<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
PHOENIX TECHNOLOGIES LTD.
- --------------------------------------------------------------------------------
(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)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
[LOGO]
December 30, 1997
To Our Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders of
Phoenix Technologies Ltd. to be held on Wednesday, February 18, 1998, at your
Company's headquarters located at 411 East Plumeria Drive, San Jose, California,
commencing at 10:00 a.m., California Time. The Board of Directors looks forward
to greeting personally those stockholders able to attend.
The Board of Directors has given careful consideration to the proposals
described in the attached Notice and Proxy Statement and recommends a vote FOR
each of them. It is important that your shares be represented at the meeting
whether or not you plan to attend. Accordingly, please take a moment now and
sign, date and mail the enclosed proxy in the envelope provided.
Following the completion of the formal portion of the meeting, we will give
you a financial report and general comments on the Company's affairs. We shall
then be pleased to answer appropriate stockholders' questions with respect to
the Company and its operations.
On behalf of Phoenix's Board of Directors and its management team, I would
like to express our appreciation for your ongoing support of our efforts.
Cordially,
[JACK KAY SIG]
JACK KAY
PRESIDENT AND CHIEF EXECUTIVE OFFICER
<PAGE>
PHOENIX TECHNOLOGIES LTD.
411 EAST PLUMERIA DRIVE
SAN JOSE, CALIFORNIA 95134
(408) 570-1000
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 18, 1998
------------------------
Notice is hereby given that the Annual Meeting of Stockholders of Phoenix
Technologies Ltd. (the "Company" or "Phoenix") will be held at the Company's
headquarters located at 411 East Plumeria Drive, San Jose, California 95134, on
February 18, 1998, at 10:00 a.m., California Time, to consider and act upon the
following matters:
1. To elect two Class 2 Directors to the Board of Directors of the Company;
2. To approve an amendment to the Company's 1998 Stock Plan to increase the
number of shares reserved for issuance thereunder by 800,000 shares;
3. To approve the Amended 1991 Employee Stock Purchase Plan, which includes
an increase to the number of shares reserved for issuance thereunder by
150,000 shares;
4. To ratify the selection by the Board of Directors of Ernst & Young, LLP
as the Company's independent public accountants for the current fiscal
year; and
5. To transact such other business as may properly come before the meeting
or any adjournments thereof.
Stockholders of record at the close of business on December 20, 1997 will be
entitled to vote at the meeting or any adjournments thereof.
All stockholders are cordially invited to attend the meeting.
STUART J. NICHOLS, SECRETARY
December 30, 1997
<PAGE>
PROXY STATEMENT
PHOENIX TECHNOLOGIES LTD.
411 EAST PLUMERIA DRIVE
SAN JOSE, CALIFORNIA 95134
------------------------
PROXY STATEMENT FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD FEBRUARY 18, 1998
------------------------
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of Phoenix Technologies Ltd. (the "Company" or "Phoenix") of
proxies for use at the Annual Meeting of Stockholders of the Company (the
"Meeting") to be held on February 18, 1998, at the Company's headquarters
located at 411 East Plumeria Drive, San Jose, California, commencing at 10:00
a.m., California Time, and at any adjournments thereof. All proxies are
solicited for the purposes set forth herein and in the Notice of Annual Meeting
of Stockholders that accompanies this proxy statement. All proxies will be voted
in accordance with the instructions contained therein, and, if no choice is
specified, the proxies will be voted in favor of the nominees and the proposals
set forth in the accompanying Notice of Meeting and this Proxy Statement.
The Company's Annual Report for the fiscal year ended September 30, 1997 is
first being mailed to stockholders with the mailing of this Notice, Proxy
Statement and form of Proxy on or about December 30, 1997.
VOTING
The only class of voting securities entitled to be voted at the Meeting is
the Company's Common Stock, par value $.001 per share ("Common Stock"). Each
share of Common Stock is entitled to one vote. The Board of Directors has fixed
December 20, 1997 as the record date for determining stockholders who are
entitled to notice of and to vote at the Meeting. At the close of business on
the record date, there were outstanding and entitled to vote 16,846,592 shares
of Common Stock held by 393 stockholders of record.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
The holders of a majority of these shares of Common Stock issued and
outstanding and entitled to vote at the Meeting will constitute a quorum for the
Meeting. The required quorum for transacting business at the Annual Meeting is a
majority of the votes eligible to be cast by holders of shares of Common Stock
issued and outstanding on the record date (i.e., 8,423,296 shares). Shares that
are voted "FOR", "AGAINST", "ABSTAIN" or "WITHHELD" are treated as being present
at the Annual Meeting (the "Votes Cast") with respect to such matter. The
Company will count abstentions for purposes of determining both (i) the presence
or absence of a quorum for transacting business, and (ii) the total number of
Votes Cast with respect to a proposal (other than the election of directors).
Accordingly, abstentions will have the same effect as a vote against the
proposal.
Broker non-votes will be counted for purposes of determining the presence or
absence of a quorum for transacting business, but will not be counted for
purposes of determining the number of Votes Cast with respect to the particular
proposal on which the broker has expressly not voted. Accordingly, broker non-
votes will not affect the outcome of the voting on a proposal that requires a
majority of the Votes Cast (such as the approval of a plan).
<PAGE>
COST OF SOLICITING PROXIES
The cost of soliciting proxies will be borne by the Company. Following the
original mailing of the proxies and other soliciting materials, employees or
other agents of the Company may solicit proxies by mail, telephone, telegraph or
personal interviews. The Company will request brokers, custodians, nominees and
other record holders to forward copies of the proxy and other soliciting
material to persons for whom they hold shares of Common Stock of the Company,
and to request authority for the exercise of proxies; in such cases, the
Company, upon request of the record holders, will reimburse such holders for
their reasonable expenses.
REVOCABILITY OF PROXIES
Any person signing a proxy in the form accompanying this Proxy Statement has
the power to revoke it prior to the Meeting or at the Meeting prior to the vote
pursuant to the proxy. Any proxy may be revoked by a stockholder at any time
before it is exercised by giving written notice to that effect to the Secretary
of the Company, by submitting a subsequent proxy or by attending the Meeting and
voting in person. Please note, however, that if a stockholder's shares are held
of record by a broker, bank or other nominee and that stockholder wishes to vote
at the Meeting, the stockholder must bring to the Meeting a letter from the
broker, bank or other nominee confirming that stockholder's beneficial ownership
of the shares.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Management of the Company has nominated Ronald D. Fisher and Lance E.
Hansche as Class 2 Directors (the "Nominees"). Messrs. Fisher and Hansche are
presently Class 2 Directors of the Company. The Company expects each of the
Nominees to be available to serve as a Director. If, however, either of the
Nominees is unable or declines to serve for any reason, proxies will be voted
(in the absence of any contrary specification by a stockholder) for the election
of a substitute nominee selected by the proxy holders.
The Company has a classified Board of Directors consisting of two Class 1
Directors (Mr. Finch and Mr. Morris), two Class 2 Directors (Mr. Fisher and Mr.
Hansche) and two Class 3 Directors (Mr. Federman and Mr. Kay). The Class 1, 2
and 3 Directors are scheduled to serve until the Annual Meetings of Stockholders
to be held in 2000, 1998, and 1999, respectively, and until their respective
successors are elected and qualified. At each Annual Meeting of Stockholders,
Directors will be elected for a full term of three years to succeed those
Directors whose terms are expiring. Thus, if Messrs. Fisher and Hansche are
elected, they will serve until the Annual Meeting of Stockholders in 2001.
Certain information with respect to the Directors of the Company is set
forth below. The Directors whose names are followed by an asterisk(*) are
members of the Audit Committee and the Compensation Committee.
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE SINCE POSITIONS AND CURRENT OFFICES WITH THE COMPANY
- ------------------------------------------- --- ----------- -----------------------------------------------------
<S> <C> <C> <C>
Charles Federman*.......................... 41 1991 Director
Lawrence G. Finch*......................... 63 1988 Director
Ronald D. Fisher........................... 50 1990 Director; Chairman
Lance E. Hansche........................... 50 1986 Director
Jack Kay................................... 51 1995 Director; President and Chief Executive Officer
Anthony P. Morris*......................... 51 1993 Director
</TABLE>
2
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Mr. Federman has been a Partner of Broadview Associates, L.L.C., an
investment banking firm since January 1987, and is presently a Managing
Director. Mr. Federman is a director of Logic Works, Inc., MathSoft, Inc. and
International Microcomputer Software, Inc.
Mr. Finch has been a general partner of Sigma Partners, a venture capital
partnership, since January 1989. From 1987 to 1988 he was an advisor to Sigma
Partners. From March 1984 to November 1987, Mr. Finch was President and Chief
Executive Officer of Paradise Systems, Inc., a video technology company. Mr.
Finch is a director of International Network Services.
Mr. Fisher has served as Chairman of the Company since June 1994. From
January 1990, when he joined the Company, until October 1995, Mr. Fisher held
the additional title of Chief Executive Officer. Mr. Fisher currently serves as
the Vice Chairman of SOFTBANK Holdings, Inc. Mr. Fisher is also a director of
Xionics Document Technologies, Inc., MicroTouch Systems, Inc., Segue Software,
Inc., and SOFTBANK Corporation, Japan.
Since 1995, Mr. Hansche has been President of LifeCycle Systems, Inc., a
computer software company he co-founded. Mr. Hansche was employed by the Company
from 1982 until July 1997, serving as a Strategic Advisor on a part-time
non-officer basis since September 1993. He served as Senior Vice President,
Corporate Strategy of the Company from February 1992 until September 1993. From
February 1990 to February 1992, the Company employed Mr. Hansche as Senior Vice
President, Computer Division and Business Development.
Mr. Kay has served as President and Chief Executive Officer of the Company
since October 1, 1995. He joined the Company as Vice President of Worldwide
Sales in May 1990. In January 1992, he was appointed Senior Vice President and
Chief Operating Officer. In June 1994, he was promoted to President and Chief
Operating Officer.
Mr. Morris has been a principal with Morris & Associates, a management
consulting and financial advisory firm which he founded in 1987. He is also an
investor in a number of private technology companies.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held a total of five meetings during the fiscal year
ended September 30, 1997. During fiscal 1997, each Director attended at least
eighty percent of the aggregate number of meetings of the Board of Directors
held during the year and the total number of meetings held by all committees of
the Board of Directors on which he served during the fiscal year.
The Board of Directors has an Audit Committee and a Compensation Committee.
The Company does not have a standing nominating committee of the Board of
Directors or a committee performing similar functions.
The Audit Committee, which consists of Messrs. Federman, Finch and Morris,
held four meetings during fiscal 1997. The Audit Committee's functions include
making recommendations to the Board of Directors relative to the appointment of
independent public accountants, conferring with the Company's independent public
accountants regarding the scope and the results of the audit of the Company's
books and accounts and reporting the same to the Board of Directors, and
establishing and monitoring policy relative to non-audit services provided by
the independent public accountants.
The Compensation Committee, which consists of Messrs. Federman, Finch and
Morris, met once and took additional actions by written consent during fiscal
1997. The Compensation Committee's functions include making grants under, and
the administration of, stock option and other employee equity and bonus plans,
and setting the cash compensation of executive officers and other key employees,
and reviewing and approving the Company's executive compensation policy.
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<PAGE>
COMPENSATION OF DIRECTORS
Non-employee Directors are paid a fee of $1,500 for each meeting of the
Board of Directors they attend. Directors are also reimbursed for out-of-pocket
expenses for attending meetings of the Board of Directors or any committee of
the Board of Directors. Morris & Associates has a consulting agreement with the
Company under which consulting fees were paid in fiscal 1997 and Broadview
Associates, L.L.C. had certain investment banking and appraisal agreements with
the Company under which fees were paid in fiscal 1997 (see, "Compensation
Committee Interlocks and Insider Participation").
Directors are entitled to receive options under the Company's 1994 and 1996
Stock Plans and will be eligible to receive options under the 1998 Stock Plan if
the stockholders approve the Plan. During fiscal 1997, the Company granted stock
options for 7,000 shares to each of Messrs. Federman, Finch and Morris and
granted options to Mr. Hansche on 32,400 shares, each grant having an exercise
price equal to the fair market value of the Company's Common Stock on the date
of grant.
REQUIRED VOTE
Directors shall be elected by a plurality of votes of the shares of the
Company's Common Stock entitled to vote and represented in person or by proxy at
the Meeting. Votes against, votes withheld and broker non-votes have no legal
effect on the election of Directors due to the fact that such elections are by a
plurality.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR MESSRS. FISHER AND HANSCHE
PROPOSAL NO. 2
APPROVAL OF THE 1998 STOCK PLAN
On December 2, 1997, the Board of Directors adopted the 1998 Stock Plan (the
"Plan") and reserved 800,000 shares of Common Stock for issuance thereunder
subject to stockholder approval. No options or rights to purchase stock have
been granted pursuant to the Plan. The Plan is summarized below.
The Board proposes the Plan principally to provide a continuing benefit
program for attracting and retaining employees, officers, directors, consultants
and independent contractors important to the future of the Company. The Board
believes that stock incentive programs, such as the Plan, are commonly employed
by companies in the software industry and, in particular, in Silicon Valley
where Phoenix is headquartered, as an important element of a total compensation
program.
The Board is seeking stockholder approval for a number of reasons,
including: (a) the traditional right of stockholders to vote on employee benefit
programs which may have a significant dilutive impact; (b) requirements of the
Nasdaq Stock Market, Inc. applicable to companies with securities listed on the
Nasdaq National Market; (c) the ability to grant incentive stock options as
provided in the Internal Revenue Code of 1986, as amended (the "Code"); and (d)
the ability to ensure tax deductibility under Section 162(m) of the Code. At the
Annual Meeting, the stockholders are being asked to approve the Plan and the
reservation of shares thereunder.
SUMMARY OF THE 1998 STOCK PLAN
GENERAL. The purpose of the Plan is to attract and retain the best
available personnel, to provide additional incentive to the employees, directors
and consultants of the Company and to promote the success of the Company's
business. Options and stock purchase rights may be granted under the Plan.
Options granted under the Plan may be either "incentive stock options," as
defined in Section 422 of the Internal Revenue Code of 1986, as amended, or
nonstatutory stock options.
4
<PAGE>
ADMINISTRATION. The Plan may generally be administered by the Board or a
Committee appointed by the Board (as applicable, the "Administrator").
ELIGIBILITY; LIMITATIONS. Nonstatutory stock options and stock purchase
rights may be granted under the Plan to employees, directors and consultants of
the Company and any parent or subsidiary of the Company. Incentive stock options
may be granted only to employees. The Administrator, in its discretion, selects
the employees, directors and consultants to whom options and stock purchase
rights may be granted, the time or times at which such options and stock
purchase rights shall be granted, and the number of shares subject to each such
grant.
Section 162(m) of the Code places limits on the deductibility for federal
income tax purposes of compensation paid to certain executive officers of the
Company. In order to preserve the Company's ability to deduct the compensation
income associated with options and stock purchase rights granted to such
persons, the Plan provides that no employee, director or consultant may be
granted, in any fiscal year of the Company, options and stock purchase rights to
purchase more than 125,000 shares of Common Stock. Notwithstanding this limit,
however, in connection with such individual's initial employment with the
Company, he or she may be granted options or stock purchase rights to purchase
up to an additional 125,000 shares of Common Stock.
TERMS AND CONDITIONS OF OPTIONS. Each option is evidenced by a stock option
agreement between the Company and the optionee, and is subject to the following
additional terms and conditions:
(a) EXERCISE PRICE. The Administrator determines the exercise price of
options at the time the options are granted. The exercise price of an incentive
stock option may not be less than 100% of the fair market value of the Common
Stock on the date such option is granted; provided, however, the exercise price
of an incentive stock option granted to a 10% stockholder may not be less than
110% of the fair market value of the Common Stock on the date such option is
granted. The fair market value of the Common Stock is generally determined with
reference to the closing sale price for the Common Stock (or the closing bid if
no sales were reported) on the last market trading day prior to the date the
option is granted.
(b) EXERCISE OF OPTION; FORM OF CONSIDERATION. The Administrator
determines when options become exercisable, and may in its discretion,
accelerate the vesting of any outstanding option. Stock options granted under
the Plan generally vest and become exercisable over four years. The means of
payment for shares issued upon exercise of an option is specified in each option
agreement. The Plan permits payment to be made by cash, check, promissory note,
other shares of Common Stock of the Company (with some restrictions), cashless
exercises, a reduction in the amount of any Company liability to the optionee,
any other form of consideration permitted by applicable law, or any combination
thereof.
(c) TERM OF OPTION. The term of an incentive stock option may be no more
than ten (10) years from the date of grant; provided that in the case of an
incentive stock option granted to a 10% stockholder, the term of the option may
be no more than five (5) years from the date of grant. No option may be
exercised after the expiration of its term.
(d) TERMINATION OF EMPLOYMENT. If an optionee's employment or consulting
relationship terminates for any reason other than death or disability, then all
options held by the optionee under the Plan expire on the earlier of (i) the
date set forth in his or her notice of grant (normally ninety days past
termination) or (ii) the expiration date of such option. To the extent the
option is exercisable at the time of such expiration, the optionee may exercise
all or part of his or her option at any time before expiration.
(e) DEATH OR DISABILITY. If an optionee's employment or consulting
relationship terminates as a result of death or disability, then all options
held by such optionee under the Plan expire on the earlier of (i) the date set
forth in his or her notice of grant (normally 90 days after death or disability)
or (ii) the expiration date of such option. The optionee (or the optionee's
estate or the person who acquires the right to exercise the option by bequest or
inheritance), may exercise all or part of the option at any time before such
expiration to the extent that the option was exercisable at the time of such
termination.
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<PAGE>
(g) NONTRANSFERABILITY OF OPTIONS: Options granted under the Plan are
generally not transferable other than by will or the laws of descent and
distribution, and may be exercised during the optionee's lifetime only by the
optionee.
(h) OTHER PROVISIONS: The stock option agreement may contain other terms,
provisions and conditions not inconsistent with the Plan as may be determined by
the Administrator.
STOCK PURCHASE RIGHTS. In the case of stock purchase rights, unless the
Administrator determines otherwise, the Restricted Stock Purchase Agreement
shall grant the Company a repurchase option exercisable upon the voluntary or
involuntary termination of the purchaser's employment with the Company for any
reason (including death or disability). The purchase price for shares
repurchased pursuant to the Restricted Stock Purchase Agreement shall be the
original price paid by the purchaser and may be paid by cancellation of any
indebtedness of the purchaser to the Company. The repurchase option shall lapse
at a rate determined by the Administrator.
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. In the event that the stock of
the Company changes by reason of any stock split, reverse stock split, stock
dividend, combination, reclassification or other similar change in the capital
structure of the Company effected without the receipt of consideration,
appropriate adjustments shall be made in the number and class of shares of stock
subject to the Plan, the number and class of shares of stock subject to any
option or stock purchase right outstanding under the Plan, and the exercise
price of any such outstanding option or stock purchase right.
In the event of a liquidation or dissolution, any unexercised options or
stock purchase rights will terminate. The Administrator may, in its discretion
provide that each optionee shall have the right to exercise all of the
optionee's options and stock purchase rights, including those not otherwise
exercisable, until the date ten (10) days prior to the consummation of the
liquidation or dissolution.
In connection with any merger, consolidation, acquisition of assets or like
occurrence involving the Company, each outstanding option or stock purchase
right shall be assumed or an equivalent option or right substituted by the
successor corporation. If the successor corporation refuses to assume the
options and stock purchase rights or to substitute substantially equivalent
options and stock purchase rights, the optionee shall have the right to exercise
the option or stock purchase right as to all the optioned stock, including
shares not otherwise exercisable. In such event, the Administrator shall notify
the optionee that the option or stock purchase right is fully exercisable for
fifteen (15) days from the date of such notice and that the option or stock
purchase right terminates upon expiration of such period.
AMENDMENT AND TERMINATION OF THE PLAN. The Board may amend, alter, suspend
or terminate the Plan, or any part thereof, at any time and for any reason.
However, the Company shall obtain stockholder approval for any amendment to the
Plan to the extent necessary to comply with Section 162(m) and Section 422 of
the Code, or any similar rule or statute. No such action by the Board or
stockholders may alter or impair any option or stock purchase right previously
granted under the Plan without the written consent of the optionee. Unless
terminated earlier, the Plan shall terminate ten years from the date of its
approval by the stockholders or the Board of the Company, whichever is earlier.
FEDERAL INCOME TAX CONSEQUENCES
INCENTIVE STOCK OPTIONS. An optionee who is granted an incentive stock
option does not recognize taxable income at the time the option is granted or
upon its exercise, although the exercise may subject the optionee to the
alternative minimum tax. Upon a disposition of the shares more than two years
after grant of the option and one year after exercise of the option, any gain or
loss is treated as long-term capital gain or loss. If these holding periods are
not satisfied, the optionee recognizes ordinary income at the time of
disposition equal to the difference between the exercise price and the lower of
(i) the fair market value of the shares at the date of the option exercise or
(ii) the sale price of the shares. Any gain or loss recognized on such a
premature disposition of the shares in excess of the amount treated as ordinary
income is treated as
6
<PAGE>
long-term or short-term capital gain or loss, depending on the holding period. A
different rule for measuring ordinary income upon such a premature disposition
may apply if the optionee is also an officer, director, or 10% stockholder of
the Company. The Company is entitled to a deduction in the same amount as the
ordinary income recognized by the optionee.
NONSTATUTORY STOCK OPTIONS. An optionee does not recognize any taxable
income at the time he or she is granted a nonstatutory stock option. Upon
exercise, the optionee recognizes taxable income generally measured by the
excess of the then fair market value of the shares over the exercise price. Any
taxable income recognized in connection with an option exercise by an employee
of the Company is subject to tax withholding by the Company. The Company is
entitled to a deduction in the same amount as the ordinary income recognized by
the optionee. Upon a disposition of such shares by the optionee, any difference
between the sale price and the optionee's exercise price, to the extent not
recognized as taxable income as provided above, is treated as long-term or
short-term capital gain or loss, depending on the holding period.
STOCK PURCHASE RIGHTS. Stock purchase rights will generally be taxed in the
same manner as nonstatutory stock options. However, restricted stock is
generally purchased upon the exercise of a stock purchase right. At the time of
purchase, restricted stock is subject to a "substantial risk of forfeiture"
within the meaning of Section 83 of the Code. As a result, the purchaser will
not recognize ordinary income at the time of purchase. Instead, the purchaser
will recognize ordinary income on the dates when a stock ceases to be subject to
a substantial risk of forfeiture. The stock will generally cease to be subject
to a substantial risk of forfeiture when it is no longer subject to the
Company's right to repurchase the stock upon the purchaser's termination of
employment with the Company. At such times, the purchaser will recognize
ordinary income measured as the difference between the purchase price and the
fair market value of the stock on the date the stock is no longer subject to a
substantial risk of forfeiture.
The purchaser may accelerate to the date of purchase his or her recognition
of ordinary income, if any, and the beginning of any capital gain holding period
by timely filing an election pursuant to Section 83(b) of the Code. In such
event, the ordinary income recognized, if any, is measured as the difference
between the purchase price and the fair market value of the stock on the date of
purchase, and the capital gain holding period commences on such date. The
ordinary income recognized by a purchaser who is an employee will be subject to
tax withholding by the Company. Different rules may apply if the purchaser is
also an officer, director, or 10% stockholder of the Company.
THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF FEDERAL INCOME TAXATION
UPON OPTIONEES, HOLDERS OF STOCK PURCHASE RIGHTS, AND THE COMPANY WITH RESPECT
TO THE GRANT AND EXERCISE OF OPTIONS AND STOCK PURCHASE RIGHTS UNDER THE PLAN.
IT DOES NOT PURPORT TO BE COMPLETE, AND DOES NOT DISCUSS THE TAX CONSEQUENCES OF
THE EMPLOYEE'S OR CONSULTANT'S DEATH OR THE PROVISIONS OF THE INCOME TAX LAWS OF
ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH THE EMPLOYEE OR CONSULTANT
MAY RESIDE.
REQUIRED VOTE
The affirmative vote of the holders of a majority of the shares represented
and voting at the Annual Meeting is required to approve the adoption of the 1998
Stock Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR THE APPROVAL OF THE 1998 STOCK PLAN
7
<PAGE>
PROPOSAL NO. 3
APPROVAL OF AMENDED AND RESTATED 1991 EMPLOYEE STOCK PURCHASE PLAN
The Board of Directors adopted the 1991 Employee Stock Purchase Plan (the
"ESPP") in 1991 and stockholders approved the ESPP in February 1992. Under the
ESPP as originally adopted, 500,000 shares of the Company's Common Stock
(subject to adjustment for any dividend, stock split or other relevant changes
in the Company's capitalization) were reserved for issuance. In February 1996,
the stockholders approved an amended and restated ESPP pursuant to which
amendment 150,000 additional shares were authorized. As of September 30, 1997, a
total of 508,789 shares had been issued under the ESPP over the twelve offering
periods since its inception.
PROPOSAL
In December 1997, the Board of Directors amended the ESPP to increase the
shares reserved by 150,000 shares, for an aggregate of 800,000 shares reserved
for issuance. At the Annual Meeting, the stockholders are being asked to approve
the amendment to increase the number of shares reserved under the ESPP.
SUMMARY OF THE AMENDED AND RESTATED EMPLOYEE STOCK PURCHASE PLAN
The ESPP permits eligible employees to purchase shares of the Company's
Common Stock at a price equal to the lower of 85% of the closing price of
Phoenix Common Stock as reported on the Nasdaq National Market on the first or
last day of each offering period. Offering periods may be of any duration up to
the maximum period permitted for an employee stock purchase plan intended to
meet the qualifications of Section 423 of the Code. To date, offering periods
under the ESPP have been of six months duration starting each June 1 and
December 1 and there is no plan to change that duration. All employees of
Phoenix or its subsidiaries who are normally employed for 20 or more hours per
week and more than five months in a calendar year are eligible to participate in
the ESPP. An employee may elect to have up to 10% deducted from his or her
eligible compensation, which is cash compensation received as base salary,
commissions, and overtime or shift premiums. An employee may change his or her
payroll deduction once during an offering period and may also change the
deduction effective at the beginning of any later offering period. The
Compensation Committee of the Board of Directors administers the ESPP.
FEDERAL INCOME TAX CONSEQUENCES. The ESPP is intended to qualify as an
"employee stock purchase plan" as defined in Section 423 of the Code, which
provides that a participant will not realize any federal income tax consequence
when the participant joins the plan or receives shares of the Company's Common
Stock at the end of an offering period. The participant must, however, recognize
income or loss on the difference between the sale price and the purchase price
of the shares. If the participant has owned the shares for more than one year
and more than two years from the beginning of the Offering Period in which the
shares were purchased (the "Related Offering Period"), the participant will (a)
recognize no gain if the market price on the date of sale equals the purchase
price for the shares, (b) recognize a capital loss if the market price on the
date of sale is less than the purchase price for the shares, or (c) if the
market price on the date of sale is greater than the purchase price for the
shares, recognize ordinary income in an amount equal to the lesser of (i) the
excess of the market price of the shares on the first day of the Related
Offering Period over the purchase price or (ii) the excess of the proceeds
received on the sale of the shares over the purchase price. In the case of (c)
above, if there is any additional gain, it will be treated as capital gain. If
the participant sells the shares before holding for more than one year or before
the second anniversary of the beginning of the Related Offering Period, the
participant must recognize ordinary income to the extent of the lesser of (a)
the excess of the market price on the last day of the Related Offering Period
over the purchase price or (b) the excess of the proceeds received on the sale
of the shares over the purchase price. The Company generally is entitled to a
tax deduction only with respect to the ordinary income recognized by
8
<PAGE>
the participant if the one- and two-year holding period requirements are not
met. The ESPP is not qualified under Section 401(a) of the Code.
REQUIRED VOTE
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 Meeting and voting on
the matter is required for approval of Proposal No. 3.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR APPROVAL OF THE AMENDED AND RESTATED 1991 EMPLOYEE STOCK PURCHASE PLAN
PROPOSAL NO. 4
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors, on the recommendation of its Audit Committee in
September 1997, has selected the firm of Ernst & Young LLP as the Company's
independent auditors for the current fiscal year and is asking stockholders to
ratify this selection.
Representatives of Ernst & Young LLP are expected to be present at the
Meeting. They will have the opportunity to make a statement if they desire to do
so and are also expected to be available to respond to appropriate questions
from stockholders.
REQUIRED VOTE
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 Meeting and voting on
the matter is required for approval of Proposal No. 4.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR RATIFICATION OF THE SELECTION OF ERNST & YOUNG LLP
9
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of November 30, 1997 with
respect to the Common Stock owned beneficially by (i) any person who is known to
the Company to be the beneficial owner of more than five percent of its Common
Stock, (ii) each Director of the Company, (iii) each Named Executive Officer as
defined in the Summary Compensation Table below, and (iv) all current Directors
and executive officers of the Company as a group. Except as otherwise indicated
in the footnotes to the table, the beneficial owners listed have sole voting and
investment power (subject to community property laws where applicable) as to all
of the shares beneficially owned by them.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
- ------------------------------------------------------------ ---------------------- --------
<S> <C> <C>
Kopp Investment Advisors, Inc. (1) ......................... 3,083,227 18.2%
6600 France Avenue South, Suite 672
Edina, MN 55435
Intel Corporation (2) ...................................... 1,324,557 7.8%
2200 Mission College Boulevard
Santa Clara, CA 95052-8119
Wasatch Advisors, Inc. (3) ................................. 1,159,764 6.9%
68 South Main Street, Suite 400
Salt Lake City, UT 84101
Franklin Resources (4) ..................................... 885,000 5.2%
777 Mariners Island Blvd.
San Mateo, California 94404
Ronald D. Fisher (5)(8)..................................... 465,300 2.8%
Jack Kay (8)................................................ 472,050 2.8%
Lawrence G. Finch (8)....................................... 54,473 *
Lance E. Hansche (8)........................................ 15,875 *
Charles Federman (6)(8)..................................... 53,500 *
Robert J. Riopel (8)........................................ 42,147 *
Anthony P. Morris (7)(8).................................... 34,438 *
Craig Slayter (8)........................................... 33,647 *
David Frodsham (8).......................................... 37,984 *
Stuart J. Nichols........................................... 616 *
All current directors and executive officers as a group (10 1,265,458 7.5%
persons)(8)...............................................
</TABLE>
- ------------------------
* Ownership is less than 1%
(1) Based on information provided by Kopp Investment Advisors, Inc. ("KIA") on
behalf of itself, LeRoy C. Kopp ("Kopp") and Caring and Sharing Foundation
("Foundation"). Of these shares, 3,028,227 are held in a fiduciary or
representative capacity. Accordingly, persons other than KIA, Kopp and
Foundation have the right to receive, or the power to direct the receipt of,
dividends from, or the proceeds from the sale of, such shares. No such
person individually has an interest that relates to more than five percent
of the Company's Common Stock.
(2) Based on information provided pursuant to Schedule 13D filed with the
Securities and Exchange Commission on October 15, 1997 by Intel Corporation
("Intel"). Includes 429,586 shares with respect to which Intel may acquire
beneficial ownership at or within 60 days after November 30, 1997.
10
<PAGE>
(3) Based on information provided pursuant to Schedule 13G/A filed with the
Securities and Exchange Commission on August 25, 1997 by Wasatch Advisors,
Inc.
(4) Based on information provided pursuant to Schedule 13G filed with the
Securities and Exchange Commission on February 12, 1997 by Franklin
Resources, Inc.
(5) Includes 28,000 shares owned by Mr. Fisher, 3,300 shares held in the name of
Mr. Fisher's spouse; 2,000 shares held in the name of Mr. Fisher's son; and
2,000 shares held in the name of Mr. Fisher's daughter. Mr. Fisher has no
voting or investment power and disclaims beneficial ownership with respect
to the shares owned by his wife, son and daughter.
(6) Includes 18,000 shares owned by Mr. Federman and 1,000 shares held in trust
for his son.
(7) Includes 5,000 shares owned by Mr. Morris and 5,000 shares held in a
custodial account for his minor daughters.
(8) Includes an aggregate of 1,141,670 shares as to which the named persons
could acquire beneficial ownership at or within 60 days after November 30,
1997. As to each named person, such amounts are as follows: Mr.
Fisher--430,000; Mr. Kay--471,241; Mr. Finch--54,189; Mr. Hansche--15,875;
Mr. Federman--34,500; Mr. Riopel--41,147; Mr. Morris--24,438; Mr.
Slayter--33,251; Mr. Frodsham--37,029.
11
<PAGE>
EXECUTIVE COMPENSATION
The following table shows, as to the Chief Executive Officer and the other
persons who were executive officers as of September 30, 1997 (the "Named
Executive Officers"), as well as two former executive officers, all reportable
compensation awarded to, earned by, or paid to each for services to the Company
during the fiscal year ended September 30, 1997, as well as (where applicable)
such compensation for each such individual for the Company's previous two fiscal
years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------
-------------------------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS(#)
- ------------------------------------------------------- ---- ------------- ------------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Jack Kay............................................... 1997 $ 251,700 $ 159,813 -- 50,000
President and 1996 $ 225,000 $ 112,500 -- 0
Chief Executive Officer 1995 $ 175,000 $ 97,000 -- 0
David Frodsham (1)..................................... 1997 $ 134,860 $ 92,044(7) -- 70,000
Vice President and General Manager, PC Systems
Division
Stuart J. Nichols (2).................................. 1997 $ 53,826 $ 15,275 -- 35,000
Vice President, General Counsel & Secretary
Robert J. Riopel (3)................................... 1997 $ 166,700 $ 68,250 -- 35,000
Vice President, Finance, Chief 1996 $ 125,000 $ 50,000 -- 5,000
Financial Officer and Treasurer 1995 $ 71,111 $ 23,556 -- 85,000
Craig K. Slayter (4)................................... 1997 $ 183,300 $ 51,275 -- 85,000
Vice President, Worldwide Field Operations
FORMER EXECUTIVES:
David A. Everett (5)................................... 1997 $ 183,300 $ 50,894 -- 35,000
Former Vice President, 1996 $ 123,750 $ 63,750 -- 75,000
Worldwide Field Operations
Gayn B. Winters (6).................................... 1997 $ 160,000 $ 51,275 $ 199,940(8) 0
Former Vice President, Engineering 1996 $ 160,000 $ 35,000 $ 25,235 0
and Chief Technology Officer 1995 $ 24,242 $ 8,206 $ 14,577 75,000
</TABLE>
- ------------------------
(1) Mr. Frodsham was promoted to Vice President, General Manager, PC Systems
Division effective July 1, 1997.
(2) Mr. Nichols joined the Company on May 13, 1997. His fiscal 1997 bonus was
guaranteed and paid on a prorated basis.
(3) Mr. Riopel joined the Company on February 28, 1995. His fiscal 1995 bonus
was guaranteed and paid on a prorated basis.
(4) Mr. Slayter was promoted to Vice President, Worldwide Field Operations
effective October 7, 1997.
(5) Mr. Everett joined the Company on December 4, 1995 as Vice President,
Worldwide Field Operations. Mr. Everett resigned from the Company effective
October 6, 1997.
12
<PAGE>
(6) Dr. Winters joined the Company on August 7, 1995. His bonus for his first
year of employment was guaranteed.
(7) Includes commissions in the amount of $74,272.
(8) Includes (1) reimbursements in connection with relocation, (2) tax
equalization paid in connection with such reimbursements, and (3)
indebtedness owed the Company that was forgiven when Dr. Winters' employment
with the Company ended.
STOCK OPTIONS
The following tables set forth the stock options granted to each of the
Named Executive Officers under the Company's stock option plans and the options
exercised by such Named Executive Officers during the fiscal year ended
September 30, 1997:
OPTION GRANTS IN FISCAL 1997
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF
SECURITIES % OF TOTAL STOCK PRICE APPRECIATION
UNDERLYING OPTIONS GRANTED EXERCISE OR FOR OPTION TERM(3)
OPTIONS TO EMPLOYEES IN BASE PRICE EXPIRATION ------------------------
NAME GRANTED(1) FISCAL YEAR ($/SHARE)(2) DATE 5%($) 10%($)
- ------------------------------- ----------- -------------------- ----------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Jack Kay....................... 50,000 4.2% $ 12.375 5/13/07 $ 389,129 $ 986,128
David Frodsham................. 70,000 5.9% $ 13.50 7/21/07 $ 594,305 $ 1,506,087
Stuart J. Nichols.............. 35,000 3.0% $ 12.375 5/13/07 $ 272,390 $ 690,290
Robert J. Riopel............... 35,000 3.0% $ 12.375 5/13/07 $ 272,390 $ 690,290
Craig K. Slayter(4)............ 35,000 3.0% $ 12.375 5/13/07 $ 272,390 $ 690,290
50,000 4.2% $ 15.125 12/12/06 $ 475,602 $ 1,205,268
FORMER EXECUTIVE:
David A. Everett............... 35,000 3.0% $ 12.375 5/13/97 $ 272,390 $ 690,290
</TABLE>
- ------------------------
(1) All stock options granted to the Named Executive Officers vest over a
four-year period.
(2) The exercise price may be paid in cash, in shares of the Company's Common
Stock valued at fair market value on the exercise date, or through a
cashless exercise involving a same-day sale of all or part of the purchased
shares.
(3) These columns reflect the potential realizable value of each grant assuming
the market value of the Company's stock appreciates at 5% and 10% annually
from the date of grant over the term of the option. There is no assurance
that the actual stock price appreciation over the 10-year option term will
be at the assumed 5% or 10% levels or at any other level. Unless the market
price of the stock does in fact appreciate over the option term, no value
will be realized from the option grants.
(4) Mr. Slayter received two option grants during the fiscal year. The first
grant was given as part of his compensation package as Vice President and
General Manager, Special Products Division. The second grant was given in
connection with his promotion to Vice President, Worldwide Field Operations.
13
<PAGE>
AGGREGATED OPTION EXERCISES IN FISCAL 1997
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FY END(#)(2) AT FY END($)(3)
SHARES ACQUIRED VALUE -------------------------- --------------------------
NAME ON EXERCISE(#) REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------ --------------- ------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jack Kay...................... 0 0 439,992 150,008 $ 4,298,625 $ 1,112,579
David Frodsham................ 0 0 22,812 93,436 $ 172,803 $ 182,646
Stuart J. Nichols............. 0 0 0 35,000 $ 0 $ 87,000
Robert J. Riopel.............. 0 0 34,554 90,446 $ 243,820 $ 478,055
Craig K. Slayter.............. 8,000 $ 99,703 23,563 93,437 $ 164,281 $ 152,969
FORMER EXECUTIVES:
David A. Everett.............. 7,500 $ 55,313 29,797 80,703 $ 62,666 $ 218,896
Gayn B. Winters............... 25,000 $ 115,313 0 50,000 $ 0 $ 206,250
</TABLE>
- ------------------------
(1) These amounts represent the fair market value of the shares underlying the
stock options on the date of exercise less the stock option exercise price.
(2) These options were granted on various dates during fiscal years 1991 through
1997.
(3) These amounts represent the difference between the exercise price of the
stock options and the closing price of Phoenix Common Stock on September 30,
1997 for all options held by each Named Executive Officer. The stock option
exercise prices ranged from $2.38 to $19.875 per share.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors administers the
Company's executive compensation program. The role of the Compensation Committee
is to set the salaries and other compensation of the executive officers and
certain other key employees of Phoenix, and to make grants under, and to
administer, the stock option and other employee equity and bonus plans. The
members of the Compensation Committee are Charles Federman, Lawrence G. Finch
and Anthony P. Morris. Each of these persons is a non-employee director within
the meaning of Section 16 of the Securities Exchange Act of 1934, as amended,
and an "outside director" within the meaning of Section 162(m) of the Code.
GENERAL COMPENSATION PHILOSOPHY
The Compensation Committee of the Board of Directors establishes the overall
executive compensation strategies of the Company and approves compensation
elements for the Chief Executive Officer and other executive officers. The goals
of the Company's compensation policy are to attract, retain and reward executive
officers who contribute to the overall success of the Company by offering
compensation that is competitive in the industry, to motivate executive officers
to achieve the Company's business objectives and to align the interests of
executive officers with the long-term interests of stockholders.
The compensation philosophy of the Compensation Committee is to provide a
compensation package for each executive officer designed to support
accomplishment of the Company's business strategies, objectives and initiatives.
Consistent with this philosophy, cash compensation for executive officers is
intended to vary with the performance of the Company, and any long-term
incentive should be closely aligned with the interest of the Company's
stockholders. For incentive-based compensation, the Compensation Committee
considers the desirability of structuring such compensation arrangements so as
to qualify for deductibility under Section 162(m) of the Code.
14
<PAGE>
Cash compensation for the executive officers named in the Summary
Compensation Table above consists of the following components:
- Base salary
- An incentive bonus related to growth in revenue and in earnings per share
as well as satisfaction of individual objectives.
Long term incentive-based compensation for executive officers is realized
through the granting of stock options. The stock option program directly links a
portion of compensation to the interests of stockholders by providing an
incentive to maximize stockholder value. 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.
COMPENSATION OF EXECUTIVE OFFICERS DURING FISCAL 1997
Each executive officer's performance for the past fiscal year and objectives
for the current year are reviewed, in light of the executive's responsibility
level and the Company's fiscal performance versus objectives and potential
performance targets. When establishing salaries, bonus levels and stock option
awards for executive officers, the Committee considers: (1) the Company's
financial performance during the past year, (2) the individual's performance
during the past year, and (3) the salaries of executive officers in similar
positions of companies of comparable size and other companies within the
computer software industry. The companies whose executive officer salaries were
considered in determining compensation for the Company's executive officers were
not intended to correlate with the companies included in the indices used by the
Company in preparing its stock performance graph. With respect to executive
officers other than the CEO, the Committee places considerable weight upon the
recommendations of the CEO. The method for determining compensation varies from
case to case based on a discretionary and subjective determination of what is
appropriate at the time. Generally, no one factor is given greater consideration
in determining compensation than the other factors referred to above. The
Compensation Committee determines the incentive bonus and criteria for earning
all or a portion of the incentive bonus. In making this determination, the
Compensation Committee considers the recommendations of management.
SALARY: The salaries for the executive officers were adjusted effective as
of the beginning of the fiscal year, to ensure that executive salary levels
remained competitive in light of market conditions.
CASH INCENTIVE BONUSES: The Company has employed a cash-based incentive
bonus program intended to motivate and reward executives by making a portion of
cash compensation directly dependent upon corporate earnings per share. The
bonus targets for executive officers are based on individual compensation plans.
The Committee determines the amount targeted for the CEO and the CEO recommends
to the Committee the bonus targets for the remainder of the executive officers.
The amount of bonus earned has historically been tied to the Company's earnings
per share, before recurring charges.
As a percent of total cash compensation (percentage determined by dividing
the target bonus by the sum of base salary and target bonus), fiscal 1997 target
bonuses for the Named Executive Officers, comprising all of the executive
officers who earned incentive bonuses with respect to fiscal 1997, ranged from
20% to 33%, with an average of 31%. For fiscal 1997, Mr. Kay's bonus was
targeted at $125,800 or 33% of his total targeted base salary and target bonus.
STOCK OPTIONS GRANTED TO EXECUTIVE OFFICERS IN FISCAL 1997
The Compensation Committee of the Board periodically reviews the number of
vested and unvested options held by each executive officer. During such reviews,
which generally occur annually, the Committee makes stock option grants to
executive officers to provide greater incentives to those officers to continue
their employment with the Company, to maintain competitive overall compensation
for each executive, and to provide a reward to the executives for increasing the
value of the Company's Common Stock. Stock
15
<PAGE>
options typically have been granted to an executive officer when the executive
first joins the Company, in connection with a significant change in
responsibilities and, occasionally, to achieve equity within a peer group. When
making stock option grants for executive officers, the Board considers the
Company's performance during the past year, the responsibility level and
performance of the executive officer, prior option grants to the executive
officer, the level of vested and unvested options, and industry and competitive
conditions. Stock option grants generally become exercisable over a four year
period. Options generally have exercise prices equal to the fair market value of
the Company's Common Stock on the date of grant.
During fiscal 1997, each of the Named Executives received option grants. The
grant to Mr. Frodsham was made in connection with his promotion to Vice
President and General Manager of the Company's PC Systems Division and covers
70,000 shares. The grant to Mr. Nichols was made in connection with his hiring
and covers 35,000 shares. The grant to Mr. Riopel was made to address the
various compensation objectives noted above and covers 35,000 shares. The grants
to Mr. Slayter covered 35,000 and 50,000 shares, to address compensation
objectives noted above and in connection with his promotion to Vice President,
Worldwide Field Operations, respectively. Each of the above referenced option
grants had exercise prices equal to the fair market value of the Company's
Common Stock on the date of grant and vest over a four-year period.
FISCAL 1997 CEO COMPENSATION
Compensation for the CEO is determined through a process similar to that
discussed above for executive officers in general. As indicated above, the
Company's compensation program is designed to achieve corporate financial goals
and other strategic objectives. This pay-for-performance program is most clearly
exemplified in the compensation of the Company's Chief Executive Officer.
In setting compensation levels for the Chief Executive Officer, the
Compensation Committee reviewed competitive information reflecting the relevant
compensation data for chief executive officers of companies of comparable size
within the software industry. As a result of this review, effective October 1,
1996, Mr. Kay's salary was increased from $225,000 to $251,700. In fiscal 1997,
Mr. Kay was paid a bonus of $159,813 for fiscal 1996 results, which represented
42% of the sum of his total targeted base salary and target bonus. This bonus
was primarily based on the Company's overall performance. Effective October 1,
1997, Mr. Kay's salary was increased from $251,700 to $275,000.
MEMBERS OF THE COMPENSATION COMMITTEE
CHARLES FEDERMAN
LAWRENCE G. FINCH
ANTHONY P. MORRIS
CERTAIN TRANSACTIONS
LANCE E. HANSCHE: In October 1996, the Company loaned Lance E. Hansche
$200,000 pursuant to a promissory note bearing interest at the rate of 6.02%.
The note was secured by trust deeds on certain real property. The note provided
for repayment on the earliest of April 30, 1997, the date when Mr. Hansche sells
shares of Phoenix stock, the date Mr. Hansche sells the collateral securing the
note, or the date Mr. Hansche ceases to be a member of Phoenix's Board of
Directors. Mr. Hansche exercised stock options granted him by Phoenix and used
the proceeds in part to repay the loan in January 1997.
During fiscal 1997, Mr. Hansche was employed pursuant to an arrangement with
the Company under which he provided the Company with strategic advice on product
direction and markets. Under the arrangement, the Company paid Mr. Hansche
$1,500 per day for each day he provided services to the Company, and he agreed
to work a minimum of 60 days per year. That employment arrangement was
terminated July 15, 1997. During fiscal 1997, the Company paid Mr. Hansche
$71,250 pursuant to this arrangement.
16
<PAGE>
LifeCycle Systems Inc. ("LifeCycle") is a software company in which Mr.
Hansche is a founder, shareholder and director. During fiscal 1997, the Company
advanced LifeCycle $121,000. On October 30, 1997, the Company advanced LifeCycle
an additional $200,000. Both advances were made to finance certain development
efforts undertaken by LifeCycle in anticipation of entering a future joint
development and licensing agreement between LifeCycle and the Company.
GAYN B. WINTERS: In August 1995, the Company loaned Dr. Winters $200,000
for use in connection with his relocation to California. The loan was secured by
certain residential real property owned or acquired after the loan was made. The
loan did not bear interest and was repayable in five equal annual installments.
The Company further agreed to pay Dr. Winters a special bonus of $40,000 on each
payment date under the note, provided Dr. Winters was then employed by the
Company. The Company forgave the balance of Dr. Winters' indebtedness (valued at
$160,000) when Dr. Winters' employment with the Company ended.
INTEL CORPORATION: In December 1995, the Company and Intel Corporation
entered into two primary agreements: a technology agreement under which Phoenix
licensed certain of its software products for use by Intel on its motherboard
products for the desktop and server markets; and a Common Stock and Warrant
Purchase Agreement under which Intel agreed to purchase 894,971 shares of
Phoenix common stock and a warrant to purchase an additional 1,073,281 shares of
common stock. The aggregate purchase price for the shares and the warrant was
$10.8 million. The warrant vests and becomes exercisable in four installments
over a five year period from the date of the agreement; the exercise price of
the warrant increases annually from $12.88 to $15.22. The sale of the shares and
the warrant was concluded in February 1996 following the completion of certain
closing conditions.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors, executive officers, and persons who own more than 10%
of a registered class of the Company's equity securities to file with the
Securities and Exchange Commission (the "SEC") reports of ownership and changes
of ownership of the Company's Common Stock and other equity securities.
Executive officers, directors and 10% stockholders are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms they
file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company during, and with respect to, its most recent
fiscal year and written representations that no other reports were required, the
filing requirements of Section 16(a) applicable to its executive officers,
directors and 10% stockholders were satisfied.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee of the Company's Board of
Directors during fiscal 1997 were Messrs. Federman, Finch and Morris, all of
whom are non-employee Directors.
The Company entered into a month-to-month consulting agreement with Morris &
Associates in July 1993. Under that agreement, the Company pays Morris &
Associates $6,000 per month. Anthony P. Morris is a Director of the Company and
a principal of Morris & Associates. During fiscal 1997, the Company paid $60,000
in consulting fees to Morris & Associates. Such fees represented more than 5% of
the consolidated revenue for Morris & Associates for its last fiscal year.
The Company retains the services of Broadview Associates, L.L.C.
("Broadview") to investigate and evaluate potential acquisitions, to assist in
the sale of portions of the Company's business, and to advise the Company on
general business matters. In fiscal 1997, the Company engaged Broadview to
assist it in its development of long-term growth strategies, which may include
identifying possible acquisition candidates. Under the engagement letter, the
Company agreed to pay Broadview a retainer of $5,000 per month and to pay
certain fees upon the successful completion of any such acquisition.
17
<PAGE>
During fiscal 1997, the Company paid Broadview $68,980 for services rendered
during fiscal 1997, which included fees for services rendered in connection with
the analysis and preliminary negotiations on acquisition targets. Charles
Federman is a Director of the Company and a Managing Director of Broadview.
COMPANY STOCK PRICE PERFORMANCE
The graph below compares the cumulative total stockholder return on the
Common Stock of the Company from September 30, 1992 to September 30, 1997 with
the cumulative total return on the Standard and Poor's 500 and the Standard and
Poor's Computer Software and Services market indices over the same period,
assuming the investment of $100 in the Company's Common Stock and in each of the
indices on September 30, 1992 and the reinvestment of all dividends.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG PHOENIX TECHNOLOGIES LTD., THE STANDARD & POOR'S 500 INDEX
AND THE STANDARD & POOR'S COMPUTER SOFTWARE & SERVICES INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PHOENIX TECHNOLOGIES LTD. S & P 500 S & P COMPUTERS (SOFTWARE & SERVICES)
<S> <C> <C> <C>
9/92 $100 $100 $100
9/93 $87 $113 $133
9/94 $115 $117 $158
9/95 $259 $152 $230
9/96 $354 $183 $334
9/97 $305 $257 $549
</TABLE>
OTHER MATTERS
Management knows of no other matters to be submitted to the stockholders at
the Annual Meeting. However, if any other matters properly come before the
Meeting, the persons named in the accompanying proxy intend to vote the shares
they represent as the Board of Directors may recommend.
18
<PAGE>
DEADLINE FOR SUBMISSION OF STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the 1999 Annual
Meeting of Stockholders must be received by the Company at its principal office
in San Jose, California, not later than September 1, 1998 for inclusion in the
proxy statement for that meeting.
By Order of the Board of Directors
STUART J. NICHOLS, SECRETARY
December 30, 1997
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THE BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND THE MEETING.
WHETHER YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN AND RETURN
THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. PROMPT RESPONSE WILL GREATLY
FACILITATE ARRANGEMENTS FOR THE MEETING AND YOUR COOPERATION WILL BE
APPRECIATED.
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APPENDIX A
PHOENIX TECHNOLOGIES LTD.
1998 STOCK PLAN
1. PURPOSES OF THE PLAN. The purposes of this Stock Plan are:
- to attract and retain the best available personnel for positions of
substantial responsibility,
- to provide additional incentive to Employees, Directors and Consultants,
and
- to promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Administrator at the time of
grant. Stock Purchase Rights may also be granted under the Plan.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "ADMINISTRATOR" means the Board or any of its Committees as shall be
administering the Plan, in accordance with Section 4 of the Plan.
(b) "APPLICABLE LAWS" means the requirements relating to the administration
of stock option plans under U. S. state corporate laws, U.S. federal and state
securities laws, the Code, any stock exchange or quotation system on which the
Common Stock is listed or quoted and the applicable laws of any foreign country
or jurisdiction where Options or Stock Purchase Rights are, or will be, granted
under the Plan.
(c) "BOARD" means the Board of Directors of the Company.
(d) "CODE" means the Internal Revenue Code of 1986, as amended.
(e) "COMMITTEE" means a committee of Directors appointed by the Board in
accordance with Section 4 of the Plan.
(f) "COMMON STOCK" means the common stock of the Company.
(g) "COMPANY" means Phoenix Technologies Ltd., a Delaware corporation.
(h) "CONSULTANT" means any person, including an advisor, engaged by the
Company or a Parent or Subsidiary to render services to such entity.
(i) "DIRECTOR" means a member of the Board.
(j) "DISABILITY" means total and permanent disability as defined in Section
22(e)(3) of the Code.
(k) "EMPLOYEE" means any person, including Officers and Directors, employed
by the Company or any Parent or Subsidiary of the Company. A Service Provider
shall not cease to be an Employee in the case of (i) any leave of absence
approved by the Company or (ii) transfers between locations of the Company or
between the Company, its Parent, any Subsidiary, or any successor. For purposes
of Incentive Stock Options, no such leave may exceed ninety days, unless
reemployment upon expiration of such leave is guaranteed by statute or contract.
If reemployment upon expiration of a leave of absence approved by the Company is
not so guaranteed, on the 181st day of such leave any Incentive Stock Option
held by the Optionee shall cease to be treated as an Incentive Stock Option and
shall be treated for tax purposes as a Nonstatutory Stock Option. Neither
service as a Director nor payment of a director's fee by the Company shall be
sufficient to constitute "employment" by the Company.
(l) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
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(m) "FAIR MARKET VALUE" means, as of any date, the value of Common Stock
determined as follows:
(i) If the Common Stock is listed on any established stock exchange or a
national market system, including without limitation the Nasdaq National
Market or The Nasdaq Small Cap Market of The Nasdaq Stock Market, its Fair
Market Value shall be the closing sales price for such stock (or the closing
bid, if no sales were reported) as quoted on such exchange or system for the
last market trading day prior to the time of determination, as reported in
THE WALL STREET JOURNAL or such other source as the Administrator deems
reliable;
(ii) If the Common Stock is regularly quoted by a recognized securities
dealer but selling prices are not reported, the Fair Market Value of a Share
of Common Stock shall be the mean between the high bid and low asked prices
for the Common Stock on the last market trading day prior to the day of
determination, as reported in THE WALL STREET JOURNAL or such other source
as the Administrator deems reliable; or
(iii) In the absence of an established market for the Common Stock, the
Fair Market Value shall be determined in good faith by the Administrator.
(n) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(o) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify as
an Incentive Stock Option.
(p) "NOTICE OF GRANT" means a written or electronic notice evidencing
certain terms and conditions of an individual Option or Stock Purchase Right
grant. The Notice of Grant is part of the Option Agreement.
(q) "OFFICER" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(r) "OPTION" means a stock option granted pursuant to the Plan.
(s) "OPTION AGREEMENT" means an agreement between the Company and an
Optionee evidencing the terms and conditions of an individual Option grant. The
Option Agreement is subject to the terms and conditions of the Plan.
(t) "OPTION EXCHANGE PROGRAM" means a program whereby outstanding Options
are surrendered in exchange for Options with a lower exercise price.
(u) "OPTIONED STOCK" means the Common Stock subject to an Option or Stock
Purchase Right.
(v) "OPTIONEE" means the holder of an outstanding Option or Stock Purchase
Right granted under the Plan.
(w) "PARENT" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(x) "PLAN" means this 1998 Stock Plan.
(y) "RESTRICTED STOCK" means shares of Common Stock acquired pursuant to a
grant of Stock Purchase Rights under Section 11 of the Plan.
(z) "RESTRICTED STOCK PURCHASE AGREEMENT" means a written agreement between
the Company and the Optionee evidencing the terms and restrictions applying to
stock purchased under a Stock Purchase Right. The Restricted Stock Purchase
Agreement is subject to the terms and conditions of the Plan and the Notice of
Grant.
(aa) "RULE 16B-3" means Rule 16b-3 of the Exchange Act or any successor to
Rule 16b-3, as in effect when discretion is being exercised with respect to the
Plan.
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(bb) "SECTION 16(B)" means Section 16(b) of the Exchange Act.
(cc) "SERVICE PROVIDER" means an Employee, Director or Consultant.
(dd) "SHARE" means a share of the Common Stock, as adjusted in accordance
with Section 13 of the Plan.
(ee) "STOCK PURCHASE RIGHT" means the right to purchase Common Stock
pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant.
(ff) "SUBSIDIARY" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 13 of the
Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 800,000 Shares. The Shares may be authorized, but unissued, or
reacquired Common Stock.
If an Option or Stock Purchase Right expires or becomes unexercisable
without having been exercised in full, or is surrendered pursuant to an Option
Exchange Program, the unpurchased Shares which were subject thereto shall become
available for future grant or sale under the Plan (unless the Plan has
terminated); PROVIDED, HOWEVER, that Shares that have actually been issued under
the Plan, whether upon exercise of an Option or Right, shall not be returned to
the Plan and shall not become available for future distribution under the Plan,
except that if Shares of Restricted Stock are repurchased by the Company at
their original purchase price, such Shares shall become available for future
grant under the Plan.
4. ADMINISTRATION OF THE PLAN.
(a) PROCEDURE.
(i) MULTIPLE ADMINISTRATIVE BODIES. The Plan may be administered by
different Committees with respect to different groups of Service Providers.
(ii) SECTION 162(M). To the extent that the Administrator determines
it to be desirable to qualify Options granted hereunder as
"performance-based compensation" within the meaning of Section 162(m) of the
Code, the Plan shall be administered by a Committee of two or more "outside
directors" within the meaning of Section 162(m) of the Code.
(iii) RULE 16B-3. To the extent desirable to qualify transactions
hereunder as exempt under Rule 16b-3, the transactions contemplated
hereunder shall be structured to satisfy the requirements for exemption
under Rule 16b-3.
(iv) OTHER ADMINISTRATION. Other than as provided above, the Plan
shall be administered by (A) the Board or (B) a Committee, which committee
shall be constituted to satisfy Applicable Laws.
(b) POWERS OF THE ADMINISTRATOR. Subject to the provisions of the Plan,
and in the case of a Committee, subject to the specific duties delegated by the
Board to such Committee, the Administrator shall have the authority, in its
discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options and Stock Purchase
Rights may be granted hereunder;
(iii) to determine the number of shares of Common Stock to be covered by
each Option and Stock Purchase Right granted hereunder;
(iv) to approve forms of agreement for use under the Plan;
(v) to determine the terms and conditions, not inconsistent with the
terms of the Plan, of any Option or Stock Purchase Right granted hereunder.
Such terms and conditions include, but are not
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limited to, the exercise price, the time or times when Options or Stock
Purchase Rights may be exercised (which may be based on performance
criteria), any vesting acceleration or waiver of forfeiture restrictions,
and any restriction or limitation regarding any Option or Stock Purchase
Right or the shares of Common Stock relating thereto, based in each case on
such factors as the Administrator, in its sole discretion, shall determine;
(vi) to reduce the exercise price of any Option or Stock Purchase Right
to the then current Fair Market Value if the Fair Market Value of the Common
Stock covered by such Option or Stock Purchase Right shall have declined
since the date the Option or Stock Purchase Right was granted;
(vii) to institute an Option Exchange Program;
(viii) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan;
(ix) to prescribe, amend and rescind rules and regulations relating to
the Plan, including rules and regulations relating to sub-plans established
for the purpose of qualifying for preferred tax treatment under foreign tax
laws;
(x) to modify or amend each Option or Stock Purchase Right (subject to
Section 15(c) of the Plan), including the discretionary authority to extend
the post-termination exercisability period of Options longer than is
otherwise provided for in the Plan;
(xi) to authorize any person to execute on behalf of the Company any
instrument required to effect the grant of an Option or Stock Purchase Right
previously granted by the Administrator;
(xii) to make all other determinations deemed necessary or advisable for
administering the Plan.
(c) EFFECT OF ADMINISTRATOR'S DECISION. The Administrator's decisions,
determinations and interpretations shall be final and binding on all Optionees
and any other holders of Options or Stock Purchase Rights.
5. ELIGIBILITY. Nonstatutory Stock Options and Stock Purchase Rights may be
granted to Service Providers. Incentive Stock Options may be granted only to
Employees.
6. LIMITATIONS.
(a) Notwithstanding anything to the contrary in this Plan, no person who is
an Officer or Director will be eligible to receive a grant of Option or Stock
Purchase Right hereunder until such time as this Plan is approved by the
stockholders of the Company.
(b) Each Option shall be designated in the Option Agreement as either an
Incentive Stock Option or a Nonstatutory Stock Option. However, notwithstanding
such designation, to the extent that the aggregate Fair Market Value of the
Shares with respect to which Incentive Stock Options are exercisable for the
first time by the Optionee during any calendar year (under all plans of the
Company and any Parent or Subsidiary) exceeds $100,000, such Options shall be
treated as Nonstatutory Stock Options. For purposes of this Section 6(b),
Incentive Stock Options shall be taken into account in the order in which they
were granted. The Fair Market Value of the Shares shall be determined as of the
time the Option with respect to such Shares is granted.
(c) Neither the Plan nor any Option or Stock Purchase Right shall confer
upon an Optionee any right with respect to continuing the Optionee's
relationship as a Service Provider with the Company, nor shall they interfere in
any way with the Optionee's right or the Company's right to terminate such
relationship at any time, with or without cause.
(d) The following limitations shall apply to grants of Options:
(i) No Service Provider shall be granted, in any fiscal year of the
Company, Options to purchase more than 125,000 Shares.
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(ii) In connection with his or her initial service, a Service Provider
may be granted Options to purchase up to an additional 125,000 Shares which
shall not count against the limit set forth in subsection (i) above.
(iii) The foregoing limitations shall be adjusted proportionately in
connection with any change in the Company's capitalization as described in
Section 13.
(iv) If an Option is cancelled in the same fiscal year of the Company in
which it was granted (other than in connection with a transaction described
in Section 13), the cancelled Option will be counted against the limits set
forth in subsections (i) and (ii) above. For this purpose, if the exercise
price of an Option is reduced, the transaction will be treated as a
cancellation of the Option and the grant of a new Option.
7. TERM OF PLAN. Subject to Section 19 of the Plan, the Plan shall become
effective upon its adoption by the Board. It shall continue in effect for a term
of ten (10) years unless terminated earlier under Section 15 of the Plan.
8. TERM OF OPTION. The term of each Option shall be stated in the Option
Agreement. In the case of an Incentive Stock Option, the term shall be ten (10)
years from the date of grant or such shorter term as may be provided in the
Option Agreement. Moreover, in the case of an Incentive Stock Option granted to
an Optionee who, at the time the Incentive Stock Option is granted, owns stock
representing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or any Parent or Subsidiary, the term of the
Incentive Stock Option shall be five (5) years from the date of grant or such
shorter term as may be provided in the Option Agreement.
9. OPTION EXERCISE PRICE AND CONSIDERATION.
(a) EXERCISE PRICE. The per share exercise price for the Shares to be
issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time the Incentive Stock
Option is granted, owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of
the Fair Market Value per Share on the date of grant.
(B) granted to any Employee other than an Employee described in
paragraph (A) immediately above, the per Share exercise price shall be no
less than 100% of the Fair Market Value per Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option, the per Share exercise
price shall be determined by the Administrator. In the case of a
Nonstatutory Stock Option intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the per
Share exercise price shall be no less than 100% of the Fair Market Value per
Share on the date of grant.
(iii) Notwithstanding the foregoing, Options may be granted with a per
Share exercise price of less than 100% of the Fair Market Value per Share on
the date of grant pursuant to a merger or other corporate transaction.
(b) WAITING PERIOD AND EXERCISE DATES. At the time an Option is granted,
the Administrator shall fix the period within which the Option may be exercised
and shall determine any conditions which must be satisfied before the Option may
be exercised.
(c) FORM OF CONSIDERATION. The Administrator shall determine the
acceptable form of consideration for exercising an Option, including the method
of payment. In the case of an Incentive Stock Option, the
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Administrator shall determine the acceptable form of consideration at the time
of grant. Such consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) other Shares which (A) in the case of Shares acquired upon exercise
of an option, have been owned by the Optionee for more than six months on
the date of surrender, and (B) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which
said Option shall be exercised;
(v) consideration received by the Company under a cashless exercise
program implemented by the Company in connection with the Plan;
(vi) a reduction in the amount of any Company liability to the Optionee,
including any liability attributable to the Optionee's participation in any
Company-sponsored deferred compensation program or arrangement;
(vii) any combination of the foregoing methods of payment; or
(viii) such other consideration and method of payment for the issuance
of Shares to the extent permitted by Applicable Laws.
10. EXERCISE OF OPTION.
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A STOCKHOLDER. Any Option granted
hereunder shall be exercisable according to the terms of the Plan and at such
times and under such conditions as determined by the Administrator and set forth
in the Option Agreement. Unless the Administrator provides otherwise, vesting of
Options granted hereunder shall be suspended during any unpaid leave of absence.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company receives: (i) written
or electronic notice of exercise (in accordance with the Option Agreement) from
the person entitled to exercise the Option, and (ii) full payment for the Shares
with respect to which the Option is exercised. Full payment may consist of any
consideration and method of payment authorized by the Administrator and
permitted by the Option Agreement and the Plan. Shares issued upon exercise of
an Option shall be issued in the name of the Optionee or, if requested by the
Optionee, in the name of the Optionee and his or her spouse. Until the Shares
are issued (as evidenced by the appropriate entry on the books of the Company or
of a duly authorized transfer agent of the Company), no right to vote or receive
dividends or any other rights as a stockholder shall exist with respect to the
Optioned Stock, notwithstanding the exercise of the Option. The Company shall
issue (or cause to be issued) such Shares promptly after the Option is
exercised. No adjustment will be made for a dividend or other right for which
the record date is prior to the date the Shares are issued, except as provided
in Section 13 of the Plan.
Exercising an Option in any manner shall decrease the number of Shares
thereafter available, both for purposes of the Plan and for sale under the
Option, by the number of Shares as to which the Option is exercised.
(b) TERMINATION OF RELATIONSHIP AS A SERVICE PROVIDER. If an Optionee
ceases to be a Service Provider, other than upon the Optionee's death or
disability, the Optionee may exercise his or her Option within such period of
time as is specified in the Option Agreement to the extent that the Option is
vested on the date of termination (but in no event later than the expiration of
the term of such Option as set forth in the Option Agreement). In the absence of
a specified time in the Option Agreement, the Option shall remain exercisable
for three (3) months following the Optionee's termination. If, on the date of
termination, the Optionee is
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not vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option shall revert to the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time specified by the
Administrator, the Option shall terminate, and the Shares covered by such Option
shall revert to the Plan.
(c) DISABILITY OF OPTIONEE. If an Optionee ceases to be a Service Provider
as a result of the Optionee's Disability, the Optionee may exercise his or her
Option within such period of time as is specified in the Option Agreement to the
extent the Option is vested on the date of termination (but in no event later
than the expiration of the term of such Option as set forth in the Option
Agreement). In the absence of a specified time in the Option Agreement, the
Option shall remain exercisable for twelve (12) months following the Optionee's
termination. If, on the date of termination, the Optionee is not vested as to
his or her entire Option, the Shares covered by the unvested portion of the
Option shall revert to the Plan. If, after termination, the Optionee does not
exercise his or her Option within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(d) DEATH OF OPTIONEE. If an Optionee dies while a Service Provider, the
Option may be exercised within such period of time as is specified in the Option
Agreement (but in no event later than the expiration of the term of such Option
as set forth in the Notice of Grant), by the Optionee's estate or by a person
who acquires the right to exercise the Option by bequest or inheritance, but
only to the extent that the Option is vested on the date of death. In the
absence of a specified time in the Option Agreement, the Option shall remain
exercisable for twelve (12) months following the Optionee's termination. If, at
the time of death, the Optionee is not vested as to his or her entire Option,
the Shares covered by the unvested portion of the Option shall immediately
revert to the Plan. The Option may be exercised by the executor or administrator
of the Optionee's estate or, if none, by the person(s) entitled to exercise the
Option under the Optionee's will or the laws of descent or distribution. If the
Option is not so exercised within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(e) BUYOUT PROVISIONS. The Administrator may at any time offer to buy out
for a payment in cash or Shares an Option previously granted based on such terms
and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.
11. STOCK PURCHASE RIGHTS.
(a) RIGHTS TO PURCHASE. Stock Purchase Rights may be issued either alone,
in addition to, or in tandem with other awards granted under the Plan and/or
cash awards made outside of the Plan. After the Administrator determines that it
will offer Stock Purchase Rights under the Plan, it shall advise the offeree in
writing or electronically, by means of a Notice of Grant, of the terms,
conditions and restrictions related to the offer, including the number of Shares
that the offeree shall be entitled to purchase, the price to be paid, and the
time within which the offeree must accept such offer. The offer shall be
accepted by execution of a Restricted Stock Purchase Agreement in the form
determined by the Administrator.
(b) REPURCHASE OPTION. Unless the Administrator determines otherwise, the
Restricted Stock Purchase Agreement shall grant the Company a repurchase option
exercisable upon the voluntary or involuntary termination of the purchaser's
service with the Company for any reason (including death or disability). The
purchase price for Shares repurchased pursuant to the Restricted Stock Purchase
Agreement shall be the original price paid by the purchaser and may be paid by
cancellation of any indebtedness of the purchaser to the Company. The repurchase
option shall lapse at a rate determined by the Administrator.
(c) OTHER PROVISIONS. The Restricted Stock Purchase Agreement shall
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion.
(d) RIGHTS AS A STOCKHOLDER. Once the Stock Purchase Right is exercised,
the purchaser shall have the rights equivalent to those of a stockholder, and
shall be a stockholder when his or her purchase is entered upon the records of
the duly authorized transfer agent of the Company. No adjustment will be made
for a
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dividend or other right for which the record date is prior to the date the Stock
Purchase Right is exercised, except as provided in Section 13 of the Plan.
12. NON-TRANSFERABILITY OF OPTIONS AND STOCK PURCHASE RIGHTS. Unless
determined otherwise by the Administrator, an Option or Stock Purchase Right may
not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any
manner other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Optionee, only by the Optionee. If the
Administrator makes an Option or Stock Purchase Right transferable, such Option
or Stock Purchase Right shall contain such additional terms and conditions as
the Administrator deems appropriate.
13. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION, MERGER OR ASSET
SALE.
(a) CHANGES IN CAPITALIZATION. Subject to any required action by the
stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Option and Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option or Stock
Purchase Right.
(b) DISSOLUTION OR LIQUIDATION. In the event of the proposed dissolution
or liquidation of the Company, the Administrator shall notify each Optionee as
soon as practicable prior to the effective date of such proposed transaction.
The Administrator in its discretion may provide for an Optionee to have the
right to exercise his or her Option until ten (10) days prior to such
transaction as to all of the Optioned Stock covered thereby, including Shares as
to which the Option would not otherwise be exercisable. In addition, the
Administrator may provide that any Company repurchase option applicable to any
Shares purchased upon exercise of an Option or Stock Purchase Right shall lapse
as to all such Shares, provided the proposed dissolution or liquidation takes
place at the time and in the manner contemplated. To the extent it has not been
previously exercised, an Option or Stock Purchase Right will terminate
immediately prior to the consummation of such proposed action.
(c) MERGER OR ASSET SALE. In the event of a merger of the Company with or
into another corporation, or the sale of substantially all of the assets of the
Company, each outstanding Option and Stock Purchase Right shall be assumed or an
equivalent option or right substituted by the successor corporation or a Parent
or Subsidiary of the successor corporation. In the event that the successor
corporation refuses to assume or substitute for the Option or Stock Purchase
Right, the Optionee shall fully vest in and have the right to exercise the
Option or Stock Purchase Right as to all of the Optioned Stock, including Shares
as to which it would not otherwise be vested or exercisable. If an Option or
Stock Purchase Right becomes fully vested and exercisable in lieu of assumption
or substitution in the event of a merger or sale of assets, the Administrator
shall notify the Optionee in writing or electronically that the Option or Stock
Purchase Right shall be fully vested and exercisable for a period of fifteen
(15) days from the date of such notice, and the Option or Stock Purchase Right
shall terminate upon the expiration of such period. The Option or Stock Purchase
Right shall be considered assumed if, following the merger or sale of assets,
the Optionee has the right to purchase or receive the same consideration the
shareholders of the Company received in the merger or sale of assets. If the
shareholders of the Company received any consideration other than common stock
of the successor
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corporation, the Administrator may, with the consent of the successor
corporation, provide that the consideration received upon exercise of the Option
or Stock Purchase Right will be solely the common stock of the successor
corporation, with the exercise price of the Option and the number of shares
subject to the Option adjusted for the exchange rate used in the merger or sale
of assets. If the shareholders of the Company received any consideration other
than common stock of the successor corporation, the exchange rate will reflect
the fair market value of any such consideration received.
14. DATE OF GRANT. The date of grant of an Option or Stock Purchase Right
shall be, for all purposes, the date on which the Administrator makes the
determination granting such Option or Stock Purchase Right, or such other later
date as is determined by the Administrator. Notice of the determination shall be
provided to each Optionee within a reasonable time after the date of such grant.
15. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. The Board may at any time amend, alter,
suspend or terminate the Plan.
(b) STOCKHOLDER APPROVAL. The Company shall obtain stockholder approval of
any Plan amendment to the extent necessary and desirable to comply with
Applicable Laws.
(c) EFFECT OF AMENDMENT OR TERMINATION. No amendment, alteration,
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
Termination of the Plan shall not affect the Administrator's ability to exercise
the powers granted to it hereunder with respect to Options granted under the
Plan prior to the date of such termination.
16. CONDITIONS UPON ISSUANCE OF SHARES.
(a) LEGAL COMPLIANCE. Shares shall not be issued pursuant to the exercise
of an Option or Stock Purchase Right unless the exercise of such Option or Stock
Purchase Right and the issuance and delivery of such Shares shall comply with
Applicable Laws and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
(b) INVESTMENT REPRESENTATIONS. As a condition to the exercise of an
Option or Stock Purchase Right, the Company may require the person exercising
such Option or Stock Purchase Right to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required.
17. INABILITY TO OBTAIN AUTHORITY. The inability of the Company to obtain
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.
18. RESERVATION OF SHARES. The Company, during the term of this Plan, will at
all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
19. STOCKHOLDER APPROVAL. The Plan shall be subject to approval by the
stockholders of the Company within twelve (12) months after the date the Plan is
adopted. Such stockholder approval shall be obtained in the manner and to the
degree required under Applicable Laws.
A-9
<PAGE>
PHOENIX TECHNOLOGIES LTD.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, revoking all prior proxies, hereby appoints Jack Kay,
Robert J. Riopel and Stuart J. Nichols, and each of them, with power of
substitution, as proxies to represent and vote as designated herein all
shares of stock of Phoenix Technologies Ltd. (the "Company") which the
undersigned would be entitled to vote if personally present at the Annual
Meeting of Stockholders of the Company to be held on February 18, 1997 at the
Company's principal executive office located at 411 E. Plumeria Drive, San
Jose, California, at 10:00 a.m., California time, and at any and all
adjournments of that meeting.
The proxy, when properly executed and returned, will be voted in the
manner directed herein by the undersigned stockholder. If no direction is
given, this proxy will be voted for Election of Messrs. Fisher and Hansche
and for Proposals 2, 3 and 4. In their discretion, the proxies are also
authorized to vote upon such other matters as may properly come before the
meeting or any adjournment of that meeting.
(Continued, and to be signed on the reverse side)
1. TO ELECT RONALD D. FISHER AND LANCE E. HANSCHE TO THE BOARD OF DIRECTORS
AS CLASS 2 DIRECTORS.
FOR BOTH WITHHOLD (INSTRUCTION: To withhold authority to
NOMINEES AUTHORITY vote nominee, write that nominee's
EXCEPT AS FOR BOTH name on the space provided below.)
NOTED TO NOMINEES
THE RIGHT ----------------------------------
[ ] [ ]
2. TO APPROVE THE 1998 STOCK PLAN.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. TO APPROVE THE AMENDMENT TO THE 1991 EMPLOYEE STOCK PURCHASE PLAN.
4. TO RATIFY THE SELECTION OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS FOR
THE CURRENT FISCAL YEAR.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Please sign exactly as name appears hereon. If the stock is registered in the
names of two or more persons, each should sign. Executors, administrators,
trustees, guardians, attorneys and corporate officers should add their
titles. PLEASE FILL IN, DATE, SIGN AND MAIL THIS PROXY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
Dated ________________________________, 1998
______________________________________
(Signature)
