<PAGE>
================================================================================
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] 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
CONSILIUM, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[_] 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:
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(2) Aggregate number of securities to which transaction applies:
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(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.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
CONSILIUM, INC.
CONSILIUM
485 CLYDE AVENUE
MOUNTAIN VIEW, CA 94043
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 11, 1997
Dear Stockholder:
You are invited to attend the Annual Meeting of the Stockholders of
Consilium, Inc. (the "Company"), which will be held on March 11, 1997, at 3:00
p.m. at Consilium, Inc., 485 Clyde Avenue, Mountain View, California for the
following purposes:
1. To elect one (1) Class III director to hold office for a three-year
term and until his successor is elected and qualified.
2. To consider and vote upon a proposal to approve the Company's 1996
Stock Option Plan.
3. To consider a proposal to ratify the appointment of Arthur Andersen
LLP as the Company's independent public accountants for the fiscal
year ending October 31, 1997.
4. To transact such other business as may properly come before the
meeting.
Stockholders of record at the close of business on January 14, 1997 are
entitled to notice of, and to vote at, this meeting and any adjournments
thereof.
By order of the Board of Directors,
/s/ Michael J. Field
MICHAEL J. FIELD,
Secretary
Mountain View, California
February 19, 1997
<PAGE>
CONSILIUM, INC.
485 CLYDE AVENUE
MOUNTAIN VIEW, CALIFORNIA 94043
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
The accompanying proxy is solicited by the Board of Directors of Consilium,
Inc., a Delaware corporation (the "Company"), for use at the Annual Meeting of
Stockholders to be held March 11, 1997, or any adjournment thereof, for the
purposes set forth in the accompanying Notice of Annual Meeting. The date of
this Proxy Statement is February 19, 1997, the approximate date on which this
Proxy Statement and the accompanying form of proxy were first sent or given to
stockholders.
GENERAL INFORMATION
Annual Report. An annual report for the fiscal year ended October 31,
1996, is enclosed with this Proxy Statement.
Voting Securities. Only stockholders of record of shares of Common Stock
as of the close of business on January 14, 1997, will be entitled to vote at the
meeting and any adjournment thereof. As of that date, there were 7,928,051
shares of Common Stock of the Company, par value $.01 per share, issued and
outstanding. Stockholders may vote in person or by proxy. Each holder of
shares of Common Stock is entitled to one (1) vote for each share of Common
Stock held on the proposals presented in this Proxy Statement. The Company's
bylaws provide that a majority of all of the shares of the Common Stock entitled
to vote, whether present in person or represented by proxy, shall constitute a
quorum for the transaction of business at the meeting.
Solicitation of Proxies. The cost of soliciting proxies will be borne by
the Company. In addition, the Company will solicit stockholders by mail through
its regular employees, and will request banks and brokers, and other custodians,
nominees and fiduciaries, to solicit their customers who have stock of the
Company registered in the names of such persons and will reimburse them for
their reasonable, out-of-pocket costs. The Company may use the services of its
officers, directors, and others to solicit proxies, personally or by telephone,
without additional compensation. The Company has also engaged the services of
MacKenzie Partners, Inc. ("MacKenzie Partners"), a proxy solicitation firm. The
Company will pay a fee for such services, which it reasonably expects to be no
more than $5,000, and will reimburse out-of-pocket expenses of MacKenzie
Partners.
Voting of Proxies. All valid proxies received prior to the meeting will be
voted. All shares represented by a proxy will be voted, and where a stockholder
specifies by means of the proxy a choice with respect to any matter to be acted
upon, the shares will be voted in accordance with the specification so made. If
no choice is indicated on the proxy, the shares will be voted in favor of the
proposal. A stockholder giving a proxy has the power to revoke his or her
proxy, at any time prior to the time it is voted, by delivery to the Secretary
of the Company of a written instrument revoking the proxy or a duly executed
proxy with a later date, or by attending the meeting and voting in person.
Stock Ownership of Certain Beneficial Owners and Management. The following
table sets forth certain information, as of December 31, 1996, with respect to
the beneficial ownership of the Company's Common Stock by (i) all persons known
by the Company to be the beneficial owners of more than 5% of the outstanding
Common Stock of the Company, (ii) each director and director-nominee of the
Company, (iii) each executive officer and former executive officer of the
Company
2
<PAGE>
named in the Summary Compensation Table, and (iv) all current executive officers
and directors of the Company as a group.
<TABLE>
<CAPTION>
SHARES OWNED (1)
-----------------------------
NAME AND ADDRESS OF NUMBER OF PERCENTAGE
BENEFICIAL OWNERS SHARES OF CLASS (2)
- ------------------- ---------- ------------
<S> <C> <C>
Jonathan J. Golovin and Susan K. Golovin (3).................... 1,678,770 18.79%
Consilium, Inc.
485 Clyde Avenue
Mountain View, CA 94043
Michael H. Iles (4)............................................. 987,185 11.00%
Technology Investors I Ltd. Partnership
260 Engleburn Avenue
Peterborough, Ontario K9H 1S7 Canada
Wellington Management Company (5)............................... 598,000 6.66%
75 State Street
Boston, MA 02109
Centennial Associates, L.P. (6)................................. 763,700 8.55%
900 Third Avenue
New York, NY 10022
Robert C. Fink (7).............................................. 6,250 *
Laurence R. Hootnick (8)........................................ 425,750 4.77%
Robert Horne (9)................................................ 13,000 *
Thomas A. Tomasetti (10)........................................ 285,295 3.19%
Frank Kaplan (11)............................................... 83,124 *
Edward J. Norton (12)........................................... 114,383 1.27%
Richard Lloyd Payton (13)....................................... 77,999 *
Executive officers and directors as a group (13 persons) (14)... 2,888,274 32.17%
</TABLE>
- -----------------------
* Less than 1%
(1) Except as indicated in the footnotes to this table, the persons named in
the table have sole voting and investment power with respect to all shares
of Common Stock shown as beneficially owned by them, subject to community
property laws, where applicable.
(2) Calculated on the basis of 7,928,051 shares of Common Stock outstanding,
except that shares of Common Stock underlying options exercisable within 60
days of December 31, 1996 are deemed to be outstanding for purposes of
calculating the beneficial ownership of securities of the holders of such
options or of Common Stock of the Company.
(3) Includes 1,353,446 shares held directly by Jonathan J. Golovin and Susan K.
Golovin as Community Property, 200,000 shares held in trust by Jonathan J.
Golovin, Susan K. Golovin and Inge Golovin as Trustees for Dr. and Mrs.
Golovin's minor children, 18,670 shares held in trust by Jonathan and Susan
Golovin as Trustees for their minor children and 6,654 shares held
3
<PAGE>
in trust by Susan K. Golovin as Trustee for their minor children. Dr.
Golovin, Chairman of the Board of Directors and Chief Technical Officer of
the Company, may be deemed to share voting and investment power with
respect to such shares. Also includes 100,000 shares subject to stock
options exercisable within sixty days of December 31, 1996, of which 14,584
are unvested and subject to repurchase by the Company.
(4) Based on a Schedule 13G filed with the Securities and Exchange Commission
on February 7, 1997. Michael H. Iles, a citizen of Canada, wholly owns
Closeburn Management Ltd., a corporation organized under the laws of Canada
("Closeburn"). A wholly-owned subsidiary of Closeburn is the sole general
partner of Technology Investors I Limited Partnership, a limited
partnership organized under the laws of Ontario ("Technology Investors").
Closeburn acts as the investment manager of Technology Investors.
Technology Investors is the record holder of 942,085 shares of Common Stock
of the Company. Since Closeburn is wholly-owned by Mr. Iles, Mr. Iles may
be deemed to be the beneficial owner of the 942,085 shares of Common Stock
held of record by Technology Investors. Mr. Iles also directly owns 45,100
shares of Common Stock of the Company. In addition, the number of shares
of Common Stock of the Company stated above does not include 24,600 shares
of the Company's Common Stock registered under the name of Lievre Valley
Investment Club, an investment club of which a wholly-owned corporation of
Mr. Iles is a member.
(5) Based on a Schedule 13F filed with the Securities and Exchange Commission
on November 4, 1996 by Wellington Management Company, LLP. By reason of
advisory and other relationships with persons who own the shares,
Wellington Management Company may be deemed to be the beneficial owner of
all such shares. Wellington Management Company has the sole power to vote
117,700 shares and the shared power to vote 131,900 shares, and the sole
power to dispose of 389,500 shares and the shared power to dispose of
208,500 shares.
(6) Based on representations of representatives of Centennial Associates, L.P.
(7) All 6,250 shares are subject to stock options exercisable within sixty days
of December 31, 1996, and all of the shares are vested.
(8) Includes 3,000 shares held directly and 41,000 shares held indirectly.
Also includes 381,750 shares subject to stock options exercisable within
sixty days of December 31, 1996, of which 313,250 are unvested and subject
to repurchase by the Company.
(9) Includes 12,500 vested shares subject to stock options exercisable within
sixty days of December 31, 1996.
(10) Includes 196,540 shares held directly. Also includes 88,755 vested shares
subject to stock options exercisable within sixty days of December 31,
1996.
(11) Includes 80,000 shares subject to stock options exercisable within sixty
days of December 31, 1996. 45,625 of such shares are unvested and subject
to repurchase by the Company.
(12) Includes 110,000 shares subject to stock options exercisable within sixty
days of December 31, 1996. 69,792 of such shares are unvested and subject
to repurchase by the Company.
(13) Includes 68,700 shares subject to stock options exercisable within sixty
days of December 31, 1996. 46,855 of such shares are unvested and subject
to repurchase by the Company.
4
<PAGE>
(14) Includes 1,049,305 shares subject to stock options exercisable within sixty
days of December 31, 1996. 625,792 of such shares are unvested and subject
to repurchase by the Company.
ELECTION OF DIRECTORS
The Company has a classified Board of Directors currently consisting of two
Class I directors (Robert Horne and Robert C. Fink), two Class II directors
(Thomas A. Tomasetti and Laurence R. Hootnick), and one Class III director
(Jonathan J. Golovin), who will serve until the Annual Meetings of Stockholders
to be held in 1998, 1999 and 1997, respectively, and until their respective
successors are duly elected and qualified. Directors in a class are elected for
a term of three years to succeed the directors in such class whose terms expire
at such annual meeting.
Management's nominee for election at the Annual Meeting of Stockholders to
Class III of the Board of Directors is Jonathan J. Golovin. If elected, the
nominee will serve as a director until the Company's Annual Meeting of
Stockholders in 2000, and until his successor is elected and qualified. If the
nominee declines to serve or becomes unavailable for any reason, or if a vacancy
occurs before the election (although Management knows of no reason to anticipate
that this will occur), the proxies may be voted for a substitute nominee as the
Board of Directors may designate.
If a quorum is present and voting, the nominee for the position as Class
III director receiving the highest number of votes will be elected. Abstentions
will have no effect on the vote.
The table below sets forth for the Company's directors, including the Class
III nominee to be elected at this meeting, certain information with respect to
age and background.
<TABLE>
<CAPTION>
POSITION DIRECTOR
NAME WITH THE COMPANY AGE SINCE
- ---- ---------------- --- --------
<S> <C> <C> <C>
Class III director whose term expires at the 1997 Annual Meeting of
Stockholders:
Jonathan J. Golovin Chairman of the Board
of the Company since 1978 and
Chief Technical Officer 46 1978
Class I directors whose terms expire at the 1998 Annual Meeting of Stockholders:
Robert Horne Director 58 1994
Robert C. Fink Director 61 1996
Class II directors to be elected at the 1999 Annual Meeting of Stockholders:
Thomas A. Tomasetti Director 52 1987
Laurence R. Hootnick Director and President/CEO
of the Company 54 1996
since 1996
</TABLE>
Dr. Golovin, the founder of Consilium, was President of the Company from
1978 to 1987, and has served as a director and Chairman of the Company since its
inception and as Secretary from
5
<PAGE>
January 1989 to August 1996. In April 1992, Dr. Golovin was named Chief
Technical Officer of the Company. Dr. Golovin has also taught both graduate and
undergraduate courses in operations management and production planning at the
Massachusetts Institute of Technology and the University of California at
Berkeley. Dr. Golovin holds a Ph.D. in Operations Management from the
Massachusetts Institute of Technology and a B.S. degree from Cornell University.
Mr. Horne was appointed as a director of the Company in December 1994.
Since May 1995, he has served as Vice President, Business Development at
Northern Telecom, a telecommunications company. From July 1994 to May 1995, Mr.
Horne was a consultant to the pharmaceutical and medical device industries.
From June 1993 to July 1994, Mr. Horne was President and Chief Executive Officer
of BioCAD Corporation, a biotechnology firm, which was acquired by Molecular
Simulations in July 1994. From 1992 to June 1993, he was Senior Vice President
of Transgenic Sciences, Inc., a provider of New Drug Application testing
services to pharmaceutical and biotechnology companies. From 1986 to 1992, he
held several senior level positions at Digital Equipment Corporation, ultimately
serving as Vice President, Chemical, Pharmaceutical and Healthcare Markets, and
prior to that he held various senior level positions with Stauffer Company. Mr.
Horne holds a B.S. in Chemistry, a Masters Degree in Chemical Engineering from
Cambridge University and an M.B.A. from Harvard Business School. Mr. Horne also
serves as a director of American Telecorp, Inc.
Mr. Fink was appointed as a director of the Company in January 1996. Mr.
Fink has been employed by Lam Research Corp., a semiconductor equipment company,
since Lam Research acquired Drytek, Inc. in 1993, most recently as Senior Vice
President of Development. Mr. Fink served as President of Drytek from 1988
until its acquisition by Lam Research. Prior to that time, he was Director of
VLSI Operations at ITT Corporation's Semiconductor Division and was with General
Instrument Corp.'s Microelectronics Division, most recently as Director of
Worldwide Manufacturing Resources. Mr. Fink also serves as a director of
Uniphase Corporation.
Mr. Tomasetti served as President and Chief Executive Officer of the
Company from June 1987 to June 1996, and has served as a director since November
1987. From June 1996 to the present Mr. Tomasetti has been a partner in the
Brenner Group, a management outplacement and consulting group. Mr. Tomasetti
was a technology consultant with Hillman Ventures, a venture capital firm, from
November 1986 to June 1987, and served as Chief Executive Officer for Formaster
Magnetic Designs, a software duplication equipment firm, from November 1984 to
December 1986. From January 1982 to September 1984, he was Director of Western
Operations for Scientific Calculations, Inc., a software company, and previously
spent 16 years at General Electric Company, a diversified multinational
conglomerate, most recently as Vice President/General Manager for the Calma
division. Mr. Tomasetti holds a B.S. degree in Engineering from the University
of Massachusetts at Lowell.
Mr. Hootnick was appointed as a director of the Company in January 1996.
In June 1996, he was appointed President and Chief Executive Officer of the
Company. Mr. Hootnick was Senior Vice President, Finance and Operations for
Computing Corp., a computer company, from December 1995 to June 1996. From May
1995 to December 1995, Mr. Hootnick worked as a self-employed consultant. From
August 1994 to May 1995 Mr. Hootnick served as the Chief Operating Officer of
NetManage, Inc., a software company. From May 1991 to August 1994, Mr. Hootnick
served as President and Chief Executive Officer of Maxtor Corporation, a disk
drive manufacturer. He was employed by Intel Corporation from 1973 until 1991,
most recently as Senior Vice President. Mr. Hootnick holds a B.S. in Industrial
Management from the Massachusetts Institute of Technology and an M.B.A. in
Finance from the University of Maryland. Mr. Hootnick also serves as a director
of Network General Corporation and Wildflower Productions.
During the fiscal year ended October 31, 1996, the Board held six (6)
meetings. Each director serving on the Board in fiscal year 1996 attended at
least 75% of such meetings of the Board and the Committees on which he serves.
6
<PAGE>
The Company does not have a standing Nominating Committee, but does have an
Audit Committee and a Compensation Committee.
The Audit Committee's function is to review with the Company's independent
public accountants and management the annual financial statements and
independent public accountants' opinion, review the scope and results of the
examination of the Company's financial statements by the independent public
accountants, approve all professional services and related fees performed by the
independent public accountants, recommend the retention of the independent
public accountants to the Board, subject to ratification by the stockholders,
and periodically review the Company's accounting policies and internal
accounting and financial controls. The members of the Audit Committee are
Robert Fink and Robert Horne. During the fiscal year ended October 31, 1996,
the Audit Committee held five (5) meetings.
The Compensation Committee's function is to review and approve salary and
bonus levels and stock option grants. The members of the Compensation Committee
are Robert Fink and Robert Horne. During the fiscal year ended October 31, 1996,
the Compensation Committee held five (5) meetings. For additional information
concerning the Compensation Committee, see "REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION" and "EXECUTIVE COMPENSATION
AND OTHER MATTERS - Compensation Committee Interlocks and Insider
Participation."
7
<PAGE>
EXECUTIVE COMPENSATION AND OTHER MATTERS
The following table sets forth information concerning the compensation of
the Chief Executive Officer of the Company, former Chief Executive Officer of
the Company, and the four other executive officers of the Company as of October
31, 1996 whose total salary and bonus for the fiscal year ended October 31, 1996
exceeded $100,000, for services in all capacities to the Company and its
subsidiaries, during the fiscal years ended October 31, 1996, 1995 and 1994:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
-------------------------------------- ------------
Awards
------
Securities
Name and Principal Underlying All Other
Position Year Salary Bonus/1/ Options Compensation
- ----------------------------- ---- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Laurence R. Hootnick/2/ 1996 $ 85,462 $ 0 315,000/3/ $4,500/4/
President and Chief ----
Executive Officer 1995 __ __ __ __
----
1994 __ __ __ __
----
Thomas A. Tomasetti/5/ 1996 $200,000/6/ $ 0 0 $3,500/7/
Former President and Chief ----
Executive Officer 1995 $200,000 $ 38,073/8/ 0 0
----
1994 $188,156 $ 13,167/9/ 0 0
----
Edward J. Norton 1996 $140,000 $ 91,985/10/ 20,000 0
Senior Vice President and ----
President, Semiconductor 1995 $135,000 $ 74,275/11/ 70,000 0
and Electronics Group ----
1994 $ 18,952/12/ $ 0 0 0
----
Jonathan J. Golovin 1996 $190,000 $ 25,000/13/ 0 0
Chairman of the Board ----
and Chief Technical Officer 1995 $190,000 $ 30,573/14/ 0 0
----
1994 $180,740 $ 12,289/15/ 0 0
----
Richard Lloyd Payton 1996 $118,000 $ 80,675/16/ 20,000 0
Senior Vice President and ----
President, Healthcare 1995 $ 88,333 $116,484/17/ 32,000 0
Products and Process ----
Industries Group 1994 $ 89,332 $103,918/18/ 0 0
----
Frank Kaplan 1996 $152,500 $ 27,150/19/ 20,000 0
Senior Vice President, ----
Software Development and 1995 $142,500 $ 16,073/20/ 0 0
Quality Assurance ----
1994 $ 67,500/21/ $ 5,142/22/ 50,000 0
----
</TABLE>
- ------------------------------
/1/ Bonuses are paid based on Company performance and individual objectives set
by the Chief Executive Officer and/or the Compensation Committee. No
Company performance bonuses were paid in 1996 or 1994, except for profit
sharing in 1994.
8
<PAGE>
/2/ Mr. Hootnick became President and Chief Executive Officer of the Company on
June 14, 1996. Prior to that Mr. Hootnick served as a non-employee director
of the Company.
/3/ Includes option to purchase 15,000 shares under the Company's 1990 Outside
Director Stock Option Plan.
/4/ Includes compensation for services as a non-employee director of the
Company from January 30, 1996 through June 14, 1996.
/5/ Mr. Tomasetti served as President and Chief Executive Officer of the
Company until June 14, 1996. He continues to serve as a director of the
Company.
/6/ Includes $125,000 salary earned as Chief Executive Officer and President,
and $75,000 earned as an employee of the Company after resignation as
officer of the Company, pursuant to his resignation agreement.
/7/ Includes compensation for service as a director of the Company from August
1, 1996 through October 31, 1996.
/8/ Includes $573 in profit sharing bonus from fiscal 1995 profits, performance
bonus based on achievement of customized objectives determined by the
Compensation Committee, and performance bonus based on achievement of
Company revenue and profitability targets, net of bonus payback made after
restatement of fiscal revenues and profits.
/9/ Includes $454 in profit sharing bonus from fourth quarter 1994 profits and
performance bonus based on achievement of customized objectives determined
by the Compensation Committee.
/10/ Includes annual bonus based on successful implementation of customized
objectives specific to the management of the sales organization, paid at
the discretion of the Chief Executive Officer. Also includes commission on
revenues generated by the sales organization. Also includes special bonus
paid to key executives at the discretion of Mr. Hootnick.
/11/ Includes $573 in profit sharing bonus from fiscal 1995 profits, performance
bonus based on achievement of customized objectives determined by the Chief
Executive Officer, and performance bonus based on achievement of sales
revenue objectives and Company revenue and profitability targets, net of
bonus payback made after restatement of fiscal revenues and profits.
/12/ Mr. Norton commenced his employment with the Company on September 12,
1994.
/13/ Includes performance bonus based on customized objectives determined by the
Chief Executive Officer. Also includes special bonus paid to key executives
at the discretion of Mr. Hootnick and approved by the Compensation
Committee.
/14/ Includes $573 in profit sharing bonus from fiscal 1995 profits, performance
bonus based on achievement of customized objectives determined by the Chief
Executive Officer and approved by the Compensation Committee, and
performance bonus based on achievement of Company revenue and profitability
targets, net of bonus payback made after restatement of fiscal revenues and
profits.
/15/ Includes $454 in profit sharing bonus from fourth quarter 1994 profits and
performance bonus based on achievement of customized objectives determined
by the Chief Executive Officer and approved by the Compensation Committee.
9
<PAGE>
/16/ Includes annual bonus based on successful implementation of customized
objectives specific to the management of the sales organization, paid at
the discretion of the Chief Executive Officer. Also includes commission on
revenues generated by the sales organization. Also includes special bonus
paid to key executives at the discretion of Mr. Hootnick and approved by
the Compensation Committee.
/17/ Includes $573 in profit sharing bonus from fiscal 1995 profits, performance
bonus based on achievement of customized objectives determined by the Chief
Executive Officer, and performance bonus based on achievement of sales
revenue objectives and Company revenue and profitability targets, net of
bonus payback made after restatement of fiscal revenues and profits.
/18/ Includes $454 in profit sharing bonus from fourth quarter 1994 profits and
performance bonus based on achievement of customized objectives determined
by the Chief Executive Officer and approved by the Compensation Committee.
/19/ Includes performance bonus based on achievement of customized objectives
determined by the Chief Executive Officer, and special bonus paid to key
executives at the discretion of Mr. Hootnick and approved by the
Compensation Committee.
/20/ Includes $573 in profit sharing bonus from fiscal 1995 profits, performance
bonus based on achievement of customized objectives determined by the Chief
Executive Officer and approved by the Compensation Committee, and
performance bonus based on achievement of Company revenue and profitability
targets, net of bonus payback made after restatement of fiscal revenues and
profits.
/21/ Mr. Kaplan commenced his employment with the Company on May 2, 1994.
/22/ Includes $454 in profit sharing bonus from fourth quarter 1994 profits and
performance bonus based on achievement of customized objectives determined
by the Chief Executive Officer and approved by the Compensation Committee.
10
<PAGE>
The following table provides the specified information concerning grants of
options to purchase the Company's Common Stock made during the fiscal year ended
October 31, 1996 to the persons named in the Summary Compensation Table:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of Stock
Price Appreciation for Option
Total grants to employees in fiscal 1996 Term/1/
- --------------------------------------------------------------------------------- -----------------------------
% of Total
Number of Options
Options Granted to Expiration
Name Granted/2/ Employees Price/3/ Date 5% ($) 10% ($)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Laurence R. Hootnick 15,000 2.01% $8.938 1/30/06 $ 84,316 $ 213,673
300,000 40.13% $8.000 6/14/01 $580,191 $1,282,071
Thomas A. Tomasetti 0 0.00% -- -- -- --
Edward J. Norton 20,000 2.68% $7.000 5/21/01 $ 38,679 $ 85,471
Jonathan J. Golovin 0 0.00% -- -- -- --
Richard Lloyd Payton 20,000 2.68% $7.530 6/10/01 $ 38,679 $ 85,471
Frank Kaplan 20,000 2.68% $7.530 6/10/01 $ 38,679 $ 85,471
</TABLE>
/1/ Potential gains are net of exercise price, but before taxes associated with
exercise. These amounts represent certain assumed rates of appreciation
only, in accordance with the Securities and Exchange Commission's rules.
Actual gains, if any, on stock option exercises are dependent on the future
performance of the Common Stock, overall market conditions and the
optionholders' continued employment through the vesting period. The amounts
reflected in this table may not necessarily be achieved. One share purchased
at $8.938 per share in fiscal 1996 would yield profits of $5.62 per share at
5% appreciation over ten years, or profits of $14.25 per share at 10%
appreciation over the same period. One share purchased at $8.00, $7.75,
$7.53, or $7.00 per share in fiscal 1996 would yield respective profits of
$2.21, $2.14, $2.08, or $1.93 per share at 5% appreciation over five years,
or respective profits of $4.88, $4.73, $4.60, or $4.27 per share at 10%
appreciation over the same period.
/2/ All options granted in fiscal 1996 under the Company's 1983 Stock Option
Plan (the "1983 Option Plan") are immediately exercisable, and generally
vest over a four year period at the rate of one-fourth on the first
anniversary of the date of grant and 1/48 per month thereafter for each full
month of the optionee's continuous employment with the Company. Unvested
options are subject to repurchase by the Company. Under the 1983 Option
Plan, the Board retains discretion to modify the terms, including the price,
of outstanding options. See "EXECUTIVE COMPENSATION AND OTHER MATTERS -
Severance and Change of Control Arrangements." Options granted under the
Company's 1990 Outside Director Stock Option Plan are immediately
exercisable and vest at a rate of one-fourth per year over a four year
period on the anniversary date of the grant.
11
<PAGE>
/3/ All options listed were granted at market value on the date of grant, based
on the closing sales price on the date of grant, except for the 15,000
options granted to Mr. Hootnick under the Company's 1990 Outside Director
Stock Option Plan, which were granted at the average of the high and low
selling price on the date of grant.
The following table provides the specified information concerning
exercises of options to purchase the Company's Common Stock in the fiscal year
ended October 31, 1996, and unexercised options held as of October 31, 1996, by
the persons named in the Summary Compensation Table:
AGGREGATED OPTION EXERCISES
AND FISCAL YEAR-END VALUES
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Number of Securities
Underlying Unexercised Value of Unexercised In-the-
Options at 10/31/96 Money Options at 10/31/96/1/
---------------------------------- -----------------------------------
Name Exercisable/2/ Unexercisable Exercisable/2/ Unexercisable
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Laurence R. Hootnick 315,000/3/ 0 $ 0 --
Thomas A. Tomasetti 88,755/4/ 0 $33,283 --
Edward J. Norton 90,000/5/ 0 $ 6,250 --
Jonathan J. Golovin 100,000/6/ 0 $37,500 --
Richard Lloyd Payton 58,700/7/ 0 $ 3,138 --
Frank Kaplan 70,000/8/ 0 $ 0 --
</TABLE>
- -------------
/1/ Based on a fair market value of $6.50, the closing price of the Company's
Common Stock on October 31, 1996.
/2/ Company stock options are immediately exercisable at date of grant, but
vest over a period of four years. The value shown is for all outstanding
in-the-money options regardless of vesting restrictions.
/3/ Includes 261,250 shares that are unvested and subject to repurchase by the
Company.
/4/ All shares are vested.
/5/ Includes 29,792 shares that are unvested and subject to repurchase by the
Company.
/6/ Includes 14,584 shares that are unvested and subject to repurchase by the
Company.
/7/ Includes 16,855 shares that are unvested and subject to repurchase by the
Company.
/8/ Includes 15,625 shares that are unvested and subject to repurchase by the
Company.
12
<PAGE>
EMPLOYMENT AND CHANGE OF CONTROL ARRANGEMENTS
In July 1996, Thomas A. Tomasetti entered into a Resignation Agreement with
the Company approved by the Compensation Committee, amending his then existing
employment arrangement with the Company. Pursuant to this agreement, Mr.
Tomasetti resigned as President and Chief Executive Officer of the Company, and
agreed to remain an employee of the Company at his then current base salary
through June 1997. Under this agreement, Mr. Tomasetti is not entitled to any
bonus in fiscal 1996 or thereafter, and his outstanding options are each amended
to provide that there is no further vesting under such options following Mr.
Tomasetti's resignation from his officer positions effective in June 1996, but
that he will receive an option grant of 15,000 shares for his services as an
outside director, subject to the stockholders' approval of the 1996 Stock Option
Plan.
Pursuant to a letter agreement dated June 3, 1996 between the Company and
Laurence R. Hootnick, its President and Chief Executive Officer, the Company and
Mr. Hootnick are each required to give 30 days notice of termination of
employment, and upon the Company's termination of Mr. Hootnick's employment, he
is entitled to severance pay consisting of six months base salary, payable in
accordance with the Company's payroll procedures, and six months of extended
coverage under the Company's medical plan. Under this letter agreement, Mr.
Hootnick's benefits include: (A) $240,000 annual base salary, (B) a $120,000
executive bonus (pro-rated on an annual fiscal year basis), and (C) the
following grants of nonqualified stock options: (i) on June 14, 1996, under the
1983 Option Plan, an option to purchase 300,000 shares of the Company's Common
Stock at an exercise price per share equal to the fair market value of a share
of such stock on June 14, 1996, (ii) on or after November 1996, under the 1983
Option Plan, an additional option to purchase 78,000 shares of Common Stock at
an exercise price per share equal to the fair market value of a share of such
stock on the grant date, and (iii) upon approval by the stockholders of the
proposed 1996 Stock Option Plan (described below), an additional option to
purchase 20,000 shares of Common Stock at an exercise price equal to the fair
market value of a share of such stock on the grant date.
In the event of a transfer of control of the Company as defined under the
1983 Option Plan, the Company's repurchase option will terminate as of the date
of the transfer of control if the acquiring or successor corporation does not
elect to assume the outstanding options. Any outstanding options which are not
exercised or assumed will terminate as of the date of the transfer of control.
Options granted under the Company's 1990 Outside Directors Stock Option
Plan (the "Directors Plan") contain provisions pursuant to which all outstanding
options granted under the Directors Plan will become fully vested and
immediately exercisable upon a "transfer of control" as defined under the
Directors Plan.
In the event of a transfer of control of the Company as defined under the
proposed 1996 Stock Option Plan, the Company's repurchase option will terminate
as of the date of the transfer of control if the acquiring or successor
corporation does not elect to assume the outstanding options. Any outstanding
options which are not exercised or assumed will terminate as of the date of the
transfer of control.
13
<PAGE>
In December, 1996, the Company approved the execution of Change of Control
Agreements for the entire executive staff, including: Richard Lloyd Payton,
Edward J. Norton, Frank Kaplan, Ralph Zak, Wynn Bowman, Michael J. Field, Linda
Kato Ujihara, and Clifton Wong, which provide (i) in the event of an Involuntary
Termination of the executive within twelve months after a Change of Control of
the Company, the executive receives severance pay equal to 100% of the annual
base salary plus the full amount of annual bonus at the "on-target" level for
the fiscal year, and (ii) in the event of a Change of Control of the Company,
the executive receives a credit of 12 months service for purposes of determining
the vesting and exercisability of stock options, and if the executive continues
employment after the Change of Control at the request of the Board of Directors,
vesting of unvested shares continues during employment, and the executive is
credited with an additional 12 months of service for purposes of determining
vesting and exercisability upon the earlier of (a) Involuntary Termination of
the executive within a 90-day period following the Change of Control, or (b) 90
days following the Change of Control, provided the executive continues to serve
as of that date. Mr. Laurence R. Hootnick and Dr. Jonathan J. Golovin entered
into similar Change of Control Agreements, except that in the event of
Involuntary Termination within twelve months of a Change of Control, Mr.
Hootnick or Dr. Golovin receive severance pay equal to 200% of their respective
annual base salary, plus the annual bonus at the "on-target level;" and in the
event of a Change of Control, Dr. Golovin receives credit of 24 months service
for purposes of determining the vesting and exercisability of his stock options,
and Mr. Hootnick receives credit of either 24, 30 or 36 months service
(depending on the value of the consideration received by the Company's
stockholders pursuant to the Change of Control of the Company), for purposes of
determining the vesting and exercisability of stock options granted to him.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company receive $10,000 per fiscal
year (pro rated on a fiscal year basis) for their services as members of the
Board of Directors. In addition, each such director receives $1,000 for each
Board meeting and $500 for each Committee meeting attended by the director. The
Company's Directors Plan provides for the automatic grant of an option to
purchase 15,000 shares of the Company's Common Stock to directors of the Company
who are not employees of the Company (an "Outside Director") upon initial
appointment or election to the Board of Directors,
14
<PAGE>
and subsequent grants to each Outside Director of an option to purchase 2,500
shares of Common Stock on the date of the first Board meeting of each successive
fiscal year thereafter, prorated for the first year based on the number of full
months of service as a director.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Robert Horne has served on the Compensation Committee since his appointment
effective upon the 1995 Annual Meeting. Robert C. Fink was appointed to the
Compensation Committee in March 1996 to replace Jonathan J. Golovin, Chairman of
the Board of Directors and Chief Technical Officer, who served on the
Compensation Committee from September 1995 to March 1996. Dr. Golovin did not
participate in any deliberations regarding compensation of any executive
officers of the Company during the 1996 fiscal year.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers, directors and persons who beneficially own more than 10% of
the Company's Common Stock to file initial reports of ownership and reports of
changes in ownership with the Securities and Exchange Commission ("SEC"). Such
persons are required by SEC regulations to furnish the Company with copies of
all Section 16(a) forms filed by such persons.
Based solely on the Company's review of such forms furnished to the Company
and written representations from certain reporting persons, the Company believes
that all filing requirements applicable to the Company's executive officers,
directors and more than 10% stockholders were complied with, except that, due to
administrative error, two statements of changes in beneficial ownership each
reflecting one transaction by Laurence R. Hootnick were not timely filed; also,
due to administrative error, one annual statement of beneficial ownership
reporting an exempt option grant to Wynn Bowman was not timely filed; and
further, also due to administrative error, one annual statement of changes in
beneficial ownership reporting a cancellation of unvested shares of Thomas A.
Tomasetti by the Company was not timely filed.
CHANGES TO BENEFIT PLANS
The Company proposes to the stockholders the approval of the adoption of
the Company's 1996 Stock Option Plan (the "1996 Plan"). See "APPROVAL OF
ADOPTION OF 1996 STOCK OPTION PLAN." Subject to approval of the 1996 Plan by
the Company's stockholders, Laurence R. Hootnick will be granted a stock option
for 20,000 shares of Common Stock under the 1996 Plan pursuant to a letter
agreement dated June 3, 1996 between Laurence R. Hootnick and the Company. In
addition, subject to the approval of the 1996 Plan by the Company's
stockholders, Thomas A. Tomasetti will be granted a stock option for 15,000
shares of Common Stock under the 1996 Plan pursuant to the resignation agreement
dated July 19, 1996 between Thomas A. Tomasetti and the Company.
15
<PAGE>
The following table sets forth option grants under the 1996 Plan that the
Company will make upon approval of the 1996 Plan by the Stockholders of the
Company. Since grants under the 1996 Plan are made at the discretion of the
Board of Directors, other future grants under the 1996 Plan are not yet
determinable.
NEW PLAN BENEFITS
<TABLE>
<CAPTION>
Consilium, Inc.
1996 Stock Option Plan
------------------------------------------
Number of Options Exercise Price Per
Name and Position to be Granted/1/ Share ($)/2/
- ---------------------------- ----------------- ------------------
<S> <C> <C>
Laurence R. Hootnick 20,000 --
President and Chief
Executive Officer
Thomas A. Tomasetti 15,000 --
Former President and Chief
Executive Officer
Edward J. Norton -- --
Senior Vice President and
President, Semiconductor
and Electronics Group
Jonathan J. Golovin -- --
Chairman of the Board and
Chief Technical Officer
Richard Lloyd Payton -- --
Senior Vice President and
President, Healthcare
Products and Process
Industries Group
Frank Kaplan -- --
Senior Vice President,
Software Development and
Quality Assurance
All Executive Officers 20,000 --
as a group (10 persons)
All Outside Directors 15,000 --
as a group (3 persons)
All Non-Executive Officer -- --
Employees as a group
</TABLE>
- ------------------------------------------
/1/ Based on the Company's current obligations to grant options under the 1996
Plan, subject to the approval of the 1996 Plan by the stockholders of the
Company. Other grants under the 1996 Plan are not yet determinable, since
they will be made at the discretion of the Board of Directors.
/2/ The exercise price per share for any grant to be made under the 1996 Plan
is unknown since it will be based on the fair market value on the date of
grant.
16
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
In September 1995, Dr. Jonathan J. Golovin, the Chairman of the Board and
Chief Technical Officer of the Company, was appointed to the Compensation
Committee ("the Committee") to replace L. Barton Alexander shortly before Mr.
Alexander's death. In March 1996, Robert C. Fink was appointed to replace Dr.
Golovin on the Compensation Committee, and from that time the Committee has been
comprised of two non-management directors of the Company, Robert C. Fink and
Robert Horne. Dr. Golovin did not participate in any deliberations regarding
compensation for himself or any other executive officer during his tenure on the
Committee.
In fiscal 1996, the Compensation Committee was responsible for setting and
administering the policies governing annual compensation of the executive
officers of the Company. These policies are based upon the philosophy that the
Company's long-term success in its marketplace is best achieved through
recruitment and retention of the best people in the industry. The Committee
applied this philosophy in determining compensation for Company executive
officers in four areas: salary, bonuses, stock options, and benefits upon a
Change of Control of the Company.
SALARY. The Company strives to offer salaries to its executive officers
which are targeted at the median in its industry for similar positions requiring
similar qualifications. In determining executive officers' salaries, the
Compensation Committee considers information provided by the Human Resources
Director, whose recommendations are based upon salary surveys of companies in
similar industries, and of similar size and geographic location. In preparing
the performance graph set forth in the section entitled "COMPARISON OF
STOCKHOLDER RETURN," the Company has selected the S&P Technology-500 (formerly
known as the S&P High Tech Composite) as its published industry index; however,
the companies included in the Company's salary surveys are not necessarily those
included in this index, because companies in the index may not compete with the
Company for executive talent, and companies which do compete for executive
officers may not be publicly traded.
The Compensation Committee generally evaluates the performance and sets the
salary of the Company's Chief Executive Officer on an annual basis. See "Chief
Executive Officer Compensation." The Chief Executive Officer evaluates the
performance of all other executive officers, and recommends salary adjustments
which are subject to review by the Compensation Committee. In addition to
considering the results of performance evaluations and information concerning
competitive salaries, the Compensation Committee and the Chief Executive Officer
place weight on the financial condition of the Company and the competitive
employment situation in the Company's industry and geographic area in
considering salary adjustments.
Mr. Hootnick recommended salary increases ranging from 3% to 28% of base
salary for certain of the Company's executive officers in fiscal 1996. The
Committee believes that such increases in salary were advisable to encourage
these executive officers to remain with the Company.
BONUSES. The Company seeks to provide additional incentives and rewards to
executives who make contributions of outstanding value to the Company. For this
reason, the Compensation Committee awards incentive compensation which can
comprise a substantial portion of the total compensation of executive officers
when earned and paid. In fiscal 1996, the Compensation Committee determined to
continue to provide incentive compensation in two components, with a portion
contingent on Company performance and another portion based on achievement of
corporate and individual objectives under a Management By Objective ("MBO")
bonus plan, both as described below. The total incentive bonuses which could be
awarded if all Company performance targets and corporate MBOs were achieved
comprised up to 31.5% of total cash compensation for executive officers, with
more senior executive officers having a larger percentage of total compensation
comprised of incentive compensation.
17
<PAGE>
The Board of Directors, in consultation with the Chief Executive Officer,
determines annually the total amount of cash bonuses available for executive
officers. The target amounts of bonus available are set annually by the
Compensation Committee with respect to the Chief Executive Officer and by the
Chief Executive Officer with respect to other executive officers. Awards are
weighted so that proportionately higher awards are received when the Company's
performance exceeds targets and proportionately smaller or no awards are made
when the Company does not meet targets. Bonuses are paid annually. The
largest portion of the bonus is contingent upon the performance of the Company
as a whole, based upon the Company attaining certain revenue and operating
profit goals set by the Board of Directors annually in consultation with the
Chief Executive Officer. This portion of the bonus was not paid in fiscal 1996
because revenue and profitability levels of the Company in fiscal year 1996 did
not meet the performance goals established by the Board of Directors.
In fiscal 1996, individual MBOs were established for Mr. Tomasetti and for
each executive officer. Mr. Hootnick established corporate objectives in place
of the individual objectives for executive officer in the fourth quarter of
fiscal 1996. In fiscal 1996, the bonuses paid to the eligible executive
officers based on achievement of corporate MBOs were from 75% to 99% of targeted
bonuses. Mr. Hootnick was not eligible to receive a bonus based on achievement
of either individual or corporate objectives, but only based on the Company
achieving predetermined revenue and operating profit targets.
In addition, in fiscal 1996 the Committee approved a special bonus for key
executive officers at the discretion of Mr. Hootnick in order to retain such
officers, in light of the competitive employment market in Silicon Valley and
the Committee's determination that compensation for these officers was below
market for officers of similar experience at companies in the Company's industry
and geographic area. In fiscal 1996, special bonuses paid to certain executive
officers were from 2% to 9% of their total compensation. These bonuses were not
based on Company performance criteria, but instead on Mr. Hootnick's view of
their relative contributions, both historical and expected, to Company
performance.
For further information on bonuses paid to certain executive officers, see
"SUMMARY COMPENSATION TABLE" and "EXECUTIVE COMPENSATION AND OTHER MATTERS -
Compensation Committee Interlocks and Insider Participation."
STOCK OPTIONS. The Committee believes that employee equity ownership
provides significant additional motivation to executive officers to maximize
value for the Company's stockholders, and therefore makes periodic grants of
stock options under the Company's option plans. Such options are granted at the
prevailing market price, and will only have value if the Company's stock price
increases over the exercise price. Therefore, the Committee believes that stock
options serve to align the interest of executive officers closely with other
stockholders because of the direct benefit executive officers receive through
improved stock performance.
In fiscal 1996, the Compensation Committee made determinations concerning
the size and frequency of option grants for executive officers, after
consideration of recommendations from the Chief Executive Officer and
information provided by Human Resources personnel. Option grants were based
upon relative position and responsibilities of each executive officer,
historical and expected contributions of each officer to the Company, and
previous option grants to such executive officers. Options were granted with a
goal to provide competitive equity compensation for executive officers compared
to executive officers of similar rank in companies of the Company's industry,
geographic location and size. Generally, option grants vest over four years,
and although the options are immediately exercisable, shares are subject to
repurchase by the Company until vesting restrictions have lapsed. Option grants
for fiscal 1996 are set forth in the table entitled "OPTION GRANTS IN LAST
FISCAL YEAR" in the section entitled "EXECUTIVE COMPENSATION AND OTHER MATTERS."
18
<PAGE>
CHANGE OF CONTROL AGREEMENTS. In December 1996, following the completion
of fiscal 1996, the Committee determined that it was in the best interests of
the Company and its stockholders to adopt change of control agreements to
provide the executive officers of the Company with certain severance benefits
upon a change of control of the Company (as defined in the agreements), and upon
the executive officers' termination of employment following a change of control.
The Committee believed that such benefits would provide such executive officers
with enhanced financial security, thereby providing incentive for such officers
to remain employed by the Company during a period of uncertainty when there is
the possibility of or negotiation of a change of control transaction.
Accordingly, the Committee unanimously recommended adoption of change of control
agreements for the Company's executive officers. The terms of such agreements
are described above in the section entitled "EXECUTIVE COMPENSATION AND OTHER
MATTERS - Employment and Change of Control Agreements." The Committee
recommended an agreement for Mr. Hootnick providing a severance payment equal to
200% of salary, plus targeted bonus, and vesting of options based on the sale
price for the Company, pursuant to the terms of Mr. Hootnick's offer letter.
The Board of Directors, based on the recommendation of the Compensation
Committee, also approved these agreements for any future executive officer of
the Company to attract and retain such executives.
CHIEF EXECUTIVE OFFICER COMPENSATION. In fiscal 1996 Mr. Tomasetti
continued his fiscal 1995 base salary as President and Chief Executive Officer.
Mr. Tomasetti also had individual MBOs, the achievement of which would have
determined Mr. Tomasetti's bonus under the MBO portion of the Company's bonus
plan for executive officers. In June 1996, Mr. Tomasetti resigned as President
and Chief Executive Officer of the Company and entered into a Resignation
Agreement approved by the Compensation Committee. Pursuant to the agreement,
Mr. Tomasetti will remain an employee of the Company at his 1996 base salary
through June 1997, but was not entitled to any bonus in fiscal 1996 or
thereafter. Mr. Tomasetti's outstanding options were each amended to provide
that there would be no further vesting under such options following Mr.
Tomasetti's resignation from his officer positions effective in June 1996, but
that he would receive an option grant of 15,000 shares for his services as an
outside director, subject to the stockholders' approval of the proposed 1996
Option Plan. See "EXECUTIVE COMPENSATION AND OTHER MATTERS - Employment and
Change of Control Agreements."
Laurence R. Hootnick became the President and CEO of the Company in June
1996, concurrent with Mr. Tomasetti's resignation. The Company and Mr. Hootnick
have entered into an employment letter agreement following arms-length
negotiations and approval by the Compensation Committee. Under this agreement
Mr. Hootnick is entitled to an annual salary of $240,000, participation in the
Company's employee benefits plans, and a target bonus of 50% of salary (pro-
rated for service in the fiscal year), which terms the Committee determined to
be competitive compared with compensation for chief executive officers in
companies in similar industries and of similar size and geographic location.
Under the agreement, Mr. Hootnick's bonus depends upon the Company's achieving
profitability and revenue targets approved by the Compensation Committee. Such
goals were not achieved in fiscal 1996, and accordingly Mr. Hootnick received no
bonus for fiscal 1996. Also pursuant to his employment letter agreement, Mr.
Hootnick was granted options for 300,000 shares in fiscal 1996 and an additional
option for 78,000 shares in fiscal 1997, and is to be granted additional options
for 20,000 shares subject to the approval by the stockholders of the proposed
1996 Stock Option Plan. The number of shares subject to such options was
determined by the Committee to provide competitive equity compensation compared
to chief executive officers in companies of the Company's industry, geographic
location and size. For a more detailed description of the terms of the
employment letter agreement, see the section entitled "EXECUTIVE COMPENSATION
AND OTHER MATTERS - Employment and Change of Control Agreements."
DEDUCTIBILITY OF EXECUTIVE COMPENSATION. The Company has considered the
amendments to the Internal Revenue Code and related regulations of the Internal
Revenue Service which restrict deductibility of executive compensation paid to
each of the five most highly compensated executive officers at the end of any
fiscal year to the extent such compensation exceeds $1,000,000 for any of
19
<PAGE>
such officers in any year and does not qualify for an exception under the
statute or regulations. The Compensation Committee concluded in January 1994
that it would be advisable to establish certain restrictions on the granting of
options under the option plans to assist in the qualification of compensation
recognized in connection with the exercise of such options for an exemption;
these restrictions were approved at the 1994 Annual Meeting of Stockholders.
The Committee also approved identical restrictions on the granting of options
under the 1996 Stock Option Plan submitted for stockholder approval. See
"APPROVAL OF ADOPTION OF 1996 STOCK OPTION PLAN." The Committee does not
believe that other components of the Company's compensation will be likely to
exceed $1,000,000 for any executive officer in the foreseeable future and
therefore concluded that no further action with respect to qualifying such
compensation for deductibility was necessary at this time. In the future, the
Committee will continue to evaluate the advisability of qualifying its executive
compensation for deductibility of such compensation. The Committee's policy is
to qualify its executive compensation for deductibility under applicable tax
laws as practicable.
COMPENSATION COMMITTEE
Robert Horne
Robert C. Fink
20
<PAGE>
COMPARISON OF STOCKHOLDER RETURN
Set forth below is a line graph comparing the annual percentage change in
the cumulative total return on the Company's Common Stock with the cumulative
total return of the S&P 500 and the S&P Technology-500/1/ for the period
commencing on October 31, 1991 and ending on October 31, 1996.
COMPARISON OF CUMULATIVE TOTAL RETURN
FROM OCTOBER 31, 1991 THROUGH OCTOBER 31, 1996/2/
CONSILIUM, INC., S&P 500, S&P TECHNOLOGY - 500
PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION>
Measurement Period CONSILIUM, S&P S&P
(Fiscal Year Covered) INC. 500 INDEX TECHNOLOGY -500
- ------------------------ ---------- --------- ---------------
<S> <C> <C> <C>
Measurement Pt- 10/31/91 $100.00 $100.00 $100.00
FYE 10/31/92 $ 41.62 $109.95 $100.95
FYE 10/31/93 $ 29.48 $126.39 $125.42
FYE 10/31/94 $ 29.48 $131.27 $152.24
FYE 10/31/95 $ 57.23 $165.98 $230.55
FYE 10/31/96 $ 30.06 $205.97 $278.94
</TABLE>
- -------------------
/1/ The S&P Technology-500 was previously named the "S&P High Tech Composite."
/2/ Assumes that $100.00 was invested on October 31, 1991 in the Company's
Common Stock and each index, and that all dividends were reinvested. No
dividends have been declared on the Company's Common Stock. Stockholder
returns over the indicated period should not be considered indicative of
future stockholder returns.
21
<PAGE>
APPROVAL OF ADOPTION OF 1996 STOCK OPTION PLAN
GENERAL
The Board of Directors unanimously approved the adoption of the Company's
1996 Stock Option Plan (the "1996 Plan") on December 13, 1996 (the "Effective
Date"), subject to stockholder approval. If the 1996 Plan is approved by the
Company's stockholders, future option grants would be made pursuant to the 1996
Plan rather than the Company's Fourth Amended and Restated 1983 Stock Option
Plan or the Company's 1993 Stock Option Plan (collectively, the "Prior Plans").
The stockholders are now being asked to approve the adoption of the 1996
Plan, the material features of which are described below. The Board of
Directors believes that the availability of an adequate stock option program is
an important factor in attracting and retaining qualified officers, employees
and consultants essential to the success of the Company and in aligning their
long-term interests with those of the stockholders.
DESCRIPTION OF PLAN
The following summary of the 1996 Plan is qualified in its entirety by the
specific language of the 1996 Plan, a copy of which is available to any
stockholder upon request.
General. The 1996 Plan provides for the grant of incentive stock options
within the meaning of section 422 of the Internal Revenue Code of 1986, as
amended (the "Code") and nonstatutory stock options. Subject to approval of the
1996 Plan by the Company's stockholders, Laurence R. Hootnick will be granted a
stock option for 20,000 shares of Common Stock under the 1996 Plan pursuant to a
letter agreement dated June 3, 1996 between Mr. Hootnick and the Company.
Subject to the approval of the 1996 Plan by the Company's stockholders, Thomas
A. Tomasetti will be granted a stock option for 15,000 shares of Common Stock
under the 1996 Plan pursuant to a resignation agreement dated July 19, 1996
between Mr. Tomasetti and the Company. See "EXECUTIVE COMPENSATION AND OTHER
MATTERS - Employment and Change of Control Agreements, and - Change of Benefit
Plans." As of February 7, 1997, no options have been granted under the 1996
Plan.
Shares Subject to Plan. The maximum number of authorized but unissued or
reacquired shares of the Company's Common Stock available for issuance under the
1996 Plan is equal to the sum of (a) 390,000 shares, (b) the number of shares,
as of the Effective Date, subject to outstanding options granted under the Prior
Plans, and (c) the number of shares available for future grant under the Prior
Plans as of the Effective Date (the "Share Reserve"). The Share Reserve will be
reduced by the number of shares which continue to be subject to outstanding
options granted under the Prior Plans, are issued upon exercise of such options,
or are issued pursuant to options granted under the Prior Plans after the
Effective Date. As of February 7, 1997, 635,624 shares were available for grant
under the 1996 Plan. The 1996 Plan imposes a grant limit under which no
employee may receive in any fiscal year options to purchase in excess of 200,000
shares; provided, however, that a new hire may receive options to purchase up to
300,000 shares (the "Grant Limit"). Appropriate adjustments will be made to
the shares subject to the 1996 Plan, to the Grant Limit, and to outstanding
options upon any stock dividend, stock split, reverse stock split,
recapitalization, combination, reclassification, or similar change in the
capital structure of the Company. To the extent that any outstanding option
under the 1996 Plan expires or terminates prior to exercise in full or if shares
issued upon exercise of an option are repurchased by the Company, the shares of
Common Stock for which such option is not exercised or repurchased are returned
to the 1996 Plan and become available for future grant.
Administration. The 1996 Plan is administered by the Board of Directors or
a duly appointed committee of the Board (hereinafter referred to as the
"Board"). With respect to the participation of individuals whose transactions
in the Company's equity securities are subject to Section 16 of the Securities
Exchange Act of 1934 (the "Exchange Act"), the 1996 Plan must be administered in
22
<PAGE>
compliance with the requirements of Rule 16b-3 under the Exchange Act, if any.
Subject to the provisions of the 1996 Plan, the Board determines the persons to
whom options are to be granted, the number of shares to be covered by each
option, whether an option is to be an incentive stock option or a nonstatutory
stock option, the timing and terms of exercisability of each option or the
vesting of shares acquired upon the exercise of an option, including the effect
thereon of an optionee's termination of service, the exercise price of and the
type of consideration to be paid to the Company upon the exercise of each
option, the duration of each option, and all other terms and conditions of the
options.
The 1996 Plan authorizes the Board to amend, modify, extend, renew, or
grant a new option in substitution for, any option, to waive any restrictions or
conditions applicable to any option or any shares acquired upon the exercise
thereof, and to accelerate, continue, extend or defer the exercisability of any
option or the vesting of any shares acquired upon the exercise of an option,
including with respect to the period following an optionee's termination of
service with the Company. The 1996 Plan provides, subject to certain
limitations, for indemnification by the Company of any director, officer or
employee against all reasonable expenses, including attorneys' fees, incurred in
connection with any legal action arising from such person's action or failure to
act in administering the 1996 Plan. The Board will interpret the 1996 Plan and
options granted thereunder, and all determinations of the Board will be final
and binding on all persons having an interest in the 1996 Plan or any option.
Eligibility. Options may be granted under the 1996 Plan to employees,
directors and consultants of the Company or of any present or future parent or
subsidiary corporations of the Company. The 1996 Plan also permits options to
be granted to prospective employees, consultants and directors in connection
with written offers of employment or engagement, provided that such options may
not become exercisable prior to the individual's commencement of service. As of
February 7, 1997, the Company had approximately 260 employees, including 10
executive officers, and 2 non-employee directors. While any person eligible
under the 1996 Plan may be granted a nonstatutory option, only employees may be
granted incentive stock options.
Terms and Conditions of Options. Each option granted under the 1996 Plan
is evidenced by a written agreement between the Company and the optionee
specifying the number of shares subject to the option and the other terms and
conditions of the option, consistent with the requirements of the plan. The
exercise price per share of each option granted under the 1996 Plan must equal
at least the fair market value of a share of the Company's Common Stock on the
date of grant. However, any incentive stock option granted to a person who at
the time of grant owns stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company or any parent or subsidiary
corporation of the Company (a "Ten Percent Stockholder") must have an exercise
price equal to at least 110% of the fair market value of a share of Common Stock
on the date of grant. As of February 7, 1997, the closing price of a share of
the Company's Common Stock as reported on the Nasdaq National Market was $6.25.
The option exercise price may be paid in cash, by check, or in cash
equivalent, by tender of shares of the Company's Common Stock owned by the
optionee having a fair market value not less than the exercise price, by the
assignment of the proceeds of a sale or loan with respect to some or all of the
shares of Common Stock being acquired upon the exercise of the option, by means
of a promissory note, by any other lawful consideration approved by the Board,
or by any combination of these. The Board may nevertheless restrict the forms
of payment permitted in connection with any option grant. The 1996 Plan also
authorizes the Company to withhold from shares otherwise issuable upon the
exercise of an option or to accept the tender of shares of the Company's Common
Stock in full or partial payment of any tax withholding obligations.
Options granted under the 1996 Plan become exercisable and vested at such
times and subject to such conditions as specified by the Board. Generally,
options granted under the 1996 Plan become exercisable in installments over a
period of time specified by the Board at the time of grant, subject to
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the optionee's continued service with the Company. However, the Board may also
grant options that are exercisable immediately on and after the date of grant,
subject to the right of the Company to reacquire at the optionee's exercise
price any unvested shares held by the optionee upon termination of service or if
the optionee attempts to transfer any unvested shares. Shares acquired under
such options generally vest in installments subject to the optionee's continued
service. The 1996 Plan provides that the maximum term of an incentive stock
option is ten years unless granted to a Ten Percent Stockholder, in which case
the maximum term is five years. Consistent with the Code, the 1996 Plan does
not limit the term of a nonstatutory stock option. Options are nontransferable
by the optionee other than by will or by the laws of descent and distribution,
and are exercisable during the optionee's lifetime only by the optionee.
However, the 1996 Plan provides that a nonstatutory stock option may be
assignable or transferable to the extent permitted by the Board and set forth in
the option agreement.
Transfer of Control. The 1996 Plan provides that, in the event of (i) a
sale or exchange by the stockholders in a single or series of related
transactions of more than 50% of the Company's voting stock, (ii) a merger or
consolidation in which the Company is a party, (iii) the sale, exchange or
transfer of all or substantially all of the assets of the Company, or (iv) a
liquidation or dissolution of the Company wherein, upon any such event, the
stockholders of the Company immediately before such event do not retain, in
substantially the same proportions as their ownership of shares immediately
before the transaction, direct or indirect beneficial ownership of more than 50%
of the total combined voting power of the voting stock of the Company, its
successor, or the corporation to which the assets of the Company were
transferred (a "Transfer of Control"), any unexercisable or unvested portion of
the outstanding options will become immediately exercisable and vested in full
prior to the Transfer of Control unless the acquiring or successor corporation
assumes the Company's rights and obligations under the outstanding options or
substitutes substantially equivalent options for such corporation's stock. To
the extent that the options outstanding under the 1996 Plan are not assumed,
substituted for, or exercised prior to the Transfer of Control, they will
terminate.
Termination or Amendment. The 1996 Plan will continue in effect until the
earlier of its termination by the Board or the date on which all shares
available for issuance under the 1996 Plan have been issued and all restrictions
on such shares under the terms of the 1996 Plan and the option agreements have
lapsed, provided that all incentive stock options must be granted within ten
years of the Effective Date. The 1996 Plan further provides that the period for
granting incentive stock options will be extended to a period of ten years
following any subsequent approval of an increase in the maximum number of shares
issuable under the 1996 Plan. The Board may terminate or amend the 1996 Plan at
any time. However, subject to changes in the law that would permit otherwise,
without stockholder approval, the Board may not adopt an amendment to the 1996
Plan which would increase the total number of shares of Common Stock issuable
thereunder, change the class of persons eligible to receive incentive stock
options, or otherwise require approval of the Company's stockholders under any
applicable law, regulation or rule. No amendment may adversely affect an
outstanding option without the consent of the optionee, unless the amendment is
required to preserve the option's status as an incentive stock option or is
necessary to comply with any applicable law.
SUMMARY OF UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following summary is intended only as a general guide as to the United
States federal income tax consequences under current law of participation in the
1996 Plan and does not attempt to describe all possible federal or other tax
consequences of such participation or tax consequences based on particular
circumstances.
Incentive Stock Options. An optionee recognizes no taxable income for
regular income tax purposes as the result of the grant or exercise of an
incentive stock option qualifying under section 422 of the Code. Optionees who
do not dispose of their shares for two years following the date the option was
granted nor within one year following the exercise of the option will normally
recognize a long-
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term capital gain or loss equal to the difference, if any, between the sale
price and the purchase price of the shares. If an optionee satisfies such
holding periods upon a sale of the shares, the Company will not be entitled to
any deduction for federal income tax purposes. If an optionee disposes of
shares within two years after the date of grant or within one year from the date
of exercise (a "disqualifying disposition"), the difference between the fair
market value of the shares on the determination date (see discussion under
"Nonstatutory Stock Options" below) and the option exercise price (not to exceed
the gain realized on the sale if the disposition is a transaction with respect
to which a loss, if sustained, would be recognized) will be taxed as ordinary
income at the time of disposition. Any gain in excess of that amount will be a
capital gain. If a loss is recognized, there will be no ordinary income, and
such loss will be a capital loss. A capital gain or loss will be long-term if
the optionee's holding period is more than 12 months. Any ordinary income
recognized by the optionee upon the disqualifying disposition of the shares
generally should be deductible by the Company for federal income tax purposes,
except to the extent such deduction is limited by applicable provisions of the
Code or the regulations thereunder.
The difference between the option exercise price and the fair market value
of the shares on the determination date of an incentive stock option (see
discussion under "Nonstatutory Stock Options" below) is an adjustment in
computing the optionee's alternative minimum taxable income and may be subject
to an alternative minimum tax which is paid if such tax exceeds the regular tax
for the year. Special rules may apply with respect to certain subsequent sales
of the shares in a disqualifying disposition, certain basis adjustments for
purposes of computing the alternative minimum taxable income on a subsequent
sale of the shares and certain tax credits which may arise with respect to
optionees subject to the alternative minimum tax.
Nonstatutory Stock Options. Options not designated or qualifying as
incentive stock options will be nonstatutory stock options. Nonstatutory stock
options have no special tax status. An optionee generally recognizes no taxable
income as the result of the grant of such an option. Upon exercise of a
nonstatutory stock option, the optionee normally recognizes ordinary income in
the amount of the difference between the option exercise price and the fair
market value of the shares on the determination date (as defined below). If the
optionee is an employee, such ordinary income generally is subject to
withholding of income and employment taxes. The "determination date" is the
date on which the option is exercised unless the shares are subject to a
substantial risk of forfeiture and are not transferable, in which case the
determination date is the earlier of (i) the date on which the shares are
transferable or (ii) the date on which the shares are not subject to a
substantial risk of forfeiture. If the determination date is after the exercise
date, the optionee may elect, pursuant to Section 83(b) of the Code, to have the
exercise date be the determination date by filing an election with the Internal
Revenue Service not later than 30 days after the date the option is exercised.
Upon the sale of stock acquired by the exercise of a nonstatutory stock option,
any gain or loss, based on the difference between the sale price and the fair
market value on the determination date, will be taxed as capital gain or loss.
A capital gain or loss will be long-term if the optionee's holding period is
more than 12 months. No tax deduction is available to the Company with respect
to the grant of a nonstatutory stock option or the sale of the stock acquired
pursuant to such grant. The Company generally should be entitled to a deduction
equal to the amount of ordinary income recognized by the optionee as a result of
the exercise of a nonstatutory stock option, except to the extent such deduction
is limited by applicable provisions of the Code or the regulations thereunder.
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
The affirmative vote of a majority of the votes present or represented by
proxy and entitled to vote at the Annual Meeting of Stockholders, at which a
quorum representing a majority of all outstanding shares of Common Stock of the
Company is present and voting, either in person or by proxy, is required for
approval of this proposal. Abstentions and broker non-votes will each be
counted as present for purposes of determining the presence of a quorum.
Abstentions will have the
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same effect as a negative vote on this proposal. Broker non-votes will have no
effect on the outcome of this vote.
The Board of Directors believes that the adoption of the 1996 Plan is in
the best interests of the Company and the stockholders for the reasons stated
above. THEREFORE, THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR"
THE PROPOSAL TO ADOPT THE 1996 PLAN.
CHANGES IN COMPANY'S CERTIFYING ACCOUNTANTS AND
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
CHANGES IN COMPANY'S CERTIFYING ACCOUNTANT
On July 12, 1996, Coopers & Lybrand L.L.P. ("Coopers"), the independent
accountant engaged to audit the financial statements of the Company during the
Company's two most recent fiscal years and prior thereto, resigned. The reports
of Coopers for the fiscal years ended October 31, 1995 and October 31, 1994,
including the restatement reported in the Company's Form 10-K/A for the year
ended October 31, 1995, contained no adverse opinion or disclaimer of opinion,
and were not qualified as to other uncertainties, audit scope, or accounting
principles.
Coopers did not inform the Audit Committee, the Board of Directors or
management of its intent to resign prior to delivery of its resignation.
Accordingly, neither the Audit Committee nor the Board of Directors nor
management made any recommendation with respect to Coopers' resignation. After
Coopers' resignation, Coopers identified to the Company a disagreement required
to be reported in accordance with Item 304 of Regulation S-K. This disagreement
identified by Coopers was resolved to the satisfaction of Coopers and was
reflected in the Company's Notes to Consolidated Financial Statements in the
Company's Form 10-Q for the three month period ended April 30, 1996, the
Company's Form 10-K/A for the year ended October 31, 1995 and Form 10-Q/A for
the three month period ended January 31, 1996. The disagreement was identified
as follows: During the week of May 13, 1996, the Company received a letter
dated May 6, 1996 from Honeywell, Inc. alleging claims for unidentified breaches
of contract, misrepresentation, and fraud. The letter did not set forth any
basis for the claims, did not allege an amount at issue, and asserted an intent
to litigate unless satisfactory progress was made toward resolution of the
claim. In early June 1996, after consulting counsel, who had been unable to
obtain information from Honeywell concerning the materiality of the claim,
management believed that disclosure of the Honeywell letter would be premature
and that the Company should first investigate the matter to determine
materiality and to understand the basis for the claims, and accordingly
considered at that time omitting disclosure from the Company's Form 10-Q, Form
10-K/A and Form 10-Q/A. On June 11, 1996, Coopers advised the Company's Audit
Committee that Coopers disagreed with management's proposed omission of a
description of such letter in the Company's Form 10-Q for the three month period
ended April 30, 1996. The Audit Committee and management concurred with
Coopers' recommendation and the Company included disclosure of the receipt of
such letter in the Company's Quarterly Report on Form 10-Q for the three months
ended April 30, 1996 filed on June 14, 1996, and the Company's Form 10-K/A for
the year ended October 31, 1995 and the Company's Form 10-Q/A for the three
month period ended January 31, 1996, each filed July 2, 1996.
During the Company's two most recent fiscal years and the interim period
preceding resignation, Coopers has not advised management, the Audit Committee
or the Board of Directors of the Company of any issues regarding significant
internal control matters, problems with management's representations or
financial statements, requirements for expanded audit scope or information that
materially impacts the fairness or reliability of the Company's financial
statements. During the two previous fiscal years and the interim period through
the date of resignation, there were no other disagreements between the Company
and Coopers on any matter of accounting
26
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principles or practices, financial statement disclosure or auditing scope or
procedure, which if not resolved to the satisfaction of Coopers would have
caused it to make reference to the subject matter of the disagreement in
connection with its report.
On August 2, 1996, the Company engaged Arthur Andersen LLP ("Arthur
Andersen") as its principal accountant to audit the Company's financial
statements for the fiscal year ended October 31, 1996. The engagement of Arthur
Andersen was approved by the Company's Audit Committee. The Company has not
consulted with Arthur Andersen during the previous two fiscal years and the
interim period to date on any matter which was the subject of any disagreement
or with respect to any "reportable event" as defined in Item 304 of Regulation
S-K or on the application of accounting principles to any specified transaction,
whether completed or proposed, or the type of audit opinion which might be
rendered on the Company's financial statements.
APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors of the Company has selected Arthur Andersen,
independent accountants for the Company since August 2, 1996, as independent
accountants to audit the financial statements of the Company for the fiscal year
ending October 31, 1997. A representative of Arthur Andersen is expected to be
present at the Annual Meeting with the opportunity to make a statement if the
representative desires to do so, and is expected to be available to respond to
appropriate questions.
The affirmative vote of a majority of the votes cast at the Annual Meeting
of Stockholders, at which a quorum representing a majority of all outstanding
shares of Common Stock of the Company is present and voting, either in person or
by proxy, is required for approval of this proposal. THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE APPOINTMENT OF ARTHUR ANDERSEN AS THE
COMPANY'S INDEPENDENT ACCOUNTANTS FOR THE FISCAL YEAR ENDING OCTOBER 31, 1997.
STOCKHOLDER PROPOSALS TO BE PRESENTED
AT NEXT ANNUAL MEETING
Proposals of stockholders intended to be presented at the next Annual
Meeting of the Stockholders of the Company must be received by the Company at
its offices at 485 Clyde Avenue, Mountain View, California, 94043, not later
than October 22, 1997, and satisfy the conditions established by the Securities
and Exchange Commission for stockholder proposals to be included in the
Company's proxy statement for that meeting.
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TRANSACTION OF OTHER BUSINESS
At the date of this Proxy Statement, the only business which the Board of
Directors intends to present or knows that others will present at the meeting is
as set forth above. If any other matter or matters are properly brought before
the meeting, or any adjournment thereof, it is the intention of the persons
named in the accompanying form of proxy to vote the proxy on such matters in
accordance with their best judgment.
By Order of the Board of Directors
/s/ Michael J. Field
MICHAEL J. FIELD,
Secretary
February 19, 1997
28
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CONSILIUM, INC.
1996 STOCK OPTION PLAN
1. ESTABLISHMENT, PURPOSE AND TERM OF PLAN.
---------------------------------------
1.1 ESTABLISHMENT. The Consilium, Inc. 1996 Stock Option Plan (the
"PLAN") is hereby established effective as of December 13, 1996 (the "EFFECTIVE
DATE").
1.2 PURPOSE. The purpose of the Plan is to advance the interests of
the Participating Company Group and its stockholders by providing an incentive
to attract, retain and reward persons performing services for the Participating
Company Group and by motivating such persons to contribute to the growth and
profitability of the Participating Company Group.
1.3 TERM OF PLAN. The Plan shall continue in effect until the earlier
of its termination by the Board or the date on which all of the shares of Stock
available for issuance under the Plan have been issued and all restrictions on
such shares under the terms of the Plan and the agreements evidencing Options
granted under the Plan have lapsed. However, all Incentive Stock Options shall
be granted, if at all, within ten (10) years from the earlier of the date the
Plan is adopted by the Board or the date the Plan is duly approved by the
stockholders of the Company. Notwithstanding the foregoing, if the maximum
number of shares of Stock issuable pursuant to the Plan as provided in Section
4.1 has been increased at any time, all Incentive Stock Options shall be
granted, if at all, no later than the last day preceding the tenth (10th)
anniversary of the earlier of (a) the date on which the latest such increase in
the maximum number of shares of Stock issuable under the Plan was approved by
the stockholders of the Company or (b) the date such amendment was adopted by
the Board.
2. DEFINITIONS AND CONSTRUCTION.
----------------------------
2.1 DEFINITIONS. Whenever used herein, the following terms shall have
their respective meanings set forth below:
(a) "BOARD" means the Board of Directors of the Company. If one or
more Committees have been appointed by the Board to administer the Plan, "Board"
also means such Committee(s).
(b) "CODE" means the Internal Revenue Code of 1986, as amended,
and any applicable regulations promulgated thereunder.
(c) "COMMITTEE" means the Compensation Committee or other
committee of the Board duly appointed to administer the Plan and having such
powers as shall be specified by the Board. Unless the powers of the Committee
have been specifically limited, the Committee shall have all of the powers of
the Board
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granted herein, including, without limitation, the power to amend or terminate
the Plan at any time, subject to the terms of the Plan and any applicable
limitations imposed by law.
(d) "COMPANY" means Consilium, Inc., a Delaware corporation, or
any successor corporation thereto.
(e) "CONSULTANT" means any person, including an advisor, engaged
by a Participating Company to render services other than as an Employee or a
Director.
(f) "DIRECTOR" means a member of the Board or of the board of
directors of any other Participating Company.
(g) "EMPLOYEE" means any person treated as an employee (including
an officer or a Director who is also treated as an employee) in the records of a
Participating Company; provided, however, that neither service as a Director nor
payment of a director's fee shall be sufficient to constitute employment for
purposes of the Plan.
(h) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(i) "FAIR MARKET VALUE" means, as of any date, the value of a
share of Stock or other property as determined by the Board, in its sole
discretion, or by the Company, in its sole discretion, if such determination is
expressly allocated to the Company herein, subject to the following:
(i) If, on such date, there is a public market for the Stock,
the Fair Market Value of a share of Stock shall be the closing sale price of a
share of Stock (or the mean of the closing bid and asked prices of a share of
Stock if the Stock is so quoted instead) as quoted on the Nasdaq National
Market, the Nasdaq Small-Cap Market or such other national or regional
securities exchange or market system constituting the primary market for the
Stock, as reported in the Wall Street Journal or such other source as the
-------------------
Company deems reliable. If the relevant date does not fall on a day on which the
Stock has traded on such securities exchange or market system, the date on which
the Fair Market Value shall be established shall be the last day on which the
Stock was so traded prior to the relevant date, or such other appropriate day as
shall be determined by the Board, in its sole discretion.
(ii) If, on such date, there is no public market for the
Stock, the Fair Market Value of a share of Stock shall be as determined by the
Board without regard to any restriction other than a restriction which, by its
terms, will never lapse.
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(j) "INCENTIVE STOCK OPTION" means an Option intended to be (as
set forth in the Option Agreement) and which qualifies as an incentive stock
option within the meaning of Section 422(b) of the Code.
(k) "INSIDER" means an officer or a Director of the Company or any
other person whose transactions in Stock are subject to Section 16 of the
Exchange Act.
(l) "NONSTATUTORY STOCK OPTION" means an Option not intended to be
(as set forth in the Option Agreement) or which does not qualify as an Incentive
Stock Option.
(m) "OPTION" means a right to purchase Stock (subject to
adjustment as provided in Section 4.2) pursuant to the terms and conditions of
the Plan. An Option may be either an Incentive Stock Option or a Nonstatutory
Stock Option.
(n) "OPTION AGREEMENT" means a written agreement between the
Company and an Optionee setting forth the terms, conditions and restrictions of
the Option granted to the Optionee and any shares acquired upon the exercise
thereof.
(o) "OPTIONEE" means a person who has been granted one or more
Options.
(p) "PARENT CORPORATION" means any present or future "parent
corporation" of the Company, as defined in Section 424(e) of the Code.
(q) "PARTICIPATING COMPANY" means the Company or any Parent
Corporation or Subsidiary Corporation.
(r) "PARTICIPATING COMPANY GROUP" means, at any point in time, all
corporations collectively which are then Participating Companies.
(s) "RULE 16B-3" means Rule 16b-3 under the Exchange Act, as
amended from time to time, or any successor rule or regulation.
(t) "SECTION 162(M)" means Section 162(m) of the Code, as amended
by the Revenue Reconciliation Act of 1993 (P.L. 103-66).
(u) "STOCK" means the common stock, par value $0.01, of the
Company, as adjusted from time to time in accordance with Section 4.2.
(v) "SUBSIDIARY CORPORATION" means any present or future
"subsidiary corporation" of the Company, as defined in Section 424(f) of the
Code.
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<PAGE>
(w) "TEN PERCENT OWNER OPTIONEE" means an Optionee who, at the
time an Option is granted to the Optionee, owns stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of a
Participating Company within the meaning of Section 422(b)(6) of the Code.
2.2 CONSTRUCTION. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of the Plan. Except when otherwise indicated by the context, the
singular shall include the plural and the plural shall include the singular.
Use of the term "or" is not intended to be exclusive, unless the context clearly
requires otherwise.
3. ADMINISTRATION.
--------------
3.1 ADMINISTRATION BY THE BOARD. The Plan shall be administered by
the Board, including any duly appointed Committee of the Board. All questions of
interpretation of the Plan or of any Option shall be determined by the Board,
and such determinations shall be final and binding upon all persons having an
interest in the Plan or such Option. Any officer of a Participating Company
shall have the authority to act on behalf of the Company with respect to any
matter, right, obligation, determination or election which is the responsibility
of or which is allocated to the Company herein, provided the officer has
apparent authority with respect to such matter, right, obligation, determination
or election.
3.2 ADMINISTRATION WITH RESPECT TO INSIDERS. With respect to
participation by Insiders in the Plan, at any time that any class of equity
security of the Company is registered pursuant to Section 12 of the Exchange
Act, the Plan shall be administered in compliance with the requirements, if any,
of Rule 16b-3.
3.3 POWERS OF THE BOARD. In addition to any other powers set forth in
the Plan and subject to the provisions of the Plan, the Board shall have the
full and final power and authority, in its sole discretion:
(a) to determine the persons to whom, and the time or times at
which, Options shall be granted and the number of shares of Stock to be subject
to each Option;
(b) to designate Options as Incentive Stock Options or
Nonstatutory Stock Options;
(c) to determine the Fair Market Value of shares of Stock or other
property;
(d) to determine the terms, conditions and restrictions applicable
to each Option (which need not be identical) and any shares acquired upon the
exercise thereof, including, without limitation, (i) the exercise price of the
Option, (ii) the method of payment for shares purchased upon the exercise of the
Option, (iii) the method for satisfaction of any tax withholding obligation
arising in
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connection with the Option or such shares, including by the withholding or
delivery of shares of stock, (iv) the timing, terms and conditions of the
exercisability of the Option or the vesting of any shares acquired upon the
exercise thereof, (v) the time of the expiration of the Option, (vi) the effect
of the Optionee's termination of employment or service with the Participating
Company Group on any of the foregoing, and (vii) all other terms, conditions and
restrictions applicable to the Option or such shares not inconsistent with the
terms of the Plan;
(e) to approve one or more forms of Option Agreement;
(f) to amend, modify, extend, or renew, or grant a new Option in
substitution for, any Option or to waive any restrictions or conditions
applicable to any Option or any shares acquired upon the exercise thereof;
(g) to accelerate, continue, extend or defer the exercisability of
any Option or the vesting of any shares acquired upon the exercise thereof,
including with respect to the period following an Optionee's termination of
employment or service with the Participating Company Group;
(h) to prescribe, amend or rescind rules, guidelines and policies
relating to the Plan, or to adopt supplements to, or alternative versions of,
the Plan, including, without limitation, as the Board deems necessary or
desirable to comply with the laws of, or to accommodate the tax policy or custom
of, foreign jurisdictions whose citizens may be granted Options; and
(i) to correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Option Agreement and to make all other
determinations and take such other actions with respect to the Plan or any
Option as the Board may deem advisable to the extent consistent with the Plan
and applicable law.
3.4 COMMITTEE COMPLYING WITH SECTION 162(M). If a Participating
Company is a "publicly held corporation" within the meaning of Section 162(m),
the Board may establish a Committee of "outside directors" within the meaning of
Section 162(m) to approve the grant of any Option which might reasonably be
anticipated to result in the payment of employee remuneration that would
otherwise exceed the limit on employee remuneration deductible for income tax
purposes pursuant to Section 162(m).
4. SHARES SUBJECT TO PLAN.
----------------------
4.1 MAXIMUM NUMBER OF SHARES ISSUABLE. Subject to adjustment as
provided in Section 4.2, the maximum aggregate number of shares of Stock that
may be issued under the Plan shall be the sum of (a) Three Hundred Ninety
Thousand (390,000) shares, (b) the number of shares of Stock, as of the
Effective Date, subject to outstanding options granted pursuant to the Company's
Fourth Amended and Restated 1983 Stock Option Plan and 1993 Stock Option Plan
(collectively, the "PRIOR
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PLANS"), which amount is One Million Six Hundred Seventy-Seven Thousand Six
Hundred Fifty-Four (1,677,654) shares (the "PRIOR PLAN OPTIONS"), and (c) the
number of shares of Stock available for future grant under the Prior Plans as of
the Effective Date, which amount is Two Hundred Forty-Five Thousand Six Hundred
Twenty-Four (245,624) (the "PRIOR PLAN AVAILABLE SHARES"), resulting in an
aggregate total of Two Million Three Hundred Thirteen Thousand Two Hundred
Seventy-Eight (2,313,278) shares (the "SHARE RESERVE") and shall consist of
authorized but unissued or reacquired shares of Stock or any combination
thereof. Notwithstanding the foregoing, the Share Reserve, determined at any
time, shall be reduced by (a) the number of shares remaining subject to
outstanding Prior Plan Options, (b) the number of shares issued upon the
exercise of Prior Plan Options, and (c) the number of shares, if any, of the
Prior Plan Available Shares which are issued upon the exercise of options
granted under the Prior Plans subsequent to the Effective Date. If an
outstanding Option for any reason expires or is terminated or canceled, or if
shares of Stock acquired, subject to repurchase, upon the exercise of an Option
are repurchased by the Company, the shares of Stock allocable to the unexercised
portion of such Option or such repurchased shares of Stock shall again be
available for issuance under the Plan.
4.2 ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE. In the event of any
stock dividend, stock split, reverse stock split, recapitalization, combination,
reclassification or similar change in the capital structure of the Company,
appropriate adjustments shall be made in the number and class of shares subject
to the Plan and to any outstanding Options, in the Section 162(m) Grant Limit
set forth in Section 5.4, and in the exercise price per share of any outstanding
Options. If a majority of the shares which are of the same class as the shares
that are subject to outstanding Options are exchanged for, converted into, or
otherwise become (whether or not pursuant to an Ownership Change Event, as
defined in Section 8.1) shares of another corporation (the "NEW SHARES"), the
Board may unilaterally amend the outstanding Options to provide that such
Options are exercisable for New Shares. In the event of any such amendment, the
number of shares subject to, and the exercise price per share of, the
outstanding Options shall be adjusted in a fair and equitable manner as
determined by the Board, in its sole discretion. Notwithstanding the foregoing,
any fractional share resulting from an adjustment pursuant to this Section 4.2
shall be rounded up or down to the nearest whole number, as determined by the
Board, and in no event may the exercise price of any Option be decreased to an
amount less than the par value, if any, of the stock subject to the Option. The
adjustments determined by the Board pursuant to this Section 4.2 shall be final,
binding and conclusive.
5. ELIGIBILITY AND OPTION LIMITATIONS.
----------------------------------
5.1 PERSONS ELIGIBLE FOR OPTIONS. Options may be granted only to
Employees, Consultants, and Directors. For purposes of the foregoing sentence,
"Employees," "Consultants" and "Directors" shall include prospective Employees,
prospective Consultants and prospective Directors to whom Options are granted in
connection with written offers of employment or other service relationship with
the
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Participating Company Group. Eligible persons may be granted more than one (1)
Option.
5.2 OPTION GRANT RESTRICTIONS. Any person who is not an Employee on
the effective date of the grant of an Option to such person may be granted only
a Nonstatutory Stock Option. An Incentive Stock Option granted to a prospective
Employee upon the condition that such person become an Employee shall be deemed
granted effective on the date such person commences service with a Participating
Company, with an exercise price determined as of such date in accordance with
Section 6.1.
5.3 FAIR MARKET VALUE LIMITATION. To the extent that options
designated as Incentive Stock Options (granted under all stock option plans of
the Participating Company Group, including the Plan) become exercisable by an
Optionee for the first time during any calendar year for stock having an
aggregate Fair Market Value greater than One Hundred Thousand Dollars
($100,000), the portion of such options which exceeds such amount shall be
treated as Nonstatutory Stock Options. For purposes of this Section 5.3, options
designated as Incentive Stock Options shall be taken into account in the order
in which they were granted, and the Fair Market Value of stock shall be
determined as of the time the option with respect to such stock is granted. If
the Code is amended to provide for a different limitation from that set forth in
this Section 5.3, such different limitation shall be deemed incorporated herein
effective as of the date and with respect to such Options as required or
permitted by such amendment to the Code. If an Option is treated as an Incentive
Stock Option in part and as a Nonstatutory Stock Option in part by reason of the
limitation set forth in this Section 5.3, the Optionee may designate which
portion of such Option the Optionee is exercising. In the absence of such
designation, the Optionee shall be deemed to have exercised the Incentive Stock
Option portion of the Option first. Separate certificates representing each such
portion shall be issued upon the exercise of the Option.
5.4 SECTION 162(M) GRANT LIMIT. Subject to adjustment as provided in
Section 4.2, at any such time as a Participating Company is a "publicly held
corporation" within the meaning of Section 162(m), no Employee shall be granted
one or more Options within any fiscal year of the Company which in the aggregate
are for the purchase of more than Two Hundred Thousand (200,000) shares;
provided, however, that the Company may make grant any newly-hired Employee an
Option for the purchase of up to Three Hundred Thousand (300,000) shares (the
"SECTION 162(M) GRANT LIMIT"). An Option which is canceled in the same fiscal
year of the Company in which it was granted shall continue to be counted against
the Section 162(m) Grant Limit for such period.
6. TERMS AND CONDITIONS OF OPTIONS. Options shall be evidenced by Option
-------------------------------
Agreements specifying the number of shares of Stock covered thereby, in such
form as the Board shall from time to time establish. Option Agreements may
incorporate all or any of the terms of the Plan by reference and shall comply
with and be subject to the following terms and conditions:
7
<PAGE>
6.1 EXERCISE PRICE. The exercise price for each Option shall be
established in the sole discretion of the Board; provided, however, that (a) the
exercise price per share for an Option shall be not less than the Fair Market
Value of a share of Stock on the effective date of grant of the Option and (b)
no Incentive Stock Option granted to a Ten Percent Owner Optionee shall have an
exercise price per share less than one hundred ten percent (110%) of the Fair
Market Value of a share of Stock on the effective date of grant of the Option.
Notwithstanding the foregoing, an Option (whether an Incentive Stock Option or a
Nonstatutory Stock Option) may be granted with an exercise price lower than the
minimum exercise price set forth above if such Option is granted pursuant to an
assumption or substitution for another option in a manner qualifying under the
provisions of Section 424(a) of the Code.
6.2 EXERCISE PERIOD. Options shall be exercisable at such time or
times, or upon such event or events, and subject to such terms, conditions,
performance criteria, and restrictions as shall be determined by the Board and
set forth in the Option Agreement evidencing such Option; provided, however,
that (a) no Incentive Stock Option shall be exercisable after the expiration of
ten (10) years after the effective date of grant of such Option, (b) no
Incentive Stock Option granted to a Ten Percent Owner Optionee shall be
exercisable after the expiration of five (5) years after the effective date of
grant of such Option, and (c) no Option granted to a prospective Employee,
prospective Consultant or prospective Director may become exercisable prior to
the date on which such person commences service with a Participating Company.
6.3 PAYMENT OF EXERCISE PRICE.
(a) FORMS OF CONSIDERATION AUTHORIZED. Except as otherwise
provided below, payment of the exercise price for the number of shares of Stock
being purchased pursuant to any Option shall be made (i) in cash, by check, or
cash equivalent, (ii) by tender to the Company of shares of Stock owned by the
Optionee having a Fair Market Value (as determined by the Company without regard
to any restrictions on transferability applicable to such stock by reason of
federal or state securities laws or agreements with an underwriter for the
Company) not less than the exercise price, (iii) by the assignment of the
proceeds of a sale or loan with respect to some or all of the shares being
acquired upon the exercise of the Option (including, without limitation, through
an exercise complying with the provisions of Regulation T as promulgated from
time to time by the Board of Governors of the Federal Reserve System) (a
"CASHLESS EXERCISE"), (iv) by the Optionee's promissory note in a form approved
by the Company, (v) by such other consideration as may be approved by the Board
from time to time to the extent permitted by applicable law, or (vi) by any
combination thereof. The Board may at any time or from time to time, by adoption
of or by amendment to the standard forms of Option Agreement described in
Section 7, or by other means, grant Options which do not permit all of the
foregoing forms of consideration to be used in payment of the exercise price or
which otherwise restrict one or more forms of consideration.
8
<PAGE>
(b) TENDER OF STOCK. Notwithstanding the foregoing, an Option may
not be exercised by tender to the Company of shares of Stock to the extent such
tender of Stock would constitute a violation of the provisions of any law,
regulation or agreement restricting the redemption of the Company's stock.
Unless otherwise provided by the Board, an Option may not be exercised by tender
to the Company of shares of Stock unless such shares either have been owned by
the Optionee for more than six (6) months or were not acquired, directly or
indirectly, from the Company.
(c) CASHLESS EXERCISE. The Company reserves, at any and all
times, the right, in the Company's sole and absolute discretion, to establish,
decline to approve or terminate any program or procedures for the exercise of
Options by means of a Cashless Exercise.
(d) PAYMENT BY PROMISSORY NOTE. No promissory note shall be
permitted if the exercise of an Option using a promissory note would be a
violation of any law. Any permitted promissory note shall be on such terms as
the Board shall determine at the time the Option is granted. The Board shall
have the authority to permit or require the Optionee to secure any promissory
note used to exercise an Option with the shares of Stock acquired upon the
exercise of the Option or with other collateral acceptable to the Company.
Unless otherwise provided by the Board, if the Company at any time is subject to
the regulations promulgated by the Board of Governors of the Federal Reserve
System or any other governmental entity affecting the extension of credit in
connection with the Company's securities, any promissory note shall comply with
such applicable regulations, and the Optionee shall pay the unpaid principal and
accrued interest, if any, to the extent necessary to comply with such applicable
regulations.
6.4 TAX WITHHOLDING. The Company shall have the right, but not the
obligation, to deduct from the shares of Stock issuable upon the exercise of an
Option, or to accept from the Optionee the tender of, a number of whole shares
of Stock having a Fair Market Value, as determined by the Company, equal to all
or any part of the federal, state, local and foreign taxes, if any, required by
law to be withheld by the Participating Company Group with respect to such
Option or the shares acquired upon the exercise thereof. Alternatively or in
addition, in its sole discretion, the Company shall have the right to require
the Optionee, through payroll withholding, cash payment or otherwise, including
by means of a Cashless Exercise, to make adequate provision for any such tax
withholding obligations of the Participating Company Group arising in connection
with the Option or the shares acquired upon the exercise thereof. The Company
shall have no obligation to deliver shares of Stock or to release shares of
Stock from an escrow established pursuant to the Option Agreement until the
Participating Company Group's tax withholding obligations have been satisfied by
the Optionee.
9
<PAGE>
7. STANDARD FORMS OF OPTION AGREEMENT.
----------------------------------
7.1 INCENTIVE STOCK OPTIONS. Unless otherwise provided by the Board
at the time the Option is granted, an Option designated as an "Incentive Stock
Option" shall comply with and be subject to the terms and conditions set forth
in the appropriate form of Incentive Stock Option Agreement adopted by the Board
concurrently with its adoption of the Plan and as amended from time to time.
7.2 NONSTATUTORY STOCK OPTIONS. Unless otherwise provided by the
Board at the time the Option is granted, an Option designated as a "Nonstatutory
Stock Option" shall comply with and be subject to the terms and conditions set
forth in the appropriate form of Nonstatutory Stock Option Agreement adopted by
the Board concurrently with its adoption of the Plan and as amended from time to
time.
7.3 STANDARD TERM OF OPTIONS. Except as otherwise provided in Section
6.2 or by the Board in the grant of an Option, any Option granted hereunder
shall have a term of ten (10) years from the effective date of grant of the
Option.
7.4 AUTHORITY TO VARY TERMS. The Board shall have the authority from
time to time to vary the terms of any of the standard forms of Option Agreement
described in this Section 7 either in connection with the grant or amendment of
an individual Option or in connection with the authorization of a new standard
form or forms; provided, however, that the terms and conditions of any such new,
revised or amended standard form or forms of Option Agreement are not
inconsistent with the terms of the Plan. Such authority shall include, but not
by way of limitation, the authority to grant Options which are immediately
exercisable subject to the Company's right to repurchase any unvested shares of
Stock acquired by an Optionee upon the exercise of an Option in the event such
Optionee's employment or service with the Participating Company Group is
terminated for any reason, with or without cause.
8. TRANSFER OF CONTROL.
-------------------
8.1 DEFINITIONS.
(a) An "OWNERSHIP CHANGE EVENT" shall be deemed to have occurred
if any of the following occurs with respect to the Company:
(i) the direct or indirect sale or exchange in a single or
series of related transactions by the stockholders of the Company of more than
fifty percent (50%) of the voting stock of the Company;
(ii) a merger or consolidation in which the Company is a
party;
(iii) the sale, exchange, or transfer of all or substantially
all of the assets of the Company; or
10
<PAGE>
(iv) a liquidation or dissolution of the Company.
(b) A "TRANSFER OF CONTROL" shall mean an Ownership Change Event
or a series of related Ownership Change Events (collectively, the "TRANSACTION")
wherein the stockholders of the Company immediately before the Transaction do
not retain immediately after the Transaction, in substantially the same
proportions as their ownership of shares of the Company's voting stock
immediately before the Transaction, direct or indirect beneficial ownership of
more than fifty percent (50%) of the total combined voting power of the
outstanding voting stock of the Company or the corporation or corporations to
which the assets of the Company were transferred (the "TRANSFEREE
CORPORATION(S)"), as the case may be. For purposes of the preceding sentence,
indirect beneficial ownership shall include, without limitation, an interest
resulting from ownership of the voting stock of one or more corporations which,
as a result of the Transaction, own the Company or the Transferee
Corporation(s), as the case may be, either directly or through one or more
subsidiary corporations. The Board shall have the right to determine whether
multiple sales or exchanges of the voting stock of the Company or multiple
Ownership Change Events are related, and its determination shall be final,
binding and conclusive.
8.2 EFFECT OF TRANSFER OF CONTROL ON OPTIONS. In the event of a
Transfer of Control, the surviving, continuing, successor, or purchasing
corporation or parent corporation thereof, as the case may be (the "ACQUIRING
CORPORATION"), may either assume the Company's rights and obligations under
outstanding Options or substitute for outstanding Options substantially
equivalent options for the Acquiring Corporation's stock. For purposes of this
Section 8.2, an Option shall be deemed assumed if, following the Transfer of
Control, the Option confers the right to purchase, for each share of Stock
subject to the Option immediately prior to the Transfer of Control, the
consideration (whether stock, cash or other securities or property) to which a
holder of a share of Stock on the effective date of the Transfer of Control was
entitled. In the event the Acquiring Corporation assumes or substitutes for an
outstanding Option in connection with a Transfer of Control, no acceleration of
exercisability or vesting shall occur, unless otherwise provided in the Option
Agreement evidencing such Option or a change of control agreement between the
Company and the Optionee, if any. In the event the Acquiring Corporation elects
not to assume or substitute for outstanding Options in connection with a
Transfer of Control, any unexercisable or unvested portion of the outstanding
Options shall be immediately exercisable and vested in full as of the date ten
(10) days prior to the date of the Transfer of Control. The exercise or vesting
of any Option that was permissible solely by reason of this Section 8.2 shall be
conditioned upon the consummation of the Transfer of Control. Any Options which
are neither assumed or substituted for by the Acquiring Corporation in
connection with the Transfer of Control nor exercised as of the date of the
Transfer of Control shall terminate and cease to be outstanding effective as of
the date of the Transfer of Control. Notwithstanding the foregoing, shares
acquired upon exercise of an Option prior to the Transfer of Control and any
consideration received pursuant to the Transfer of Control with respect to such
shares shall continue to be subject to all applicable provisions of the Option
Agreement evidencing such Option except as otherwise
11
<PAGE>
provided in such Option Agreement. Furthermore, notwithstanding the foregoing,
if the corporation the stock of which is subject to the outstanding Options
immediately prior to an Ownership Change Event described in Section 8.1(a)(i)
constituting a Transfer of Control is the surviving or continuing corporation
and immediately after such Ownership Change Event less than fifty percent (50%)
of the total combined voting power of its voting stock is held by another
corporation or by other corporations that are members of an affiliated group
within the meaning of Section 1504(a) of the Code without regard to the
provisions of Section 1504(b) of the Code, the outstanding Options shall not
terminate unless the Board otherwise provides in its sole discretion.
9. PROVISION OF INFORMATION. Each Optionee shall be given access to
------------------------
information concerning the Company equivalent to that information generally made
available to the Company's common stockholders.
10. NONTRANSFERABILITY OF INCENTIVE STOCK OPTIONS. During the lifetime of
---------------------------------------------
the Optionee, an Option shall be exercisable only by the Optionee or the
Optionee's guardian or legal representative. No Option shall be assignable or
transferable by the Optionee, except by will or by the laws of descent and
distribution. Notwithstanding the foregoing, a Nonstatutory Stock Option shall
be assignable or transferable to the extent permitted by the Board and set forth
in the Option Agreement evidencing such Option.
11. INDEMNIFICATION. In addition to such other rights of indemnification
---------------
as they may have as members of the Board or officers or employees of the
Participating Company Group, members of the Board and any officers or employees
of the Participating Company Group to whom authority to act for the Board or the
Company is delegated shall be indemnified by the Company against all reasonable
expenses, including attorneys' fees, actually and necessarily incurred in
connection with the defense of any action, suit or proceeding, or in connection
with any appeal therein, to which they or any of them may be a party by reason
of any action taken or failure to act under or in connection with the Plan, or
any right granted hereunder, and against all amounts paid by them in settlement
thereof (provided such settlement is approved by independent legal counsel
selected by the Company) or paid by them in satisfaction of a judgment in any
such action, suit or proceeding, except in relation to matters as to which it
shall be adjudged in such action, suit or proceeding that such person is liable
for gross negligence, bad faith or intentional misconduct in duties; provided,
however, that within sixty (60) days after the institution of such action, suit
or proceeding, such person shall offer to the Company, in writing, the
opportunity at its own expense to handle and defend the same.
12. TERMINATION OR AMENDMENT OF PLAN. The Board may terminate or amend
--------------------------------
the Plan at any time. However, subject to changes in applicable law,
regulations or rules that would permit otherwise, without the approval of the
Company's stockholders, there shall be (a) no increase in the maximum aggregate
number of shares of Stock that may be issued under the Plan (except by operation
of the provisions of Section 4.2), (b) no change in the class of persons
eligible to receive
12
<PAGE>
Incentive Stock Options, and (c) no other amendment of the Plan that would
require approval of the Company's stockholders under any applicable law,
regulation or rule. In any event, no termination or amendment of the Plan may
adversely affect any then outstanding Option or any unexercised portion thereof,
without the consent of the Optionee, unless such termination or amendment is
required to enable an Option designated as an Incentive Stock Option to qualify
as an Incentive Stock Option or is necessary to comply with any applicable law,
regulation or rule.
IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies that
the foregoing Consilium, Inc. 1996 Stock Option Plan was duly adopted by the
Board on December 13, 1996.
---------------------------------
Secretary
13
<PAGE>
PLAN HISTORY
------------
December 13, 1996 Board adopts Plan, with an initial reserve of 2,313,278
shares.
[______________, 1997] Stockholders approve Plan, with an initial reserve of
2,313,278 shares.
14
<PAGE>
CONSILIUM, INC.
Proxy for Annual Meeting of Stockholders
Solicited by the Board of Directors
P The undersigned hereby appoints Jonathan J. Golovin and Lawrence R.
Hootnick, or either, as proxy with the power of substitution to vote and
R act on and consent in respect to any and all shares of the stock of
Consilium, Inc. held or owned by or standing in the name of the undersigned
O on the Company's books on January 14, 1997, at the Annual Meeting of
Stockholders of the Company to be held at Consilium, Inc., 485 Clyde
X Avenue, Mountain View, California at 3:00 p.m. on March 11, 1997, and any
continuation or adjournment thereof, with all power the undersigned would
Y possess if personally present at the meeting.
The undersigned hereby directs and authorizes said proxies, and each
of them, or their substitutes, to vote as specified below with respect to
the proposals listed in paragraphs 1, 2 and 3 on the reverse side, or if no
specification is made, to vote in favor thereof.
The undersigned hereby further confers upon said proxies, and each of
them, or their substitutes, discretionary authority to vote in respect to
all other matters which may properly come before the meeting or any
continuation or adjournment thereof.
The undersigned hereby acknowledges receipt of: (1) Notice of Annual
Meeting of Stockholders of the Company, (2) accompanying Proxy Statement,
and (3) Annual Report of the Company for the fiscal year ended October 31,
1996.
-----------
SEE REVERSE
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
-----------
<PAGE>
DETACH HERE
Please mark
[X] votes as in
this example.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO
SIGN AND PROMPTLY MAIL THIS PROXY IN THE RETURN ENVELOPE SO THAT YOUR STOCK
MAY BE REPRESENTED AT THE MEETING.
FOR AGAINST ABSTAIN
1. Election of the following 2. To approve of a [ ] [ ] [ ]
director: proposal to adopt the
Nominee: Jonathan J. Golovin Company's 1996 Stock
FOR WITHHELD Option Plan.
[ ] [ ]
3. To ratify the [ ] [ ] [ ]
appointment of Arthur
Andersen LLP as
independent public
accountants of the
Company for the fiscal
year ending October 31,
1997.
MARK HERE [ ] MARK HERE [ ]
FOR ADDRESS IF YOU PLAN
CHANGE AND TO ATTEND
NOTE AT LEFT THE MEETING
Sign exactly as your name(s) appears on your
stock certificate. If shares of stock stand
of record in the names of two or more persons
or in the name of husband and wife, whether
as joint tenants or otherwise, both or all of
such persons should sign the above Proxy. If
shares of stock are held of record by a
corporation, the Proxy should be executed by
the President or Vice President and the
Secretary or Assistant Secretary. Executors
or administrators or other fiduciaries who
execute the above Proxy for a deceased
Stockholder should give their full title.
Please date the Proxy.
Signature:__________________ Date:_____ Signature:__________________ Date:_____
