<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF
1934
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 (S)240.14a-11(c) or (S)240.14a-12
CONSILIUM, INC.
(Name of Registrant as Specified In Its Charter)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
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 No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
[CONSILIUM, INC. LOGO APPEARS HERE]
485 CLYDE AVENUE
MOUNTAIN VIEW, CA 94043
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 18, 1998
Dear Stockholder:
You are invited to attend the Annual Meeting of the Stockholders of
Consilium, Inc., a Delaware corporation (the "Company"), which will be held on
March 18, 1998, at 3:00 p.m., local time, at the Company, 485 Clyde Avenue,
Mountain View, California for the following purposes:
1. To elect two (2) Class I directors, each to hold office for a three-year
term and until their respective successors are elected and qualified.
2. To consider and vote upon a proposal to amend the Company's 1989
Employee Stock Purchase Plan to increase the maximum aggregate number of
shares reserved for issuance thereunder by 300,000.
3. To consider and vote upon a proposal to amend the Company's 1990 Outside
Directors Stock Option Plan to increase the maximum aggregate number of
shares reserved for issuance thereunder by 50,000.
4. To consider and vote upon a proposal to amend the Company's 1996 Stock
Option Plan to increase the maximum aggregate number of shares reserved
for issuance thereunder by 500,000.
5. 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, 1998.
6. To transact such other business as may properly come before the meeting.
Stockholders of record at the close of business on February 6, 1998, are
entitled to notice of, and to vote at, this meeting and any adjournments
thereof. For ten days prior to the meeting, a complete list of the
stockholders entitled to vote at the meeting will be available for examination
by any stockholder for any purpose relating to the meeting during ordinary
business hours at the Company.
By Order of the Board of Directors,
/s/ Michael J. Field
-------------------------
MICHAEL J. FIELD,
Secretary
Mountain View, California
February 17, 1998
<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 18, 1998, or any adjournment thereof, for the
purposes set forth in the accompanying Notice of Annual Meeting. The date of
this Proxy Statement is February 17, 1998, 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 on Form 10-K for the fiscal year ended
October 31, 1997, is enclosed with this Proxy Statement.
Voting Securities. Only stockholders of record as of the close of business
on February 6, 1998, will be entitled to vote at the meeting and any
adjournment thereof. As of that date, there were 8,371,635 shares of Common
Stock of the Company, par value $0.01 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 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 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. 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 also may use the services of its
officers, directors, and others to solicit proxies, personally or by
telephone, without additional compensation. In addition, the Company has
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 $7,500, 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 proposals. 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.
1
<PAGE>
Security Ownership of Certain Beneficial Owners and Management. The
following table sets forth certain information, as of January 31, 1998, 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 of the Company named in
the Summary Compensation Table and (iv) all executive officers and directors
of the Company as a group:
<TABLE>
<CAPTION>
SHARES OWNED (1)
---------------------
NAME AND ADDRESS OF NUMBER PERCENTAGE
BENEFICIAL OWNERS (#) OF SHARES OF CLASS (2)
--------------------- --------- -----------
<S> <C> <C>
Jonathan J. Golovin and Susan K. Golovin (3)......... 1,678,770 19.82%
Centennial Associates, L.P. (4)...................... 1,615,785 19.30%
900 Third Avenue
New York, NY 10022
Michael J. Field (5)................................. 16,666 *
Robert C. Fink (6)................................... 10,000 *
Laurence R. Hootnick (7)............................. 301,017 3.04%
Robert Horne (8)..................................... 21,750 *
Frederick M. O'Such.................................. 0 *
Thomas A. Tomasetti (9).............................. 202,790 2.42%
Edward J. Norton (10)................................ 71,190 *
Richard Lloyd Payton (11)............................ 30,783 *
Executive Officers and Directors as a group (12
persons) (12)....................................... 2,383,480 26.94%
</TABLE>
- --------
# Unless otherwise provided, the address for each Beneficial Owner is 485
Clyde Avenue, Mountain View, CA 94043.
* 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 8,371,635 of Common Stock outstanding, except
that shares of Common Stock underlying options exercisable within 60 days
of January 31, 1998 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 and 225,324 shares held in trust by
Jonathan J. Golovin and/or Susan K. Golovin as Trustees for Dr. and Mrs.
Golovin's 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
January 31, 1998.
(4) Based on an amendment to Schedule 13D filed with the Securities and
Exchange Commission on June 13, 1997 by Centennial Associates, L.P.
("CALP"). CALP may be deemed to be the beneficial owner of all such
shares owned by the partnership. CALP has the sole power to vote and
dispose of all 1,615,785 shares.
(5) Includes 12,291 shares subject to stock options exercisable within sixty
days of January 31, 1998.
(6) Includes 10,000 shares subject to stock options exercisable within sixty
days of January 31, 1998.
(7) Includes 208,708 shares subject to stock options exercisable within sixty
days of January 31, 1998, of which 67,500 shares are unvested and subject
to repurchase by the Company. Of the shares held not subject to options,
7,309 are held directly by Mr. Hootnick and 85,000 are held in trust by
Mr. Hootnick.
(8) Includes 500 shares held by his spouse. Also includes 16,250 shares
subject to stock options exercisable within sixty days of January 31,
1998.
2
<PAGE>
(9) Includes 6,250 shares subject to stock options exercisable within sixty
days of January 31, 1998.
(10) Includes 62,498 shares subject to stock options exercisable within sixty
days of January 31, 1998, of which 8,334 of such shares are unvested and
subject to repurchase by the Company. Mr. Norton has resigned from the
Company effective as of January 31, 1998.
(11) Includes 14,180 shares subject to stock options exercisable within sixty
days of January 31, 1998.
(12) Includes 474,134 shares subject to stock options exercisable within sixty
days of January 31, 1998, of which 75,834 are unvested and subject to
repurchase by the Company.
The table below sets forth for the Company's directors, including the Class
I nominees to be elected at this meeting, and information concerning their age
and background.
<TABLE>
<CAPTION>
DIRECTOR
NAME POSITION WITH THE COMPANY AGE SINCE
- ---- ------------------------- --- --------
Class I directors to be elected at the 1998 Annual Meeting of Stockholders:
<S> <C> <C> <C>
Robert Horne............... Director 59 1994
Robert C. Fink............. Director 62 1996
Class II directors whose terms expire at the 1999 Annual Meeting of
Stockholders:
Thomas A. Tomasetti........ Director 53 1987
Laurence R. Hootnick....... Director and President/CEO of the 55 1996
Company since 1996
Class III directors whose terms expire at the 2000 Annual Meeting of
Stockholders:
Jonathan J. Golovin........ Chairman of the Board of the Company 47 1978
since 1987 and Chief Technical
Officer
Frederick M. O'Such........ Director 60 1997
</TABLE>
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 and a Masters Degree in
Chemical Engineering from Cambridge University and an M.B.A. from Harvard
Business School.
Mr. Fink was appointed as a director of the Company in January 1996. Mr.
Fink has been employed by Lam Research Corp. ("Lam Research"), a semiconductor
equipment company, since Lam Research acquired Drytek, Inc. ("Drytek") in
1993, most recently as Senior Vice President. 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 and TMCI Electronics, Inc.
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
3
<PAGE>
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
Power 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.
Dr. Golovin, the founder of the Company, 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 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
B.S. degree from Cornell University and a Ph.D. in Operations Management from
the Massachusetts Institute of Technology.
Mr. O'Such was appointed as a director of the Company in June 1997. From
1986 to the present Mr. O'Such has been President of Xertex Capital, a
financial services firm. From 1981 to 1986, Mr. O'Such was Chairman, President
and Chief Executive Officer of Xertex Corporation, a scientific instrument
manufacturer. Mr. O'Such holds a B.S. in Chemical Engineering from Lehigh
University and an M.B.A. from Harvard Business School. See "EXECUTIVE
COMPENSATION AND OTHER MATTERS--Compensation of Directors" regarding certain
compensation arrangements between Mr. O'Such and CALP.
During the fiscal year ended October 31, 1997, the Board held seven (7)
meetings. Each director serving on the Board in fiscal year 1997 attended at
least 75% of such meetings of the Board and the Committees on which he serves.
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
accountants and management the annual financial statements and independent
accountants' opinion, review the scope and results of the examination of the
Company's financial statements by the independent accountants, approve all
professional services and related fees performed by the independent
accountants, recommend the retention of the independent 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 C. Fink and Robert
Horne. During the fiscal year ended October 31, 1997, the Audit Committee held
three (3) meetings.
The Compensation Committee's function is to review and approve salary and
bonus levels and stock option grants for executive officers. The members of
the Compensation Committee are Robert C. Fink and Robert Horne. During the
fiscal year ended October 31, 1997, the Compensation Committee held eight (8)
meetings. For additional information concerning the Compensation Committee,
see "REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON
REPRICING OF OPTIONS" and "REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD
OF DIRECTORS ON EXECUTIVE COMPENSATION."
4
<PAGE>
EXECUTIVE COMPENSATION AND OTHER MATTERS
The following table sets forth information for the fiscal years ended
October 31, 1997, 1996 and 1995 concerning the compensation of the Chief
Executive Officer of the Company and the four most highly compensated
executive officers of the Company as of October 31, 1997, whose total salary
and bonus for the year ended October 31, 1997, exceeded $100,000, for services
in all capacities to the Company and its subsidiaries:
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).................... 1997 $245,625 $ 0 303,000 (3) 0
President and Chief 1996 $ 85,462 $ 0 315,000 (4) $4,500 (5)
Executive Officer 1995 $ -- $ -- -- --
Edward J. Norton (6).... 1997 $150,000 $ 93,000 (7) 110,000 (8) $1,425 (9)
Senior Vice President
and 1996 $140,000 $ 91,985 (10) 20,000 0
President,
Semiconductor and 1995 $135,000 $ 74,275 (11) 70,000 0
Electronics Group
Jonathan J. Golovin..... 1997 $210,000 $ 20,000 (7) 50,000 $1,425 (9)
Chairman of the Board 1996 $190,000 $ 25,000 (7) 0 0
and Chief Technical
Officer 1995 $190,000 $ 30,573 (11) 0 0
Richard Lloyd Payton.... 1997 $140,000 $ 79,000 (7) 88,700 (12) $2,551 (9)
Senior Vice President
and 1996 $118,000 $ 80,675 (10) 20,000 0
President, Healthcare
Products 1995 $ 88,333 $116,484 (11) 32,000 0
and Process Industries
Group
Michael J. Field (13)... 1997 $157,013 $ 66,666 (7) 70,000 (14) $2,218 (9)
Senior Vice President, 1996 $ 34,676 $ 11,667 (7) 50,000 0
Chief Administrative
Officer 1995 $ -- $ -- -- --
and Corporate Secretary
</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 fiscal 1996 or fiscal 1997. See
"REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON
EXECUTIVE COMPENSATION."
(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 an option to purchase an aggregate of 180,000 shares granted on
March 26, 1997, replacing an option to purchase 180,000 shares granted on
June 14, 1996. Options to purchase 180,000 shares were canceled in
connection with the repricing. See "REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS ON RECPRICING OF OPTIONS."
(4) Includes an option to purchase 15,000 shares under the Company's 1990
Outside Directors Stock Option Plan (the "Directors Plan").
(5) Represents compensation for services as a non-employee director of the
Company from January 30, 1996 through June 14, 1996.
(6) Mr. Norton has resigned from the Company effective as of January 31, 1998.
5
<PAGE>
(7) Includes a performance bonus based on customized objectives determined by
the Chief Executive Officer. Also includes a special bonus paid to key
executives at the discretion of Mr. Hootnick and approved by the
Compensation Committee. See "REPORT OF THE COMPENSATION COMMITTEE OF THE
BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION."
(8) Includes options to purchase an aggregate of 60,000 shares granted on
March 26, 1997, replacing an option to purchase 20,000 shares granted on
May 21, 1996, an option to purchase 20,000 shares granted on February 2,
1995, and an option to purchase 20,000 shares granted on December 13,
1996. Options to purchase 60,000 shares were canceled in connection with
the repricing. See "REPORT OF THE COMPENSATION COMMITTEE OF BOARD OF
DIRECTORS ON REPRICING OF OPTIONS."
(9) Represents a 401(k) plan contribution match by the Company.
(10) Includes an 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 a special
bonus paid to key executives at the discretion of Mr. Hootnick and
approved by the Compensation Committee. See "REPORT OF THE COMPENSATION
COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION."
(11) Includes $573 in profit sharing bonus from fiscal 1995 profits, a
performance bonus based on achievement of customized objectives
determined by the Chief Executive Officer and a performance bonus based
on achievement of sales revenue objectives and Company revenue and
profitability targets, net of a bonus payback made after restatement of
fiscal revenues and profits.
(12) Includes an option to purchase 6,700 shares granted on March 26, 1997,
replacing an option to purchase 6,700 shares granted on September 21,
1993. Also includes options to purchase an aggregate of 62,000 shares
granted on March 26, 1997, replacing an option to purchase 5,000 shares
granted on November 16, 1994, an option to purchase 27,000 shares granted
on February 22, 1995, an option to purchase 20,000 shares granted on June
19, 1996, and an option to purchase 10,000 shares granted on December 13,
1996. Options to purchase 68,700 shares were canceled in connection with
the repricing. See "REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF
DIRECTORS ON REPRICING OF OPTIONS."
(13) Mr. Field joined the Company as Senior Vice President, General Counsel
and Corporate Secretary in August 1996.
(14) Includes an option to purchase an aggregate of 50,000 shares granted on
March 26, 1997, replacing an option to purchase 50,000 shares granted on
August 15, 1996. Options to purchase 50,000 shares were canceled in
connection with the repricing. See "REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS ON REPRICING OF OPTIONS."
6
<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, 1997, 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
% OF TOTAL APPRECIATION FOR
NUMBER OF OPTIONS OPTION TERM (1)
OPTIONS GRANTED TO EXPIRATION ---------------------------
NAME GRANTED (2) EMPLOYEES (3) PRICE (4) DATE 5%($) 10%($)
- ------------------------ ---------- ------------ -------- ---------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Laurence R. Hootnick.... 78,000 4.08 $ 6.50 11/01/06 $ 318,850 $ 808,027
20,000 1.05 $ 5.00 03/11/07 $ 62,889 $ 159,374
25,000 1.31 $2.625 05/19/07 $ 41,271 $ 104,589
180,000 (5) 9.43 $ 3.75 03/26/07 $ 424,504 $ 1,075,776
Edward J. Norton........ 20,000 1.05 $ 6.25 12/13/01 $ 34,535 $ 76,314
30,000 1.57 $2.625 05/19/07 $ 49,525 $ 125,507
60,000 (6) 3.14 $ 3.75 03/26/97 $ 141,501 $ 358,592
Jonathan J. Golovin..... 50,000 2.62 $2.625 05/19/07 $ 82,542 $ 209,179
Richard Lloyd Payton.... 10,000 0.52 $ 6.25 12/13/01 $ 17,268 $ 38,157
10,000 0.52 $2.625 05/19/07 $ 16,508 $ 41,836
68,700 (7) 3.60 $ 3.75 03/26/97 $ 162,019 $ 410,588
Michael J. Field........ 20,000 1.05 $2.625 05/19/07 $ 33,017 $ 83,671
50,000 (8) 2.62 $ 3.75 03/26/07 $ 117,918 $ 298,827
</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 $6.50, $6.25, $5.00, $3.75 or $2.625 per
share in fiscal 1997 would yield respective profits of $4.09, $3.93,
$3.14, $2.36 or $1.65 per share at 5% appreciation over five years, or
respective profits of $10.36, $9.96, $7.97, $5.98 or $4.18 per share at
10% appreciation over the same period. See "Severance and Change of
Control Arrangements."
(2) All options granted in fiscal 1997 under the Company's 1996 Stock Option
Plan (the "1996 Option Plan") generally vest and become exercisable 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. Under the 1996 Option
Plan, the Board retains discretion to modify the terms, including the
price, of outstanding options.
(3) Based upon options granted to purchase an aggregate of 1,909,742 shares of
Common Stock, of which 1,053,642 shares were repriced in March 1997. See
"REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON
REPRICING OF OPTIONS."
(4) All options listed were granted at market value on the date of grant,
based on the closing sales price on the date of grant.
(5) Reflects options that were repriced in March 1997, replacing options
granted in June 1996.
(6) Reflects options that were repriced in March 1997, replacing options
granted in February 1995, May 1996 and December 1996.
(7) Reflects options that were repriced in March 1997, replacing options
granted in September 1993, November 1994, February 1995, June 1996 and
December 1996.
(8) Reflects options that were repriced in March 1997, replacing options
granted in August 1996.
7
<PAGE>
No options to purchase the Company's Common Stock were exercised in the
fiscal year ended October 31, 1997. The following table provides the specified
information concerning unexercised options held as of October 31, 1997, by the
persons named in the Summary Compensation Table:
AGGREGATED OPTION EXERCISES
AND FISCAL YEAR-END VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT 10/31/97 OPTIONS AT 10/31/97(1)
----------------------------- -----------------------------
NAME EXERCISABLE (2) UNEXERCISABLE EXERCISABLE (2) UNEXERCISABLE
- ------------------------ -------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Laurence R. Hootnick.... 173,395 (3) 264,605 $2,768 $23,806
Edward J. Norton........ 58,748 (4) 92,711 $ 0 $31,890
Jonathan J. Golovin..... 100,000 50,000 $ 0 $53,150
Richard Lloyd Payton.... 11,317 68,683 $ 0 $10,630
Michael J. Field........ 9,374 60,626 $2,214 $19,045
</TABLE>
- --------
(1) Based on a fair market value of $3.688, the closing price of the Common
Stock on October 31, 1997, as reported by the Nasdaq National Market. Does
not include options that had an exercise price greater than $3.688.
(2) Under the 1996 Option Plan, stock options vest and become exercisable over
a period of four years. Under the previous 1983 Stock Option Plan (the
"1983 Option Plan"), stock options were immediately exercisable, subject
to the Company's right to repurchase any unvested shares acquired under
the option at the original exercise price in the event of the optionee's
termination. Generally, shares subject to options granted under the 1983
Option Plan vest over a period of four years. The value shown is for all
outstanding in-the-money options regardless of vesting restrictions.
(3) Includes 80,000 shares subject to options granted under the 1983 Option
Plan that are unvested. These shares are currently exercisable in full,
but any unvested shares purchased are subject to the Company's right to
repurchase at the original exercise price in the event of optionee's
termination of employment.
(4) Includes 11,459 shares subject to options granted under the 1983 Option
Plan that are unvested. These shares are currently exercisable in full,
but any unvested shares purchased are subject to the Company's right to
repurchase at the original exercise price in the event of optionee's
termination of employment.
8
<PAGE>
The following table provides specified information concerning all repricings
of options to purchase the Company's Common Stock held by any executive
officer of the Company since May 9, 1989, the date of the Company's initial
public offering:
TEN-YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
NUMBER OF LENGTH OF
SECURITIES MARKET PRICE ORIGINAL OPTION
UNDERLYING OF STOCK EXERCISE PRICE TERM REMAINING
OPTIONS AT TIME OF AT TIME OF AT DATE OF
REPRICED OR REPRICING OR REPRICING OR NEW REPRICING OR
NAME AND POSITION DATE AMENDMENT AMENDMENT AMENDMENT EXERCISE PRICE AMENDMENT (1)
----------------- -------- ----------- ------------ -------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Laurence R. Hootnick 03/26/97 180,000 $ 3.75 $ 8.00 $ 3.75 110 months
President and Chief
Executive Officer
Edward J. Norton 03/26/97 20,000 $ 3.75 $8.625 $ 3.75 94 months
Senior Vice President 20,000 $ 3.75 $ 7.00 $ 3.75 109 months
and President, 20,000 $ 3.75 $ 6.25 $ 3.75 116 months
Semiconductor and
Electronics Group
Richard Lloyd Payton 03/26/97 6,700 $ 3.75 $6.125 $ 3.75 77 months
Senior Vice President 5,000 $ 3.75 $6.375 $ 3.75 91 months
and President, 27,000 $ 3.75 $8.625 $ 3.75 94 months
Healthcare Products and 20,000 $ 3.75 $7.531 $ 3.75 110 months
Process Industries 10,000 $ 3.75 $ 6.25 $ 3.75 116 months
Group
Michael J. Field 03/26/97 50,000 $ 3.75 $ 6.00 $ 3.75 112 months
Senior Vice President,
Chief Administrative
Officer and Corporate
Secretary
Frank Kaplan 03/26/97 50,000 $ 3.75 $ 7.75 $ 3.75 85 months
Senior Vice President, 20,000 $ 3.75 $7.531 $ 3.75 110 months
Software Development 10,000 $ 3.75 $ 6.25 $ 3.75 116 months
and Quality Assurance
Linda Kato Ujihara 03/26/97 1,750 $ 3.75 $ 7.25 $ 3.75 64 months
Director, Human 600 $ 3.75 $6.375 $ 3.75 73 months
Resources 5,000 $ 3.75 $6.375 $ 3.75 73 months
10,000 $ 3.75 $6.125 $ 3.75 77 months
4,000 $ 3.75 $7.875 $ 3.75 97 months
1,000 $ 3.75 $ 7.00 $ 3.75 109 months
4,000 $ 3.75 $ 6.25 $ 3.75 116 months
Clifton Wong 03/26/97 7,000 $ 3.75 $7.875 $ 3.75 97 months
Vice President, Finance 10,000 $ 3.75 $ 7.00 $ 3.75 109 months
and Chief Financial 23,000 $ 3.75 $ 6.25 $ 3.75 112 months
Officer
Thomas A. Tomasetti 09/21/93 3,500 $6.125 $ 7.25 $6.125 47 months
Former President and 09/21/93 125,000 $6.125 $ 8.25 $6.125 52 months
Chief Executive Officer 09/21/93 600 $6.125 $6.375 $6.125 56 months
(Presently Director)
</TABLE>
9
<PAGE>
TEN-YEAR OPTION REPRICINGS (CONTINUED)
<TABLE>
<CAPTION>
NUMBER OF LENGTH OF
SECURITIES MARKET PRICE ORIGINAL OPTION
UNDERLYING OF STOCK EXERCISE PRICE TERM REMAINING
OPTIONS AT TIME OF AT TIME OF AT DATE OF
REPRICED OR REPRICING OR REPRICING OR NEW REPRICING OR
NAME AND POSITION DATE AMENDMENT AMENDMENT AMENDMENT EXERCISE PRICE AMENDMENT(1)
----------------- -------- ----------- ------------ -------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Jonathan Golovin 09/21/93 100,000 $6.125 $6.375 $6.125 56 months
Chairman of the Board
(Presently also Chief
Technical Officer)
Mark Finkel 09/21/93 25,000 $6.125 $12.50 $6.125 39 months
Former Vice President, 12/17/91 25,000 $12.50 $18.25 $12.50 54 months
Operations and Chief
Financial Officer
Peter Reiman 09/21/93 25,000 $6.125 $17.25 $6.125 24 months
Former Vice President, 09/21/93 3,150 $6.125 $ 7.25 $6.125 47 months
Discrete Products 09/21/93 25,000 $6.125 $10.00 $6.125 50 months
Division
Michael Gray 09/21/93 5,000 $6.125 $12.50 $6.125 39 months
Former Controller 12/17/91 5,000 $12.50 $17.25 $12.50 45 months
Rodney Murray 12/17/91 26,666 $12.50 $18.75 $12.50 48 months
Former Vice Prsident, 12/17/91 8,334 $12.50 $18.75 $12.50 48 months
World Sales
Joesph Seidler 12/17/91 25,000 $12.50 $17.25 $12.50 45 months
Former Vice President.
Marketing
Parris Hawkins 12/17/91 25,000 $12.50 $18.25 $12.50 55 months
Former Vice President,
Quality and
Productivity
(Presently Principal
Engineer)
</TABLE>
- --------
(1) Repriced options vest over a four-year period beginning on the date of the
repricing. Opionees forfeit any accrued vesting on canceled options. See
"REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON
REPRICING OF OPTIONS."
SEVERANCE 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.
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,
Mr. Hootnick 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
10
<PAGE>
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 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, as amended, (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.
The Company has entered into Change of Control Agreements with certain of
its officers. The agreements provide that (i) in the event of an Involuntary
Termination (as defined therein) of the executive within twelve months after a
Change of Control (as defined therein) 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 Directors Plan provides for the automatic grant of an option to purchase
15,000 shares of 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, 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.
On December 16, 1997, members of the Board of Directors agreed to defer
their cash compensation until the Company returns to profitability.
11
<PAGE>
Pursuant to a letter from Centennial Associates, L.P. ("CALP") to Frederick
M. O'Such dated June 2, 1997, Joseph H. Reich & Co., Inc., the management
company for CALP will pay to Mr. O'Such, after each CALP fiscal year or after
certain liquidating events, a fee equal to 8% of the net realized gains of
CALP attributable to sales or other dispositions of their holdings of Company
Common Stock, for as long as Mr. O'Such serves as a director of the Company.
CALP retains complete control and discretion over its investments in the
Company, including, but not limited to, the decision to purchase or dispose of
shares, and the right to vote shares.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the last fiscal year, executive compensation was administered by the
Compensation Committee comprised of two outside directors of the Board of
Directors, Robert Horne and Robert C. Fink.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, 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 and
filed in a timely matter, except that, due to administrative error, the
following reports were not filed in a timely manner: one statement of change
in beneficial ownership reflecting two transactions by Mr. Hootnick; one
statement of change in beneficial ownership reflecting one transaction by Mr.
Kaplan; one statement of change in beneficial ownership reflecting two
transactions by Ms. Ujihara; one statement of beneficial ownership reporting
an exempt option grant to Mr. Norton; one statement of beneficial ownership
reporting an exempt option grant to Mr. O'Such; one statement of beneficial
ownership reporting an exempt option grant to Mr. Payton; and one statement of
a change in beneficial ownership reflecting one transaction by Mr. Wong.
CHANGES TO BENEFIT PLANS
1996 Stock Option Plan. The Board of Directors of the Company has adopted,
subject to stockholder approval, an amendment to the 1996 Option Plan to
increase the maximum number of shares that may be issued thereunder by 500,000
shares. See "PROPOSAL TO AMEND 1996 STOCK OPTION PLAN." As of January 31,
1998, no grant of options had been made to any person conditioned upon
stockholder approval of the increase in the share reserve of the 1996 Option
Plan.
1989 Employee Stock Purchase Plan. The Board of Directors of the Company has
adopted, subject to stockholder approval, an amendment to the 1989 Employee
Stock Purchase Plan (the "1989 Purchase Plan") to increase the maximum number
of shares that may be issued thereunder by 300,000 shares. See "PROPOSAL TO
AMEND 1989 EMPLOYEE STOCK PURCHASE PLAN." As of January 31, 1998, no purchases
had been made by any employee conditioned upon stockholder approval of the
increase in the share reserve of the 1989 Purchase Plan. Non-employee
directors are not eligible to participate in the 1989 Purchase Plan.
1990 Outside Directors Stock Option Plan. The Board of Directors of the
Company has adopted, subject to stockholder approval, an amendment to the
Directors Plan to increase the maximum number of shares that may be issued
thereunder by 50,000 shares. See "PROPOSAL TO AMEND 1990 OUTSIDE DIRECTORS
STOCK OPTION PLAN." As of January 31, 1998, no grant of options had been made
to any person conditioned upon stockholder approval of the increase in the
share reserve of the Directors Plan.
12
<PAGE>
Because grants under the 1989 Purchase Plan and the 1996 Option Plan are
made at the discretion of the Board of Directors, and the exercise price of
any grant under the 1989 Purchase Plan, the Directors Plan or the 1996 Option
Plan cannot not be known until the date of grant, future grants to be made in
fiscal 1998 under the 1989 Purchase Plan, the Directors Plan and 1996 Option
Plan are not yet determinable. Accordingly, the following table sets forth
grants of stock or stock options under the 1989 Purchase Plan, the Directors
Plan and the 1996 Option Plan during the fiscal year ended October 31, 199,7
to (i) the Chief Executive Officer of the Company and the four other most
highly compensated executive officer of the Company as of October 31, 1997;
(ii) all current executive officers as a group; (iii) all current directors
who are not executive officers as a group; and (iv) all employees, including
officers who are not executive officers, as a group.
NEW PLAN BENEFITS
<TABLE>
<CAPTION>
1990 OUTSIDE
1989 EMPLOYEE DIRECTORS
STOCK PURCHASE STOCK OPTION 1996 STOCK OPTION
PLAN (1) PLAN (2) PLAN (3)
------------------ -------------------- ------------------------
PURCHASE NO. OF EXERCISE NO. OF EXERCISE NO. OF
NAME AND POSITION PRICE SHARES PRICE SHARES PRICE SHARES
----------------- -------- -------- ----------- ------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Laurence R. Hootnick $3.1875 4,309 N/A 0 $2.625-5.00 225,000 (4)
President and Chief
Executive Officer
Edward J. Norton $3.1875 4,309 N/A 0 $2.625-3.75 90,000 (5)
Senior Vice President
and President,
Semiconductor and
Electronics Group
Jonathan J. Golovin N/A 0 N/A 0 $ 2.625 50,000
Chairman of the Board
and Chief Technical
Officer
Richard Lloyd Payton $3.1875 4,309 N/A 0 $2.625-3.75 78,700 (6)
Senior Vice President
and President,
Healthcare Products
and Process Industries
Group
Michael J. Field N/A 0 N/A 0 $2.625-3.75 70,000 (7)
Senior Vice President,
Chief Administrative
Officer and Corporate
Secretary
Executive Group (8 $3.1875 24,056 N/A 0 $2.625-5.00 760,050 (8)
persons)
Non-Executive Director N/A 0 $4.00-6.25 22,500 (9) N/A 0
Group (4 persons)
Non-Executive Officer $3.1875 141,880 N/A 0 $2.625-5.00 1,149,692 (10)
Employee Group
</TABLE>
- --------
(1) Only employees are eligible to participate in the 1989 Purchase Plan.
(2) Only non-employee directors are eligible to participate in the Directors
Plan.
(3) Only employees, employee-directors and consultants to the Company are
eligible to participate in the 1996 Option Plan.
(4) Includes options to purchase an aggregate of 180,000 shares granted on
March 26, 1997, replacing an option to purchase 180,000 shares granted on
June 14, 1996. Options to purchase 180,000 shares were canceled in
connection with the repricing.
13
<PAGE>
(5) Includes options to purchase an aggregate of 60,000 shares granted on
March 26, 1997, replacing an option to purchase 20,000 shares granted on
May 21, 1996, an option to purchase 20,000 shares granted on February 2,
1995, and an option to purchase 20,000 shares granted on December 13,
1996. Options to purchase 60,000 shares were canceled in connection with
the repricing.
(6) Includes options to purchase 6,700 shares granted on March 26, 1997,
replacing an option to purchase 6,700 shares granted on September 21,
1993. Also includes options to purchase an aggregate of 62,000 shares
granted on March 26, 1997, replacing an option to purchase 5,000 shares
granted on November 16, 1994, an option to purchase 27,000 shares granted
on February 22, 1995, an option to purchase 20,000 shares granted on June
19, 1996, and an option to purchase 10,000 shares granted on December 13,
1996. Options to purchase 68,700 shares were canceled in connection with
the repricing.
(7) Includes options to purchase an aggregate of 50,000 shares granted on
March 26, 1997, replacing an option to purchase 50,000 shares granted on
August 15, 1996. Options to purchase 50,000 shares were canceled in
connection with the repricing.
(8) Includes options to purchase an aggregate of 540,050 shares granted on
March 26, 1997, replacing options held by executive officers granted on
various dates under the 1983 Option Plan. Options to purchase 540,050
shares were canceled in connection with the repricing.
(9) Includes a one-time grant of an option to purchase 15,000 shares of
Common Stock to Mr. O'Such upon his initial appointment to the Board of
Directors in June 1997.
(10) Includes options to purchase an aggregate of 533,592 shares granted on
March 26, 1997, replacing options held by employees who were not
executive officers granted on various dates under the 1983 Option Plan.
Options to purchase 533,592 shares were canceled in connection with the
repricing.
14
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS ON REPRICING OF OPTIONS
On March 20, 1997, the Compensation Committee, comprised of Robert Horne and
Robert C. Fink, considered the options held by the Company's employees,
including executive officers, and the fact that a broad decline in the price
of the Common Stock of the Company had resulted in a substantial number of
stock options granted pursuant to the 1983 Stock Option Plan having exercise
prices well above the recent trading prices of the Company's Common Stock (the
"Underwater Options").
The Compensation Committee reviewed a study prepared by the Finance
Department of the Company demonstrating that a substantial number of the
options held by employees at that point in time were Underwater Options. The
Compensation Committee reviewed the impact of the decline in the market price
of the Company's Common Stock on the incentive afforded by the Underwater
Options and determined that such options were significantly less likely to
serve their purposes of retaining and motivating employees whose contributions
are important to the Company's future success. The Compensation Committee also
determined that unless adjustment was made, longer term employees holding
Underwater Options would perceive a substantial inequity in comparison to more
recently hired employees granted options with exercise prices set at the then
lower market price of the Company's Common Stock, and the morale of such
longer term employees would suffer as a consequence. The Compensation
Committee believed that the future success of the Company would depend in
large part on its ability to retain and motivate its highly skilled employees
for whom competition in the marketplace is intense, and the loss of such
employees could have a significant adverse impact on the Company's business.
The Compensation Committee believed that providing equity incentives to
employees of the Company to further increase the Company's performance and the
value of the Company for its stockholders was both important and cost
effective. The Compensation Committee considered other alternatives, such as
granting new options selectively to then employed key employees, but
determined that the size of the additional options that would be required to
offset the decline in the market price of the Company's Common Stock would
result in significant dilution to the stockholders.
Considering these factors, the Compensation Committee determined that it was
in the best interests of the Company and its stockholders to restore the
incentives for employees and executive officers holding Underwater Options to
remain with the Company by adopting a stock option exchange program whereby
employees holding Underwater Options may elect to receive new options pursuant
to the 1996 Stock Option Plan having an exercise price comparable to the
trading price at that time in exchange for the cancellation of the Underwater
Options. The Compensation Committee concluded that each eligible employee
holding one or more Underwater Options who agreed to the cancellation of such
Underwater Options on or before a date specified by the Company's management
(such date was determined to be March 26, 1997) (the "Effective Date") would
be granted effective as of 2:00 p.m. PST on the Effective Date, with respect
to each separate Underwater Option which would be canceled on the Effective
Date, a new option pursuant to the 1996 Stock Option Plan (a "New Option") to
purchase the number of shares of the Company's Common Stock that were subject
to and unexercised under such Underwater Option immediately prior to its
cancellation. The Compensation Committee also concluded that the exercise
price per share under each New Option would be equal to the closing sale price
per share of the Company's Common Stock on the Effective Date as quoted on the
Nasdaq National Market and that each New Option shall vest in forty-eight (48)
approximately equal monthly installments commencing on the Effective Date with
a term of ten (10) years commencing on the Effective Date, unless earlier
terminated in accordance with the provisions of the option agreement
evidencing such New Option. Accordingly, optionees who participated in the
exchange received a lower exercise price in exchange for their forfeiting
accrued vesting on their exchanged options. The offer to exchange options was
completed on March 26, 1997; options for a total of 873,642 shares with
exercise prices ranging from $6.00 per share to $12.14 per share were
exchanged for options for an equal number of shares at an exercise price of
$3.75 per share.
COMPENSATION COMMITTEE
Robert Horne
Robert C. Fink
15
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
In fiscal 1997, the Compensation Committee of the Board of Directors was
comprised of Robert Horne and Robert C. Fink. 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 Compensation Committee applied this philosophy in
determining compensation for the Company's 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 6% to 15% of base
salary for certain of the Company's executive officers in fiscal 1997. The
Compensation 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. The total incentive compensation which could be
awarded if all Company performance targets and individual objectives were
achieved comprised up to 83% of total cash compensation for executive
officers, with more senior executive officers having a larger percentage of
total cash compensation comprised of incentive compensation.
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 cash bonuses available are set annually by the
Chief Executive Officer, with approval of the Compensation Committee, with
respect to executive officers. Mr. Hootnick, the Chief Executive Officer, 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 pursuant to his employment agreement with
the Company. See "Chief Executive Officer Compensation." In fiscal 1997, the
Compensation Committee provided incentive compensation under a Management By
Objective bonus plan with two components, a portion contingent on Company
performance ("Company Performance Bonus") and another portion based on
achievement of individual objectives ("Individual Performance Bonus"), both as
described below.
16
<PAGE>
The largest portion of the cash bonus is the Company Performance Bonus and
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.
Company Performance Bonuses 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. Company Performance Bonuses are paid annually. No Company Performance
Bonuses were paid in fiscal 1997 because revenue and profitability levels of
the Company in fiscal year 1997 did not meet the performance goals established
by the Board of Directors.
The remaining portion of the cash bonus is the Individual Performance Bonus
and is contingent upon each executive officer's individual performance based
on achievement of customized objectives determined by the Chief Executive
Officer, with approval of the Compensation Committee. In fiscal 1997, the
Individual Performance Bonuses paid to the eligible executive officers based
on achievement of customized objectives were 100% of targeted bonuses.
In addition, in fiscal 1997 the Compensation 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 1997, special bonuses paid
to certain executive officers were from 2% to 7% 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 1997, 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. All options granted in fiscal 1997 to
executive officers in their capacities as such were granted under the 1996
Stock Option Plan. Generally, option grants under the 1996 Stock Option Plan
vest and become exercisable over four years. Option grants for fiscal 1997 are
set forth in the table entitled "OPTION GRANTS IN LAST FISCAL YEAR" in the
section entitled "EXECUTIVE COMPENSATION AND OTHER MATTERS."
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
17
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change of control transaction. Accordingly, the Committee unanimously
recommended adoption of change of control agreements for the Company's
executive officers. The Company entered into such agreements with certain
executive officers, the terms of which are described above in the section
entitled "EXECUTIVE COMPENSATION AND OTHER MATTERS--Severance 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. The Company and Mr. Hootnick 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, 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. Although the Company did not achieve the profitability
and revenue targets as previously set by the Compensation Committee, the
Compensation Committee is currently considering what bonus, if any, should be
paid to Mr. Hootnick in order to keep his total cash compensation competitive
compared with compensation for chief executive officers in companies in
similar industries and of similar size and geographic location.
Pursuant to his employment letter agreement, Mr. Hootnick was granted in
fiscal 1997 options to purchase 98,000 shares of Common Stock, 20,000 of which
were subject to the approval of stockholders of the 1996 Stock Option Plan.
Additionally, Mr. Hootnick was granted an option to purchase 25,000 shares of
the Company's Common Stock in May 1997. The number of shares subject to
options granted to Mr. Hootnick in fiscal 1997 was determined by the
Compensation Committee to provide competitive equity compensation compared to
chief executive officers of companies in 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--Severance 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 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 Option Plan. See
"PROPOSAL TO AMEND 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
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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 (formerly named the
"S&P High Tech Composite") for the period commencing on October 31, 1992, and
ending on October 31, 1997.
COMPARISON OF CUMULATIVE TOTAL RETURN FROM OCTOBER 31, 1992, THROUGH OCTOBER
31, 1997(1)
CONSILIUM, INC., S&P 500, S&P TECHNOLOGY-500
<TABLE>
<CAPTION>
10/31/92 10/31/93 10/31/94 10/31/95 10/31/96 10/31/97
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
S&P Technology-500........ $100.00 $111.81 $112.89 $138.98 $168.55 $218.59
S&P 500................... $100.00 $121.76 $142.19 $213.52 $258.26 $385.71
Consilium, Inc............ $100.00 $ 70.83 $ 70.83 $137.50 $ 72.22 $ 40.97
</TABLE>
- --------
(1) Assumes that $100.00 was invested on October 31, 1992, 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.
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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 two Class III director
(Jonathan J. Golovin and Frederick M. O'Such), who will serve until the Annual
Meetings of Stockholders to be held in 1998, 1999 and 2000, 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. As of June 11, 1997, Class
III of the Board of Directors was expanded to two directors, and Frederick M.
O'Such was appointed to fill the resulting vacancy.
Management's nominees for election at the Annual Meeting of Stockholders to
Class I of the Board of Directors are Robert Horne and Robert C. Fink. If
elected, the nominees will serve as directors until the Company's Annual
Meeting of Stockholders in 2001, and until their successors are elected and
qualified. If a 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
such substitute nominee as Management may designate.
If a quorum is present and voting, the two nominees for the positions as
Class I directors receiving the highest number of votes will be elected.
Abstentions and broker non-votes will each be counted as present for purposes
of determining the presence of a quorum. Abstentions and broker non-votes, on
the other hand, will have no effect on the outcome of the vote. THE BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE NOMINEES NAMED ABOVE.
PROPOSAL TO AMEND 1989 EMPLOYEE STOCK PURCHASE PLAN
The Company's 1989 Purchase Plan is intended to qualify as an "employee
stock purchase plan" under section 423 of the Code. Management believes that
the availability of an adequate number of shares under the 1989 Purchase Plan
is an important factor in attracting and retaining qualified employees
essential to the success of the Company. As of January 31, 1998, there were 43
shares available for issuance under the 1989 Purchase Plan. In December 1997,
the Board of Directors amended the 1989 Purchase Plan, subject to stockholder
approval, to increase the number of shares of the authorized but unissued
Common Stock of the Company reserved for issuance under the 1989 Purchase Plan
from 880,000 shares to 1,180,000 shares.
SUMMARY OF THE PROVISIONS OF THE 1989 PURCHASE PLAN
The following summary of the 1989 Purchase Plan is qualified in its entirety
by the specific language of the 1989 Purchase Plan, a copy of which is
available to any stockholder upon request.
Any employee of the Company or any present or future parent or subsidiary
corporation of the Company (including any director who is also an employee) is
eligible to participate in the 1989 Purchase Plan so long as the employee is
customarily employed for at least 20 hours per week and more than five months
in any calendar year. No person who owns or holds options to purchase, or as a
result of participation in the 1989 Purchase Plan would own or hold options to
purchase, 5% or more of the total combined voting power or value of all
classes of stock of the Company is entitled to participate in the 1989
Purchase Plan. As of January 31, 1998, 234 employees were eligible to
participate in the 1989 Purchase Plan.
Each offering of Common Stock under the 1989 Purchase Plan is generally for
a period of six months (an "Offering Period"). Offering Periods under the 1989
Purchase Plan generally commence on or about March 16 and September 16 of each
year and end on the next following September 15 and March 15, respectively.
However, the 1989 Purchase Plan authorizes the Board of Directors to establish
a different term for one or more offerings, provided that no offering may
exceed a term of 27 months. At the end of each Offering Period, shares are
issued based on the payroll deductions accumulated during that Offering
Period. Participation in the 1989
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<PAGE>
Purchase Plan is limited to eligible employees who authorize payroll
deductions pursuant to the 1989 Purchase Plan. Such payroll deductions must be
at least 1% but may not exceed 10% of an employee's compensation. Once an
employee becomes a participant in the 1989 Purchase Plan, that employee will
automatically participate in each successive offering until such time as that
employee withdraws from the 1989 Purchase Plan, becomes ineligible to
participate in the 1989 Purchase Plan, or his or her employment ceases.
The purchase price per share at which the shares of the Company's Common
Stock are sold in an offering generally will be equal to 85% of the lesser of
the fair market value of the Common Stock on the first or the last day of the
Offering Period. As of January 30, 1998, the closing price of the Company's
Common Stock, as reported on the Nasdaq National Market, was $1.875 per share.
Subject to certain limitations, the number of shares of the Company's Common
Stock a participant purchases in an Offering Period is determined by dividing
the total amount of payroll deductions withheld from the participant's
compensation during the Offering Period by the purchase price per share.
Participants may not purchase shares of the Company's Common Stock having a
fair market value exceeding $25,000 in any calendar year (measured by the fair
market value of the Company's Common Stock on the first day of the Offering
Period in which the shares are purchased). Furthermore, no participant may
purchase in any single Offering Period more than the lesser of (a) the number
of whole shares of the Company's Common Stock arrived at by multiplying $1,250
by the number of full and fractional months in the Offering Period and
dividing the product by 85% of the fair market value of the shares on the
first day of an Offering Period, or (b) 1,000 shares (which amount is prorated
for Offering Periods of other than 6 months duration). Any cash not applied to
the purchase of shares will be returned to the participant unless the amount
of such cash is less than the amount necessary to purchase a whole share of
Common Stock, in which case the Company may establish procedures to apply the
remaining amount to a subsequent Offering Period.
A participant may withdraw from an offering at any time without affecting
his or her eligibility to participate in future offerings. However, once a
participant withdraws from an offering, that participant may not again
participate in the same offering.
The Board of Directors may at any time amend or terminate the 1989 Purchase
Plan, except that the approval of the Company's stockholders is required
within twelve months of the adoption of any amendment increasing the number of
shares authorized for issuance under the 1989 Purchase Plan, or changing the
definition of the corporations which may be designated by the Board as
corporations whose employees may purchase shares of the Company's Common Stock
under the 1989 Purchase Plan. The 1989 Purchase Plan will terminate at the
time determined by the Board of Directors or when all the shares reserved for
issuance under the 1989 Purchase Plan have been issued, whichever occurs
first.
SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES OF THE 1989 PURCHASE PLAN
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 1989 Purchase Plan and does not attempt to describe all potential tax
consequences. Furthermore, the tax consequences are complex and subject to
change, and a taxpayer's particular situation may be such that some variation
of the described rules is applicable.
Generally, a participant recognizes no taxable income either as a result of
becoming a participant in the 1989 Purchase Plan or purchasing shares of the
Company's Common Stock under the 1989 Purchase Plan.
The tax consequences of a disposition of 1989 Purchase Plan shares vary
depending on the period that such stock is held before its disposition. If a
participant disposes of shares purchased under the 1989 Purchase Plan within
two years from the first day of the applicable Offering Period or within one
year from the date of purchase (which is the last day of an Offering Period)
(a "disqualifying disposition"), the participant will realize ordinary income
in the year of such disposition equal to the amount by which the fair market
value of the shares on the date the shares were purchased exceeds the purchase
price. The amount of the ordinary income will be added to the participant's
basis in the shares, and any additional gain or resulting loss recognized on
the disposition of the shares will be a capital gain or loss. A capital gain
or loss will be long-term or mid-term if the participant's holding period is
more than twelve months.
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<PAGE>
If the participant disposes of shares purchased under the 1989 Purchase Plan
at least two years after the first day of the applicable Offering Period and
at least one year after the date of purchase, the participant will realize
ordinary income in the year of disposition equal to the lesser of (i) the
excess of the fair market value of the shares on the date of disposition over
the purchase price or (ii) 15% of the fair market value of the shares on the
first day of the applicable Offering Period. The amount of any ordinary income
will be added to the participant's basis in the shares, and any additional
gain recognized upon the disposition after such basis adjustment will be a
long-term or mid-term capital gain. If the fair market value of the shares on
the date of disposition is less than the purchase price, there will be no
ordinary income and any loss recognized will be a long-term or mid-term
capital loss.
The Company will generally be entitled to a deduction in the year of a
disqualifying disposition equal to the amount of ordinary income recognized by
the participant as a result of the disposition, except to the extent such
deduction is limited by applicable provisions of the Code or the regulations
thereunder. In all other cases, no deduction is allowed to the Company.
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
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. Abstentions and broker
non-votes will each be counted as present for purposes of determining the
presence of a quorum. Abstentions will have the same effect as a negative
vote. Broker non-votes, on the other hand, will have no effect on the outcome
of the vote.
The Board of Directors believes that the increase in the share reserve of
the 1989 Purchase Plan is in the best interests of the stockholders and the
Company for the reasons stated above. THEREFORE, THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL OF THE INCREASE IN THE SHARE
RESERVE OF THE 1989 EMPLOYEE STOCK PURCHASE PLAN.
PROPOSAL TO AMEND 1990 OUTSIDE DIRECTORS STOCK OPTION PLAN
The Company's Directors Plan provides for the automatic grant of
nonqualified stock options to members of the Board of Directors who are not
employees of the Company. Currently, the Company has four (4) nonemployee
directors. The stockholders are now being asked to approve the amendment to
increase by 50,000 shares the maximum aggregate number of shares of Common
Stock issuable under the Directors Plan. The Board of Directors believes that
the approval of the amendment of the Directors Plan is in the best interests
of the Company and its stockholders because the availability of stock options
is an important factor in attracting and retaining qualified nonemployee
directors essential to the success of the Company.
SUMMARY OF THE PROVISIONS OF THE DIRECTORS PLAN
The following summary of the Directors Plan is qualified in its entirety by
the specific language of the Directors Plan, a copy of which is available to
any stockholder upon request.
General. The Directors Plan provides for the automatic grant of nonstatutory
stock options to nonemployee directors of the Company. As of January 31, 1998,
no options to purchase shares granted under the Directors Plan had been
exercised, option to purchase an aggregate of approximately 85,000 shares
remained outstanding and approximately 15,000 shares remained available for
future grant under the Directors Plan.
Shares Subject to Plan. Currently, a maximum of 100,000 shares of the
authorized but unissued shares of the Common Stock of the Company may be
issued upon the exercise of options granted pursuant to the Directors
22
<PAGE>
Plan. In December 1997, the Board of Directors amended the Directors Plan,
subject of stockholder approval, to increase the share reserve to an aggregate
of 150,000 shares. 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 will
be made to the shares subject to the Directors Plan, to the terms of automatic
option grants under the plan, and to outstanding options. To the extent that
any outstanding option under the Directors Plan expires or terminates prior to
exercise in full or if shares issued upon the exercise of an option are
repurchased by the Company, the shares of Common Stock for which such option
is not exercised or the repurchased shares are returned to the plan and become
available for future grants.
Administration. The Directors Plan is administered by the Board of Directors
or a duly appointed committee of the Board (hereinafter referred to as the
"Board"). The Board is authorized to interpret the Directors Plan and options
granted thereunder, and all determinations of the Board will be final and
binding on all persons having an interest in the Directors Plan or any option.
Eligibility. Only directors of the Company who are not at the time of option
grant employees of the Company or of any parent or subsidiary corporation of
the Company (the "Outside Directors") are eligible to participate in the
Directors Plan. Currently, the Company has four Outside Directors.
Automatic Grant of Options. The Directors Plan provides that each Outside
Director who first serves on the Board after January 17, 1990 (the "Effective
Date") automatically will be granted an option to purchase 15,000 shares of
Common Stock on the date of his or her initial election or appointment (an
"Initial Option"). The Directors Plan also provides for the annual automatic
grant of an additional option to purchase 2,500 shares of Common Stock on the
date of the first meeting of the Board of each fiscal year, which amount is
prorated for Outside Directors who have served on the Board for less than 12
months as of the date of grant (an "Annual Option").
Terms and Conditions of Options. Each option granted under the Directors
Plan will be evidenced by a written agreement between the Company and the
Outside Director specifying the number of shares subject to the option and the
other terms and conditions of the option, consistent with the requirements of
the Directors Plan. The exercise price of any option granted under the
Directors Plan must equal the fair market value, as determined pursuant to the
plan, of a share of the Company's Common Stock on the date of grant.
Generally, the fair market value of the Common Stock will be the average of
the high and low prices per share on the date of grant as reported on the
Nasdaq National Market. As of January 30, 1998, the closing price of the
Company's Common Stock, as reported on the Nasdaq National Market, was $1.875
per share. No option granted under the Directors Plan is exercisable after the
expiration of 10 years after the date such option is granted, subject to
earlier termination in the event the optionee's service with the Company
ceases or in the event of a Transfer of Control of the Company, as discussed
below. Shares subject to an Initial Option will vest and become exercisable in
four equal annual installments following the date of grant. Shares subject to
Annual Options are generally fully vested and exercisable on and after the
date of grant.
Generally, the exercise price may be paid in cash, by check, or in cash
equivalent. During the lifetime of the optionee, the option may be exercised
only by the optionee. An option may not be transferred or assigned, except by
will or the laws of descent and distribution.
Transfer of Control. The Directors Plan provides that, in the event of (i) a
sale or exchange by the stockholders of more than 50% of the Company's voting
stock, (ii) a merger or consolidation in which the Company is not the
surviving corporation, or (iii) the sale, exchange or transfer of all or
substantially all of the assets of the Company (a "Transfer of Control"), all
outstanding options will become immediately exercisable and vested as of a
date prior to the Transfer of Control. To the extent that the options
outstanding under the Directors Plan are not exercised prior to the Transfer
of Control, they will terminate.
Termination or Amendment. The Directors Plan will continue until terminated
by the Board or until all of the shares reserved for issuance under the plan
have been issued. The Board may terminate or amend the Directors Plan at any
time, but, without stockholder approval, the Board may not amend the Directors
Plan to
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<PAGE>
increase the total number of shares of Common Stock reserved for issuance
thereunder or expand the class of persons eligible to receive options under
the plan. No termination or amendment of the Directors Plan may adversely
affect an outstanding option without the consent of the optionee.
SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES OF THE DIRECTORS PLAN
The federal income tax consequences of the options granted under the
Directors Plan are the same as the federal income tax consequences described
for nonstatutory stock options granted pursuant to the 1996 Plan set forth
below.
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
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. Abstentions and broker
non-votes will each be counted as present for purposes of determining the
presence of a quorum. Abstentions will have the same effect as a negative
vote. Broker non-votes, on the other hand, will have no effect on the outcome
of the vote.
The Board of Directors believes that the increase in the share reserve of
the Directors Plan is in the best interests of the stockholders and the
Company for the reasons stated above. THEREFORE, THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL OF THE INCREASE IN THE SHARE
RESERVE OF THE 1990 OUTSIDE DIRECTORS STOCK OPTION PLAN.
PROPOSAL TO AMEND 1996 STOCK OPTION PLAN
The Company's 1996 Option Plan was adopted by the Board of Directors on
December 13, 1996 (the "Effective Date") and approved by the Company's
stockholders in March 1997. The 1996 Option Plan permits the discretionary
grant of stock options to eligible employees, consultants and directors.
The stockholders are now being asked to approve an amendment to increase by
500,000 shares the maximum aggregate number of shares issuable under the 1996
Option Plan. The Board of Directors believes that the amendment of the 1996
Option Plan is in the best interests of the Company and its stockholders
because 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.
SUMMARY OF THE PROVISIONS OF THE 1996 OPTION PLAN
The following summary of the 1996 Option Plan is qualified in its entirety
by the specific language of the 1996 Option Plan, a copy of which is available
to any stockholder upon request.
General. The 1996 Option 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. As of January
31, 1998, options to purchase approximately 717 shares granted under the 1996
Option Plan had been exercised, option to purchase an aggregate of
approximately 1,494,648 shares remained outstanding and approximately 486,598
shares remained available for future grant under the 1996 Option Plan.
Shares Subject to Plan. Currently, the maximum number of authorized but
unissued or reacquired shares of the Company's Common Stock available for
issuance under the 1996 Option 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 Company's Fourth Amended and Restated 1983 Stock
Option Plan and 1993 Stock Option Plan (collectively, the "Prior Plans"), and
(c) the number of shares available for future grant under the Prior Plans as
of the
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<PAGE>
Effective Date (the "Share Reserve"). In December 1997, the Board of Directors
amended the 1996 Option Plan, subject to stockholder approval, to increase the
Share Reserve by 500,000 shares. 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.
The 1996 Option 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 Option 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 Option 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 Option Plan and become available for
future grant.
Administration. The 1996 Option 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 Option Plan
must be administered in compliance with the requirements of Rule 16b-3 under
the Exchange Act, if any. Subject to the provisions of the 1996 Option 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 Option 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 Option 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
Option Plan. The Board will interpret the 1996 Option 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 Option Plan or any option.
Eligibility. Options may be granted under the 1996 Option Plan to employees,
directors and consultants of the Company or of any present or future parent or
subsidiary corporations of the Company. The 1996 Option 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 individuals commencement of
service. As of January 31, 1998, the Company had approximately 234 employees,
including 7 executive officers, and 4 non-employee directors. While any person
eligible under the 1996 Option 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 Option
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 Option 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
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<PAGE>
date of grant. As of January 30, 1998, the closing price of a share of the
Company's Common Stock as reported on the Nasdaq National Market was $1.875.
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
Option 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 Option Plan become exercisable and vested at
such times and subject to such conditions as specified by the Board.
Generally, options granted under the 1996 Option Plan become exercisable in
installments over a period of time specified by the Board at the time of
grant, subject to 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 Option 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 Option 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 Option
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 Option 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 Option Plan
are not assumed, substituted for, or exercised prior to the Transfer of
Control, they will terminate.
Termination or Amendment. The 1996 Option 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 Option Plan have been issued and all
restrictions on such shares under the terms of the 1996 Option 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 Option 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 Option Plan.
The Board may terminate or amend the 1996 Option 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 Option 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.
26
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SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES OF THE 1996 OPTION PLAN
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 Option 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-term or mid-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 or mid-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
Pan 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 or
mid-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.
27
<PAGE>
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
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. Abstentions and broker
non-votes will each be counted as present for purposes of determining the
presence of a quorum. Abstentions will have the same effect as a negative
vote. Broker non-votes, on the other hand, will have no effect on the outcome
of the vote.
The Board of Directors believes that the increase in the share reserve of
the 1996 Option Plan is in the best interests of the stockholders and the
Company for the reasons stated above. THEREFORE, THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL OF THE INCREASE IN THE SHARE
RESERVE OF THE 1996 STOCK OPTION PLAN.
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
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 fiscal year ended October 31, 1995 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
28
<PAGE>
through the date of resignation, there were no other disagreements between the
Company and Coopers on any matter of accounting 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 as
independent accountants to audit the financial statements of the Company for
the fiscal year ending October 31, 1998. 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. Abstentions and broker
non-votes will each be counted as present for purposes of determining the
presence of a quorum. Abstentions and broker non-votes, on the other hand,
will have no effect on the outcome of the vote. 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, 1998.
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 19, 1998 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.
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 17, 1998
29
<PAGE>
1620-PS-98
<PAGE>
DETACH HERE
CONSILIUM, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Jonathan J. Golovin and Laurence R.
Hootnick, or either, as proxy with the power of substitution to vote and 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 on the Company's
books on February 6, 1998, at the Annual Meeting of Stockholders of the
Company to be held at Consilium, Inc., 485 Clyde Avenue, Mountain View,
California at 3:00 p.m. local time on March 18, 1998, and any continuation or
adjournment thereof, with all power the undersigned would 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 1,2,3,4 AND 5 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 on Form 10-K of the Company for the fiscal year ended
October 31, 1997.
SEE REVERSE
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
<PAGE>
CN512 F DETACH HERE
[X] PLEASE MARK
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.
1. Election of the following directors:
Nominees: Robert C. Fink and Robert Horne
FOR WITHHELD MARK HERE
[ ] [ ] IF YOU PLAN [ ]
TO ATTEND
THE MEETING
MARK HERE
FOR ADDRESS [ ]
CHANGE AND
NOTE BELOW
[ ]_______________________________________
For both nominees except as noted above
FOR AGAINST ABSTAIN
2. To amend the Company's 1989 Employee Stock Purchase [ ] [ ] [ ]
Plan to increase the maximum aggregate number of
shares reserved for issuance thereunder by 300,000
shares.
3. To amend the Company's 1990 Outside Directors Stock [ ] [ ] [ ]
Option Plan to increase the maximum aggregate number
of shares reserved for issuance thereunder by 50,000
shares.
4. To amend the Company's 1996 Stock Option Plan to [ ] [ ] [ ]
increase the maximum aggregate number of shares
reserved for issuance thereunder by 500,000 shares.
5. To ratify the appointment of Arthur Andersen, LLP [ ] [ ] [ ]
as independent public accountants of the Company
for the fiscal year ending October 31, 1998.
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: _________________
