<PAGE>
SCHEDULE 14(a) INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant X
--
Filed by a Party other than the Registrant
--
Check the appropriate box:
Preliminary Proxy Statement
- --
X Definitive Proxy Statement
- --
Definitive Additional Materials
- --
Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
- --
Wind River Systems, Inc.
------------------------
(Name of Registrant as Specified In Its Charter)
Wind River Systems, Inc.
------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box)
X No fee required.
- --
Fee computed on table below per Exchange Act Rules 14(a)-6(i)(4) and 0-11.
- --
1. Title of each class of securities to which transaction applies:
2. Aggregate number of securities to which transaction applies:
3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: (1)
4. Proposed maximum aggregate value of transaction:
(1) Set forth the amount on which the filing fee is calculated and state
how it was determined.
Fee paid previously with preliminary materials.
- --
- -- Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1. Amount Previously Paid:
2. Form, Schedule or Registration Statement No.:
3. Filing Party:
4. Date Filed:
<PAGE>
WIND RIVER SYSTEMS, INC.
1010 Atlantic Avenue
Alameda, CA 94501
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 24, 1997
TO THE STOCKHOLDERS OF WIND RIVER SYSTEMS, INC.:
Notice is hereby given that the Annual Meeting of Stockholders of Wind
River Systems, Inc., a Delaware corporation (the "Company"), will be held on
Thursday, July 24, 1997, at 10:00 a.m. local time at 1010 Atlantic Avenue,
Alameda, California, for the following purposes:
1. To elect five directors to hold office for the ensuing year and until
their successors are elected and have qualified.
2. To ratify the selection of Price Waterhouse LLP as independent
accountants of the Company for its fiscal year ending January 31,
1998.
3. To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on May 29, 1997, as
the record date for the determination of stockholders entitled to notice of and
to vote at this Annual Meeting and at any adjournment or postponement thereof.
By Order of the Board of Directors
RICHARD W. KRABER
Secretary
Alameda, California
June 12, 1997
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR
REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE PREPAID IF
MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE. EVEN IF YOU HAVE
GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING.
PLEASE NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK
OR OTHER NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE
RECORD HOLDER A PROXY ISSUED IN YOUR NAME.
<PAGE>
WIND RIVER SYSTEMS, INC.
1010 Atlantic Avenue
Alameda, California 94501
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of Wind
River Systems, Inc., a Delaware corporation (the "Company"), for use at the
Annual Meeting of Stockholders to be held on July 24, 1997, at 10:00 A.M. local
time (the "Annual Meeting"), or at any adjournment or postponement thereof, for
the purposes set forth herein and in the accompanying Notice of Annual Meeting.
The Annual Meeting will be held at Wind River Systems, Inc., 1010 Atlantic
Avenue, Alameda, California. The Company intends to mail this proxy statement
and accompanying proxy card on or about JUNE 12, 1997, to all stockholders
entitled to vote at the Annual Meeting.
On March 10, 1997, a three-for-two stock split was effected by means of
payment of a stock dividend with respect to all of the Company's Common Stock
outstanding on February 24, 1997. All share numbers and prices in this Proxy
Statement as of a date prior to March 10, 1997 have been adjusted to give effect
to the stock dividend.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies, including
preparation, assembly, printing and mailing of this proxy statement, the proxy
and any additional information furnished to stockholders. Copies of
solicitation materials will be furnished to banks, brokerage houses, fiduciaries
and custodians holding in their names shares of Common Stock beneficially owned
by others to forward to such beneficial owners. The Company may reimburse
persons representing beneficial owners of Common Stock for their costs of
forwarding solicitation materials to such beneficial owners. Original
solicitation of proxies by mail may be supplemented by telephone, telegram or
personal solicitation by directors, officers or other regular employees of the
Company or, at the Company's request, American Stock Transfer and Trust Co. No
additional compensation will be paid to directors, officers or other regular
employees for such services, but American Stock Transfer and Trust Co. will be
paid its customary fee, estimated to be $5,000, if it renders solicitation
services.
VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of Common Stock at the close of business on May 29,
1997, will be entitled to notice of and to vote at the Annual Meeting. At the
close of business on May 29, 1997, the Company had outstanding and entitled to
vote 25,317,484 shares of Common Stock.
Each holder of record of Common Stock on such date will be entitled to one
vote for each share held on all matters to be voted upon at the Annual Meeting.
All votes will be tabulated by the inspector of election appointed for the
meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions will be counted towards the
tabulation of votes cast on proposals presented to the stockholders and will
have the same effect as negative votes. Broker non-votes are counted towards a
quorum, but are not counted for any purpose in determining whether a matter has
been approved.
REVOCABILITY OF PROXIES
<PAGE>
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
Secretary of the Company at the Company's principal office, 1010 Atlantic
Avenue, Alameda, California 94501, a written notice of revocation or a duly
executed proxy bearing a later date, or it may be revoked by attending the
meeting and voting in person. Attendance at the meeting will not, by itself,
revoke a proxy.
STOCKHOLDER PROPOSALS
Proposals of stockholders that are intended to be presented at the
Company's 1998 annual meeting of stockholders must be received by the Company
not later than February 12, 1998, in order to be included in the proxy statement
and proxy relating to that annual meeting.
2
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Restated Certificate of Incorporation and By-laws authorize a
board of five directors. All directors hold office until the next annual
meeting of stockholders and until their successors are elected and have
qualified, or until their earlier death, resignation or removal.
The Board of Directors is presently composed of five members. All the
nominees for election to this class are currently directors of the Company who
were previously elected by the stockholders. If elected at the Annual Meeting,
each of the nominees would serve until the 1998 annual meeting and until his or
her successor is elected and has qualified, or until such director's earlier
death, resignation or removal.
Directors are elected by a plurality of the votes present in person or
represented by proxy and entitled to vote at the meeting. Shares represented by
executed proxies will be voted, if authority to do so is not withheld, for the
election of the five nominees named below. In the event that any nominee should
be unavailable for election as a result of an unexpected occurrence, such shares
will be voted for the election of such substitute nominee as management may
propose. Each person nominated for election has agreed to serve if elected, and
management has no reason to believe that any nominee will be unable to serve.
NOMINEES
Set forth below is biographical information for each person nominated.
JERRY L. FIDDLER, 45, has served as Chairman of the Board since he
co-founded the Company in February 1983. From February 1983 to March 1994,
he also served as Chief Executive Officer of the Company. Prior to founding
the Company, he was a computer scientist in the Real-Time Systems Group at
Lawrence Berkeley Laboratory. Mr. Fiddler holds a B.A. in music and
photography and an M.S. in computer science from the University of Illinois.
RONALD A. ABELMANN, 59, joined the Company in March 1994 as Chief Executive
Officer, President and Director. From 1987 to 1993, he served as the founding
Chief Executive Officer of Vantage Analysis Systems, a developer of VHDL-based
simulation software for design automation. Prior to then, he served as Group
Vice President and General Manager for the Instrument Division of Varian
Associates. Mr. Abelmann holds a B.S. and an M.S. in applied physics from the
University of California at Los Angeles, and an M.B.A. from Stanford University.
Mr. Abelmann currently serves on the board of directors of Scopus Technology,
Inc. and on the board of directors of Photometrics Limited.
DAVID N. WILNER, 43, has served as Chief Technical Officer and a Director
since he co-founded the Company in February 1983. Prior to founding the Company,
he was a senior staff scientist in the Real-Time Systems Group at Lawrence
Berkeley Laboratory. Mr. Wilner holds a B.S. in computer science from the
University of California at Berkeley.
WILLIAM B. ELMORE, 44, became a director of the Company in August 1990. He
is currently a general partner of Foundation Capital, a venture capital
investment firm. From 1987 to 1995, he was a general partner of Inman & Bowman
and Inman & Bowman Entrepreneurs, venture capital investment firms. Mr. Elmore
holds a B.S. and an M.S. in electrical engineering from Purdue University and an
M.B.A. from Stanford University. Mr. Elmore currently serves on the board of
directors of ParcPlace--Digitalk, Inc.
DAVID B. PRATT, 57, became a director of the Company in April 1995. He
has been an officer of Adobe Systems Incorporated, a developer of software for
printing and publishing, since 1988. He is currently an Executive Vice
President and Chief Operating Officer at Adobe. From 1987 to 1988, he was
Executive Vice President and Chief Operating Officer of Logitech Corporation.
From 1986 to 1987, he was Senior Vice President and Chief Operating Officer of
Quantum Corporation. Mr. Pratt holds a B.S.E.E. degree from the Massachusetts
Institute of Technology and an M.B.A. from the University of Chicago.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF EACH NAMED NOMINEE.
3
<PAGE>
BOARD COMMITTEES AND MEETINGS
During the fiscal year ended January 31, 1997, the Board of Directors held
six meetings. The Board has an Audit Committee and a Compensation Committee.
It has no nominating committee.
The Audit Committee meets with the Company's independent accountants at
least annually to review the results of the annual audit and discuss the
financial statements; recommends to the Board the independent accountants to be
retained; and receives and considers the accountants' comments as to controls,
adequacy of staff and management performance and procedures in connection with
audit and financial controls. The Audit Committee is composed of two
non-employee directors: Messrs. Elmore and Pratt. It met once during fiscal
1997.
The Compensation Committee makes recommendations concerning salaries and
incentive compensation, awards stock options to employees and consultants under
the Company's stock option plans and otherwise determines compensation levels
and performs such other functions regarding compensation as the Board may
delegate. The Compensation Committee is composed of two non-employee directors:
Messrs. Elmore and Pratt. It met once during fiscal 1997.
During the fiscal year ended January 31, 1997, all directors except David
N. Wilner attended 75% or more of the aggregate of the meetings of the Board and
of the committees on which he served, held during the period for which he was a
director or committee member, respectively.
4
<PAGE>
PROPOSAL 2
RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected Price Waterhouse LLP as the Company's
independent accountants for the fiscal year ending January 31, 1998 and has
further directed that management submit the selection of independent accountants
for ratification by the stockholders at the Annual Meeting. Price Waterhouse
LLP has audited the Company's financial statements since the fiscal year ended
January 31, 1990. Representatives of Price Waterhouse LLP are expected to be
present at the Annual Meeting, will have an opportunity to make a statement if
they so desire and will be available to respond to appropriate questions.
Stockholder ratification of the selection of Price Waterhouse LLP as the
Company's independent accountants is not required by the Company's By-laws or
otherwise. However, the Board is submitting the selection of Price Waterhouse
LLP to the stockholders for ratification as a matter of good corporate practice.
If the stockholders fail to ratify the selection, the Audit Committee and the
Board will reconsider whether or not to retain that firm. Even if the selection
is ratified, the Audit Committee and the Board in their discretion may direct
the appointment of different independent accountants at any time during the year
if they determine that such a change would be in the best interests of the
Company and its stockholders.
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy and entitled to vote at the Annual Meeting will
be required to ratify the selection of Price Waterhouse LLP.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 2.
5
<PAGE>
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table and footnotes set forth certain information regarding
the ownership of the Company's Common Stock as of May 29, 1997, by: (i) each
director and nominee for director as of May 29, 1997; (ii) each of the executive
officers named in the Summary Compensation below; (iii) all executive officers
and directors of the Company as a group; and (iv) all those known by the Company
to be beneficial owners of more than five percent of its Common Stock:
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP (1)
--------------------
BENEFICIAL OWNERS NUMBER OF SHARES PERCENT OF TOTAL
----------------- ---------------- ----------------
<S> <C> <C>
Jerry L. Fiddler(2)
1010 Atlantic Avenue
Alameda, CA 94501 2,847,225 11.2%
David N. Wilner(3)
1010 Atlantic Avenue
Alameda, CA 94501 1,902,608 7.5
Pilgrim Baxter and Associates
1255 Drummers Lane, Suite 300
Wayne, PA 19087 2,631,225 10.4
Ronald A. Abelmann(4) 396,267 1.5
William B. Elmore(5) 118,370 *
David R. Larrimore(6) 94,217 *
David Pratt(7) 9,375 *
Robert L. Wheaton(8) 20,952 *
All executive officers and directors
as a group (10 persons) (9) 5,632,785 21.6
</TABLE>
* Less than one per cent.
(1) This table is based upon information supplied by officers, directors
and principal stockholders. Unless otherwise indicated in the
footnotes to this table and subject to community property laws where
applicable, each of the stockholders named in this table has sole
voting and investment power with respect to the shares indicated as
beneficially owned. Applicable percentages are based on 25,317,484
shares outstanding on May 29, 1997, adjusted as required by rules
promulgated by the SEC.
(2) Includes 2,655,438 shares held by The Fiddler and Alden Family Trust,
of which Mr. Fiddler is a trustee. Also includes 22,357 shares
subject to stock options exercisable within 60 days of May 29, 1997.
(3) Includes 258,750 shares held in trust for Mr. Wilner's minor child.
Also includes 22,357 shares subject to stock options exercisable
within 60 days of May 29, 1997.
(4) Includes 366,537 shares subject to stock options exercisable within 60
days of May 29, 1997.
(5) Includes 12,375 shares subject to stock options exercisable within 60
days of May 29, 1997.
(6) Includes 89,757 shares subject to stock options exercisable within 60
days of May 29, 1997.
<PAGE>
(7) Includes 7,125 shares subject to stock options exercisable within 60
days of May 29, 1997.
(8) Includes 20,952 shares subject to stock options exercisable within 60
days of May 29, 1997.
(9) Includes 743,622 shares subject to stock options held by officers and
directors exercisable within 60 days of May 29, 1997.
6
<PAGE>
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file with the SEC
initial reports of ownership and reports of changes in ownership of Common Stock
and other equity securities of the Company. Officers, directors and greater
than ten percent shareholders are required by SEC regulation to furnish the
Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company and written representations that no
other reports were required, during the fiscal year ended January 31, 1997,
all Section 16(a) filing requirements applicable to its officers, directors
and greater than ten percent beneficial owners were complied with, except
that: 4 reports, covering an aggregate of 5 transactions, were filed late by
Mr. Abelmann; 3 reports, covering an aggregate of 4 transactions, were filed
late by Mr. Elmore; 2 reports, covering an aggregate of 4 transactions, were
filed late by Mr. Fiddler; 1 report, covering an aggregate of 2 transactions,
was filed late by Mr. Fraser; 1 report, covering 1 transaction, was filed late
by Mr. Larrimore; 3 reports, covering an aggregate of 3 transactions, were
filed late by Mr. Shenton; 2 reports, covering an aggregate of 2 transactions,
were filed late by Mr. Wheaton; and 1 report, covering 1 transaction, was
filed late by Mr. Wilner.
DIRECTORS' AND EXECUTIVE OFFICERS' COMPENSATION
COMPENSATION OF DIRECTORS
Each director who is not an employee of the Company (a "Non-Employee
Director") receives a per meeting fee of $1,200. In accordance with Company
policy, Directors may be reimbursed for certain expenses in connection with
attendance at Board and committee meetings. Directors who are also executive
officers of the Company are not separately compensated for their service as
directors.
All Non-Employee Directors participate in the Company's 1995 Non-Employee
Directors' Stock Option Plan (the "Directors' Plan"). The Directors' Plan
provides for the automatic grant of options to purchase Common Stock of the
Company to Non-Employee Directors. Stock options granted under the
Director's Plan have an exercise price equal to the fair market value of the
Common Stock on the date of grant, vest in four equal annual installments and
expire ten years from the date of grant. Under the Directors' Plan, each
person who was a Non-Employee Director on April 27, 1995 was granted, and
each person after such date who is elected for the first time as a
Non-Employee Director will automatically be granted, an option to purchase
15,000 shares of Common Stock upon the date of his or her election to the
Board, whichever is applicable. Additionally, on April 1 of each year,
commencing with April 1, 1996, each person who is then a Non-Employee
Director automatically is granted an option to purchase 3,000 shares of
Common Stock. The aggregate number of shares of Common Stock authorized for
issuance pursuant to the exercise of options granted under the Directors'
Plan is 225,000.
During the last fiscal year, options were granted covering 4,500 shares
to each of Messrs. Elmore and Pratt at an exercise price of $13.61 per share
(adjusted for a 3 for 2 stock split on March 10, 1997). During 1996, David
Pratt exercised options for 5,250 shares of Common Stock.
7
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table shows for the fiscal year ended January 31, 1997,
compensation awarded or paid to, or earned by the Company's Chief Executive
Officer and its other four most highly compensated executive officers who earned
over $100,000 (the "Named Executive Officers"):
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------- AWARDS
----------------
NAME AND PRINCIPAL POSITION FISCAL SALARY($) BONUS($)(1) SHARES
- --------------------------- ------ ------ -------- ------
YEAR UNDERLYING
---- ----------
OPTIONS (#)(2)
--------------
<S> <C> <C> <C> <C>
Ronald A. Abelmann 1997 $228,333 $161,000 60,000
President and 1996 $201,667 $100,000 135,000
Chief Executive Officer 1995 $171,975 $75,000 815,625
Jerry L. Fiddler 1997 $145,000 $96,700 -
Chairman of the Board 1996 $140,833 $64,228 47,250
1995 $135,000 $32,326 -
Robert L. Wheaton 1997 $143,605 $117,202 30,000
Senior Vice President of Sales 1996 $135,000 $83,115 54,000
1995 $135,000 $66,249 -
David N. Wilner 1997 $145,000 $101,500 -
Chief Technical Officer 1996 $140,833 $64,398 47,250
1995 $135,000 $31,401 -
David Larrimore (3) 1997 $141,417 $98,850 42,750
Vice President of Marketing 1996 $96,144 $47,331 182,250
1995 - - -
</TABLE>
(1) Includes bonuses and sales commissions earned in respective fiscal year and
paid the following fiscal year pursuant to the Company's fiscal management
incentive arrangements.
(2) All options have exercise at prices ranging from 85% to 110% of fair market
value of the Common Stock on the date of the grant.
(3) Mr. Larrimore joined the Company in May 1995.
8
<PAGE>
STOCK OPTION GRANTS AND EXERCISES
The following tables show for the fiscal year ended January 31, 1997,
certain information regarding options granted to, exercised by, and held at year
end by the Named Executive Officers:
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
---------------------------------
POTENTIAL REALIZABLE VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF
SHARES OPTIONS STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO PER SHARE MARKET PRICE FOR OPTION TERM (3)
OPTIONS EMPLOYEES IN EXERCISE ON DATE OF EXPIRATION -------------------------------------
NAME GRANTED(#)(1) FISCAL YEAR (2) PRICE GRANT DATE 0%($) 5%($) 10%($)
- ---- ---------- ----------- ----- ----- ---- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ronald A. 60,000 8.1% $16.72 $19.67 7/23/2006 $176,802 $918,894 $2,057,418
Abelmann
Jerry L. -- -- -- -- -- -- -- --
Fiddler
Robert L. 30,000 4.0 16.72 19.67 7/23/2006 88,401 459,447 1,028,709
Wheaton
David N. -- -- -- -- -- -- -- --
Wilner
David R. 42,750 5.8 16.72 19.67 7/23/2006 125,971 654,712 1,465,910
Larrimore
</TABLE>
(1) Options generally become exercisable at a rate of 1/4 of the shares subject
to the option at the end of the first year and 1/48 of the shares subject
to the option at the end of each month thereafter. All options may be
repriced by the Company's board of directors.
(2) Based on options to purchase 741,000 shares of Common Stock granted in the
fiscal year ended January 31, 1997.
(3) The potential realizable value is based on the term of the option at its
time of grant. It is calculated by assuming that the stock price on the
date of grant appreciates at the indicated annual rate, compounded annually
for the entire term of the option and that the option is exercised and sold
on the last day of its term for the appreciated stock price. There can be
no assurance that the values shown in this table will be achieved.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1997,
AND VALUE OF OPTIONS AT END OF FISCAL YEAR 1997
NUMBER OF
SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT END END
NUMBER OF OF FISCAL 1997(#) OF FISCAL 1997($)(2)
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED ($)(1) UNEXERCISABLE UNEXERCISABLE
- ---- --------------- --------------- ------------- -------------
<S> <C> <C> <C> <C>
Ronald A. Abelmann 390,000 $8,603,194 237,871 / 382,754 $7,390,000 /$10,745,500
Jerry L. Fiddler -- -- 16,733 / 30,517 439,800 / 771,100
Robert L. Wheaton 180,454 3,012,335 45,369 / 83,177 1,334,680 / 2,000,800
David N. Wilner -- -- 16,733 / 30,517 439,800 / 771,100
David R. Larrimore 15,000 379,500 56,807 / 153,193 1,614,000 / 3,834,900
</TABLE>
(1) Value realized is based on the fair market value of the Company's Common
Stock on the date of exercise minus the exercise price and does not
necessarily indicate that the optionee sold such stock.
(2) Fair market value of the Company's Common Stock on January 31, 1997 ($33.92)
minus the exercise price of the options.
9
<PAGE>
EMPLOYMENT AGREEMENT
In March 1994, the Company and Mr. Abelmann entered into an employment
agreement providing for the employement of Mr. Abelmann as President and
Chief Executive Officer. The agreement provided for Mr. Abelmann's base
salary and bonuses of up to 50% of base salary determined upon the
achievement of worldwide goals related to revenue and net income. In fiscal
year 1997, the Compensation Committee approved a 70% bonus for Mr. Abelmann.
Under the agreement, Mr. Abelmann was granted an option to purchase
815,625 shares of the Company's Common Stock under the Company's 1987 Equity
Incentive Plan (the "1987 Plan") with an exercise price equal to the then
fair market value of the Common Stock. In addition, 112,500 shares of the
Company's Common Stock were purchased with cash and a full recourse
promissory note (the "Note"), also under the 1987 Plan. The Note in the
amount of $182,812.50 accrued interest at 5.36% per annum with interest
payable annually in arrears and the outstanding principal was due and payable
on March 4, 1998. The full amount of the Note was secured by a pledge of
shares of Common Stock of the Company. On September 24, 1996, Mr. Abelmann
paid all of the outstanding principal and interest due under the Note. The
above share numbers and prices have been adjusted to reflect stock dividends
on May 24, 1996, and March 10, 1997.
The agreement also provides that, in the event Mr. Abelmann's employment
is terminated without cause, he will receive, as severance, continued payment
of his then base salary for six months following such termination.
SEVERANCE PLAN
In November 1995, the Compensation Committee of the Board of Directors
adopted a Change in Control Incentive and Severance Benefit Plan (the "Severance
Plan") to provide an incentive to officers of the Company with the title of Vice
President or above in the event of certain "change of control" transactions, and
severance benefits in the event of certain terminations of employment within
twelve (12) months of the change of control.
Upon the occurrence of a change of control, all executive officers,
except the Chief Executive Officer, will receive acceleration of vesting for
all shares subject to stock options which would otherwise have vested within
one year of the date of the change of control. The Chief Executive Officer
will receive two years' worth of accelerated vesting, except to the extent
that the option acceleration would create adverse tax consequences for the
Chief Executive Officer and the Company under the golden parachute provisions
of sections 280G and 49999 of the Internal Revenue Code ("Code"), in which
case the Chief Executive Officer will have accelerated the maximum number of
shares allowed under the golden parachute provisions.
If an executive officer other than the Chief Executive Officer is
terminated without "Cause" or voluntarily terminates with "Good Reason" (in
each case as defined in the Severance Plan) within twelve (12) months of a
change in control, the executive will receive continued compensation for 12
months (including an estimated bonus amount), continued health insurance for
the same period, and accelerated vesting for stock options that would
otherwise vest within one year of the date of termination. In addition, for
the Chief Executive Officer, any shares which would have received
acceleration of vesting on account of the change in control but did not
because of the limitation to avoid the golden parachute tax provisions shall
receive accelerated vesting on the termination date. If the total severance
payments would cause an executive to become liable for golden parachute
excise tax payments, then the Company shall pay that executive's excise tax
liability and all other taxes associated with the Company's payment of the
excise tax in order to leave the executive in the same after-tax position as
if no excise tax had been imposed.
10
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION (1)
The Board of Directors has delegated to the Compensation Committee of the
Board of Directors (the "Committee") the authority to establish and maintain the
compensation programs for all employees, including executives. For the Chief
Executive Officer and other executive officers, the Committee evaluates
performance and determines compensation policies and levels. The Compensation
Committee is presently comprised of two non-employee directors. Neither of
these non-employee directors has any interlocking or other type of relationship
that would call into question his independence as a committee member.
The Compensation Committee believes that, with respect to the application
of Section 162(m) of the Code, at the present time it is highly unlikely that
the cash compensation paid to any Named Executive Officer in a taxable year will
exceed $1 million. However, options granted with exercise prices at least 100%
of fair market value are intended to qualify under the 1987 Plan as
"performance-based compensation."
The objectives of the Company's executive compensation policies are to
attract, retain and reward executive officers who contribute to the Company's
success, to align the financial interests of executive officers with the
performance of the Company, to strengthen the relationship between executive pay
and stockholder value, to motivate executive officers to achieve the Company's
business objectives and to reward individual performance. In carrying out these
objectives, the Committee considers the level of compensation paid to executive
officers in positions of companies similarly situated in size and products, the
individual performance of each executive officer, corporate performance, and the
responsibility and authority of each position relative to other positions within
the Company.
An executive officer's base salary is supplemented by two additional
compensation components: awards under the Management Incentive Plan ("MIP"),
designed to reward participants for individual and Company-wide performance;
and options granted under the 1987 Plan, designed to provide long-term
incentives to all employees of the Company. Each of these components is
discussed in turn below:
Base Salary
The method used by the Compensation Committee to determine executive
compensation is designed to provide for a base salary that, while competitive
with comparable companies, is nevertheless calculated to result in a base salary
that is at the lower end of the competitive range for those companies. In
establishing base salaries for executive officers, the Company considers the
individual executive's level of responsibility, compensation surveys and market
data of general industry companies of similar size. These companies include
some, but not all, of the companies on the Nasdaq Computer and Data Processing
Stocks Index and are selected to represent the types of companies with which the
Company competes in the market for executive talent. Salaries for executives
are reviewed on an annual basis and may be changed at that time on the basis of
a subjective analysis of the individual performance of the executive, the
Company's financial performance and changes in salary levels at comparable
companies.
(1) The material in this report is not "soliciting material," is not
deemed filed with the SEC, and is not to be incorporated by reference
into any filing of the Company under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended, whether
made before or after the date hereof and irrespective of any general
incorporation language contained in any filing.
11
<PAGE>
Management Incentive Plan
The MIP has been established to provide cash bonuses to reward executives
for their contributions to the achievement of Company-wide performance goals.
The MIP provides for the yearly establishment of a compensation pool based on
achieving worldwide goals related to revenue and net income in the Company's
operating plan, as well as other objectives in the operating plan specific to
such officers' individual areas of management responsibility, some of which
may be determined subjectively.
1987 Equity Incentive Plan
The 1987 Plan was established to provide all employees of the Company
with an opportunity to share, along with the stockholders of the Company, in
the long-term performance of the Company.
Periodic grants of stock options are generally made annually to all
eligible employees, with additional grants being made to certain employees
upon commencement of employment and, occasionally, following a significant
change in job responsibilities, scope or title. Stock options granted under
the 1987 Plan generally have a four-year vesting schedule and generally
expire ten years from the date of grant. The exercise price of stock options
granted under the 1987 Plan is usually 85% to 100% of fair market value of
the underlying stock on the date of grant.
The Compensation Committee considers, periodically, the grant of
stock-based compensation to all executive officers. Such grants are made on the
basis of a subjective analysis of individual performance, the Company's
financial performance, and the executive's existing options.
CEO Compensation
The base salary, incentives and stock options for the Chief Executive
Officer were determined in accordance with the criteria described in the "Base
Salary," "Management Incentive Plan," and "1987 Equity Incentive Plan" sections
of this report.
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
William B. Elmore
David Pratt
12
<PAGE>
PERFORMANCE MEASUREMENT COMPARISON (1)
The following chart shows a comparison of cumulative returns for the
Company, the Nasdaq Stock Market (United States Companies) and the Nasdaq
Computer and Data Processing Stocks beginning April 15, 1993, when the Company's
Common Stock commenced public trading. The graph assumes reinvestment of the
full amount of all dividends.
COMPARISON OF CUMULATIVE TOTAL RETURN ON INVESTMENT
TOTAL SHAREHOLDER RETURN
[CHART]
15Apr93 Jan94 Jan95 Jan96 Jan97
WIND RIVER SYSTEMS, INC. 100 60 88 280 754
NASDAQ US INDEX COMPOSITE 100 120 114 161 212
NASDAQ COMPUTER & DATA PROCESSING 100 113 127 197 268
(1) The Section is not "soliciting material," is not deemed filed with the SEC,
and is not to be incorporated by reference into any filing of the Company
under the Securities Act of 1933, as amended, or the Securities Exchange
Act of 1934, as amended, whether made before or after the date hereof and
irrespective of any general incorporation language contained in such
filing.
13
<PAGE>
CERTAIN TRANSACTIONS
The Company has entered into indemnity agreements with certain officers and
directors which provide, among other things, that the Company will indemnify
such officer and director, under the circumstances and to the extent provided
for therein, for expenses, damages, judgments, fines and settlements he may be
required to pay in actions or proceedings which he is or may be made a party by
reason of his position as a director, officer or other agent of the Company, and
otherwise to the full extent permitted under Delaware law and the Company's
By-laws.
OTHER MATTERS
The Board of Directors knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters are properly brought
before the meeting, it is the intention of the persons named in the accompanying
proxy to vote on such matters in accordance with their best judgment.
By Order of the Board of Directors
RICHARD W. KRABER
Secretary
June 12, 1997
<PAGE>
WIND RIVER SYSTEMS, INC.
PROXY SOLICITED ON BEHALF OF BOARD OF DIRECTORS
The undersigned hereby appoints Jerry L. Fiddler, Ronald A. Abelmann, David
N. Wilner or any of them with full power of substitution, proxies to vote at the
Annual Meeting of the Stockholders of Wind River Systems, Inc. (the "Company"),
to be held on July 24, 1997 at 10:00 a.m., local time, and at any and all
postponements, continuations and adjournments thereof, with all powers that the
undersigned would possess if personally present, upon and in respect of the
following matters and in accordance with the following instructions, with
discretionary authority as to any and all other matters that may properly come
before the meeting.
(TO BE SIGNED ON REVERSE SIDE)
<PAGE>
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF STOCKHOLDERS
WIND RIVER SYSTEMS, INC.
JULY 24, 1997
Please Detach and Mail in the Envelope Provided
<TABLE>
<CAPTION>
<S><C>
/X/ PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
WITHHOLD
FOR AUTHORITY
all nominees to vote for all
listed nominees listed FOR AGAINST ABSTAIN
ELECTION / / / / NOMINEES: Jerry L. Fiddler 2. To ratify selection of
OF Ronald A. Abelmann Price Waterhouse as the / / / / / /
DIRECTORS David N. Wilner Company's independent
William B. Elmore auditors for the fiscal
To withhold authority for any nominee(s), David B. Pratt year ending January 31,
write such nominee(s)' name(s) below: 1998
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL
BE VOTED FOR ALL NOMINEES LISTED IN PROPOSAL 1 AND FOR
PROPOSAL 2, AS MORE SPECIFICALLY DESCRIBED IN THE PROXY
STATEMENT. IF SPECIFIC INSTRUCTIONS ARE INDICATED, THIS
PROXY WILL BE VOTED IN ACCORDANCE THEREWITH.
- -----------------------------------------
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.
SIGNATURES DATE SIGNATURES DATE
----------------------------------- --------------- ----------------------------------- ---------------
Note: Please sign exactly as name appears hereon. Joint owners should each sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such.
</TABLE>
