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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
[X] Definitive revised proxy statement Commission Only (as permitted
[ ] Definitive additional materials by Rule 14a-6(e)(2))
[ ] Soliciting material pursuant to Rule 240.14a-11(c) or Rule 240.14a-12
INTERNATIONAL MICROCOMPUTER SOFTWARE, 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:
COMMON
(2) Aggregate number of securities to which transaction applies:
5,898,030
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
-----------------------
(3) Filing party:
-------------------------------------------------------
(4) Date filed:
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INTERNATIONAL MICROCOMPUTER SOFTWARE, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD FRIDAY, FEBRUARY 5TH, 1999
To the Shareholders:
The Annual Meeting of Shareholders of International Microcomputer
Software, Inc. ("IMSI" or the "Company") will be held at the Company's executive
offices located at 75 Rowland Way, Novato, California on Friday, February 5th,
1999, at 10 a.m. PST, for the following purposes:
1. To elect five directors to hold office until the next annual
meeting of shareholders and until their successors are elected.
2. To approve an amendment to the Company's 1993 Employee Incentive
Plan to increase the number of shares of Common Stock reserved
for issuance thereunder by 750,000 shares, from 2,175,000 shares
to 2,925,000 shares.
3. To transact such other business as properly may come before the
meeting and any adjournments and postponements thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this notice.
Only shareholders of record at the close of business on December 7th,
1998 are entitled to notice of, and to vote at, the meeting and any adjournments
and postponements thereof.
You are cordially invited to attend the meeting in person.
By Order of the Board of Directors
/s/ Geoffrey B. Koblick,
Geoffrey B. Koblick,
Chairman of the Board, Secretary
Novato, California
December 28th, 1998
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN AND RETURN
THE ACCOMPANYING PROXY CARD AS SOON AS POSSIBLE IN THE ENCLOSED POSTAGE
PREPAID ENVELOPE. THANK YOU FOR ACTING PROMPTLY.
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INTERNATIONAL MICROCOMPUTER SOFTWARE, INC.
75 ROWLAND WAY
NOVATO, CALIFORNIA 94945
(415) 878-4000
ANNUAL MEETING OF SHAREHOLDERS
PROXY STATEMENT
DECEMBER 28th, 1998
To the Shareholders:
The enclosed proxy is solicited on behalf of the Board of Directors (the
"Board") of International Microcomputer Software, Inc., a California corporation
("IMSI" or the "Company"), for use at the Company's annual meeting of
shareholders and any adjournments and postponements (the "Annual Meeting") to be
held at 10 a.m. PST on February 5th, 1999, at the Company's executive offices
located at 75 Rowland Way, Novato, California 94945. Only shareholders of record
on the close of business on December 7th, 1998 (the "Record Date") are entitled
to notice of, and to vote at, the Annual Meeting. On the Record Date, the
Company had approximately 5,898,030 shares of Common Stock, no par value
("Common Stock"), outstanding and entitled to vote. A majority of the shares
outstanding on the Record Date will constitute a quorum for the transaction of
business. This Proxy Statement and the accompanying form of proxy were first
mailed to shareholders on or about December 28th, 1998.
VOTING RIGHTS AND SOLICITATION OF PROXIES
Holders of Common Stock are entitled to one vote for each share of
Common Stock held, except that in the election of directors each shareholder has
cumulative voting rights as described below. The authorized number of directors
of the Company currently is five (5). For the election of directors, any
shareholder may exercise cumulative voting rights, which enable the shareholder
to cast a number of votes equal to the number of shares held multiplied by the
number of directors to be elected by the class of stock held. All such votes may
be cast for a single nominee or may be distributed among any or all of the
nominees.
Proxies cannot be voted for a greater number of persons than the number
of nominees named. In order to be entitled to cumulate votes, a shareholder must
give notice at the Annual Meeting, prior to voting, of the shareholder's
intention to do so. In addition, no shareholder will be entitled to cumulate
votes for a candidate unless that candidate's name has been placed in nomination
before the voting. If one shareholder gives such a notice, all shareholders may
cumulate their votes. In such an event, the proxy holder may allocate among the
Board of Directors' nominees the votes required by proxies in the proxy holder's
sole discretion. Shareholders are requested, by means of the accompanying proxy,
to grant discretionary authority to the proxy holders to cumulate votes.
In the event that a broker indicates on a proxy that it does not have
discretionary authority as to certain shares to vote on a particular matter,
those shares will be counted as present in determining the existence of a
quorum. Broker non-votes and abstentions on a particular proposal will not be
considered present except for purposes of determining a quorum, so those shares
will not be counted as either yes or no votes in determining whether or not the
proposal is approved.
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Directors will be elected by a plurality of the votes of the shares of
Common Stock present in person or represented by proxy at the Annual Meeting and
entitled to vote on the election of directors.
Proposal No. 2 relating to the increase in the number of shares under
the Company's 1993 Employee Incentive Plan (the "1993 Plan") requires for
approval the affirmative vote of a majority of shares of Common Stock present in
person or represented by proxy at the Annual Meeting and entitled to vote on the
proposal.
Any proxy which is returned using the form of proxy enclosed and which
is not marked as to a particular item will be voted "for" the election of
directors and "for" the other proposals described in this Proxy Statement, and
as the proxy holders deem advisable on other matters that may come before the
Annual Meeting, as the case may be, with respect to the item not marked.
If sufficient votes in favor of the proposals are not received by the
date of the Annual Meeting, the persons named as proxies may propose one or more
adjournments of the Annual Meeting to permit further solicitations of proxies.
Any such adjournment would require the affirmative vote of the majority of the
outstanding shares present in person or represented by proxy at the Annual
Meeting.
The cost of preparing, assembling, printing and mailing the Proxy
Statement, the Notice of Annual Meeting of Shareholders and the enclosed form of
proxy, as well as the cost of soliciting proxies relating to the Annual Meeting,
will be borne by the Company. Following the original mailing of the proxies and
other soliciting materials, the Company will request that the brokers,
custodians, nominees and other record holders forward copies of the proxy and
other soliciting materials to persons for whom they hold shares of Common Stock
and request authority for the exercise of proxies. In such cases, the Company,
upon the request of the record holders, will reimburse such holders for their
reasonable expenses. The original solicitation of proxies by mail may be
supplemented by telephone, telegram and personal solicitation by directors,
officers and employees of the Company.
REVOCABILITY OF PROXIES
Any shareholder giving a proxy in the form accompanying this Proxy
Statement has the power to revoke the proxy before its use. A proxy can be
revoked (i) by an instrument of revocation delivered before the Annual Meeting
to the Secretary of the Company at the Company's principal executive offices,
(ii) by a duly executed proxy bearing a later date or time than the date or time
of the proxy being revoked, or (iii) by voting in person at the Annual Meeting.
Please note, however, that if a shareholder's shares are held of record by a
broker, bank or other nominee and that shareholder wishes to vote at the Annual
Meeting, the shareholder must bring to the Annual Meeting a letter from the
broker, bank or other nominee confirming that shareholder's beneficial ownership
of the shares. Attendance at the Annual Meeting will not by itself revoke a
proxy.
PROPOSAL NO. 1 - ELECTION OF DIRECTORS
NOMINEES
Five (5) directors are to be elected to the Board at the Annual Meeting
to serve until the next annual meeting and until their respective successors are
elected and qualified or until the death, resignation, or removal of the
director. Each of the nominees, other than Mr. Ostrovsky, is currently a
director of the Company. If any nominee is unable or unwilling to serve as a
director, the proxies may be voted for such substitute nominee as the proxy
holder may determine. The Board has no reason to believe that any of the persons
named below will be unable or unwilling to serve as a director if elected.
Proxies received will be voted "FOR" the election of the nominees named below
unless the proxy is marked in such a manner as to withhold authority so to vote.
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THE BOARD RECOMMENDS A VOTE FOR THE ELECTION
OF EACH OF THE NOMINATED DIRECTORS.
The names of the nominees and certain information about them are set
forth below:
<TABLE>
<CAPTION>
NAME AGE OCCUPATION SINCE
- ---- --- ---------- -----
<S> <C> <C> <C>
Charles Federman 42 Managing Director the BRM 1996
Group
Earl S. Hamlin 59 Private Investor 1995
Geoffrey B. Koblick 44 Chairman of the Board of 1982
Directors, General Counsel
and Secretary of the Company
Robert Mayer 44 Executive Vice President of 1985
the Company
Abe Ostrovsky 55 Chairman of JetForm 1998
Corporation
Martin Sacks 39 President and Chief 1988
Executive Officer of the
Company
</TABLE>
Mr. Federman became a director in May 1996. Mr. Federman is Chairman of
the Executive Committee and a Managing Director of the BRM Group, an information
and technology mergers and acquisitions firm. Mr. Federman holds a Bachelor of
Science degree from the University of Pennsylvania, Wharton School of Business.
Mr. Hamlin became a director in 1995. Mr. Hamlin is a private investor.
From 1989 to 1994, he was a portfolio manager at Volpe, Brown & Whelan, an
investment-banking firm. From 1973 to 1989, he was employed at Hambrecht &
Quist, where he held several positions, including financial analyst. He has been
a director of 800 Software, a distributor of personal computer software and
hardware, and is currently a director of Data Storage Systems, Inc. and National
Employment Wire Service, Inc., which are both private companies.
Mr. Koblick has been the Chairman of the Board of Directors and
Secretary of the Company since its inception and served as the Company's
President from its inception through September 15, 1987, and from July 1, 1988
to June 30, 1990. From 1981 to 1982, Mr. Koblick was legal counsel at MicroPro
International Corporation (which later changed its name to WordStar
International Incorporated). Between 1979 and 1981, he practiced law in San
Francisco with Gunheim & Yturbide.
Mr. Mayer has served as the Company's Vice President of Sales since 1990
and as a director since 1985. Prior to 1990 he served as Vice President of
Operations. Before joining the Company, Mr. Mayer worked at Gundlach Bundschu
Winery in Sonoma from 1980 to 1983, where he was the assistant wine maker and
oversaw day-to-day operations.
Mr. Ostrovsky has been nominated for election as a director of the
Company. Joining JetForm in 1991 as COO, Mr. Ostrovsky became CEO in 1992. In
December 1995, Mr. Ostrovsky resigned his CEO position at JetForm and became
Chairman of the Board. Mr. Ostrovsky also serves on the boards of NetManage
(Nasdaq: NETM) and Seec(Nasdaq: SEEC). Mr. Ostrovsky attended the University of
Miami, where he majored in mechanical engineering.
Mr. Sacks has been a director of the Company since 1988 and the
Company's President and Chief Executive Officer since June 30, 1990. He was the
founder of Milan Systems America, Inc. which was acquired by the Company in
1988. From 1979 to 1983, Mr. Sacks served as a consultant for
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Arthur Young & Company. Mr. Sacks also founded a software training company in
1984 and received a Bachelor of Commerce and a Bachelor of Accounting degree
from the University of Witwatersrand, South Africa in 1981, and is a qualified
chartered accountant (South Africa).
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All directors hold office until the next annual meeting of shareholders
and until their successors are elected and qualified.
BOARD MEETINGS
During the last full fiscal year ended June 30, 1998 ("fiscal 1998"),
the Board held four (4) meetings, including telephone conference meetings. Each
nominee who was a director during fiscal 1998 attended more than 75% of the
number of Board meetings and the total number of meetings held by all committees
on which such director served that were held during fiscal 1998 during the time
such person was a director. The Board does not have a nominating committee or
any committee performing such function, and there are no specific procedures for
shareholders to follow to submit nominee recommendations.
DIRECTOR COMPENSATION
Non-employee directors employed by the Company currently receive $500
for each meeting attended. Directors are also eligible to participate in the
Company's incentive plans. Officers serve at the pleasure of the Board of
Directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board (the "Committee") makes all
decisions involving the compensation of executive officers of the Company.
Charles Federman, and departing board members, Gordon K. Landies and Earl S.
Hamlin, are the members of the Committee.
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REPORT OF THE COMPENSATION COMMITTEE
This Report of the Compensation Committee is required by the SEC and
shall not be deemed to be incorporated by reference by any general statement
incorporating by reference this Proxy Statement into any filing under the
Securities Act, or under the Exchange Act, except to the extent that the Company
specifically incorporates this information by reference, and shall not otherwise
be deemed soliciting material or filed under such acts.
Final decisions regarding executive compensation and stock option grants
to executives are made by the Compensation Committee of the Board of Directors
(the "Committee"). The Committee is composed of three independent non-employee
directors, none of whom have any interlocking relationships as defined by the
SEC.
GENERAL COMPENSATION POLICY
The Committee acts on behalf of the Board to establish the general
compensation policy of the Company for all employees of the Company. The
Committee typically reviews base salary levels and target bonuses for the Chief
Executive Officer ("CEO") and other executive officers and employees of the
Company at or about the beginning of each fiscal year. The Committee administers
the Company's incentive and equity plans, including the 1993 Equity Incentive
Plan (the "Plan"). The Committee's philosophy in compensating executive
officers, including the CEO, is to relate compensation to corporate performance.
Consistent with this philosophy, the incentive component of the compensation of
the executive officers of the Company is contingent on corporate profits and
sales performance. Long-term equity incentives for executive officers are
effected through the granting of stock options under the Plan. Stock options
generally have value for the executive only if the price of the Company's stock
increases above the fair market value on the grant date and the executive
remains in the Company's employ for the period required for the shares to vest
or, where vesting of options is subject to the attainment of certain performance
objectives, if the specified performance objectives are attained. The base
salaries, incentive compensation and stock option grants of the executive
officers are determined in part by the Committee informally reviewing data on
prevailing compensation practices in technology companies with whom the Company
competes for executive talent and by their evaluating such information in
connection with the Company's corporate goals. To this end, the Committee
attempted to compare the compensation of the Company's executive officers with
the compensation practices of comparable companies to determine base salary,
target bonuses and target total cash compensation. In addition to their base
salaries, the Company's executive officers, including the CEO, are entitled to
participate in the Plan. In preparing the performance graph for this Proxy
Statement, the Company used the Hambrecht & Quist Computer Software Index as its
published line of business index. The compensation practices of most of the
companies in the Hambrecht & Quist Computer Software Index were not reviewed by
the Company when the Committee reviewed the compensation information described
above because such companies were determined not to be competitive with the
Company for executive talent.
FISCAL 1998 EXECUTIVE COMPENSATION
BASE COMPENSATION. The Committee reviewed the recommendations and
performance and market data outlined above and established a base salary level
for each executive officer, including the CEO.
INCENTIVE COMPENSATION. Cash bonuses are awarded only if the Company
meets predetermined objectives set by the Board at the beginning of the year.
For fiscal 1998, the objectives used by the Company as the basis for incentive
compensation for the CEO and the other executives
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were based on earnings per share performance. The target amount of bonus and the
actual amount of bonus are determined by the Committee, in its discretion.
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STOCK OPTIONS. In fiscal 1998, the following stock options were granted
to executive officers: Mr. Sacks - 50,000, Mr. Koblick - 45,000, and Mr. Mayer -
30,000. Generally, for current executive officers, the stock option grants were
smaller than the grants made by comparable technology companies. Stock options
typically have been granted to executive officers when the executive first joins
the Company, in connection with a significant change in responsibilities and,
occasionally, to achieve equity within a peer group. The Committee may, however,
grant additional stock options to executives for other reasons. The number of
shares subject to each stock option granted is within the discretion of the
Committee and is based on anticipated future contribution and ability to impact
corporate and/or business unit results, past performance or consistency within
the executive's peer group. In fiscal 1998, the Committee considered these
factors, as well as the number of unvested options held by such executive
officers as of the date of grant. In the discretion of the Committee, executive
officers may also be granted stock options under the Plan to provide greater
incentives to continue their employment with the Company and to strive to
increase the value of the Common Stock. The stock options generally become
exercisable over a four-year period and, in certain instances, sooner based on
the attainment of certain objectives and are granted at a price that is equal to
the fair market value of the Common Stock on the date of grant.
COMPANY PERFORMANCE AND CEO COMPENSATION. Because Mr. Sacks was
responsible for the Company obtaining a significant portion of its objectives
for fiscal 1998, the Committee exercised its discretion and recommended, during
the first quarter of fiscal 1998, that Mr. Sacks should be granted a stock
option to purchase 50,000 shares of the Common Stock. These objectives included
satisfactorily managing the Company's overall corporate business plan, such as
meeting the Company's profitability projections and the Company's sales targets,
and significantly strengthening the Company's market position. In granting the
stock option to Mr. Sacks, the Committee reviewed Mr. Sacks' prior outstanding
option grants and the number of options that remained unexercisable, and the
number of shares Mr. Sacks already owned. The Committee believes that this grant
was appropriate because it gave proper incentives to Mr. Sacks for fiscal 1998
and took account of his prior significant stock holdings. The Committee also
reviewed the compensation practices of the comparable companies in recommending
this grant to Mr. Sacks.
COMPLIANCE WITH SECTION 162(m) OF THE INTERNAL REVENUE CODE OF 1986. The
Company intends to comply with the requirements of Section 162(m) of the
Internal Revenue Code of 1986 for fiscal 1999. The Plan is already in compliance
with Section 162(m) by limiting stock awards to named executive officers. The
Company does not expect cash compensation for any employee in 1999 to be in
excess of $1,000,000 or consequently affected by the requirements of Section
162(m).
COMPENSATION COMMITTEE
Earl Hamlin
Charles Federman
Gordon Landies
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COMPANY STOCK PRICE PERFORMANCE
The stock price performance graph below is required by the SEC and shall
not be deemed to be incorporated by reference by any general statement
incorporating by reference this Proxy Statement into any filing under the
Securities Act, or under the Exchange Act, except to the extent that the Company
specifically incorporates this information by reference, and shall not otherwise
be deemed soliciting material or filed under such acts. The chart below compares
the cumulative total stockholder return on the Common Stock of the Company from
June 30, 1993 to June 30, 1998 with the cumulative total return on The Nasdaq
(US only) Stock Market and the Nasdaq Computer and Data Processing Services
Index (assuming the investment of $100 in the Company's Common Stock and in each
of the indexes on June 30, 1993, and reinvestment of all dividends). Unless
otherwise specified, all dates refer to the last day of each month presented.
CUMULATIVE TOTAL RETURN
<TABLE>
<CAPTION>
6/93 6/94 6/95 6/96 6/97 6/98
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
IMSI California 100 145 169 285 439 653
NASDAQ STOCK MARKET- US 100 101 135 173 210 278
NASDAQ COMPUTER AND DATA PROCESSING
Services Index 100 100 264 217 274 415
</TABLE>
PROPOSAL NO. 2 - APPROVAL OF AMENDMENTS TO 1993
EMPLOYEE INCENTIVE PLAN
GENERAL
Shareholders are being asked to approve an amendment to the Company's
1993 Employee Incentive Plan (the "1993 Plan") to increase the number of shares
of Common Stock reserved for issuance thereunder by 750,000 shares, from
2,175,000 shares to 2,925,000 shares. The Board of Directors of the Company
approved the proposed amendment described above on December 4th, 1998, subject
to shareholder approval. The Board believes that adding shares to the 1993 Plan
is in the best interests of the Company because it will permit the Company to
attract and retain key employees by providing them with appropriate equity
incentives. If a quorum is present, the affirmative vote of the holders of a
majority of the shares of Common Stock present or represented at the Annual
Meeting is required for approval of the amendment to the 1993 Plan.
The 1993 Plan was approved by the Board in June 1993 and approved by the
Company's shareholders in April 1994. In April 1995, the shareholders approved
amendments (previously approved by the Board) to the 1993 Plan increasing the
number of shares reserved for issuance thereunder from 450,000 shares to 675,000
shares and making certain other amendments to the 1993 Plan. In January 1996,
the shareholders approved amendments (previously approved by the Board) to the
1993 Plan increasing the number of shares reserved for issuance thereunder from
675,000 shares to 1,125,000 shares. In March 1997, the shareholders approved an
amendment (previously approved by the Board) to the 1993 Plan increasing the
number of shares reserved for issuance thereunder from 1,125,000 shares to
1,425,000 shares. In December 1997, the shareholders approved an amendment
(previously approved by the Board) to the 1993 Plan increasing the number of
shares for issuance thereunder from 1,425,000 shares to 2,175,000 shares.
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The 1993 Plan provides for awards of stock options, restricted stock,
and stock purchase rights, and authorizes profit sharing awards. As of December
7, 1998, approximately 225 employees and directors of the Company were eligible
to receive awards under the 1993 Plan. As of December 7, 1998, approximately
361,700 shares were available for future options and other awards under the 1993
Plan and all other stock plans of the Company, and on December 7, 1998, the
closing price of the Common Stock was $9.50. Employees, directors and officers
of the Company have an interest in the approval of the proposed amendments to
the 1993 Plan by virtue of their eligibility to receive awards under the 1993
Plan.
The Company will provide, without charge, to each person to whom a proxy
statement is delivered, upon request of such person and by first class mail
within one business day of receipt of such request, a copy of the 1993 Plan. Any
such request should be directed as follows: Secretary, International
Microcomputer Software, Inc., 75 Rowland Way, Novato, California 94945;
telephone number (415) 257-3000.
THE BOARD OF DIRECTORS RECOMMENDS A
VOTE FOR APPROVAL OF THE 1993 PLAN.
SUMMARY OF THE 1993 PLAN
Administration. The 1993 Plan is administered by the Board, but the
Board may delegate administration to a committee (in either case, the
"Administrator"). The Administrator acts as the manager of the 1993 Plan, and as
such has the power, subject to the terms and restrictions set forth in the 1993
Plan, to select the persons ("Participants") to receive options granted pursuant
to the 1993 Plan ("Options") or other awards under the 1993 Plan (collectively,
"Awards"), to fix the number of shares that each Participant may acquire, to set
the terms and conditions of each Award (including any vesting or exercisability
provisions or limitations regarding any Award or the shares of Common Stock
relating thereto, and the waiver, amendment, extension or acceleration of any
such provisions or limitations), to reduce the exercise price of any Award to
the then current fair market value if the fair market value of the Common Stock
covered by such Award shall have declined since the date the Award was granted,
and to determine all other matters relating to the 1993 Plan, subject to
applicable law. Determinations made by the Administrator are final and binding
on all parties. The Administrator may delegate nondiscretionary administrative
duties to such employees of the Company as it deems proper. The 1993 Plan at
present is administered by the Board.
ERISA, Internal Revenue Code. The 1993 Plan is not subject to the
Employee Retirement Income Security Act of 1974 ("ERISA") and is not qualified
under Section 401(a) of the Internal Revenue Code of 1986, as amended (the
"Code").
Eligibility. Every person who, at the date on which an Award was granted
to that person (the "Grant Date") is a full-time employee of the Company or any
Affiliate is eligible to receive Awards (including options that are intended to
be incentive stock options ("ISOs") within the meaning of the Code). Every
person who at the Grant Date is a consultant to the Company or any Affiliate, or
any person who is a director of the Company, but not a full-time employee, is
eligible to receive non-qualified options ("NQOs") but is not eligible to
receive ISOs. The term "Affiliate" means a "parent corporation" or a "subsidiary
corporation" as defined in the applicable provisions of the Code.
Securities Subject to the Plan. The total number of shares that are
reserved and available for issuance pursuant to the exercise of Awards under the
1993 Plan, as proposed to be amended, is 2,925,000 shares of Common Stock. The
shares covered by the portion of any grant that expires unexercised under the
1993 Plan will become available again for grants under the 1993 Plan. The
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number of shares reserved for issuance under the 1993 Plan is subject to
adjustment in accordance with the provisions for adjustment in the 1993 Plan.
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Granting of Options. No Options may be granted under the 1993 Plan after
10 years from the date that the Board initially adopted the 1993 Plan. Unless an
earlier expiration date is specified by the Administrator at the Grant Date, an
NQO generally expires 10 years and two days from its Grant Date, and an ISO
expires 10 years from its Grant Date, except that an ISO granted to any ten
percent shareholder expires five years from its Grant Date. The exercise price
of an NQO is determined by the Administrator. The exercise price of an ISO shall
be determined in accordance with the applicable provisions of the Code and is at
best equal to the fair market value of the stock covered by the ISO at the Grant
Date.
Each Award will be evidenced by a written agreement (in the case of
Options, referred to as the "Option Agreement," and in the case of other Awards,
referred to as the "Award Agreement"), in a form satisfactory to the Company,
executed by the Company and the Participant to whom the Award is granted.
Provisions of Award Agreements need not be the same for each Participant. Awards
may, in the sole discretion of the Administrator, be exercisable entirely at the
Grant Date or at such times and in such amounts as the Administrator may
specify. No Award is assignable or otherwise transferable by the Participant
except by will or by the laws of descent and distribution. During the life of
the Participant, an Option is exercisable only by the Participant or the
Participant's guardian or legal representative.
Unless the Administrator determines otherwise, the aggregate value of
all shares covered by any ISOs granted to a Participant with respect to stock in
the Company or any Affiliate that first become exercisable during any one
calendar year may not exceed $100,000. For this purpose, value is the fair
market value of the shares covered by the ISOs when the ISOs were granted. If
the Administrator grants Options that would otherwise be ISOs in excess of this
$100,000 limit, the Options that exceed the limit, determined in order of grant,
will be treated for tax purposes as NQOs.
Changes in Capital Structure. Subject to the provisions described in the
next two sections, if the stock of the Company is changed by reason of a stock
split, reverse stock split, stock dividend, or recapitalization, or converted
into or exchanged for other securities as a result of a merger, consolidation or
reorganization, the Administrator may make appropriate adjustments in (a) the
number and class of shares of stock subject to the 1993 Plan and each
outstanding Award, and (b) the exercise price of each outstanding Award.
Corporate Transactions. New option rights may be substituted for Awards
granted, or the Company's obligations as to outstanding Awards may be assumed by
an employer corporation other than the Company, or an affiliate thereof, in
connection with any merger, consolidation, acquisition, separation,
reorganization, dissolution, liquidation, sale or like occurrence in which the
Company is involved and which the Administrator determines, in its absolute
discretion, would materially alter the structure of the Company or its
ownership. Notwithstanding the foregoing, if such an event occurs and if such
employer corporation, or an affiliate thereof, does not substitute new option
rights for, and substantially equivalent to, outstanding Awards, or assume the
outstanding Awards, or if there is no employer corporation, or if the
Administrator determines, in its sole discretion, that outstanding Awards should
not then continue to be outstanding, the Administrator may upon ten days' prior
written notice to Participants, in its absolute discretion, (a) shorten the
period during which Awards, are exercisable (provided they remain exercisable to
the extent otherwise exercisable, for at least ten days after the date the
notice is given), or (b) cancel Awards upon payment to the Participant in cash
with respect to each Award to the extent then exercisable, of an amount which,
in the absolute discretion of the Administrator, is determined to be equivalent
to any excess of the fair market value (at the effective time of such event) of
the consideration that the Participant would have received if the Award had been
exercised before the effective time, over the exercise price of the Awards. If,
however, there is a successor corporation and replacement Awards are not
granted, or existing Awards
14
<PAGE> 15
are not assumed by the successor corporation, all outstanding Awards shall
become exercisable before the consummation of the transaction such that the
Participants have not less than ten days to exercise their Awards and become
shareholders of record entitled to receive the consideration paid to the other
shareholders of the Company. The actions described above may be taken without
any regard to any resultant tax consequences to the Participant. Notwithstanding
any other provision of the Plan, except where prohibited by the terms of a state
securities law permit or qualification with respect to the grant of an Award or
the issuance of Common Stock upon the exercise of an Award, the Administrator
may, in particular Award Agreements or thereafter, provide for the accelerated
vesting of an Award upon any event which the Administrator determines, in its
discretion, constitutes a "change in control" of the Company as defined in the
Plan. Except as expressly provided in any Award Agreement, in the event of a
"change in control," any Options outstanding immediately before the change in
control and not then exercisable and vested become fully exercisable and vested
immediately before the change in control; provided that the Administrator may in
its discretion decide that a change in control does not alter the exercisability
or vesting of outstanding Options. In this context, certain actions described
above may result in "parachute payments" under the Code for certain
Participants.
Payment of Exercise Price. Except as described below, payment in full,
in cash, must be made for all stock purchased at the time a written notice of
exercise is given to the Company. Proceeds of any such payment will constitute
general funds of the Company. At the time an Award is granted or before it is
exercised, the Administrator, in the exercise of its absolute discretion, may
authorize any one or more of the following additional methods of payment: (a)
acceptance of the Participant's full recourse promissory note for some or all of
the aggregate exercise price of the shares being acquired, with such terms as
the Administrator approves; (b) delivery by the Participant of Common Stock or
other securities of the Company already owned by the Participant; (c) surrender,
sale or withholding from the shares issuable upon exercise of the Award of a
number of shares with a fair market value equal to the aggregate exercise price
of the shares being acquired; or (d) any other property, so long as such
property constitutes valid consideration under applicable law.
Termination of Employment. Any Award or portion thereof that has not
vested on or before the date on which a Participant ceases, for any reason, with
or without cause, to be an employee or director of, or a consultant to, the
Company or an Affiliate ("Employment Termination"), expires upon the date of
Employment Termination. An Award or portion thereof that has vested as of the
date of Employment Termination, to the extent the Award has not then expired or
been exercised, is exercisable for a period of (a) three months, or (b) in the
case of Participants subject to Section 16(b) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), if the Company and the Participant so
agree, seven months following the date of the Participant's sale, if any, of
Common Stock within the meaning of Rule 16b-3 promulgated pursuant to the
Exchange Act, within six months before the date of Employment Termination. If,
however, Employment Termination is due to the permanent disability or death of
the Participant, then the Participant, the Participant's personal representative
or any other person who acquires Award rights from the Participant by will or
the applicable laws of descent and distribution, may, within 12 months after the
date of Employment Termination, exercise such Award rights to the extent they
were exercisable on the date of Employment Termination. The Administrator may,
with the consent of the Participant, modify any of the periods described above
in an Award Agreement or thereafter.
Tax Compensation Rights. In connection with the grant of any Award (the
"Associated Award"), the Administrator may grant the Participant the right (the
"Tax Compensation Right") to receive from the Company an amount (the "Tax
Compensation Amount") in cash which will not exceed an amount equal to the then
existing maximum statutory federal income tax rate (including any surtax or
similar charge or assessment) for corporations multiplied by the amount of
compensation expense deductible by the Company for federal income tax purposes
as a result of exercise of the
15
<PAGE> 16
Associated Award. The Administrator may also, in its discretion, loan to the
Participant an amount equal to the Tax Compensation Amount.
Withholding and Employment Taxes. At the time of exercise of an Award,
the Participant must remit to the Company in cash all applicable federal and
state withholding and employment taxes. The Administrator may, in the exercise
of the Administrator's sole discretion, permit a Participant to pay some or all
of such taxes by means of a promissory note on such terms as the Administrator
deems appropriate. If and to the extent authorized and approved by the
Administrator in its sole discretion, a Participant may elect, by means of a
form of election to be prescribed by the Administrator, to have shares which are
acquired upon exercise of an Award withheld by the Company or tender other
shares of Common Stock or other securities of the Company owned by the
Participant to the Company at the time the amount of such taxes is determined in
order to pay the amount of such tax obligations. Unless the Administrator
otherwise determines, the Participant must pay to the Company in cash, promptly
when the amount of such obligations becomes determinable, all applicable federal
and state withholding taxes resulting from the lapse of restrictions imposed on
exercise of an Award, from a transfer or other disposition of shares acquired
upon exercise of an Award, or otherwise related to the Award or the shares
acquired upon exercise of the Award.
Amendment, Suspension or Termination of the Plan. The Board may at any
time amend, alter, suspend or discontinue the 1993 Plan without shareholder
approval, except as required by applicable law; provided, however, that no
amendment, alteration, suspension or discontinuation shall be made that would
impair the rights of any Participant under any Award previously granted, without
the Participant's consent, except to conform the 1993 Plan and Awards granted
under the 1993 Plan to the requirements of federal or other tax laws or the
requirements of Rule 16b-3.
Liability and Indemnification of Administrator. No member of the group
constituting the Administrator will be liable for any act or omission on such
member's own part, including but not limited to the exercise of any power or
discretion given to such member under the 1993 Plan, except for those acts or
omissions resulting from such member's own gross negligence or willful
misconduct. The Company will indemnify each present or future member of the
group constituting the Administrator against, and each member of the group
constituting the Administrator shall be entitled without further act on his or
her part to indemnity from the Company for, all expenses (including the amount
of judgments and the amount of approved settlements made with a view to the
curtailment of costs of litigation, other than amounts paid to the Company
itself) reasonably incurred by such person in connection with or arising out of
any action, suit or proceeding to the full extent permitted by law and by the
Articles of Incorporation and Bylaws of the Company.
Restricted Stock. Participants awarded Restricted Stock must, within
certain time periods specified in the 1993 Plan, pay to the Company, if required
by applicable law, an amount equal to the par value of the Stock subject to the
Award. Subject to the provisions of the 1993 Plan and the Award Agreement,
during a period set by the Administrator, commencing with, and not exceeding 10
years from, the date of such award (the "Restriction Period"), the Participant
may not sell, assign, transfer, pledge or otherwise encumber shares of
Restricted Stock. Within these limits, the Administrator may in its discretion
provide for the lapse of such restrictions in installments and may accelerate or
waive such restrictions, in whole or in part, based on service, performance or
such other factors or criteria as the Administrator may determine. Unless
otherwise determined by the Administrator, cash dividends with respect to shares
of Restricted Stock will be automatically reinvested in additional Restricted
Stock, and dividends payable in Stock shall be paid in the form of Restricted
Stock. Except to the extent otherwise provided in the Award Agreement and as
described above under "Restrictions," upon a Participant's Employment
Termination during the Restriction Period, all shares still subject to
restriction will be forfeited by the Participant.
16
<PAGE> 17
Stock Purchase Rights. The Administrator may grant Stock Purchase
Rights, which enable the recipients to purchase Common Stock at a price
determined by the Administrator. Stock Purchase Rights will be exercisable for a
period determined by the Administrator not exceeding 30 days from the date of
grant. The Administrator, however, may provide that, if required under Rule
16b-3, Stock Purchase Rights granted to persons subject to Section 16(b) of the
Exchange Act will not become exercisable until six months and one day after the
grant date and will then be exercisable for 10 trading days at the purchase
price specified by the Administrator as described in the preceding paragraph.
The Administrator, in its discretion, may provide for rights of repurchase of
shares acquired upon exercise of Stock Purchase Rights, including without
limitation at the original purchase price of such shares, upon the Employment
Termination of a Participant.
Profit Sharing. After completion of a particular fiscal year of the
Company (or other fiscal period established by the Administrator) and delivery
to the Company of its financial statements for that fiscal period, the Company
may in its discretion allocate a percentage of the net income of the Company for
that fiscal period for possible distribution to the Company's employees (any
such amount for a particular fiscal period referred to as a "Profit Sharing
Amount"). The Administrator shall have complete discretion to allocate some or
all of a Profit Sharing Amount to qualifying employees of the Company, and to
determine the allocation of any Profit Sharing Amount among particular
qualifying employees. To qualify, an employee must have been a regular,
permanent employee of the Company for the full fiscal year to which the Profit
Sharing Amount relates or, if a shorter fiscal period is utilized, for the past
four full consecutive fiscal quarters, including the fiscal period to which the
Profit Sharing Amount relates; for example, if the Company's fiscal year ends on
June 30, and the Profit Sharing Amount relates to that fiscal year, an employee
must have been a full-time regular employee from July 1 through June 30.
The Administrator may allocate some or all of the Profit Sharing Amount
in cash to eligible employees, in such amounts as the Administrator may in its
discretion determine (the amount allocated to a particular employee referred to
as the "Employee's Allocation"). An eligible employee may elect to request
distributions of the Employee's Allocation in cash or to have a portion of the
Employee's Allocation take the form of shares of Stock or (if the Administrator
so approves) discounted stock options, or a combination thereof, by making a
written election at such times, and by means of such written documentation, as
the Administrator may prescribe; provided, however, that the Company shall be
under no obligation to deliver shares of Stock, and delivery of such shares
shall be in the discretion of the Company.
The Company may, in lieu of distributing some or all of an Employee's
Allocation in cash, distribute some or all of an Employee's Allocation by
issuing shares of Common Stock. Such shares may either be authorized but
unissued shares, shares reacquired in private transactions, or shares purchased
by the Company in open market purchase transactions. The purchase price for such
shares will be paid from (and credited against) an Employee's Allocation. The
purchase price for any such shares will be their fair market value on the date
of issuance (or, if they are acquired by the Company, then the purchase price
paid by the Company).
A person or entity selected by the Administrator will hold the
certificates representing any shares allocated to an employee pursuant to such
documentation as is satisfactory to the Administrator. All shares held by any
such person or entity shall at all times remain subject to the claims of the
Company's general creditors. If such person or entity is the record owner of
such shares, then the person or entity shall vote any shares of Common Stock
included in an Employee's Allocation held pursuant to such documentation in
accordance with the instructions of the employee. At any time after allocated
shares have vested (pursuant to the provisions described below), an employee
shall be entitled to receive a certificate representing the vested shares.
17
<PAGE> 18
Unless the Administrator determines otherwise in a particular case, any
award of cash or shares under the profit sharing provisions of the 1993 Plan
will be subject to a five-year vesting period. Twenty percent of the Employee's
Allocation for any fiscal year shall vest immediately, and the balance shall
vest ratably and equally over five years on each anniversary of the fiscal year
of the profit sharing. No employee shall have any right to receive any cash
portion of an Employee's Allocation, or transfer or make any other disposition
of Stock that has not vested. Upon the Employment Termination of an employee,
the employee shall have no further rights with respect to any unvested portion
of the Employee's Allocation, and any shares of Stock which have not vested may
be redeemed at the option of the Company, without payment of any consideration,
by notice from the Company to the record holder of such shares.
18
<PAGE> 19
Retirement. Upon retirement of an employee, all outstanding shares
included in the Employee's Allocation held by the Company for that employee's
account shall be considered fully vested and distributed to the retiring
employee. For purposes of this section, "retirement" shall mean voluntary
termination by the employee of the employee's employment with the Company or an
affiliate after the employee has reached age 60.
Offset and Withholding. In the event that any amounts are due to the
Company from a participating employee, regardless of the source of the
obligation, an Employee's Allocation may be applied by the Company towards
satisfaction of such other obligations.
No Vested Rights; Company Discretion. Without limiting any other
provision in the 1993 Plan giving the Company or the Administrator the
flexibility to administer and interpret the 1993 Plan, all benefits, Awards, and
provisions of the 1993 Plan may be changed, modified, terminated or canceled, at
any time without notice, with or without any reason, by the Company; and no
employee, officer or director of the Company shall have any right to receive any
amounts under the profit sharing provisions of the 1993 Plan otherwise than in
the absolute discretion of the Company.
SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES
The following description of federal income tax consequences associated
with participation in the 1993 Plan is based on current provisions of the Code
and administrative and judicial interpretations thereof. It does not describe
applicable state, local, or foreign tax considerations, nor does it discuss any
estate or gift tax considerations. The applicable rules are complex and may vary
depending upon a participant's individual circumstances. The following
description is thus necessarily general and does not address all of the
potential federal and other income tax consequences to every participant of the
1993 Plan or transactions thereunder. Moreover, comprehensive Treasury
regulations covering certain of the issues described below have been proposed
but have not yet been adopted.
Incentive Stock Options
Option, Exercise, Alternative Minimum Tax. A Participant will not have
taxable income upon the grant or exercise of an ISO. However, the "Option
Spread" (the amount by which the fair market value of the Common Stock acquired
upon exercise of the Option (the "Option Shares") on the relevant measurement
date exceeds the exercise price) is includable in the Participant's "alternative
minimum taxable income" in determining the Participant's liability for the
"alternative minimum tax." The maximum alternative minimum tax rate applicable
to individuals is now 28%. The Option Spread generally is measured for this
purpose on the day the Option is exercised; however, if both (i) the Option
Shares are subject to a "substantial risk of forfeiture" (including a right of
repurchase in favor of the Company and perhaps, in the case of certain officers,
limitations on the resale of such shares imposed by Section 16(b) of the
Exchange Act) and (ii) the Participant does not make an election under Section
83(b) of the Code with respect to such shares within 30 days after the purchase
date (a "Section 83(b) Election"), then the Option Spread should be measured,
and should be includable in alternative minimum taxable income, on the date the
risk of forfeiture lapses. (For purposes of the alternative minimum tax, the
fair market value of Option Shares acquired under an ISO is determined by
ignoring any restriction which by its terms may some day lapse.) The Company
receives no income tax deduction upon grant or exercise of an ISO but is
entitled to a deduction equal to the ordinary income taxable to the Participant
upon a Disqualifying Disposition.
In general, an ISO must be exercised within three months of Employment
Termination to retain the federal income tax treatment described above. In the
case of a Participant who is permanently and totally disabled, as defined in the
Code, or who dies while owning an Option, this
19
<PAGE> 20
three-month period is extended to 12 months. The 1993 Plan allows the Company to
extend this three-month in the case of certain Participants who are subject to
Section 16(b) of the Exchange Act. Any such extension may be treated as the
grant of a new Option to the Participant, which must meet the requirements for
ISO status on the date of the agreement; in all events, if an Option is
exercised more than three months after Employment Termination, it will, except
in the cases of a permanently and totally disabled or deceased Participant, not
qualify as an ISO.
Sale of Option Shares; Disqualifying Dispositions. A Participant
generally will be entitled to long-term capital gain treatment upon sale (other
than to the Company) or other disposition of Option Shares held longer than two
years from the grant date and one year from the date the Participant receives
the shares. If the Option Shares are sold or disposed of (including by gift, but
not including certain tax-free exchanges) before both of these holding periods
have expired (a "Disqualifying Disposition"), the Option Spread (but generally
not more than the amount of gain if the Disqualifying Disposition is a sale) is
taxable as ordinary income. For this purpose, the Option Spread is measured at
the Exercise Date unless the Option Shares were subject to a substantial risk of
forfeiture upon purchase and the Participant did not file a Section 83(b)
Election, in which event the Option Spread is measured at the date the
restriction lapsed. If gain on a Disqualifying Disposition exceeds the amount
treated as ordinary income, the excess is capital gain, which will be long-term
if the Option Shares were held for more than one year. The holding period for
Option Shares commences with the Option exercise date unless the shares are
subject to a substantial risk of forfeiture and no Section 83(b) Election is
filed, in which event the holding period commences with the date the risk
lapsed. A sale of Common Stock to the Company, including use of Common Stock to
pay withholding or withheld by the Company upon exercise of an ISO, will
constitute a redemption of such Common Stock and may be taxable as a dividend
unless certain tests in the Code are met.
Non-Qualified Stock Options
Option; Exercise; Tax Consequences to the Company. A Participant does
not have taxable income upon the grant of an NQO. Federal income tax
consequences upon exercise will depend upon whether the Option Shares thereby
acquired are subject to a substantial risk of forfeiture, described above. If
the Option Shares are not subject to a substantial risk of forfeiture (or if
they are subject to such a risk and the Participant files a Section 83(b)
Election with respect to the shares), the Participant will have ordinary income
at the time of exercise measured by the Option Spread on the Exercise Date. The
Participant's tax basis in the Option Shares will be their fair market value on
the date of exercise, and the holding period for purposes of determining whether
capital gain or loss upon sale is long-term or short-term also will begin with
the day after transfer. If the Option Shares are restricted and no Section 83(b)
Election is filed, the Participant will not be taxable upon exercise, but
instead will have ordinary income on the date the restrictions lapse, in an
amount equal to the Option Spread on the date of lapse. The Participant's
holding period begins with the date of lapse.
In either case, the amount of ordinary income recognized by a
Participant who is an employee constitutes "supplemental wages" subject to
withholding of federal income and employment taxes by the Company, and the
Company receives a corresponding income tax deduction.
Sale of Option Shares. Upon sale other than to the Company of Option
Shares acquired under an NQO, a Participant generally will recognize capital
gain or loss to the extent of the difference between the sale price and the
Participant's tax basis in the shares, which will be "long-term" gain or loss if
the shares are held more than one year. A sale of shares to the Company will
constitute a redemption of such shares, which may be taxable as a dividend.
Tender of Stock to Satisfy Withholding Obligation. If a Participant
tenders Common Stock in satisfaction of an income tax withholding obligation
described above, the surrendered shares will be
20
<PAGE> 21
treated as redeemed by the Company at their then fair market value. The amount
of the withholding obligation thus satisfied may be taxable to the participant
as a dividend unless the redemption meets certain tests set forth in the Code.
If Shares acquired pursuant to exercise of an ISO are tendered, the redemption
may also be a disqualifying disposition of those shares. Participants should
consult with their personal tax advisors before tendering Common Stock in
satisfaction of a withholding obligation.
21
<PAGE> 22
Deductibility of Interest. Interest paid on indebtedness incurred to
purchase Option Shares should constitute "investment interest" deductible for
income tax purposes only against "net investment income." Investment income
includes most interest and dividend income, but does not include earned income
(e.g., wages) or income from "passive activities" of a participant. Interest
paid on indebtedness incurred to satisfy a withholding obligation generally will
be nondeductible "personal" interest.
Parachute Payments. In certain corporate transactions, such as a merger
in which the Company is not the surviving corporation, the 1993 Plan permits the
Administrator to cancel outstanding options and pay to Participants an amount
equal to the difference between the fair market value of the shares issuable
upon exercise of the option and the exercise price of the option (such
difference referred to as the "spread"). Under certain circumstances, the amount
of the spread could be, or be part of, an "excess parachute payment" under
Section 280G of the Code. If the spread is an excess parachute payment, the
Participant would incur tax liability equal to 20% of the amount deemed to be an
"excess parachute payment." Similarly, the value of the acceleration of
outstanding options pursuant to a "Change in Control" may also be regarded as an
excess parachute payment. The Company is not entitled to a deduction for any
excess parachute payments, even if the Company would otherwise have been
entitled to a deduction for such payments.
Tax Compensation Rights. Tax compensation rights will constitute
ordinary wage income, subject to income and employment tax withholding, when
paid to the Participant other than as proceeds of a loan.
Profit Sharing Plan Awards. Profit sharing amounts paid in cash will
constitute ordinary wage income, subject to income and employment tax
withholding, to the Participant on the date paid. Profit sharing amounts paid in
shares constitute ordinary wage income, subject to income and employment tax
withholding, to the Participant on the date transferred to the Participant if
they either are not subject to a substantial risk of forfeiture, described
above, on that date or if they are subject to such a risk and the Participant
files a Section 83(b) Election with respect to the shares. The amount of such
income is the fair market value of the shares on the date of transfer,
determined without regard to any restriction that by its terms may some day
lapse. If the shares are subject to a substantial risk of forfeiture and the
Participant does not make a Section 83(b) Election with respect to them, the
Participant will have ordinary wage income, subject to income and employment tax
withholding, on the date the risk of forfeiture lapses, in the amount of the
fair market value of the shares on that date, again determined without regard to
any additional restriction that by its terms may someday lapse.
22
<PAGE> 23
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth, as of December 7, 1998, the beneficial
ownership of the Company's Common Stock by (i) each person who is known by the
Company to own of record or beneficially more than five percent of the Company's
Common Stock, (ii) each director or nominee, (iii) each other executive officer
(of which there are none) named in the Summary Compensation Table below, and
(iv) all directors and executive officers as a group. Except as otherwise
indicated, the shareholders listed in the table have sole voting and dispositive
power with respect to the shares indicated, subject to community property laws
where applicable. The business address of Messrs. Hamlin, Koblick, Landies,
Mayer, Ostrovsky and Sacks is 75 Rowland Way, Novato, California 94945. The
business address of Mr. Federman is 400 Kelby Street, Suite 1500, Fort Lee, New
Jersey 07024. The business address of Mr.
<TABLE>
<CAPTION>
NAME AND ADDRESS
OF BENEFICIAL OWNER SHARES BENEFICIALLY OWNED (1) PERCENTAGE OF CLASS(1)
------------------- ----------------------------- ----------------------
<S> <C> <C>
Charles Federman(2) (D) 43,375 *
Geoffrey Koblick(3) (O,D) 515,100 8.76%
Robert Mayer(4) (O,D) 464,066 7.89%
Martin Sacks(5) (O,D) 599,665 10.20%
Earl Hamlin(6) (D) 30,132 *
Ken Fineman (7) (O) 14,375 *
Marty Shapiro (8) 67,720 *
Gordon Landies 0 *
Abe Ostrovsky 0 *
ROI Capital 377,262 *
All directors and executive officers 1,667,338 28.35%
as a group (6 persons)
</TABLE>
- ---------------------------------------------
(O) Officer (D) Director * Less than one percent.
(1) Assumes that the person has exercised, to the extent exercisable on or
before 60 days from the date of the table, all options and warrants to
purchase Common Stock held by such person and that no other person has
exercised any outstanding options. Includes, with respect to the
category of all officers and directors as a group, 495,129 shares
subject to options so exercisable held by all officers and directors as
a group.
(2) Includes 19,750 shares issuable upon the exercise of options held by Mr.
Federman within 60 days from the date of the table.
(3) Includes 142,500 shares issuable upon the exercise of stock options held
by Mr. Koblick within 60 days from the date of the table.
(4) Includes 66,108 shares issuable upon the exercise of stock options held
by Mr. Mayer within 60 days from the date of the table.
(5) Includes 250,771 shares issuable upon the exercise of stock options held
by Mr. Sacks within 60 days from the date of the table.
(6) Includes 13,500 shares issuable upon the exercise of stock options held
by Mr. Hamlin within 60 days from the date of the table.
(7) Includes 14,375 shares issuable upon the exercise of stock options held
by Mr. Fineman within 60 days from the date of the table
23
<PAGE> 24
(8) Includes 54,900 shares issuable upon the exercise of stock options held
by Mr. Shapiro within 60 days from the date of the table
24
<PAGE> 25
EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded, earned or paid
for services rendered in all capacities to the Company and its subsidiaries
during each of the fiscal years ended June 30, 1998, 1997 and 1996 to (i) the
Company's chief executive officer during fiscal 1998, and (ii) the Company's
other executive officers other than the Chief Executive Officer, who were
serving as executive officers at the end of fiscal 1998 whose compensation
exceeded $100,000 for fiscal 1998 (collectively, "Named Persons"). No person for
whom disclosure would otherwise have been required was an executive officer
during part of fiscal 1998 but was not an executive officer at the end of fiscal
1998.
SUMMARY COMPENSATION TABLE
The following table sets forth all compensation awarded to, earned by or paid
for services rendered to the Company in all capacities during the years ended
June 30, 1997 and 1998 by (i) the Company's Chief Executive Officer and (ii)
each of the Company's other executive officers who were serving as executive
officers as of June 30, 1998 and whose compensation exceeded $100,000 for fiscal
year then ended (collectively, the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-------------------------------------------- AWARDS
NAME AND FISCAL OTHER ANNUAL SECURITIES
PRINCIPAL POSITIONS YEAR SALARY($)(1) BONUS($) COMPENSATION($)(2) UNDERLYING OPTIONS
- ------------------- ---- ------------ -------- ------------------ ------------------
<S> <C> <C> <C> <C> <C>
Martin Sacks 1998 $200,000 $48,137 $7,346 50,000
President and 1997 $200,000 22,500 5,249
Chief Executive Officer 1996 182,000 5,178 5,412 50,000
Geoffrey B. Koblick 1998 176,667 38,937 6,256 45,000
Chairman of the Board, 1997 160,000 16,000 5,249
Chief Operating 1996 111,665 3,178 5,412 35,000
Officer and General
Counsel
Robert Mayer 1998 143,387 59,864 7,603 30,000
Vice President of 1997 138,000 8,511 5,249
International Sales 1996 120,000 6,728 5,412 15,000
Martin Shapiro 1998 113,387 158,331 3,600 10,000
Vice President of 1997 85,500 173,916 1,505 5,625
Domestic Sales 1996 72,000 77,459 5,625
Kenneth R. Fineman 1998 122,500 40,000 6,184 15,000
Vice President of 1997 90,462 4,123 52,500
Finance, Chief 1996
Financial Officer
</TABLE>
- ---------------
(1) Messrs. Sacks, Koblick, Mayer, Shapiro and Fineman currently have annual
salaries of $200,000, $180,000, $144,500, $115,000 and $150,000
respectively.
(2) Consists of payments of medical premiums by the Company.
25
<PAGE> 26
OPTION GRANTS IN FISCAL 1998
The following table sets forth further information regarding individual
grants of options to acquire the Company's Common Stock during fiscal 1998 to
each Named Person.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
-----------------------------------------------------------------------
% of Total Options Exercise or
Options Granted Base Price Expiration
Name Granted to Employees In Fiscal Year ($/Shr) Date
- ---- ------- --------------------------- ------- ----
<S> <C> <C> <C> <C>
Martin Sacks 50,000 8.3% $10.00 7/1/07
Geoff Koblick 45,000 7.4% $10.00 7/1/07
Robert Mayer 30,000 5.0% $10.00 7/1/07
Ken Fineman 10,000 1.7% $12.43 2/3/08
Marty Shapiro 10,000 1.7% $12.75 12/31/07
</TABLE>
The following table sets forth information with respect to the options
exercised during fiscal 1998 by the Name Persons during fiscal 1998, including
the aggregate value of gains on the date of exercise. In addition, this table
includes the number of shares covered by both exercisable and non-exercisable
stock options as of June 30, 1998. Also reported are the values for
"in-the-money" options, which represent the positive spread between the exercise
price of any such existing stock options and the year-end price of the Common
Stock.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised
Options/SARs In-The-Money Options
Value At June 30, 1998 ($) At June 30, 1998 ($)
Name Exercise # Realized Exercisable/Unexercisable Exercisable/Unexercisable
---- ---------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Martin Sacks [0] [0] 250,771/37,500(1) $3,636,180/$173,250(2)
Geoffrey Koblick [0] [0] 142,500/33,750(1) $1,551,863/$151,875(2)
Ken Fineman [0] [0] 13,125/54,375(1) $116,025/$565,439(2)
Marty Shapiro [0] [0] 54,900/25,975(1) $725,843/$193,473(2)
Robert Mayer [0] [0] 68,608/20,000(1) $716,716/$99,000(2)
</TABLE>
(1) These options, which have a five-year vesting period, become exercisable
over time based on continuous employment with the Company and in certain
cases are subject to various performance criteria or vest in full upon
acquisition of the Company.
(2) Based on the difference between the market price of the Common Stock at
June 30, 1998 ($14.50 per share), and the aggregate exercise prices of
options shown in the table.
26
<PAGE> 27
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See "Option Grants in Fiscal 1998."
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange 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, to file with the Commission initial
reports of ownership and reports of changes in ownership of the Company's Common
Stock and other equity securities of the Company. Officers, directors and
greater than ten percent shareholders are required by the Commission's
regulations to furnish the Company with copies of all Section 16(a) forms they
filed. To the Company's knowledge, based on review of the copies of such reports
furnished to the Company, during the last fiscal year all Section 16(a) filing
requirements applicable to the Company's officers, directors, and greater than
ten percent beneficial owners were complied with.
ANNUAL REPORT TO SHAREHOLDERS
The Company's Annual Report to Shareholders for the year ended June 30,
1998, containing the audited consolidated balance sheets at June 30, 1997 and
1998 and the related consolidated statements of operations, consolidated
statements of shareholders' equity, and consolidated statements of cash flows
for each of the three years ended June 30, 1998, is being mailed with this Proxy
Statement to shareholders entitled to notice of the Annual Meeting.
SHAREHOLDER PROPOSALS
The Company will, in the future proxy statements of the Board, include
shareholder proposals complying with the applicable rules of the Securities and
Exchange Commission, any applicable state laws, and the Company's charter
documents. Accordingly, in order for a proposal by a shareholder to be included
in the proxy statement of the Board relating to the annual meeting of
shareholders following completion of the fiscal year ending June 30, 1999, the
proposal must be received in writing by the Secretary of the Company no later
than September 30th, 1999.
OTHER MATTERS
The Board knows of no other matters that will be presented at the Annual
Meeting. If however, any matter is properly presented at the Annual Meeting, the
proxy solicited hereby will be voted in accordance with the judgment of the
proxy holders. Representatives of the Company's independent auditors, Deloitte &
Touche LLP, are expected to be present at the Annual Meeting with the
opportunity to make a statement if they so desire to do so, and are expected to
be available to respond to appropriate questions.
By Order of the Board of Directors,
/s/ Geoffrey B. Koblick,
Geoffrey B. Koblick, Chairman of the Board,
Secretary Novato, California
27
<PAGE> 28
INTERNATIONAL MICROCOMPUTER SOFTWARE, INC. PROXY FOR ANNUAL MEETING OF
STOCKHOLDERS
February 5th, 1999
The undersigned hereby appoints Martin Sacks and Geoffrey B. Koblick, or either
of them, each with full power of substitution, to represent the undersigned at
the Annual Meeting of Shareholders of International Microcomputer Software, Inc.
("IMSI") to be held at 10:00 a.m. P.S.T., on Friday, February 4th, 1999, at the
Company's executive offices at 75 Rowland Way, Novato, California 94945, (415)
257-3000, and at any adjournments or postponements thereof, and to vote the
number of shares the undersigned would be entitled to vote if personally present
at the meeting on the following matters:
1. ELECTION OF DIRECTORS.
[ ] FOR all nominees listed [ ] WITHHOLD AUTHORITY
below (except as indicated to vote for all nominees
to the contrary below) listed below
Nominees: Charles Federman, Earl S. Hamlin, Geoffrey B. Koblick,
Robert Mayer, Abe Ostrovsky and Martin Sacks
Instruction: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided below:
---------------------------------------------------------
2. APPROVAL OF AMENDMENT TO 1993 EMPLOYEE INCENTIVE PLAN TO INCREASE THE
NUMBER OF SHARES OF COMMON STOCK (AND OPTIONS THEREFOR) RESERVED AND
AUTHORIZED FOR ISSUANCE UNDER THE PLAN BY 750,000 SHARES.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. THE TRANSACTION OF SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE
MEETING OR ANY ADJOURNMENTS OR POSTPONEMENTS OF THE MEETING.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF ALL
NOMINEES AND FOR PROPOSAL NO. 2
28
<PAGE> 29
THIS PROXY WILL BE VOTED AS DIRECTED ABOVE. WHEN NO CHOICE IS INDICATED,
THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE SIX NOMINEES FOR ELECTION TO
THE BOARD OF DIRECTORS AND FOR PROPOSAL NO. 2. In their discretion, the proxy
holders are authorized to vote upon such other business as may properly come
before the meeting or any adjournments or postponements thereof to the extent
authorized by Rule 14a-4(c) promulgated under the Securities Exchange Act of
1934, as amended.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF IMSI.
Dated: _____________, 1999
__________________________
__________________________
Please sign exactly as your name(s) appear(s) 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 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, administrators or other
fiduciaries that execute the above proxy for a deceased shareholder should give
their full title. Please date the proxy.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO
COMPLETE, DATE, SIGN AND PROMPTLY MAIL THIS PROXY IN THE ENCLOSED RETURN
ENVELOPE SO THAT YOUR SHARES MAY BE REPRESENTED AT THE MEETING.
29
