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:
|_| 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 Section 240.14a-11(c) or Section
240.14a-12
INTERLINK COMPUTER SCIENCES, INC.
---------------------------------
(Name of Registrant as Specified in its Charter)
--------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
__________________________________
2) Aggregate number of securities to which transaction applies:
__________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
__________________________________
4) Proposed maximum aggregate value of transaction:
__________________________________
5) Total fee paid:__________________________________
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
1) Amount Previously Paid:__________________________________
2) Form, Schedule, or Registration Statement No.:_____________________
3) Filing Party:__________________________________
4) Date Filed:__________________________________
<PAGE>
INTERLINK COMPUTER SCIENCES, INC.
-------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
-------------
To Be Held November 5, 1998
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Stockholders of
INTERLINK COMPUTER SCIENCES, INC., a Delaware corporation (the "Company"), will
be held on Thursday, November 5, 1998 at 2:00 p.m., local time, at the Company,
47370 Fremont Boulevard, Fremont California 94538 for the following purposes:
1. To elect five directors to serve until the next Annual Meeting of
Stockholders or until their successors are elected.
2. To approve an amendment to the 1992 Stock Option Plan to increase the
number of shares authorized to be issued thereunder from 2,405,000 to
2,555,000.
3. To approve an amendment to the 1996 Employee Stock Purchase Plan to
increase the number of shares authorized to be issued thereunder from
350,000 to 600,000.
4. To ratify the appointment of PricewaterhouseCoopers LLP as independent
accountants for the Company for the fiscal year ending June 30, 1999.
5. To transact such other business as may properly come before the meeting or
any adjournments thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice. Only stockholders of record at the close of
business on September 15, 1998 are entitled to notice of and to vote at the
Annual Meeting.
All stockholders are cordially invited to attend the Annual Meeting in
person. However, to ensure your representation at the Annual Meeting, you are
urged to mark, sign, date and return the enclosed Proxy as promptly as possible
in the postage-prepaid envelope enclosed for that purpose. Any stockholder
attending the Annual Meeting may vote in person even if he or she has returned a
Proxy.
Sincerely,
Augustus J. Berkeley
President and Chief Executive Officer
Fremont, California
September 18, 1998
YOUR VOTE IS IMPORTANT.
- - --------------------------------------------------------------------------------
IN ORDER TO ASSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, YOU ARE REQUESTED
TO COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE AND RETURN
IT IN THE ENVELOPE PROVIDED.
- - --------------------------------------------------------------------------------
<PAGE>
INTERLINK COMPUTER SCIENCES, INC.
-------------
PROXY STATEMENT FOR THE 1998
ANNUAL MEETING OF STOCKHOLDERS
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed Proxy is solicited on behalf of the Board of Directors of
INTERLINK COMPUTER SCIENCES, INC. (the "Company") for use at the Annual Meeting
of Stockholders to be held on Thursday, November 5, 1998 at 2:00 p.m., local
time, or at any adjournment thereof, for the purposes set forth herein and in
the accompanying Notice of Annual Meeting of Stockholders. The Company's
principal executive offices are located at 47370 Fremont Boulevard, Fremont,
California 94538. The Company's telephone number is (510) 657-9800. The Annual
Meeting will be held at the Company, 47370 Fremont Boulevard, Fremont, CA 94538.
These proxy solicitation materials and the accompanying financial
information for the fiscal year ended June 30, 1998, including financial
statements, were first mailed on or about September 25, 1998 to all stockholders
entitled to vote at the Annual Meeting.
RECORD DATE AND SHARES OUTSTANDING
Stockholders of record at the close of business on September 15, 1998
(the"Record Date") are entitled to notice of and to vote at the Annual Meeting.
At the Record Date, 8,195,175 shares of the Company's Common Stock, $.001 par
value, were issued and outstanding and held of record by approximately 213
stockholders. No shares of the Company's Preferred Stock were outstanding.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of July 31, 1998 by (i)
each person known by the Company to own beneficially more than 5% of the
outstanding shares of Common Stock, (ii) each director of the Company, (iii)
each executive officer named in the Summary Compensation Table below, and (iv)
all directors and executive officers as a group. Except as otherwise noted
below, the Company knows of no agreements among its stockholders which relate to
voting or investment power of its Common Stock.
COMMON STOCK APPROXIMATE
FIVE PERCENT STOCKHOLDERS, BENEFICIALLY PERCENTAGE
DIRECTORS AND CERTAIN EXECUTIVE OFFICERS OWNED OWNED (1)
- - ---------------------------------------- ----- ---------
Franklin Advisory Services, Inc. ................. 703,100 8.61%
One Parker Plaza, 16th Floor
Fort Lee, NJ 07024
Cisco Systems, Inc. .............................. 622,000 7.62%
170 W. Tasman Drive
San Jose, CA 95134-1706
Thomson, Horstmann & Bryant, Inc. ................ 504,200 6.18%
Park 80 West, Plaza Two
Saddlebrook, NJ 07663
ROI Capital Management, Inc. ..................... 494,400 6.06%
17 E. Sir Francis Drake Blvd., Suite 225
Larkspur, CA 94939
Entities affiliated with Advent
International Corp. (2) ........................ 447,232 5.48%
101 Federal Street
Boston, MA 02110
2
<PAGE>
COMMON STOCK APPROXIMATE
FIVE PERCENT STOCKHOLDERS, BENEFICIALLY PERCENTAGE
DIRECTORS AND CERTAIN EXECUTIVE OFFICERS OWNED OWNED (1)
- - ---------------------------------------- ----- ---------
James A. Barth (3)....................... 16,071 *
Augustus J. Berkeley (4)................. 61,046 *
Ronald W. Braniff (5).................... 76,813 *
Thomas H. Bredt (6)...................... 22,224 *
Andrew I. Fillat (7)..................... 455,045 *
Ralph B. Godfrey (8)..................... 2,813 *
William C. Jones......................... 11,868 *
Christopher A. Markle (9)................ 27,940 *
Michael J. Satterwhite (10).............. 17,384 *
All Directors and executive officers
as a group (10 persons) (11) ........... 696,204 8.33%
*Less than 1%
(1) Applicable percentage of ownership is based on 8,163,425 shares of Common
Stock outstanding as of July 31, 1998 together with applicable options for
such stockholder. Beneficial ownership is determined in accordance with
the rules of the Securities and Exchange Commission, and includes voting
and investment power with respect to shares. Shares of Common Stock
subject to options currently exercisable or exercisable within 60 days
after July 31, 1998 are deemed outstanding for computing the percentage
ownership of the person holding such options, but are not deemed
outstanding for computing the percentage ownership of any other person.
(2) Includes 38,629 shares held by Adtel L.P., 21,461 shares held by Adventact
L.P., 861 shares held by Advent International II L.P., 17,169 shares held
by Adwest L.P., 322,029 shares held by Global Private Equity II L.P. and
47,083 shares held by Golden Gate Development and Investment L.P.
(collectively "Advent International").
(3) Includes 16,071 shares subject to stock options that are exercisable
within 60 days of July 31, 1998.
(4) Includes 55,876 shares subject to stock options that are exercisable
within 60 days of July 31, 1998.
(5) Includes 76,813 shares subject to stock options that are exercisable
within 60 days of July 31, 1998.
(6) Includes 7,813 shares subject to stock options that are exercisable within
60 days of July 31, 1998.
(7) Includes 7,813 shares subject to stock options that are exercisable within
60 days of July 31, 1998. Also includes 447,232 shares owned by entities
affiliated with Advent International, of which Mr. Fillat is a Senior Vice
President. Mr. Fillat disclaims beneficial ownership of all such shares
held by those entities.
(8) Includes 2,813 shares subject to stock options that are exercisable within
60 days of July 31, 1998.
(9) Includes 15,106 shares subject to stock options that are exercisable
within 60 days of July 31, 1998.
(10) Includes 16,667 shares subject to stock options that are exercisable
within 60 days of July 31, 1998.
(11) Includes 198,972 shares subject to stock options that are exercisable
within 60 days of July 31, 1998.
REVOCABILITY OF PROXIES
Any proxy given pursuant to the solicitation may be revoked by the person
giving it at any time before its use by delivering to the Secretary of the
Company a written notice of revocation or a duly executed proxy or by attending
the Annual Meeting and voting in person.
3
<PAGE>
VOTING AND SOLICITATION
Each stockholder is entitled to one vote for each share of Common Stock
held by such stockholder on the Record Date on all matters presented at the
Annual Meeting. Stockholders do not have the right to cumulate votes in the
election of directors.
The required quorum for the transaction of business at the Annual Meeting
is a majority of the votes eligible to be cast by holders of shares of Common
Stock issued and outstanding on the Record Date. Shares that are voted "FOR",
"AGAINST" or "WITHHELD FROM" a matter are treated as being present at the
meeting for purposes of establishing a quorum and are also treated as shares
entitled to vote at the Annual Meeting (the "Votes Cast") with respect to such
matter.
While there is no definitive statutory or case law authority in Delaware
as to the proper treatment of abstentions, the Company believes that abstentions
should be counted for purposes of determining both (i) the presence or absence
of a quorum for the transaction of business and (ii) the total number of Votes
Cast with respect to a proposal (other than the election of directors). In the
absence of controlling precedent to the contrary, the Company intends to treat
abstentions in this manner. Accordingly, abstentions will have the same effect
as a vote against the proposal.
Broker non-votes will be counted for purposes of determining the presence
or absence of a quorum for the transaction of business, but will not be counted
for the purposes of determining the number of Votes Cast with respect to the
particular proposal on which the broker has expressly not voted. Accordingly,
broker non-votes will not affect the outcome of the voting on a proposal that
requires a majority of the Votes Cast (such as the approval of a plan). However,
with respect to a proposal that requires a majority of the outstanding shares
(such as an amendment to the certificate of incorporation), a broker non-vote
has the same effect as a vote against the proposal.
The cost of soliciting proxies will be borne by the Company. The Company
has retained Boston Equiserve to provide proxy solicitation services in
connection with the Annual Meeting at an estimated cost of $1,000. In addition,
the Company may reimburse brokerage firms and other persons representing
beneficial owners of shares for their expenses in forwarding solicitation
material to such beneficial owners. Proxies may also be solicited by certain of
the Company's directors, officers and regular employees, without additional
compensation, personally or by telephone or telegram.
STOCKHOLDER PROPOSALS TO BE PRESENTED AT NEXT ANNUAL MEETING
Stockholders are entitled to present proposals for action at a forthcoming
meeting if they comply with the requirements of the proxy rules promulgated by
the Securities and Exchange Commission and the Company's bylaws. Proposals of
stockholders of the Company intended to be presented for consideration at the
Company's 1999 Annual Meeting of Stockholders must be received by the Company no
later than August 27, 1999 in order that they may be included in the proxy
statement and form of proxy related to that meeting. The Company's bylaws
further provide that for any business to be properly brought before the
Company's 1999 Annual Meeting by a stockholder, the stockholder must also give
proper notice to the Company no later than August 27, 1999, in compliance with
the notice provisions set forth in such bylaws.
4
<PAGE>
PROPOSAL ONE
ELECTION OF DIRECTORS
NOMINEES
A board of five directors is to be elected at the Annual Meeting. Unless
otherwise instructed, the proxy holders will vote the proxies received by them
for the five nominees named below. In the event that any such nominee is unable
or declines to serve as a director at the time of the Annual Meeting, the
proxies will be voted for a nominee who shall be designated by the present Board
of Directors to fill the vacancy. In the event that additional persons are
nominated for election as directors, the proxy holders intend to vote all
proxies received by them in such a manner as will assure the election of as many
of the nominees listed below as possible, and, in such event, the specific
nominees to be voted for will be determined by the proxy holders. The Company is
not aware of any nominee who will be unable or will decline to serve as a
director. Each director elected at this Annual Meeting will serve as a director
until the next Annual Meeting of Stockholders or until a successor has been duly
elected and qualified.
VOTE REQUIRED
The five (5) nominees for director receiving the highest number of
affirmative votes of the shares entitled to be voted for them shall be elected
as directors. Votes withheld from any director are counted for purposes of
determining the presence or absence of a quorum, but have no other legal effect
under Delaware law.
The names of the nominees and certain information about them are set forth
below:
DIRECTOR
NAME OF NOMINEE AGE POSITION(S) WITH THE COMPANY SINCE
- - --------------- --- ---------------------------- -----
Augustus J. Berkeley........ 53 President, Chief Executive
Officer and Director 1997
Thomas H. Bredt (1)......... 57 Chairman of the Board
of Directors 1990
Ronald W. Braniff (1)(2).... 62 Director 1993
Andrew I. Fillat (2)........ 50 Director 1994
Ralph B. Godfrey............ 58 Director 1997
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
There are no family relationships between any of the directors or
executive officers of the Company.
Augustus J. Berkeley has served as President and Chief Executive Officer
from September 1997 to present and a member of the Board of Directors from
November 1997 to present. He has served as Vice President of Worldwide Sales
from January 1996 to September 1997. He also served as Vice President of North
American Sales from January 1995 to December 1995. From March 1993 to January
1995, he served as Vice President of Sales and Marketing at CRAY Research
Superserver Inc., a computer systems company. From May 1990 to January 1993, Mr.
Berkeley served as Vice President of Marketing at Sequoia Systems, Inc., a
computer systems company. Mr. Berkeley holds a B.S. in Economics and Finance
from the University of Southwestern Louisiana.
Thomas H. Bredt has served as a member of the Board of Directors since
March 1990 and as Chairman of the Board of Directors since May 1992. Mr. Bredt
has been a general partner with Menlo Ventures, a venture capital firm, from
April 1986 to the present. He also serves as a director and member of the
Compensation and Audit Committees of Red Brick Systems, a data warehousing
company, and as a director and member of the Compensation Committee of Clarify,
Inc. and FlexiInternational Software, Inc., application software companies. Mr.
Bredt holds a Ph.D. in Computer Sciences from Stanford University, an M.E.E.
from New York University and a B.S. in Engineering from the University of
Michigan.
5
<PAGE>
Ronald W. Braniff has served as a member of the Board of Directors since
March 1993. Mr. Braniff is a private investor and software business consultant.
He also serves as a director of Evoke, Inc., a systems development tools
software company. Mr. Braniff served as President and Chief Executive Officer of
ASK Computer Systems, an enterprise applications software company from 1984 to
1989. From 1966 to 1984 he was employed by Tymshare, a computer and network
services company, and held the position of Vice President and General Manager of
the Computer Services Group. Mr. Braniff holds a B.S.M.E. from Oregon State
University.
Andrew I. Fillat has served as a member of the Board of Directors since
January 1994. From April 1989 to the present, Mr. Fillat has been a partner with
Advent International, a management company for several venture capital and
private equity funds, and from June 1995 to the present, he has served as Senior
Vice President with Advent International. He serves as a director and member of
the Compensation and Audit Committees of Advanced Radio Telecom, a wireless
services company, Voxware, Inc., a voice-compression and communications company,
and Lightbridge, Inc., a services and software provider to wireless carriers.
Mr. Fillat holds a B.S. and M.S. in Electrical Engineering and Computer Science
from the Massachusetts Institute of Technology and an M.B.A. from Harvard
Graduate School of Business Administration.
Ralph B. Godfrey has served as a member of the Board of Directors since
December 1997. From 1990 to the present, Mr. Godfrey has been with 3Com
Corporation ("3Com") serving in various capacities. Mr. Godfrey is currently
Senior Vice President of 3Com's Client Access Business Unit and is a member of
3Com's Executive Committee. Prior to Mr. Godfrey joining 3Com, he was President
of Unisys' Value-Added Marketing Division which was created following the
acquisition of Convergent Technologies in 1989. Mr. Godfrey had joined
Convergent Technologies in 1988 as Vice President of North American Sales. Prior
to Convergent Technologies, Mr. Godfrey spent 20 years with Hewlett-Packard
where he held a variety of sales management positions. Mr. Godfrey holds a B.S.
and M.S. in Electrical Engineering from Auburn University.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of 17 meetings during
fiscal 1998. No director attended fewer than 75% of the meetings of the Board of
Directors or committees thereof, upon which such director served, if any. The
Board of Directors has an Audit Committee and a Compensation Committee. The
Board does not have a nominating committee or any committee performing similar
functions.
The Audit Committee, which currently consists of Messrs. Bredt and
Braniff, held 4 meetings in fiscal 1998. The Audit Committee oversees actions
recommended by the Company's independent accountants and reviews the Company's
internal financial controls.
The Compensation Committee, which consists of Messrs. Braniff and Fillat,
held 7 meetings in fiscal 1998. The Compensation Committee is responsible for
determining salaries, incentives and other forms of compensation for directors,
officers and other employees of the Company and administering various incentive
compensation and benefit plans.
The Board of Directors on March 13, 1998 created a Stock Option Plan
Committee. The Stock Option Plan Committee, consists of one member, Augustus J.
Berkeley. The Stock Option Plan Committee held one meeting in fiscal year 1998.
The Stock Option Plan Committee is responsible for granting options on an
ongoing basis to new and existing employees of the Company pursuant to the
designated guidelines approved by the Board of Directors. The authority to grant
options to employees does not extend to the granting of options to officers or
director-level employees of the Company which options must be granted and
approved by the Board of Directors or the Compensation Committee.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES TO BE ELECTED TO THE
BOARD OF DIRECTORS
6
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
The names, ages and positions of the Company's executive officers as of August
31, 1998 are as follows:
OFFICE
HELD
NAME AGE CURRENT POSITION WITH COMPANY SINCE
---- --- ----------------------------- -----
Augustus J. Berkeley..... 53 President, Chief Executive Officer
and Director 1997
James A. Barth........... 55 Vice President, Chief Financial
Officer and Secretary 1997
William C. Jones......... 51 Vice President of Marketing 1998
Victor C. Langford....... 46 Vice President of Product
Development and Customer Support 1998
Christopher A. Markle.... 41 Vice President and Chief
Technical Officer 1996
Michael J. Satterwhite... 42 Vice President of Human Resources 1996
Augustus J. Berkeley has served as President and Chief Executive Officer
from September 1997 to present and a member of the Board of Directors from
November 1997 to present. He has served as Vice President of Worldwide Sales
from January 1996 to September 1997. He also served as Vice President of North
American Sales from January 1995 to December 1995. From March 1993 to January
1995, he served as Vice President of Sales and Marketing at CRAY Research
Superserver Inc., a computer systems company. From May 1990 to January 1993, Mr.
Berkeley served as Vice President of Marketing at Sequoia Systems, Inc., a
computer systems company. Mr. Berkeley holds a B.S. in Economics and Finance
from the University of Southwestern Louisiana.
James A. Barth has served as Vice President, Chief Financial Officer and
Secretary from November 1997 to the present. From September 1995 to August 1997,
Mr. Barth was Executive Vice President, Chief Financial Officer and Secretary of
MagiNet Corporation ("MagiNet")., an international provider of interactive
entertainment and information systems for hotels. From October 1994 to September
1995, he served as Vice President of Finance, Chief Financial Officer and
Secretary of MagiNet. From March 1994 to October 1994, he served as Vice
President and Chief Financial Officer of ACC Microelectronics Corporation, a
semiconductor company. From 1982 to March 1994, he served as Vice President and
Chief Financial Officer of Rational Software Corporation, a developer of
object-oriented software engineering tools. Mr. Barth is a certified public
accountant and holds a B.S. in Business Administration from the University of
California Los Angeles.
William C. Jones has served as Vice President of Marketing from April 1998
to the present. Prior to the promotion, he held the position of Director of
Marketing, where he played a major role in the development and execution of
Interlink's e-Access strategy announced on March 30, 1998. Previously, he held
the positions of director of applications product marketing at Interlink from
April 1997 to April 1998 and MVS advanced systems planner at IBM from June 1986
to August 1989. Mr. Jones holds a B.S. in Polymer Chemistry and Textile
Engineering from North Carolina State University at Raleigh.
Victor C. Langford has served as Vice President of Product Development and
Customer Support from March 1998 to the present. From October 1995 to June 1997,
Mr. Langford served as Senior Vice President at Novell Corporation. His
responsibilities included managing product development and marketing groups in
various locations worldwide that were responsible for generating annual revenues
of approximately $250 million. Previously, Mr. Langford held senior management
positions at Novell Corporation, Software Publishing Corporation, Tymlabs and
Hewlett-Packard Company. Mr. Langford holds a B.S. in Computer Science from
North Staffordshire Polytechnic in the UK.
Christopher A. Markle has served as Vice President from December 1996 to
the present and was also appointed as the Chief Technical Officer in November
1997. He also served as the Company's Director of Marketing from June 1993 to
December 1996 and as Director of Engineering from April 1990 to June 1993. Mr.
Markle holds a B.S. in Computer Science from the Virginia Polytechnic Institute.
7
<PAGE>
Michael J. Satterwhite has served as Vice President of Human Resources
from September 1996 to the present. From October 1995 to September 1996 he was
Worldwide Director of Human Resources for Software Publishing Corporation
("SPC"), a visual communications software company. From June 1993 to October
1995, Mr. Satterwhite was the Manager of Human Resources at SPC. From June 1992
to June 1993, he was Manager of Human Resources at Oracle Corporation, an
information management software company. From 1990 to June 1992, he was Manager
of recruiting and employment at International Business Machines, Inc. Mr.
Satterwhite holds a B.S. in Organization Behavior from the University of San
Francisco.
EXECUTIVE COMPENSATION AND OTHER MATTERS
EXECUTIVE COMPENSATION
The following table sets forth all compensation for services rendered in
all capacities during the fiscal year ended June 30, 1998 awarded to, earned by,
or paid to (i) the Company's Chief Executive Officer and (ii) the Company's
other most highly compensated officers whose salary and bonus for such fiscal
year exceeded $100,000 and who were serving as an officer of the Company as of
the end of such fiscal year (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL AWARDS
COMPENSATION(1) ------
--------------- SECURITIES
FISCAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS (#) COMPENSATION (2)
- - --------------------------- ---- ------ ----- ----------- ----------------
<S> <C> <C> <C> <C> <C>
Augustus J. Berkeley (4).............. 1998 $ 240,283 $ 70,629 367,300 (7) $ 5,148
President and Chief Executive Officer 1997 222,817 11,341 65,000 1,099
1996 305,656 8,789 30,000 4,929
Ronald W. Braniff (3)................. 1998 80,500 - 51,750 (8) --
Former Interim Chief Executive Officer 1997 31,000 - 63,000 --
Christopher A. Markle................. 1998 135,006 48,062 47,500 (9) 1,732
Vice President and Chief Technical 1997 118,834 21,821 22,500 619
Officer
Michael J. Satterwhite................ 1998 120,019 49,250 50,000 (10) 1,053
Vice President of Human Resources 1997 86,240 26,504 25,000 631
William C. Jones (5).................. 1998 122,751 20,000 60,000 (11) 1,187
Vice President of Marketing
James A. Barth (6).................... 1998 99,487 18,667 90,000 882
Vice President, Chief
Financial Officer and Secretary
</TABLE>
(1) In accordance with the rules of the Securities and Exchange Commission,
other compensation in the form of perquisites and other personal benefits
has been omitted in those cases where the aggregate amount to such
perquisites and other personal benefits constituted less than the lesser
of $50,000 or 10% of the total annual salary and bonus for the Named
Executive Officer for such year.
(2) Includes premiums paid by the Company on life insurance policies where the
Company was not the beneficiary, auto allowances, and travel advances.
(3) Mr. Braniff assumed the position of Interim Chief Executive Officer from
May 1997 to September 1997, and was compensated on a consulting basis for
that period.
(4) Salary amount includes $72,817 and $205,648 of commissions in 1997 and
1996, respectively.
(5) Mr. Jones assumed the position of Vice President of Marketing in April
1998.
8
<PAGE>
(6) Mr. Barth assumed the position of Vice President, Chief Financial Officer
and Secretary in November 1997.
(7) Reflects options for 367,300 shares that were repriced in February 1998,
replacing options that were granted in November 1996, March 1997 and
October 1997.
(8) Reflects options for 48,000 shares that were repriced in February 1998,
replacing options that were granted in May 1997.
(9) Reflects options for 32,500 shares that were repriced in February 1998,
replacing options that were granted in April 1996, November 1996 and
December 1996.
(10) Reflects options for 25,000 shares that were repriced in February 1998,
replacing options that were granted in September 1996.
(11) Reflects options for 3,000 shares that were repriced in February 1998,
replacing options that were granted in August 1997.
OPTION GRANTS IN FISCAL YEAR 1998
The following table sets forth information regarding the grant of stock
options to each of the Named Executive Officers during the fiscal year ended
June 30, 1998.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
------------------------------------------------------------ ANNUAL RATES OF
NUMBER OF PERCENTAGE OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(1)
OPTIONS EMPLOYEES IN PRICE EXPIRATION --------------
NAME GRANTED FISCAL 1998 PER SHARE(3) DATE 5% 10%
---- --------- ----------- ------------ ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Augustus J. Berkeley.. 151,150 (2) (7) 8.5% $ 4.88 2/6/2005 $299,974 $699,068
151,150 (6) (7) 8.5% $ 4.88 2/6/2005 299,974 699,068
23,000 (2) (8) 1.3% $ 4.88 2/6/2005 45,646 106,375
42,000 (2) (9) 2.3% $ 4.88 2/6/2005 83,354 194,250
James A. Barth........ 60,000 (2) 3.4% $ 4.39 11/17/2004 107,255 249,949
30,000 (6) 1.7% $ 4.39 11/17/2004 53,627 124,974
Ronald W. Braniff..... 48,000 (5) (10) 2.7% $ 4.88 2/6/2005 95,261 222,000
3,750 (4) 0.2% $ 4.44 2/5/2008 10,465 26,521
William C. Jones...... 3,000 (2) (11) 0.2% $ 4.88 2/6/2005 5,954 13,875
40,000 (2) 2.2% $ 5.50 4/1/2005 89,562 208,718
17,000 (6) 1.0% $ 5.50 4/1/2005 38,064 88,705
Christopher A. Markle. 15,000 (2) 0.8% $ 4.81 10/6/2004 29,391 68,493
10,000 (2) (12) 0.6% $ 4.88 2/6/2005 19,846 46,250
7,500 (2) (8) 0.4% $ 4.88 2/6/2005 14,885 34,687
15,000 (2) (13) 0.8% $ 4.88 2/6/2005 29,769 69,375
Michael J. Satterwhite 25,000 (2) 1.4% $ 4.81 10/6/2004 48,984 114,154
25,000 (2) (14) 1.4% $ 4.88 2/6/2005 49,615 115,625
</TABLE>
(1) This column shows the hypothetical gains or "option spreads" of the
options granted based on assumed annual compound stock appreciation rates
of 5% and 10% over the full seven-year term of the options. The 5% and 10%
assumed rates of appreciation are mandated by the rules of the Securities
and Exchange Commission and do not represent the Company's estimate or
projection of future Common Stock prices. The gains shown are net of the
option exercise price, but do not include deductions for taxes or other
expenses associated with the exercise of the option or the sale of the
underlying shares. The actual gains, if any, on the exercise of stock
options will depend on the future performance of the Common Stock, the
option holder's continued employment through the option period, and the
date on which the options are exercised.
(2) Options vest as of 9/48th of the option shares after nine months from the
vesting commencement date and as to 1/48th of the option shares each month
thereafter, with full vesting occurring on the fourth anniversary of the
vesting commencement date.
9
<PAGE>
(3) Options were granted at an exercise price equal to the fair market value
of the Company's Common Stock. Exercise price may be paid in cash,
promissory note, by delivery of already-owned shares subject to certain
conditions, or pursuant to a cashless exercise procedure under which the
optionee provides irrevocable instructions to a brokerage firm to sell the
purchased shares and to remit to the Company, out of the sale proceeds, an
amount equal to the exercise price plus all applicable withholding taxes.
(4) Option was granted under the 1996 Director option plan at an exercise
price equal to the fair market value of the Company's Common Stock on the
date of grant. Options vest as to 1/48th of the option shares each month,
with full vesting occurring on the fourth anniversary of the vesting
commencement date. These options expire ten years from the date of grant.
(5) Option was granted under an agreement between Mr. Braniff and the Company,
whereby Mr. Braniff was to act as Interim Chief Executive Officer until a
full-time Chief Executive Officer was hired. Options vest as to 1/12th of
the option shares each month, with full vesting occurring on the
anniversary of the vesting commencement date. Options are also subject to
certain acceleration clauses.
(6) Options vest as to 1/84th of the option shares each month with full
vesting occurring on the seventh anniversary of the vesting commencement
date. According to the terms of these grants, if the average share price
in effect on the grant date doubles and the increased price is sustained
over a one month period, the options will accelerate their vesting by one
year. Thereafter, an additional year of vesting will accelerate for every
$5 of incremental value added to the Company's average stock. The stock
must retain its increased value over a one month period in order for any
acceleration of options to occur. The performance based option grant will
carry a two year minimum vesting schedule regardless of acceleration
factors.
(7) Reflects options that were repriced in February 1998, replacing options
granted in October 1997.
(8) Reflects options that were repriced in February 1998, replacing options
granted in November 1996.
(9) Reflects options that were repriced in February 1998, replacing options
granted in March 1997.
(10) Reflects options that were repriced in February 1998, replacing options
granted in May 1997.
(11) Reflects options that were repriced in February 1998, replacing options
granted in August 1997.
(12) Reflects options that were repriced in February 1998, replacing options
granted in April 1996.
(13) Reflects options that were repriced in February 1998, replacing options
granted in December 1996.
(14) Reflects options that were repriced in February 1998, replacing options
granted in September 1996.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END VALUES
The following table sets forth certain information regarding stock options
held as of June 30, 1998 by the Named Executive Officers.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options at
Options at June 30, 1998 June 30, 1998 (2)
Shares Acquired Value ------------------------ -----------------
Name on Exercise Realized (1) Vested Unvested Vested Unvested
---- ----------- ------------ ------ -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Augustus J. Berkeley..... -- -- 58,198 364,102 109,750 22,250
Ronald W. Braniff........ -- -- 77,516 13,984 56,000 --
James A. Barth........... -- -- 2,500 87,500 -- --
William C. Jones......... -- -- 405 59,595 -- --
Christopher A. Markle.... -- -- 22,262 37,238 32,600 --
Michael J. Satterwhite... -- -- 13,543 36,457 -- --
</TABLE>
10
<PAGE>
(1) "Value Realized" represents the fair market value of the underlying
securities on the exercise date minus the aggregate exercise price of such
options.
(2) Calculated on the basis of fair market value of the underlying securities
as of June 30, 1998 of $3.50 per share, the last trading day of fiscal
year 1998, as reported by the NASDAQ National Market, minus the aggregate
exercise price.
EMPLOYMENT AGREEMENTS AND CHANGE IN CONTROL ARRANGEMENTS
Mr. Berkeley and Mr. Barth each have entered into letter agreements with
the Company which provide for severance payments if they are terminated without
cause. Mr. Berkeley will be entitled to severance payments equal to twelve
months salary, Mr. Barth will be entitled to severance payments equal to six
months salary. All of the Named Executive Officers' employment with the Company
is terminable at will. In addition, each of the Named Executive Officers has
entered into a change of control severance agreement which provides for
acceleration of all unvested stock options and/or restricted stock held by such
officer upon an involuntary termination without cause of such officer within
twelve (12) months of a change of control transaction.
DIRECTOR COMPENSATION
Members of the Company's Board of Directors that are employees of the
Company do not receive compensation for their services as directors. The
Company's 1996 Director Option Plan provides that options will be granted to
non-employee directors of the Company pursuant to an automatic nondiscretionary
grant mechanism. Upon joining the Board of Directors, each new non-employee
director will automatically be granted an option to purchase 15,000 shares of
Common Stock and each non-employee director will subsequently be granted an
additional option to purchase 3,750 shares of Common Stock annually, each such
option to be granted at the fair market value of the Common Stock on the date of
grant. The initial option grant of 15,000 shares vests at a rate of 1/48th of
the shares per month following the date of grant, and the subsequent option
grant of 3,750 shares vests at the end of four years. In addition, the Company
reimburses the reasonable travel expenses of the directors.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act of 1934 requires the Company's executive
officers and directors, and persons who own more than 10% of a registered class
of the Company's equity securities, to file reports of initial ownership and
changes in ownership with the Securities and Exchange Commission ("SEC") and the
National Association of Securities Dealers, Inc. Executive officers, directors
and greater than ten percent stockholders are required by SEC regulation to
furnish the Company with copies of all Section 16(a) forms they file. Based
solely on its review of the copies of such forms received by it, or written
representations from certain reporting persons, the Company believes that during
fiscal 1998 all executive officers and directors of the Company complied with
all applicable filing requirements.
REPORT OF THE COMPENSATION COMMITTEE
The following is the Report of the Compensation Committee of the Company
describing the compensation policies and rationale applicable to the Company's
executive officers with respect to the compensation paid to such executive
officers for the fiscal year ended June 30, 1998. The information contained in
the report shall not be deemed to be "soliciting material" or to be "filed" with
the Securities and Exchange Commission nor shall such information be
incorporated by reference into any future filing under the Securities Act of
1933, as amended, or the Securities Exchange Act of 1934, as amended, except to
the extent that the Company specifically incorporates it by reference into such
filing.
General. The responsibilities of the Compensation Committee are to
administer the Company's various incentive plans, including the Company's 1992
Stock Option Plan and the 1996 Employee Stock Purchase Plan, and to set
compensation policies applicable to the Company's executive officers. The
Committee's fundamental policy is to offer the Company's executive officers
competitive compensation opportunities based upon overall Company performance,
their individual contribution to the financial success of the Company and their
personal
11
<PAGE>
performance. It is the Committee's objective to have a substantial portion of
each officer's compensation contingent upon the Company's performance, as well
as upon such officer's own level of performance. Accordingly, each executive
officer's compensation package comprises three elements: (i) base salary, which
is established primarily on the basis of individual performance and market
considerations; (ii) annual variable performance awards payable in cash and tied
to the Company's achievement of financial performance goals and the executive's
contribution; and (iii) long-term stock-based incentive awards, which strengthen
the mutuality of interests between the executive officers and the stockholders.
Base Salary. Base salary is primarily used by the Company as a device to
attract, motivate, reward and retain highly skilled executives. The Committee
reviewed and approved fiscal year 1998 base salaries for the Chief Executive
Officer and other executive officers at the beginning of the fiscal year or at
the date of their appointment. Base salaries were established by the Committee
based on an executive officer's job responsibilities, level of experience,
individual performance, contribution to the business, the Company's financial
performance for the past year and recommendations from management. The Committee
also took into account the salaries for similar positions at comparable
companies, based on each individual Committee member's industry experience. In
reviewing base salaries, the Committee focused significantly on each executive
officer's prior performance with the Company and expected contribution to the
Company's future success. In making base salary decisions, the Committee
exercised its discretion and judgment using these factors. No specific formula
was applied to determine the weight of each factor.
Annual Incentive Bonuses. Each executive officer's bonus is based on
qualitative and quantitative factors. Bonuses are intended to motivate and
reward executive officers by directly linking the amount of the bonus to
specific Company-based performance targets. Annual incentive bonuses for
executive officers are intended to reflect the Committee's belief that a portion
of the compensation of each executive officer should be contingent upon the
performance of the Company. To carry out this philosophy, the Board reviews and
approves the financial budget for the fiscal year. The Committee then
establishes target bonuses for each executive officer as a percentage of the
officer's base salary. The executive officers, must successfully achieve these
performance targets, which are submitted by management to the Committee for its
evaluation and approval at the beginning of the fiscal year. Company-based
performance goals are tied to different indicators of Company performance, such
as the operating results of the Company. The Committee evaluates the completion
of the Company-based performance targets and approves a performance rating
relative to the goals completed. This scoring is influenced by the Committee's
perception of the importance of the various corporate goals. The Committee
believes that the bonus arrangement provides an excellent link between the
Company's earnings performance and the incentives paid to executives.
Stock Options. The Committee provides the Company's executive officers
with long-term incentive compensation through grants of stock options under the
Company's 1992 Stock Option Plan. The Committee believes that stock options
provide the Company's executive officers with the opportunity to purchase and
maintain an equity interest in the Company and to share in the appreciation of
the value of the Company's Common Stock. The Committee believes that stock
options directly motivate an executive to maximize long-term stockholder value.
The options also use vesting periods that encourage key executives to continue
in their employment with the Company. All options granted to executive officers
to date have been granted at the fair market value of the Company's Common Stock
on the date of grant. The Committee considers the grant of each option
subjectively, considering factors such as the executive officer's relative
position and responsibilities with the Company, the individual performance of
the executive officer over the previous fiscal year, and the anticipated
contribution of the executive officer to the attainment of the Company's
long-term strategic performance goals. Stock options granted in prior years are
also taken into consideration. The Committee views stock option grants as an
important component of its long-term, performance-based compensation philosophy.
CEO Salary. The compensation of Mr. Berkeley, President and Chief
Executive Officer of the Company, consisted of base salary, an annual bonus and
incentive stock options. The Board of Directors periodically reviews the CEO's
base salary and bonus and revises his compensation based on the Board's overall
evaluation of his performance toward the achievement of the Company's financial,
strategic and other goals, with consideration given to his length of service and
to comparative chief executive officer compensation information. The
Compensation Committee believes that the Company's success is dependent in part
upon the efforts of its Chief Executive Officer. In fiscal 1998, Mr. Berkeley
earned a base salary of $276,000 as set by
12
<PAGE>
the Compensation Committee and earned a bonus of $70,629 which was based on
performance objectives. Mr. Berkeley also received an option to purchase 367,300
shares of Common Stock of the Company (with an exercise price of 100% of market
value of the Common Stock on the date of grant).
Option Repricing Report. In February 1998, all employees who held
outstanding options under the Company's stock options plans, including all
executive officers, were given the opportunity to reprice outstanding stock
options to the then current market price of $4.88 per share in return for
changing the vesting start date of the option to a point six months after the
original start date. The Company took this action to retain key employees at a
time of intense competition for experienced personnel. There were no separate
analyses of the impact of the repricing on the overall compensation of the
executive officers or any other employees.
The following table provides the specified information concerning all
repricings of options to purchase the Company's Common stock held by any
executive officer of the Company since August 15, 1996, the date of the
Company's initial public offering:
TEN-YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
Number of Length of Original
Securities Market Price Option Term
Underlying of Stock at Exercise Price Remaining at Date
Options Time of at Time of New of Repricing or
Repriced or Repricing or Repricing or Exercise Amendment
Name and Position Date Amended Amendment Amendment Price (months)
- - ----------------- ---- -------- --------- ---------- ----- --------
<S> <C> <C> <C> <C> <C> <C>
Augustus J. Berkeley....... 2/6/98 (1) 23,000 $4.88 $ 8.13 $4.88 75
President and Chief 2/6/98 (1) 42,000 4.88 8.13 4.88 75
Executive Officer 2/6/98 (1) 151,150 4.88 5.00 4.88 80
2/6/98 (1) 151,150 4.88 5.00 4.88 80
5/2/97 (1) 42,000 8.13 12.13 8.13 82
5/2/97 (1) 23,000 8.13 9.00 8.13 78
Christopher A. Markle...... 2/6/98 (1) 10,000 4.88 8.00 4.88 62
Vice President and 2/6/98 (1) 7,500 4.88 9.00 4.88 69
Chief Technical
Officer 2/6/98 (1) 15,000 4.88 8.13 4.88 75
5/2/97 (1) 15,000 8.13 16.25 8.13 77
William C. Jones........... 2/6/98 (1) 3,000 4.88 6.44 4.88 79
Vice President of
Marketing
Michael J. Satterwhite..... 2/6/98 (1) 25,000 4.88 9.38 4.88 67
Vice President of
Human Resources
Gloria M. Purdy (3)........ 2/6/98 (1) 30,000 4.88 9.00 4.88 69
Former Vice President
and Former CFO
D. Benedict Dulley (2) .... 5/2/97 (1) 12,500 8.13 12.00 8.13 71
Former Vice President
and Former Director
</TABLE>
(1) Options that were repriced in May 1997 and February 1998 were subject to a
similar vesting schedule commencing six months after the original vesting
commencement date.
(2) Mr. Dulley resigned his position as Vice President of the HARBOR division
and as a member of the Board of Directors in December 1997. He is no
longer an employee of the Company.
(3) Ms. Purdy resigned her position as Vice President, Chief Financial
Officer, and Secretary in October 1997. She is no longer an employee of
the Company.
Respectfully submitted by members of the Compensation Committee: Ronald W.
Braniff and Andrew I. Fillat
13
<PAGE>
PERFORMANCE GRAPH
The following graph compares the cumulative total return to stockholders
of the Company's Common Stock from August 15, 1996 (the date the Company first
became subject to the reporting requirements of the Securities Exchange Act of
1934, as amended) through June 30, 1998 to the cumulative total return over such
period of (i) the NASDAQ Stock Market-U.S. Index, (ii) the Russell 2000 Index
and (iii) the H&Q Technology Index. (1) The Company believes the Russell 2000
Index is a more comprable broad based index than the NASDAQ Stock Market- U.S.
Index because it includes a significantly greater percentage of companies with
similar market capitalizations.
COMPARISON OF CUMULATIVE TOTAL RETURN*
AMONG INTERLINK COMPUTER SCIENCES, INC.,
THE NASDAQ STOCK MARKET (U.S.) INDEX,
THE HAMBRECHT & QUIST TECHNOLOGY AND THE RUSSELL 2000 INDEX
[GRAPH OMITTED]
* $100 INVESTED ON 8/15/96 IN STOCK OR INDEX -
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING JUNE 30.
(1) The graph assumes that $100 was invested on August 15, 1996 (the date the
Company first became subject to the reporting requirements of the
Securities Exchange Act of 1934, as amended) in the Company's Common Stock
and in the NASDAQ Stock Market-U.S. Index, the Russell 2000 Index and in
the H & Q Technology Index and that all dividends were reinvested. No
dividends have been declared or paid on the Company's Common Stock.
Stockholder returns over the indicated period should not be considered
indicative of future stockholder returns.
The information contained in the Performance Graph shall not be deemed to
be "soliciting material" or to be "filed" with the Securities and Exchange
Commission, nor shall such information be incorporated by reference into any
future filing under the Securities Act or the Exchange Act, except to the extent
that the Company specifically incorporates it by reference into such filing.
14
<PAGE>
PROPOSAL TWO
AMENDMENT TO THE 1992 STOCK OPTION PLAN
The Company's stockholders are being asked to approve an amendment to the
Company's 1992 plan which will increase the number of shares authorized to be
issued thereunder from 2,405,000 to 2,555,000. As of June 30, 1998, 627,131
options were exercised under the 1992 Plan, options to purchase 1,509,883 shares
were outstanding under the 1992 Plan, with exercise prices ranging from $.70 to
$16.25, a weighted average exercise price of $4.19, and expiration dates ranging
from January 28, 2000 to June 24, 2005, and 170 persons were eligible to
participate in the 1992 Plan.
The Board of Directors now seeks shareholder approval of the amendment to
the Company's 1992 Plan to increase the number of shares of the Company's Common
Stock available for issuance thereunder by 150,000 shares from a total of
2,405,000 shares to a total of 2,555,000 shares. An increase in the number of
shares reserved for issuance under the 1992 Plan is needed to enable the Company
to continue to grant options to employees in accordance with its existing
compensation policies. Management of the Company believes that the ability to
grant options to employees is essential to the Company's ability to attract and
retain highly qualified employees.
A summary of the principal provisions of the 1992 Plan is set forth below:
1992 Stock Option Plan. The Company's 1992 Stock Option Plan (as amended,
the "1992 Plan") was adopted by the Board of Directors in June 1992, approved by
the Company's stockholders in July 1992 and amended in June 1996. In June 1996
and July 1996, the Board of Directors and the stockholders approved an increase
in the number of shares of Common Stock reserved under the 1992 Plan by
1,000,000 shares to 2,105,000 shares. In October 1997 and February 1998, the
Board of Directors and the stockholders approved an increase in the number of
shares of Common Stock reserved under the 1992 plan by 300,000 shares to
2,405,000 shares. The 1992 Plan provides for grants of incentive stock options,
restricted stock and stock purchase rights to employees (including officers and
employee directors) and consultants of the Company. The purpose of the 1992 Plan
is to attract and retain the best available personnel to the Company and to
encourage stock ownership by employees, officers, and consultants of the Company
to give them a greater personal stake in the success of the Company. The 1992
Plan is presently being administered by the Board of Directors, which determines
optionees and the terms of options granted, including exercise price, number of
shares subject to the option and the exercisability thereof.
The terms of options granted under the Plan generally may not exceed ten
years. However, the term of all incentive stock options and nonstatutory stock
options granted to an optionee who, at the time of grant, owns stock
representing more than 10% of the Company's outstanding capital stock, may not
exceed five years. The vesting of all stock option grants is determined by the
Board of Directors. Generally options granted under the 1992 Plan vest and
become exercisable starting nine months after the date of grant, with 9/48th of
the shares subject to the option becoming exercisable at that time and an
additional 1/48th of such shares subject to the option becoming exercisable each
month thereafter. No option may be transferred by the optionee other than by
will or the laws of descent or distribution, and each option may be exercised,
during the lifetime of the optionee, only by such optionee. An optionee whose
relationship with the Company or any related corporation ceases for any reason
(other than by death or permanent and total disability) may exercise options in
the 30-day period following such cessation (unless such options terminate or
expire sooner by their terms) or in such longer period as is determined by the
Board of Directors. In the event of a merger of the Company with or into another
corporation, all outstanding options may either be assumed or an equivalent
option may be substituted by the surviving entity or, if such options are not
assumed or substituted, such options shall terminate as of the date of the
closing of the merger. The exercise price of incentive stock options granted
under the 1992 Plan must be at least equal to the fair market value of the
shares on the date of grant. The exercise price of nonstatutory stock options
granted under the 1992 Plan is determined by the administrator. With respect to
any participant who owns stock possessing more than 10% of the voting rights of
the Company's outstanding capital stock, the exercise price of the any incentive
stock option or any nonstatutory stock option granted must equal at least
15
<PAGE>
110% of the fair market value on the grant date. The consideration for
exercising any incentive stock option or any nonstatutory stock option may
consist of cash, check, promissory note, delivery of already-owned shares of the
Company's Common Stock subject to certain conditions, delivery of a properly
executed exercise notice together with irrevocable instructions to a broker to
promptly deliver to the Company the amount of sale or loan proceeds required to
pay the exercise price, a reduction in the amount of any Company liability to an
optionee, or any combination of the foregoing methods of payments or such other
consideration or method of payment to the extent permitted under applicable law.
No incentive stock options may be granted to a participant, which, when
aggregated with all other incentive stock options granted to such participant,
would have an aggregate fair market value in excess of $100,000 becoming
exercisable in any calendar year.
The affirmative vote of a majority of the Votes Cast will be required to
approve this proposal. The Company's Board of Directors has approved this
proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE AMENDMENT OF THE 1992 STOCK
OPTION PLAN
PROPOSAL THREE
AMENDMENT TO THE 1996 EMPLOYEE STOCK PURCHASE PLAN
The Company's stockholders are being asked to approve an amendment to the
Company's 1996 Employee Stock Purchase Plan (the "Purchase Plan") which will
increase the number of shares authorized to be issued thereunder from 350,000 to
600,000. As of June 30, 1998, 198,213 shares have been issued under this plan.
The Board of Directors now seeks shareholder approval of the amendment to
the Purchase Plan to increase the number of shares of the Company's Common Stock
available for issuance thereunder by 250,000 shares from a total of 350,000
shares to a total of 600,000 shares. An increase in the number of shares
reserved for issuance under the Purchase Plan is needed to enable the Company to
continue to issue shares to participating employees in accordance with its
existing compensation policies. Management of the Company believes that the
ability to offer this plan is essential to the Company's ability to attract and
retain highly qualified employees.
A summary of the principal provisions of the Purchase Plan is set forth
below:
1996 Employee Stock Purchase Plan.
The Company's Purchase Plan was adopted by the Board of Directors in June
1996 and approved by the stockholders in July 1996. A total of 350,000 shares of
Common Stock has been reserved for issuance under the Purchase Plan. The
Purchase Plan, which is intended to qualify under Section 423 of the Internal
Revenue Code of 1986, as amended, is administered by the Board of Directors or
by a committee appointed by the Board. Employees (including officers and
employee directors of the Company) are eligible to participate if they are
customarily employed for at least 20 hours per week and for more than five
months in any calendar year. The Purchase Plan is implemented by a series of
overlapping offering periods, each consisting of approximately twenty-four
months duration. Each offering period contains four six month purchase periods,
the initial offering period under the Purchase Plan began on the effective date
of the Company's initial public offering and subsequent offering periods begin
on the first trading day on or after November 1 and May 1 of each year.
16
<PAGE>
The Purchase Plan permits eligible employees to purchase Common Stock
through payroll deductions, which may not exceed 15% of an employee's
compensation; provided, however, that in no event will any employee have
eligible compensation in excess of $50,000 in any one purchase period. Each
participant is granted an option on the first day of the offering period and
such option is automatically exercised on the last date of each purchase period.
If the fair market value of the Common Stock on any purchase date is lower than
the fair market value on the start date of the offering period, then all
participants in that offering period will be automatically withdrawn from such
offering period and reenrolled in the immediately following offering period. The
purchase price of the Common Stock under the Purchase Plan will be equal to 85%
of the lesser of the fair market value per share of Common Stock on the start
date of the offering period or on the date on which the option is exercised.
Employees may end their participation in the Purchase Plan at any time, and
participation ends automatically on termination of employment with the Company.
In any event, the Purchase Plan will terminate in June 2006, unless sooner
terminated by the Board of Directors.
The affirmative vote of a majority of the Votes Cast will be required to
approve this proposal. The Company's Board of Directors has approved this
proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE AMENDMENT OF THE 1996
EMPLOYEE STOCK PURCHASE PLAN
PROPOSAL FOUR
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected PricewaterhouseCoopers LLP,
independent accountants, to audit the financial statements of the Company for
the current fiscal year ending June 30, 1999. The Company expects that a
representative of PricewaterhouseCoopers LLP will be present at the Annual
Meeting, will have the opportunity to make a statement if he or she desires to
do so, and will be available to answer any appropriate questions.
The affirmative vote of a majority of the Votes Cast will be required to
approve this proposal. The Company's Board of Directors has approved this
proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE SELECTION
OF PRICEWATERHOUSECOOPERS LLP
OTHER MATTERS
The Company knows of no other matters to be addressed at the Annual
Meeting. If any other matters are properly addressed at the Annual Meeting, it
is the intention of the persons named in the accompanying proxy to vote the
shares represented in the manner as the Board of Directors may recommend.
BY ORDER OF THE BOARD OF DIRECTORS
Dated: September 18, 1998
17
