<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [_]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
TANGRAM ENTERPRISE SOLUTIONS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] 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:
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Notes:
<PAGE>
TANGRAM(R)
ENTERPRISE LOGO
SOLUTIONS
----------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 3, 1998
DEAR SHAREHOLDER:
The 1998 Annual Meeting of Shareholders of Tangram Enterprise Solutions, Inc.
(the "Company") will be held at 10:00 a.m. on Wednesday, June 3, 1998, at 11000
Regency Parkway, Suite 401, Cary, NC 27511, for the following purposes:
(1) to elect eight directors;
(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 20, 1998, 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,
/s/ James A. Ounsworth
James A. Ounsworth
Secretary
11000 Regency Parkway
Suite 401
Cary, NC 27511
April 29, 1998
<PAGE>
TANGRAM ENTERPRISE SOLUTIONS, INC.
11000 REGENCY PARKWAY
SUITE 401
Cary, NC 27511
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 10:00 a.m. on Wednesday, June 3, 1998, at 11000 Regency Parkway, Suite
401, Cary, 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 April 29, 1998.
VOTING SECURITIES
Only holders of record of shares of the Company's common stock, $0.01 par
value per share (the "Common Stock"), at the close of business on April 20, 1998
(the "Shares"), are entitled to receive notice of, and to vote at, the Annual
Meeting. On April 20, 1998, there were 15,717,761 Shares issued and
outstanding. Each shareholder has one vote per Share on all business of the
Annual Meeting.
The eight 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.
<PAGE>
SHAREHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Shareholders intending to present proposals at the next Annual Meeting of
Shareholders to be held in 1999 must notify the Company of the proposal no later
than December 30, 1998.
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below sets forth, as of April 20, 1998, 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 executive officers
and directors of the Company as a group.
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
SHARES OWNED(1) OUTSTANDING SHARES
----------------- ------------------
<S> <C> <C>
Safeguard Scientifics, Inc.
800 The Safeguard Building
435 Devon Park Drive
Wayne, PA 19087(2).................... 10,448,738 66.5%
W. Christopher Jesse
11000 Regency Parkway, Suite 401
Cary, NC 27511(3)...................... 1,545,212 9.5%
Steven F. Kuekes
11000 Regency Parkway, Suite 401
Cary, NC 27511(3)...................... 1,684,425 10.5%
Nancy M. Dunn(3)......................... 263,258 1.7%
Michael Forster.......................... 0 *
John N. Nelli(3)......................... 12,500 *
John F. Owens(3)......................... 13,000 *
Charles A. Root(3)....................... 150,000 *
Carl G. Sempier(3)....................... 13,000 *
Harry Wallaesa(3)........................ 5,000 *
Carl Wilson(3)........................... 5,000 *
All executive officers and directors
as a group (10 persons)(4)............. 3,691,395 21.8%
- -------
</TABLE>
* 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, Nelli, Owens, Root, Sempier, Wallaesa,
Wilson and Ms. Dunn, 575,000 Shares, 360,000 Shares, 12,500 Shares, 13,000
Shares, 150,000 Shares, 13,000 Shares, 5,000 Shares, 5,000 Shares and
90,000 Shares, respectively, that may be acquired pursuant to stock options
that are currently exercisable or that will become exercisable by June 20,
1998.
(4) Includes 1,223,500 Shares that may be acquired pursuant to stock options
that are currently exercisable or that will become exercisable by June 20,
1998.
<PAGE>
At April 1, 1998, Mr. Root beneficially owned approximately .88% 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 1999 and until their
successors are elected and have qualified. All of the nominees are presently
serving as directors of the Company. Proxies may not be voted for more than
eight 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
EIGHT 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>
Michael H. Forster Senior Vice President, Sybase, Inc., a
database management solutions
company(3)................................. 1997 55
W. Christopher Jesse President and Chief Executive Officer of
the Company................................ 1993 47
Steven F. Kuekes Senior Vice President and Chief
Technology Officer of the Company.......... 1993 39
John F. Owens President, Solo Systems, Inc., a
management consulting firm; and,
President, Implementation Conversion
Services, Inc., a systems software services
company(1)(2).............................. 1992 57
Charles A. Root Executive Vice President, Safeguard
Scientifics, Inc., a strategic
information systems company(3)............. 1991 65
Carl G. Sempier Business consultant(1)(2).................. 1992 66
Harry Wallaesa President, aligne, inc., a technology
management consulting company(2)........... 1996 47
Carl Wilson Senior Vice President and Chief
Information Officer, Marriott
International, an international
hospitality company(1)(3).................. 1995 51
</TABLE>
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
(3) Member of the Executive Committee.
<PAGE>
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
ChromaVision Medical Systems, Inc.
From 1985 to October 1995, Mr. Wallaesa served as Corporate Vice President,
Management Information Systems, of Campbell Soup Co. Mr. Wallaesa served as
President-Consulting Services of Sentry Technology Group, Inc. (formerly The
Value Sourcing Group, Inc.), management consultants in information technology
from November 1995 to December 1996.
Mr. Forster served as President and Chief Executive Officer of
MicroDecisionWare, Inc., a company specializing in MiddleWare solutions from
April 1993 to March 1994. In April 1994, MicroDecisionWare merged into Sybase
and Mr. Forster was appointed President of Sybase's InformationCONNECT Division,
the successor to MicroDecisionWare.
Mr. Wilson served as Vice President-Information Resources of Georgia-
Pacific Corporation, a diversified forest products company from December 1992 to
March 1997.
DIRECTORS' COMPENSATION
Directors are elected annually and hold office until their successors
are elected and have qualified or until their earlier resignation or removal.
Directors who are not employees of the Company or Safeguard receive $1,000 for
each Board meeting attended. Non-employee directors are reimbursed for out-of-
pocket expenses incurred in connection with attendance at meetings or other
Company business. Employees of the Company who are directors receive no
additional compensation for their service as directors.
Directors who are not employed by the Company or the Company's
affiliates have participated in the Stock Option Plan for Directors
("Directors' Plan"). Upon the adoption of the 1997 Equity Compensation Plan in
May 1997 (the "1997 Plan"), the Directors' Plan was terminated. Pursuant to the
Directors' Plan, each Eligible Director received an option to purchase 10,000
shares of the Company's Common Stock upon his election ("Initial Grant").
Thereafter, each Eligible Director had received 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 did not exceed 20,000 shares. The exercise
price of each option was equal to the fair market value of the shares on the
date of grant. Each option had a term of ten years. Initial Grants vested in
25% installments on each of the first through fourth anniversaries of the date
of grant and Service Grants vested in 50% installments on each of the first and
second anniversaries of the date of grant.
In November 1997, the Company's Board adopted an official option grant
policy to non-employee directors that is similar to the provisions of the
Directors' Plan prior to its termination. Accordingly, in 1997, Mr. Forster
received an option to purchase 10,000 shares of Common Stock at an exercise
price of $7.125 per share on his election to the Company's Board. Additionally,
Mr. Wilson received options to purchase 2,000 shares of Common Stock at an
exercise price of $7.00 per share on the second anniversary of his election as a
director. Mr. Forster's grant vests in 25% installments on each of the first
through fourth anniversaries of
<PAGE>
the date of grant and Mr. Wilson's grant vests in 50% installments on each of
the first and second anniversaries of the date of grant.
BOARD AND COMMITTEE MEETINGS
The Board of Directors held four meetings during 1997. The Company's
Board of Directors has appointed standing Executive, Compensation and Audit
Committees. It has not appointed a standing Nominating Committee. The Executive
Committee was established in March 1998 and is authorized to act upon all
matters with respect to the management of the business and affairs of the
Company, except that its authority to authorize and approve transactions is
limited to up to $5 million in the aggregate between meetings of the Board. The
Compensation Committee reviews and approves management's recommendations for
compensation paid to the executive officers of the Company and administers the
Company's stock option plans. The Compensation Committee met four times during
1997. 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 three times during 1997. Except for Mr. Wallaesa, each
director attended at least 75% of all meetings of the Board of Directors and any
committee of which he was a member. Mr. Wallaesa did not attend the one Audit
Committee meeting he was eligible to attend.
REPORT OF THE BOARD COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors (the
"Compensation Committee") 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,
Sempier and Wilson 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 philosophy of the Compensation Committee with
respect to the compensation of the Company's executive officers is (i) to
provide a competitive total compensation package that enables the Company to
attract and retain qualified executives and to align the compensation of such
executives with the Company's overall business strategies, and (ii) to provide
such executive officers with a significant equity stake in the Company. To this
end, the Compensation Committee determines executive compensation consistent
with a philosophy of compensating executive officers based on their
responsibilities and the Company's performance. The primary components of the
Company's executive compensation program are (i) base salaries, (ii) bonuses,
and (iii) stock options.
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 base salaries are subject to periodic increases to be determined by the
Compensation Committee in its discretion based upon (i) a qualitative review of
the performance of the Company and the executive, and (ii) the compensation of
executives with similar responsibilities employed by companies similar in size
<PAGE>
to the Company. The Compensation Committee has no established formula or
methodology for making such determinations. Annual cash bonuses are intended to
create an incentive for executives who significantly contribute to and influence
the Company's strategic plans and are responsible for the Company's performance.
The aims are to focus executives' attention on areas such as profitability and
asset management, to encourage teamwork, and to tie executive pay to corporate
performance goals which are consistent with the long-term goals of shareholders
and other investors. Bonuses are awarded based on the achievement of annual
financial and strategic goals approved by the Compensation Committee at the
beginning of each year. These goals may include a target range of revenues,
pretax earnings, earnings per share, return on equity, or other objective
measurement consistent with long-term shareholder goals. The Compensation
Committee approves a target range for specific financial and/or strategic goals
and a range of potential bonus amounts for each executive, stated as a
percentage of base salary. Ranges of potential bonuses are determined based
upon the executive's ability to affect the Company's performance. The Plan also
provides for the opportunity to earn excess bonus awards if the Company's
financial performance exceeds it's financial objectives. Actual bonuses are
awarded following the year-end based on the actual achievement level of the
specified corporate goals compared to the target range of achievement. For
fiscal 1997, the Compensation Committee determined that bonuses would be awarded
based primarily upon a target range for annual revenues, pretax operating
results and cashflow with the ability to adjust the payout among the
participants based on individual performance.
Grants of 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. All of the Company's executive officers are eligible to
receive options to purchase shares of Common Stock granted under the 1988 Stock
Option Plan and the 1997 Equity Compensation Plan. The Compensation Committee
believes that stock option grants are a valuable motivating tool which provide
long-term incentive to management. The Compensation Committee also believes
that issuing stock options to executives benefits the Company's shareholders by
encouraging executives to own the Company's stock, thus aligning executives' pay
with shareholders' interest. 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. The Company
also has implemented a program to grant replacement stock options under its 1997
Plan to assist eligible employees in the acquisition and retention of the
Company's stock. So long as the program remains in effect, participants may be
eligible to receive a replacement option by certifying upon exercise of a stock
option that either (i) the participant's stock ownership exceeds his or her
stock ownership goal, as established by the Company, or (ii) the participant is
working toward achievement of that ownership goal and has not sold over the 12
preceding months and does not presently intend to sell more than 30% of the
total number of shares of Company Common Stock acquired upon the exercise of
options.
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 that is paid to any of the
individuals named in the Summary Compensation Table and that 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
<PAGE>
section 162(m), the Committee's discretion to grant awards must be strictly
limited. The Company's 1997 Plan qualifies as a "performance-based" compensation
plan under currently effective rules. The Compensation 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 Compensation
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 current compensation consists of an annual base salary of
$200,000, which is subject to periodic increases determined by the Compensation
Committee in its discretion based upon (i) a qualitative review of the
performance of the Company and Mr. Jesse, and (ii) the compensation of
executives with similar responsibilities employed by companies similar in size
to the Company. In accordance with the Company's guidelines for merit
increases, the Compensation Committee authorized an increase in Mr. Jesse's 1997
base salary of approximately 8% over 1996.
Under the Company's 1997 bonus plan, Mr. Jesse was eligible for a
target bonus equal to 50% of his annual base salary. Two thirds of the
potential bonus was based on the achievement of specified corporate financial
performance objectives and one third was based on achievement of specified
personal strategic objectives to include expanding product and market awareness,
development of reseller channels and consummation of strategic relationships
with other product solution providers. Mr. Jesse was awarded a bonus of $95,565
for 1997.
OTHER EXECUTIVE COMPENSATION
In accordance with the Company's guidelines for merit increases, the
Compensation Committee authorized an increase in Mr. Kuekes' 1997 base salary of
approximately 8% over 1996. The Compensation Committee authorized an increase
in Ms. Dunn's 1997 base salary of 47% over 1996, reflecting her change in
position and the additional responsibilities she assumed in 1997 as the result
of her appointment as the President of the Consulting Solutions Division, as
well as a merit increase in accordance with Company guidelines.
The bonuses provided by the Compensation Committee to Messrs. Kuekes and
Nelli for 1997 were based two-thirds upon the Company's achievement of the
specified financial objectives discussed above with respect to the CEO's
compensation and one-third upon the individual executive officer's achievement
of specified personal strategic objectives established by the Compensation
Committee at the beginning of the year. The Compensation Committee had further
established bonus targets for Messrs. Kuekes and Nelli of up to 30% and 11.2%,
respectively, of their respective base salaries. Based upon the extent to which
the performance objectives were achieved, Messrs. Kuekes and Nelli were awarded
bonuses of $37,838 and $13,598, respectively, for 1997. The bonus provided by
the Compensation Committee to Ms. Dunn was based two-thirds upon the financial
performance of the Consulting Solutions Division and one-third upon her
achievement of specified personal strategic objectives, against a bonus target
of up to 35% of her base salary. The financial performance component was based
primarily upon a target range for annual revenues and operating results before
interest, taxes and certain non-cash items. As provided under the bonus plan,
Ms. Dunn had the opportunity to earn excess bonus awards if the Consulting
Solutions Division's financial performance exceeded it's financial objectives.
Ms. Dunn was awarded a bonus of $65,774 for 1997 due, in part, to the
achievement of 138% of her financial performance goal.
<PAGE>
The Compensation Committee also granted options under the Company's 1997
Plan to certain of its executives and employees. These options were primarily
granted to recently hired executives and employees and to employees under the
replacement option program adopted by the Board in May 1997. The Compensation
Committee granted to Mr. Nelli options in April 1997, and January 1998, to
purchase 50,000 shares each at an exercise price of $4.6875 and $6.75,
respectively.
By the Compensation Committee:
John F. Owens Carl G. Sempier Carl Wilson
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth information concerning compensation
paid to the Chief Executive Officer and all other executive officers of the
Company at December 31, 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION COMPENSATION OPTIONS/SARS (#) COMPENSATION ($)(3)
YEAR SALARY ($) BONUS ($)(1) ($)(2)
- ---------------------------------------------------------------------------------------------------------------------------
W. Christopher Jesse, 1997 $196,254 $95,565 -- -- $45,685
President and Chief
Executive Officer 1996 185,004 61,281 -- -- 28,652
1995 185,004 92,500 -- -- 26,810
- ---------------------------------------------------------------------------------------------------------------------------
Steven F. Kuekes, Senior Vice 1997 $132,501 $37,838 -- -- $19,076
President and Chief
Technology Officer 1996 125,004 41,406 -- -- 19,076
1995 125,004 90,000 -- -- 12,044
- ---------------------------------------------------------------------------------------------------------------------------
John N. Nelli, 1997 $114,681 $13,598 -- 50,000 $ 374
Senior Vice President and
Chief Financial Officer(4) 1996 -- -- -- -- --
1995 -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
Nancy M. Dunn, Senior Vice 1997 $113,834 $65,774 -- -- $16,598
President and President,
Tangram Consulting 1996 84,581 27,863 -- -- 13,232
Solutions Division
1995 82,008 41,000 -- -- 12,430
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Amounts shown do not include amounts expended by the Company 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.
<PAGE>
(2) Perquisites and other personal benefits for fiscal year 1997 did not exceed
the lesser of $50,000 or 10% of such executive officer's salary and bonus.
(3) The stated amounts for fiscal 1997 include the following amounts: term life
insurance premium payments of $957, $363, $374 and $957 for Messrs. Jesse,
Kuekes and Nelli and Ms. Dunn, respectively, and imputed interest of
$44,728, $18,713 and $15,641 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. The aggregate principal amount of
the loans made to each of Mr. Jesse, Mr. Kuekes and Ms. Dunn was $787,472,
$250,000 and $246,497, respectively. See Certain Transactions.
(4) Mr. Nelli joined the Company in February 1997 and, therefore, his salary
for 1997 represents only a portion of the year.
STOCK OPTIONS
The following table sets forth information with respect to options granted
during fiscal year 1997.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS/SARS GRANTED POTENTIAL REALIZABLE VALUE AT
UNDERLYING TO EMPLOYEES IN EXERCISE OR ASSUMED ANNUAL RATE OF STOCK PRICE
OPTIONS/SARS FISCAL YEAR BASE PRICE APPRECIATION FOR OPTION TERM
GRANTED ($/SH) (3) EXPIRATION DATE ($)(1)
NAME (#)(2) 5% 10%
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
W. Christopher Jesse -- -- -- -- $ -- $ --
Steven F. Kuekes -- -- -- -- $ -- $ --
John N. Nelli 50,000 17.3% $4.6875 -- $147,400 $373,500
Nancy M. Dunn -- -- -- -- $ -- $ --
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The potential realizable values are based on an assumption that the stock
price of the shares of Common Stock of the Company appreciates at the
annual rate shown (compounded annually) from the date of grant until the
end of the option term. These values do not take into account amounts
required to be paid as income taxes under the Internal Revenue Code of
1986, as amended, and any applicable state laws or option provisions
providing for termination of an option following termination of employment,
nontransferability, or vesting over periods of four or more years. These
amounts are calculated based on the requirements promulgated by the
Securities and Exchange Commission and do not reflect the Company's
estimate of future stock price growth of the shares of common stock of the
Company.
(2) All options are to acquire Common Stock of the Company. The options vest
25% each year commencing on April 2, 1998 and have a ten-year term. The
options continue vesting and remain exercisable so long as employment with
the Company continues. The option exercise price may be paid in cash, by
delivery of previously acquired shares, subject to certain conditions, or
same day sales (i.e. cashless broker's exercises). The Compensation
Committee has the authority to modify the terms of outstanding options,
including acceleration of the exercise date of outstanding options.
(3) All options have an exercise price at least equal to the fair market value
of the shares subject to each option on the date of grant.
<PAGE>
The following table sets forth information with respect to options exercised
during fiscal year 1997 and the number of unexercised options and the value of
unexercised in-the-money options at December 31, 1997.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
SHARES UNEXERCISED IN-THE-MONEY
ACQUIRED ON OPTIONS/SARS OPTIONS/SARS
EXERCISE VALUE AT FISCAL YEAR-END (#) AT FISCAL YEAR-END($)(1)
NAME (#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
W. Christopher Jesse -- -- 575,000 -- $2,911,225 $ --
Steven F. Kuekes -- -- 360,000 -- $1,822,680 $ --
John N. Nelli -- -- 12,500 37,500 $ 23,444 $70,331
Nancy M. Dunn -- -- 90,000 -- $ 455,670 $ --
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</TABLE>
(1) The value of unexercised in-the-money options is calculated based upon (i)
the fair market value at December 31, 1997, less the option exercise price,
multiplied by (ii) the number of shares subject to an option. On December
31, 1997, the per share fair market value utilized in calculating the
values in this table was $6.563.
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.
STOCK PERFORMANCE GRAPH
The following chart compares the cumulative total shareholder return on the
Company's Common Stock for the period December 31, 1992, through December 31,
1997, 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, 1992, 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.
<PAGE>
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1992 1993 1994 1995 1996 1997
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TANGRAM 100 141 85 74 356 389
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NASDAQ 100 115 112 159 195 240
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PEER GROUP 100 106 130 197 242 296
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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 1997, the Company paid a fee of $254,000. 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.
The Company has a $6 million unsecured revolving line of credit with
Safeguard. The amount of this line of credit was increased from $1 million to
$5 million in April 1997, and to $6 million in July 1997, to finance the cost of
introducing and marketing the new Asset Insight product. Terms of the line of
credit require monthly interest payments at the prime rate plus 1%. Principal
is due thirteen months after date of demand by Safeguard or earlier in the case
of a sale of substantially all of the assets of the Company, a business
combination or upon the closing of a debt or equity offering. At December 31,
1997, the borrowings under the Safeguard line of credit were $3 million and have
increased to $3.7 million as of April 20, 1998. The Company incurred and paid
Safeguard interest cost of $186,000 in 1997 under the revolving credit
agreement.
In April 1997, the Company made non-recourse, non-interest bearing loans to
certain officers of the Company in the aggregate amount of $500,000 and
repurchased from these officers a total of 86,018 shares of the Company's common
stock for an aggregate purchase price of $500,000. The stock was acquired at
its current market price as reflected by the average of the day's best bid and
asked prices. The stock is held in treasury. The loans are secured by shares
of the Company's common stock owned by the officers and mature at the end of
three years or termination of employment, whichever occurs first. In addition,
during 1995 and 1994, the Company made non-recourse, non-interest bearing loans
to certain officers of the Company totaling $784,000. The loans are secured by
shares of the Company's common stock owned by the officers and mature at the end
of five years or termination of employment, whichever occurs first. The
principal amounts of the loans made and outstanding at December 31, 1997, to
Messrs. Jesse and Kuekes and Ms. Dunn were $787,472, $250,000 and $246,497,
respectively.
INDEPENDENT AUDITORS
Ernst & Young LLP served as independent auditors for the Company for fiscal
year 1997. The Audit Committee of the Board of Directors presently is reviewing
the performance of the independent certified public accountants and thus has not
selected a public accountant for the fiscal year 1998. A representative of
Ernst & Young LLP is expected to be present at the Annual Meeting and will have
an opportunity at the meeting to make a statement if he desires to do so and
will be available to respond to appropriate questions.
<PAGE>
COMPLIANCE WITH SECTION 16(A) OF THE 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, 1997, through December 31, 1997, its officers,
directors and 10% Shareholders complied with all applicable section 16(a) filing
requirements.
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 1997, 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: April 29, 1998
<PAGE>
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P R O X Y
TANGRAM ENTERPRISE SOLUTIONS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
I hereby constitute and appoint W. Christopher Jesse, Steven 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 1998 Annual Meeting of Shareholders of
Tangram Enterprise Solutions, Inc. to be held on June 3, 1998, 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 -
<PAGE>
- -------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1. [X] Please mark
your votes as
indicated in
this example
WITHHELD
1. ELECTION OF DIRECTORS FOR FOR ALL
Nominees: [_] [_]
Michael H. Forster
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: _________________________
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 -
<PAGE>
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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.
TANGRAM(R)
ENTERPRISE LOGO
SOLUTIONS
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