on working with high technology companies. He has been
with R.B. Webber since 1995. From 1990 to 1995, Mr. Lauridsen was an executive
with Apple Computer; from 1991 as Vice President of Corporate Development. Mr.
Lauridsen's has also been a Partner with The Boston Consulting Group and Booz,
Allen & Hamilton's Technology Practice. He was also founder and CEO of Redwood
Fire and Casualty Insurance Company, a subsidiary of Berkshire Hathaway Company.
BOARD MEETINGS AND COMMITTEES
The Board of Directors met six times during the last fiscal year. 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 twice 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") prior to its amendment by the Board of Directors provided 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 and two
days.
An aggregate of 35,000 options were granted to nonemployee directors under
the Directors Plan during the fiscal year ended June 30, 1999.
3
<PAGE> 6
Nonemployee directors of the Company have the right to receive an annual
fee for their services as directors. During fiscal 1999, all nonemployee
directors were entitled to receive an annual fee of $10,000 each, 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.
Katharine C. Branscomb and Norman J. Wechsler each filed a late Form 4 for
June 1999 and May 1999, respectively, 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, 1999, 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 30, 1999: (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(2)
---------------- ---------------- -------------------
<S> <C> <C>
SAP AG..................................................... 1,736,263 10.19%
Postfach 1461
D-69185, Walldorf, Germany
ICS Deloitte Management.................................... 1,000,000 5.87%
Chadds Ford Business Campus
Brandywine 5 Building, Suite 350
Chadds Forth, PA
Norman J. Wechsler(1)...................................... 3,799,643 20.76%
105 South Bedford Road
Mt. Kisco, NY 10549
</TABLE>
- ---------------
(1) Includes 1,007,109 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 21,250 shares granted to Mr. Wechsler under the 1991 Nonemployee
Directors Stock Option Plan which were exercisable as of September 30, 1999,
or within 60 days from such date, and 2,680,183 shares of Common Stock,
deemed beneficially owned by Mr. Wechsler, including 764,426 shares issuable
upon conversion of Preferred Stock and 470,000 shares issuable upon exercise
of warrants.
(2) 17,044,283 shares of common stock were outstanding as of September 30, 1999.
4
<PAGE> 7
The following table sets forth as of September 30, 1999, 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....................................... 373,287 2.14%
Katharine C. Branscomb................................ 143,525 *
Norman J. Wechsler.................................... 3,799,643(2) 20.76%
Arthur W. Berry....................................... 184,051(3) 1.07%
Sze-Lo (Steve) Tsui................................... 40,125 *
Colin Bodell.......................................... 146,225 *
Mark Bickerstaffe..................................... 35,251 *
Adrian G. Rayner...................................... 61,875 *
All directors and executive officers as a group (15
persons)............................................ 5,216,044(4) 26.73%(4)
</TABLE>
- ---------------
* Less than 1%
(1) Assumes that the person has exercised, to the extent exercisable and not
subject to repurchase on or after September 30, 1999, all options to
purchase Common Stock held by him or her and that no other person has
exercised any outstanding options.
(2) Includes 1,007,109 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 21,250 shares granted to Mr. Wechsler under the 1991 Nonemployee
Directors Stock Option Plan which were exercisable as of September 30, 1999,
or within 60 days from such date, and 2,680,183 shares of Common Stock,
deemed beneficially owned by Mr. Wechsler, including 764,426 shares issuable
upon conversion of Preferred Stock and 470,000 shares issuable upon exercise
of warrants.
(3) Includes 32,529 shares of Common Stock issuable upon conversion of
Convertible Notes in the outstanding principal amount of $50,000, 32,529
shares of Common Stock issuable upon conversion of Preferred Stock and
20,000 shares issuable upon exercise of warrants.
(4) Includes 1,152,303 shares which executive officers and directors as a group
have the right to acquire prior to September 30, 1999 through the exercise
of options and which are not subject to repurchase after that date and
1,319,484 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>
ANNUAL COMPENSATION LONG-TERM
---------------------- COMPENSATION
YEAR COMMISSION/ ---------------------
ENDED SALARY BONUS SECURITIES UNDERLYING
NAME AND PRINCIPAL POSITION JUNE 30 $ $ OPTIONS/SARS(#)
--------------------------- ------- -------- ----------- ---------------------
<S> <C> <C> <C> <C>
Kenneth H. Haas................................ 1999 $196,154 $ -0- -0-
Director and Chief 1998 $193,750 $ -0- 75,000
Executive Officer 1997 $150,000 $ -0- 150,000
Sze-Lo (Steve) Tsui(1)......................... 1999 $127,051 $ 45,975 210,000
President
Colin Bodell................................... 1999 $196,154 $ -0- 30,000
Executive Vice President 1998 $189,500 $ -0- 30,000
1997 $182,000 $ -0- 50,000
Mark Bickerstaffe(3)........................... 1999 $107,855 $ 58,336 -0-
Vice President, North 1998 $ 85,000 $112,991 -0-
America Sales 1997 $ 75,000 $ 59,978 10,000
Adrian G. Rayner(2)............................ 1999 $101,584 $127,751 25,000
Vice President and Managing 1998 $102,564 $136,131 20,000
Director, Europe 1997 $ 92,892 $111,763 10,000
</TABLE>
- ---------------
(1) Mr. Tsui joined and was appointed an executive officer of the Company in
October 1998.
(2) Mr. Rayner was appointed an executive officer of the Company in August 1997.
(3) Mr. Bickerstaffe was appointed an executive officer of the Company in August
1998.
In October 1991, the Company executed an agreement with Mr. Haas which
provides for a severance payment equal to one year's salary if his employment is
terminated without cause.
The following table shows for each executive officer named in the Summary
Compensation Table certain information regarding stock option grants during
fiscal year 1999:
OPTION/SAR GRANTS IN LAST FISCAL YEAR(1)
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
PERCENT TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS/SARS RATES OF STOCK PRICE
SECURITIES GRANTED TO APPRECIATION FOR
UNDERLYING EMPLOYEES IN EXERCISE OR OPTION TERM(3)
OPTION/SARS FISCAL YEAR BASE PRICE EXPIRATION --------------------
NAME GRANTED(2) 1999 ($/SHARES) DATE 5% 10%
---- ------------- -------------- ----------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Sze-Lo (Steve) Tsui............ 160,000 18% $0.8750 10/21/08 $88,046 $223,125
50,000 6% $0.9375 5/8/09 $29,480 $ 74,707
Colin Bodell................... 30,000 3% $0.9375 5/8/09 $17,688 $ 44,824
Adrian G. Rayner............... 25,000 3% $1.0625 3/31/09 $16,705 $ 42,333
</TABLE>
- ---------------
(1) No SAR grants were made to any named executive officer during the year ended
June 30, 1999.
(2) The options have a term of ten years and two days and are immediately
exercisable upon issuance but are subject to a right of repurchase which
expires ratably over a period of 4 years, except for 10,000 shares granted
to Mr. Tsui which has no right of repurchase. 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.
(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
6
<PAGE> 9
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 1999 and options outstanding as of June 30, 1999:
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- 356,563/98,43 7 $46,413/$-0-
Sze-Lo (Steve) Tsui... -0- -0- 28,750/181,250 $2,697/$13,876
Colin Bodell.......... -0- -0- 131,875/78,125 $-0-/$939
Mark Bickerstaffe..... -0- -0- 29,500/5,000 $-0-/$-0-
Adrian G. Rayner...... -0- -0- 39,063/40,000 $-0-/$-0-
</TABLE>
- ---------------
(1) No SAR grants were outstanding at June 30, 1999.
(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. 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 $0.9688 at fiscal year end.
PROPOSAL NUMBER TWO
APPROVAL OF AMENDMENT OF THE NONEMPLOYEE DIRECTORS
1991 STOCK OPTION PLAN
BACKGROUND
At the Annual Meeting, the stockholders are being asked to approve an
amendment to the Company's 1991 Nonemployee Directors Stock Option Plan (the
"1991 Director Option Plan") to increase the number of options automatically
granted to nonemployee directors under the 1991 Director Option Plan and to
provide that such options will be fully vested and exercisable on grant.
DESCRIPTION OF THE AMENDMENT
The Board of Directors has amended the 1991 Director Option Plan to
increase the initial automatic option grant to nonemployee directors described
below from 15,000 shares to 25,000 shares, and to increase the annual automatic
option grant to nonemployee directors described below from 5,000 shares to
10,000 shares. The amendment also provides that options granted under the 1991
Director Option Plan will be fully vested and immediately exercisable on the
date of grant and no longer subject to a right of repurchase.
The proposed amendment to the 1991 Director Option Plan was approved by the
Board of Directors to strengthen the Company by providing added incentive to
attract and retain nonemployee directors. 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. Furthermore, the Company believes that the amendment to the 1991
Director Option Plan is required to remain competitive in its industry. Stock
options are generally used by technology companies to create incentives for
directors, especially technology companies in Silicon Valley with which the
Company competes directly for directors.
7
<PAGE> 10
DESCRIPTION OF THE 1991 OPTION PLAN BEFORE THE PROPOSED AMENDMENT
The 1991 Director Stock Option Plan prior to its amendment by the Board of
Directors provided 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, these options have
become exercisable in full six months after the date of grant. The shares
issuable upon exercise of previously granted options 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 1991 Director Option 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 has become
exercisable in full six months after the date of grant. These options also 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 and two
days.
The 1991 Director Option Plan is administered by the Compensation and Stock
Option Committee (the "Option Committee"). No option may be granted under the
1991 Director Option Plan after December 2001, but outstanding options may
extend beyond that date. Options may be exercised for three months after the
optionee leaves the Company and, if the optionee's term on the Board 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 Director 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.
The 1991 Director 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 Director Option Plan, provided that without approval of
stockholders, there will be: (i) no increase in the total number of shares
covered by the 1991 Director 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.
FEDERAL INCOME TAX CONSEQUENCES OF STOCK OPTIONS
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, including, for example, a Company repurchase right and any
limitations on 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 difference
between the exercise price and the fair market value ("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 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. 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. 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 may result in
dividend income to the optionee.
8
<PAGE> 11
The following table shows for each executive officer named in the Summary
Compensation Table, for all executives as a group, for all non-executive
directors as a group and for all non-executive officer employees as a group, the
options granted under the 1991 Director Option Plan for the year ended June 30,
1999.
PLAN BENEFIT
<TABLE>
<CAPTION>
NAME AND POSITION NUMBER OF SHARES
----------------- ----------------
<S> <C>
Kenneth H. Haas............................................. 0
Director and Chief Executive Officer
Sze-Lo (Steve) Tsui......................................... 0
President
Colin Bodell................................................ 0
Executive Vice President
Mark Bickerstaffe........................................... 0
Vice President, North American Sales
Adrian G. Rayner............................................ 0
Vice President and Managing Director, Europe
Executive Group............................................. 0
Non-Executive Director Group................................ 35,000
Non-Executive Officer Employee Group........................ 0
</TABLE>
PROPOSAL
At the Annual Meeting, stockholders will be asked to approve the amendment
of the 1991 Director Stock Option Plan to increase the number of options
automatically granted to nonemployee directors under the Plan and to provide
that such options will be fully vested and exercisable on grant. 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
Nonemployee Directors 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, 2000. 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, 1999, 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 2000, that proposal must be
received in writing by the Secretary of the Company at the Company's principal
executive offices no later than June 30, 2000.
9
<PAGE> 12
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 6, 2000 of a proposal to be brought before
the 2000 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 Chief Executive Officer
Mountain View, California
October 22, 1999
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.
10
<PAGE> 13
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 7, 1999, and at any
adjournments or postponements thereof.
(Continued and to be signed on the other side)
<PAGE> 14
Item 1-To elect as directors Arthur W. Berry, Katharine C. Branscomb, Kenneth H.
Haas, Robert A. Lauridsen 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 provided below:
___________________________________________
Item 2-To approve an amendment to the Company's 1991 Nonemployee
Directors Stock Option Plan to increase the number of options automatically
granted to nonemployee directors under the Plan and to provide that such options
will be fully vested and exercisable on grant.
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:___________________________________________________________, 1999
__________________________________________________________________
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.
