<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. ____)
Filed by the Registrant x
---
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/x/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
TANGRAM ENTERPRISE SOLUTIONS, INC.
(Name of Registrant as Specified In Its Charter)
TANGRAM ENTERPRISE SOLUTIONS, INC.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
x $125 per Exchange Act Rules 0-11(a)(1)(ii), 14a-6(i)(l)(4) or 14a-6(j)(2)
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14(a)-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11(1):
(4) Proposed maximum aggregate value of transaction:
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Notes:
(1) Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE>
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 30, 1996
DEAR SHAREHOLDER:
The 1996 Annual Meeting of Shareholders of Tangram Enterprise Solutions,
Inc. (the "Company") will be held at 11:00 a.m. on May 30, 1996, at 5511 Capital
Center Drive, Suite 400, Raleigh, NC 27606, for the following purposes:
(1) to elect seven directors; and
(2) to transact such other business as may properly come before the
meeting, or any adjournment or adjournments thereof.
Shareholders of record at the close of business on April 16, 1996, will be
entitled to receive notice of, and to vote at, the meeting and any adjournment
or adjournments thereof. If you do not expect to attend the meeting in person,
please complete, date and sign the enclosed Proxy and return it without delay in
the enclosed envelope, which requires no additional postage if mailed in the
United States.
By order of the Board of Directors,
James A. Ounsworth
Secretary
5511 Capital Center Drive
Suite 400
Raleigh, NC 27606
May 2, 1996
<PAGE>
TANGRAM ENTERPRISE SOLUTIONS, INC.
5511 Capital Center Drive
Suite 400
Raleigh, NC 27606
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
Proxies by the Board of Directors of Tangram Enterprise Solutions, Inc. (the
"Company") for use at the Annual Meeting of the Company's shareholders to be
held at 11:00 a.m. on May 30, 1996, at 5511 Capital Center Drive, Suite 400,
Raleigh, NC (such meeting and any adjournment or adjournments thereof referred
to as the "Annual Meeting") for the purposes set forth in the accompanying
Notice of Annual Meeting of Shareholders and in this Proxy Statement. The
Company intends to mail this Proxy Statement and related form of Proxy to
shareholders on or about May 2, 1996.
VOTING SECURITIES
Only holders of record of shares of the Company's common stock, $.01 par
value per share (the "Common Stock"), at the close of business on April 16, 1996
(the "Shares"), are entitled to receive notice of, and to vote at, the Annual
Meeting. On April 16, 1996, there were 14,640,967 Shares issued and
outstanding. Each shareholder has one vote per Share on all business of the
Annual Meeting.
The seven nominees receiving the highest number of affirmative votes of the
Shares present or represented and entitled to be voted will be elected as
directors. Votes withheld from any director, broker non-votes and abstentions
are counted for purposes of determining the presence of a quorum for the
transaction of business at the Annual Meeting. Only those votes which are cast
as affirmative or negative will be treated as voting on any matter presented at
the Annual Meeting.
REVOCABILITY OF PROXY
Proxies are revocable at any time before they are voted by delivering
written notice of revocation to the Secretary of the Company prior to or at the
Annual Meeting, by filing a duly executed Proxy bearing a later date, or by
voting in person at the Annual Meeting. Unless so revoked, the Shares
represented by Proxies will be voted at the Annual Meeting.
PERSONS MAKING THE SOLICITATION
The solicitation of this Proxy is made by the Company. The cost of
soliciting Proxies on behalf of the Board of Directors, including the actual
expenses incurred by brokerage houses, nominees and fiduciaries in forwarding
Proxy materials to beneficial owners, will be borne by the Company. In addition
to solicitation by mail, certain officers and other employees of the Company may
solicit Proxies on behalf of the Board of Directors in person, by mail or by
telephone.
1
<PAGE>
SHAREHOLDER PROPOSALS FOR 1997 ANNUAL MEETING
Shareholders intending to present proposals at the next Annual Meeting of
Shareholders to be held in 1997 must notify the Company of the proposal no later
than January 3, 1997.
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below sets forth, as of April 16, 1996, the beneficial ownership
of the Company's Shares by (i) shareholders known by the Company to beneficially
own more than 5% of the Company's outstanding Shares, (ii) each of the Company's
directors, (iii) each named executive officer and (iv) all officers and
directors of the Company as a group.
NUMBER OF PERCENT OF
SHARES OWNED(1) OUTSTANDING SHARES
--------------- ------------------
Safeguard Scientifics, Inc.
800 The Safeguard Building
435 Devon Park Drive
Wayne, PA 19087(2).................. 10,448,738 71.4%
W. Christopher Jesse
5511 Capital Center Drive, Suite 400
Raleigh, NC 27606(3)................. 1,358,347 8.6%
Steven F. Kuekes
5511 Capital Center Drive, Suite 400
Raleigh, NC 27606(3)................. 1,504,425 10.2%
John F. Owens(3)....................... 8,000 *
Charles A. Root(3)..................... 120,000 *
Carl G. Sempier(3).................... 8,000 *
Harry Wallaesa ........................ 0 *
Carl Wilson .......................... 100 *
Nancy M. Dunn(3)...................... 258,822 1.7%
All executive officers and directors
as a group (8 persons)(4)........... 3,257,694 20.0%
_______
* Less than one percent
(1) Except as otherwise disclosed, the nature of beneficial ownership is the
sole power to vote and to dispose of the Shares (except for Shares held
jointly with spouse).
(2) These Shares are held of record by Safeguard Scientifics (Delaware), Inc.,
a wholly owned subsidiary of Safeguard. All of the Shares beneficially
owned by Safeguard have been pledged by Safeguard as collateral under its
bank line of credit.
(3) Includes for Messrs. Jesse, Kuekes, Owens, Root, and Sempier and Ms. Dunn,
1,144,178 Shares, 180,000 Shares, 8,000 Shares, 120,000 Shares, 8,000
Shares and 153,166 Shares, respectively, that may be acquired pursuant to
stock options that are currently exercisable or that will become
exercisable by June 15, 1996.
(4) Includes 1,613,344 Shares that may be acquired pursuant to stock options
that are currently exercisable or that will become exercisable by June 15,
1996.
2
<PAGE>
At April 16, 1996, Mr. Root beneficially owned approximately 1.3% of the
outstanding common stock of Safeguard. Other than Mr. Root, all officers and
directors of the Company as a group beneficially owned less than 1% of
Safeguard's outstanding common stock at such date.
I. ELECTION OF DIRECTORS
It is intended that the persons named as proxies for the Annual Meeting
will vote in favor of the following nominees as directors of the Company to hold
office until the Annual Meeting of Shareholders in 1997 and until their
successors are elected and have qualified. All of the nominees, with the
exception of Harry Wallaesa, are presently serving as directors of the Company.
Proxies may not be voted for more than seven directors. Each of the nominees
has consented to serve if elected. However, if any of the nominees should
become unavailable prior to the election, the holders of the Proxies may vote
the Proxies for the election of such other persons as the Board of Directors may
recommend, unless the Board of Directors reduces the number of directors to be
elected.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR
THE NOMINEES SET FORTH IN THIS PROPOSAL. PROXIES RECEIVED BY THE BOARD WILL BE
SO VOTED UNLESS SHAREHOLDERS SPECIFY OTHERWISE ON THEIR PROXY CARDS. THE SEVEN
NOMINEES RECEIVING THE HIGHEST NUMBER OF AFFIRMATIVE VOTES OF THE SHARES PRESENT
OR REPRESENTED AND ENTITLED TO BE VOTED SHALL BE ELECTED AS DIRECTORS.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION AND BUSINESS HAS BEEN A
NAME EXPERIENCE DURING LAST FIVE YEARS DIRECTOR SINCE AGE
- --------------------- --------------------------------------------- -------------- ---
<S> <C> <C> <C>
W. Christopher Jesse President and Chief Executive Officer of
the Company(3)............................... 1993 45
Steven F. Kuekes Vice President of Technology of the
Company(4)................................... 1993 37
John F. Owens President, Solo Systems, Inc., a
management consulting firm(1)(2)(5).......... 1992 55
Charles A. Root Executive Vice President, Safeguard
Scientifics, Inc., a strategic information
systems company(2)(6)........................ 1991 63
Carl G. Sempier Business Consultant(1)(2)(7)................. 1992 64
Harry Wallaesa Managing Director, Value Sourcing
Group, Inc., management consultants
in information technology(8) ............... 45
Carl Wilson Vice President-Information Resources,
Georgia-Pacific Corporation, a diversified
forest products company(9)................... 1995 49
_________
</TABLE>
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
(3) Prior to becoming President, Chief Executive Officer and a director of the
Company in connection with the merger of Tangram Systems Corporation with
and into the Company, Mr. Jesse served as President of Tangram Systems
Corporation since March 1990. Prior to that time, Mr. Jesse was employed
by Prime Computer, Inc. as the Vice President of Federal Operations and had
served with Prime Computer, Inc. since 1978 in various other managerial
positions.
3
<PAGE>
(4) Prior to becoming Vice President of Technology and a director of the
Company in connection with the merger of Tangram Systems Corporation with
and into the Company, Mr. Kuekes served as Vice President of Technology of
Tangram Systems Corporation, a company that he co-founded in 1984.
(5) From 1980 to 1991, Mr. Owens served as Director of EDP Services for
Shearson Lehman Bros., an investment banking and brokerage firm.
(6) Mr. Root served as Vice Chairman and Chief Executive Officer of the Company
from June 1991 until August 1991, as President and Chief Executive Officer
of the Company from August 1991 to September 1993, and is currently serving
as Chairman of the Board. Mr. Root is Chairman of the Board of Coherent
Communications Systems Corporation and CompuCom Systems, Inc. and a
director of USDATA Corporation.
(7) Prior to his retirement in 1989, Mr. Sempier served as President and Chief
Executive Officer of Mannington Resilient Flooring Company.
(8) From 1985 to October 1995, Mr. Wallaesa served as Corporate Vice President,
Management Information Systems, of Campbell Soup Co.
(9) From 1991 to 1992, Mr. Wilson served as Senior Vice President, Management
Information Services, Grand Metropolitan Plc.-Food Sector and International
Retailing and as Senior Vice President, Grand Metropolitan Plc.-Food Sector
from 1990 to 1991. Grand Metropolitan Plc. is a worldwide food
international retailing and drinks firm.
DIRECTORS' COMPENSATION
Directors are elected annually and hold office until their successors are
elected and have qualified or until their earlier resignation or removal.
During 1995, directors were reimbursed for out-of-pocket expenses incurred in
connection with attendance at meetings or other Company business. Commencing
January 1996, each director who is not an employee of the Company or Safeguard
also will receive $1,000 for each Board meeting attended.
Directors who are not employed by the Company or the Company's affiliates
participate in the Stock Option Plan for Directors ("Directors' Plan").
Pursuant to the Directors' Plan, each Eligible Director receives an option to
purchase 10,000 shares of the Company's Common Stock upon his election ("Initial
Grant"). Thereafter, each Eligible Director will receive a grant to purchase
2,000 shares of Common Stock on the second anniversary of his election as a
director and at the end of every two years' service thereafter ("Service
Grants"). The maximum number of shares of Common Stock subject to options
granted to an Eligible Director under the Directors' Plan cannot exceed 20,000
shares. The exercise price of each option is equal to the fair market value of
the shares on the date of grant, which for purposes of the Directors' Plan is
defined as the inside asked price of a share of Common Stock as of the date of
grant as quoted by the market makers of the Company's Common Stock. Each option
has a term of ten years. Initial Grants vest in 25% installments on each of the
first through fourth anniversaries of the date of grant and Service Grants vest
in 50% installments on each of the first and second anniversaries of the date of
grant. In 1995, Mr. Wilson received an option to purchase 10,000 shares of
Common Stock at an exercise price of $1.75 per share on his election to the
Company's Board.
BOARD AND COMMITTEE MEETINGS
The Board of Directors held four meetings during 1995. The Company's Board
of Directors has appointed standing Compensation and Audit Committees. It has
not appointed a standing Nominating Committee. The Compensation Committee
reviews and approves management's recommendations for compensation paid to the
executive officers of the
4
<PAGE>
Company and administers the Company's stock option plans. The Compensation
Committee acted by unanimous consent during 1995. The Audit Committee meets with
the Company's independent auditors to review and approve the scope and results
of their professional services. It also reviews the procedures for evaluating
the adequacy of the Company's accounting controls, considers the range of audit
fees and makes recommendations to the Board regarding the engagement of the
Company's independent auditors. The Audit Committee met twice during 1995. All
of the directors attended at least 75% of the Board meetings; however, Mr.
Sempier attended only 67% of the Board and Committee meetings of which he was a
member.
REPORT OF THE BOARD COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors reviews and approves
compensation levels recommended by management, including incentive compensation,
for the executives of the Company and administers the Company's stock option
plans. Messrs. Owens and Sempier currently constitute the Compensation
Committee.
EXECUTIVE COMPENSATION POLICIES
The Company is in a highly competitive industry. In order to succeed, the
Company believes that it must be able to attract and retain qualified
executives, promote among them the economic benefits of stock ownership in the
Company, and motivate and reward executives who, by their industry, loyalty and
exceptional service, make contributions of special importance to the success of
the business of the Company. The Company has structured its executive
compensation program to support the strategic goals and objectives of the
Company.
Base compensation levels and benefits are initially established to be
competitive with comparable companies, which primarily are small high-tech, high
growth companies with less than $30 million in revenues. For the purpose of
establishing these levels, the Company reviews various published salary surveys.
Annual increases are determined subjectively based on the achievement of
financial and strategic objectives and individual performance. Annual cash
bonuses are intended to motivate executives to achieve and exceed annual
corporate performance targets. Bonuses are generally awarded based on pre-tax
operating results. At the beginning of each year the Compensation Committee
approves a target range of executive bonuses as a percentage of base salary and
a target range of annual pre-tax operating results. Target ranges of bonuses
are based on the Company's progress in achieving its financial and strategic
objectives as described in the Company's annual plan and the executive's ability
to affect the Company's performance.
Grants of Company stock options are intended to align the interests of
executives and key employees with the long-term interests of the Company's
shareholders and to encourage executives and key employees to remain in the
Company's employ. Generally, grants are not made in every year, but are awarded
subjectively based on a number of factors, including the achievement of the
Company's financial and strategic objectives as defined in the Company's annual
plan, the individual's contribution to those achievements and the amount and
remaining term of options already held by an individual. Financial and
strategic objectives may include reaching target levels of operating results,
developing strategic alliances, identifying and exploiting markets, developing
new products and expanding existing market share and penetration.
5
<PAGE>
COMPANY POLICY ON QUALIFYING COMPENSATION
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), provides that publicly held companies may not deduct in any taxable
year compensation in excess of one million dollars paid to any of the
individuals named in the Summary Compensation Table which is not
"performance-based" as defined in section 162(m). The annual levels of
executive compensation are not likely to exceed one million dollars for the
foreseeable future. In order for incentive compensation to qualify as
"performance-based" compensation under section 162(m), the Committee's
discretion to grant awards must be strictly limited. The Company's 1988
Stock Option Plan qualifies as a "performance-based" compensation plan under
currently effective rules. The Committee believes that the benefit to the
Company of retaining the ability to exercise discretion under the Company's
remaining incentive compensation plans outweighs the limited risk of loss of
tax deductions under section 162(m). Therefore, the Committee does not
currently intend to seek to qualify any of its other incentive compensation
plans under section 162(m).
CEO COMPENSATION
Mr. Jesse's base salary for 1995 remained at the same level as his 1994
salary. In connection with the merger of Tangram Systems Corporation with and
into the Company in September 1993, the Company entered into certain agreements
with its executive officers regarding various compensation matters. As part of
that arrangement, the Company guaranteed the payment to Mr. Jesse of a bonus in
1995 equal to 50% of his base salary for 1995, payable in quarterly
installments. In addition, the Company agreed to pay Mr. Jesse an additional
bonus of up to 50% of his base salary based upon the achievement by the Company
of a target range of annual pre-tax operating results. Mr. Jesse was awarded a
bonus for 1995 equal to his guaranteed bonus.
OTHER EXECUTIVE COMPENSATION
As noted above under discussion of the CEO's compensation, as part of the
arrangement entered into with the Company's executive officers, the Company
guaranteed the payment to Mr. Kuekes of a bonus in 1995 equal to $90,000 and to
Ms. Dunn of a bonus in 1995 equal to 50% of her base salary for 1995, payable in
quarterly installments. The Company also agreed to pay Mr. Kuekes and Ms. Dunn
an additional bonus of up to 50% of their respective base salaries based upon
the achievement by the Company of the performance objectives noted above. Mr.
Kuekes and Ms. Dunn were each awarded a bonus for 1995 equal to their guaranteed
bonus.
By the Compensation Committee:
John F. Owens Carl G. Sempier
6
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth information concerning compensation paid to
the Chief Executive Officer and all other executive officers of the Company.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
------------
Annual Compensation Awards
-------------------------------------------------------------------
Securities
Other Annual Underlying All Other
Name and Principal Compensation Options/SARA Compensation
Position YEAR SALARY ($) BONUS ($)(1) ($)(2) (#) ($)(3)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
W. Christopher Jesse, 1995 $ 185,004 $ 92,500 -- 0 $ 26,810
President and Chief
Executive Officer 1994 $ 185,004 $ 92,500 $ 73,576 575,000 --
1993 $ 46,250 $ 23,125 -- -- --
- ------------------------------------------------------------------------------------------------------------------
Steven F. Kuekes, 1995 $ 125,004 $ 90,000 -- 0 $ 12,044
Vice President of
Technology(4) 1994 $ 125,004 90,000 $ 30,779 360,000 --
1993 -- -- -- -- --
- -------------------------------------------------------------------------------------------------------------------
Nancy M. Dunn, Chief 1995 $ 82,008 $ 41,000 -- 0 $ 12,430
Financial Officer, Vice
President of Finance 1994 82,008 41,000 -- 90,000 --
and Assistant
Secretary(4) 1993 -- -- -- -- --
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Amounts shown do not include amounts expended by Tangram pursuant to plans
(including group disability, life, and health insurance) that do not
discriminate in scope, terms or operation in favor of executive officers
and that are generally available to all salaried employees.
(2) Perquisites and other personal benefits for fiscal year 1995 did not exceed
the lesser of $50,000 or 10% of such executive officer's salary and bonus.
(3) The stated amounts for fiscal 1995 include the following amounts: term
life insurance premium payments of $336, $156 and $696 for Mr. Jesse, Mr.
Kuekes and Ms. Dunn, respectively, and imputed interest of $26,474,
$11,888, and $11,734 for Mr. Jesse, Mr. Kuekes and Ms. Dunn, respectively,
in connection with interest-free, non-recourse loans made to each of the
named executive officers in August 1994 and January 1995. The aggregate
principal amount of the loans made to each of Mr. Jesse, Mr. Kuekes and Ms.
Dunn was $370,000, $250,000 and $164,000, respectively. The principal of
each loan is repayable on the earlier of the fifth anniversary of the loan
or such individual's termination of employment.
(4) Mr. Kuekes and Ms. Dunn were not employed by the Company until September
30, 1993, and their salary and bonus from the Company for 1993 did not
exceed $100,000. Therefore, their 1993 salary and bonus have been
excluded from this table.
7
<PAGE>
STOCK OPTIONS
No options were granted to the Company's Chief Executive Officer or any
other named executive officer during the last fiscal year. The following table
sets forth information with respect to options exercised during fiscal year 1995
and the number of unexercised options and the value of unexercised in-the-money
options at December 31, 1995.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Value of
Securities Underlying Unexercised
Shares Unexercised in-the-Money
Acquired Options/SARs Options/SARs
on at Fiscal Year-end (#) at Fiscal Year-End ($)(1)
Exercise Value
Name (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
W. Christopher Jesse 0 -- 1,144,178 287,500 $ 890,945 --
- ------------------------------------------------------------------------------------------------------------------------
Steven F. Kuekes 0 -- 180,000 180,000 -- --
- ------------------------------------------------------------------------------------------------------------------------
Nancy M. Dunn 19,989 $ 40,838 130,666 45,000 $ 85,052 --
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The value of unexercised in-the-money options is calculated based upon (i)
the fair market value at December 29, 1995, less the option exercise price,
multiplied by (ii) the number of shares subject to an option. On
December 29, 1995, the per share fair market value utilized in calculating
the values in this table was $1.25.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
In connection with the merger of Tangram Systems Corporation with and into
the Company, the Company entered into severance and non-competition agreements
with Messrs. Jesse and Kuekes and Ms. Dunn which provide for continued health
and dental benefits for up to a one-year period and severance payments equal to
one year of their respective base salaries upon termination of employment with
the Company for any reason other than termination for cause or voluntary
termination. The Company also may, in its discretion, provide for such benefits
and severance payments upon termination of employment for cause or voluntary
termination. Pursuant to these agreements, each of Messrs. Jesse and Kuekes and
Ms. Dunn have agreed to refrain from competing with the Company for one year
after the termination of his or her respective employment, and the Company's
severance payments and benefits are conditioned upon adherence to such
non-competition provisions.
8
<PAGE>
STOCK PERFORMANCE GRAPH
The following chart compares the cumulative total shareholder return on the
Company's Common Stock for the period December 31, 1990, through December 31,
1995, with the cumulative total return on the Nasdaq Index and the cumulative
total return for a peer group index for the same period. The peer group
consists of the companies in SIC Code 737--Computer Programming and Data
Processing Services. The comparison assumes that $100 was invested on December
31, 1990, in the Company's Common Stock and in each of the comparison indices,
and assumes reinvestment of dividends. The Company has historically reinvested
earnings in the growth of its business and has not paid cash dividends on its
Common Stock.
COMPARISON OF CUMMULATIVE TOTAL RETURNS
- -----------------------------------------------------------------------
1990 1991 1992 1993 1994 1995
- -----------------------------------------------------------------------
Tangram 100 88 100 140 85 74
Nasdaq 100 160 187 214 209 296
Peer Group 100 178 192 203 248 372
CERTAIN TRANSACTIONS
The Company and Safeguard are parties to an Administrative Services
Agreement pursuant to which Safeguard provides the Company with administrative
support services. During 1995, the Company paid a fee of $187,000, which was
equal to 1 1/2% of certain sales. The agreement also provides for the
reimbursement of certain out-of-pocket expenses incurred by Safeguard in
performing services under the agreement. The administrative support services
include consultation regarding the Company's general management, investor
relations, financial management, human resources management, certain legal
services, insurance programs administration, and tax research and planning. The
Agreement is subject to termination by the Company or Safeguard upon notice on
the last day of any quarter.
9
<PAGE>
Under a development agreement between the Company and Safeguard, Safeguard
contracted with the Company for development of an enterprise gateway product and
in a separate agreement granted marketing rights for the technology to the
Company. In 1995, the Company paid $200,000 in royalties to Safeguard for
products sold with this technology included.
The Company has provided two interest-free, non-recourse loans to each of
its executive officers, which loans are secured by a pledge of Shares and
options to purchase Shares of the Company held by each such officer. The
aggregate principal amount of the loans made in August 1994 and January 1995 to
Messrs. Jesse and Kuekes and Ms. Dunn were $370,000, $250,000 and $164,000,
respectively. The principal of each loan is repayable on the earlier of the
fifth anniversary of the loan or such individual's termination of employment.
INDEPENDENT AUDITORS
On August 22, 1995, the Company retained Ernst & Young LLP as its
independent public accountants, replacing KPMG Peat Marwick LLP, the former
independent public accountants. During the fiscal years ended December 31, 1994
and 1993, and the subsequent interim periods through August 22, 1995, there were
no disagreements with the former accountants on any matters of accounting
principles or practices, financial statement disclosures, or auditing scope or
procedures, which disagreements if not resolved to the satisfaction of the
former accountant would have caused him to make reference in connection with his
report to the subject matter of the disagreements. The former accountant's
reports on the financial statements of the Company for the fiscal years ended
December 31, 1994 and 1993, and for all years that they audited, were
unqualified. The decision to change accountants was reviewed with the Audit
Committee and the entire Board of Directors, and the Board and the Audit
Committee concurred with the decision. The Company intends to retain Ernst &
Young LLP for the current year ending December 31, 1996. A representative of
Ernest & Young LLP is expected to be present at the Annual Meeting and will have
an opportunity at the meeting to make a statement if they desire to do so and
will be available to respond to appropriate questions.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 ("1934 Act") requires
the Company's directors and executive officers and persons who own more than ten
percent of a registered class of the Company's equity securities ("10%
Shareholders"), to file reports of ownership and changes in ownership of Common
Stock and other equity securities of the Company with the Securities and
Exchange Commission ("SEC"). Officers, directors and 10% Shareholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file. Based solely on its review of the copies of such forms
received by it and written representations from certain reporting persons that
no other reports were required for those persons, the Company believes that
during the period January 1, 1995, through December 31, 1995, its officers,
directors and 10% Shareholders complied with all applicable Section 16(a) filing
requirements.
10
<PAGE>
OTHER BUSINESS
The Company is not aware of any other business to be presented at the
Annual Meeting. If any other matter should properly come before the Annual
Meeting, however, the enclosed Proxy confers discretionary authority with
respect thereto.
The Company's Annual Report for 1995, including financial statements and
other information with respect to the Company and its subsidiaries, is being
mailed simultaneously to the shareholders but is not to be regarded as proxy
solicitation material.
Dated: May 2, 1996
11
<PAGE>
Please mark
your votes as
indicated in
this example /X/
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1.
1. ELECTION OF DIRECTORS FOR WITHHELD
Nominees: FOR ALL
W. Christopher Jesse
Steven F. Kuekes / / / /
John F. Owens
Charles A. Root
Carl G. Sempier
Harry Wallaesa
Carl Wilson
TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE WHILE
VOTING FOR THE REMAINDER, STRIKE A LINE THROUGH THE NOMINEE'S
NAME IN THE ABOVE LIST.
Signature(s) Date:
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THIS PROXY MUST BE SIGNED EXACTLY AS NAME APPEARS HEREIN. Joint
tenants must both sign. When signing as attorney, executor,
administrator, trustee or guardian, or for a corporation or
partnership, please give full title.
- FOLD AND DETACH HERE -
Your Proxy vote is important, regardless of the
number of shares you own.
Whether or not you plan to attend the meeting in
person, please complete, date and sign the above
Proxy Card and return it without delay in the
enclosed envelope.
<PAGE>
PROXY
TANGRAM ENTERPRISE SOLUTIONS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
I hereby constitute and appoint W. Christopher Jesse, Stephen F. Kuekes and
Nancy M. Dunn, and each of them, my true and lawful agents and proxies with full
power of substitution in each, to vote all shares held of record by me as
specified on the reverse side and, in their discretion, on all other matters
which may properly come before the 1996 Annual Meeting of Shareholders of
Tangram Enterprise Solutions, Inc. to be held on May 30, 1996, and at any
adjournments thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR ALL NOMINEES TO THE BOARD OF DIRECTORS, AND AS THE PROXIES MAY
DETERMINE IN THEIR DISCRETION WITH REGARD TO ANY OTHER MATTER PROPERLY BROUGHT
BEFORE THE MEETING.
PLEASE MARK, SIGN AND DATE THE PROXY CARD ON THE REVERSE SIDE
AND RETURN PROMPTLY USING THE ENCLOSED ENVELOPE.
- FOLD AND DETACH HERE -
