[TEXT] THE SOFTWARE DEVELOPER'S COMPANY, INC.
90 Industrial Park Road
Hingham, Massachusetts 02043
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
to be held
October 18, 1995
To Our Stockholders:
An Annual Meeting of Stockholders of The Software
Developer's Company, Inc., a Delaware corporation (the Company or
SDC), will be held on Wednesday, October 18, 1995, at 9:00 a.m.,
local time, at the offices of Testa, Hurwitz & Thibeault at High
Street Tower, 125 High Street, 22nd Floor, Boston, Massachusetts
02110 for the following purposes:
1. To elect a Board of Directors to serve for the ensuing
year and until their respective successors have been duly elected
and qualified.
The nominees the Board proposes to present for election
are: Barry N. Bycoff, Stephen L. Watson, Aaron Kleiner, Milton J.
Pappas, Gustav H. Koven, Ralph B. Wagner and Michael L. Mark.
2. To ratify the selection of Coopers & Lybrand as
independent auditors for the Company for the fiscal year ending
March 31, 1996.
3. To transact such other business as may properly come
before the Meeting and any adjournments thereof.
Only stockholders of record on the books of the Company at
the close of business on September 1, 1995 will be entitled to
notice of, and to vote at, the Meeting.
Please sign, date and return the enclosed proxy in the
enclosed envelope at your earliest convenience. If you return
your proxy, you may nevertheless attend the Meeting and vote your
shares in person.
All stockholders are cordially invited to attend the
Meeting.
By Order of the Board of Directors,
Barry N. Bycoff,
President and Chief Executive Officer
September 14, 1995
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE,
DATE AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE
ENCLOSED ENVELOPE IN ORDER TO ASSURE REPRESENTATION OF YOUR
SHARES. THE PROXY MAY BE REVOKED BY THE PERSON EXECUTING THE
PROXY BY FILING WITH THE SECRETARY OF THE COMPANY AN INSTRUMENT
OF REVOCATION OR A DULY EXECUTED PROXY BEARING A LATER DATE, OR
BY ELECTING TO VOTE IN PERSON AT THE MEETING. NO POSTAGE NEED BE
AFFIXED IF THE PROXY IS MAILED IN THE UNITED STATES.<PAGE>
THE SOFTWARE DEVELOPER'S COMPANY, INC.
PROXY STATEMENT
1995 ANNUAL MEETING OF STOCKHOLDERS
October 18, 1995
Proxies in the form enclosed with this proxy statement are
solicited by the Board of Directors of The Software Developer's
Company, Inc., a Delaware corporation (the Company), for use at
the Annual Meeting of Stockholders to be held on October 18,
1995, at 9:00 a.m., local time, at the offices of Testa, Hurwitz
& Thibeault at High Street Tower, 125 High Street, 22nd Floor,
Boston, Massachusetts 02110, and any adjournments thereof (the
Meeting).
Only stockholders of record as of September 1, 1995 will
be entitled to notice of and to vote at the Meeting and any
adjournments thereof. As of that date, there were 7,443,748
shares (excluding treasury shares) of Common Stock, $.01 par
value, of the Company outstanding and entitled to vote. In
addition, as of that date, there were 760,968 shares of Series C
Preferred Stock, $.01 par value, of the Company outstanding and
entitled to vote.
The holders of Common Stock are entitled to cast one vote
for each share held of record and may vote in person or by proxy.
The holders of Series C Preferred Stock are also entitled to cast
one vote for each share of Series C Preferred Stock held of
record and may vote in person or by proxy. Accordingly, the
760,968 outstanding shares of Series C Preferred Stock vote
together with the holders of Common Stock as if the holders held
760,968 shares of Common Stock.
Any stockholder may revoke a proxy at any time prior to
its exercise by filing a later-dated proxy or a written notice of
revocation with the Secretary of the Company, or by voting in
person at the Meeting. If a stockholder is not attending the
Meeting, any proxy or notice should be returned in time for
receipt no later than the close of business on the last business
day preceding the Meeting.
The persons named as attorneys in the proxies are
directors and officers of the Company. All properly executed
proxies returned in time to be cast at the Meeting will be voted
and, with respect to the election of the Board of Directors, will
be voted as stated under section, Election of Directors, below.
With respect to the election of directors, any stockholder
submitting a proxy has the right to withhold authority to vote
for any individual nominee or group of nominees to the Board of
Directors by writing the name of such individual or group in the
space provided on the proxy.
<PAGE>
In addition to the election of directors, the stockholders
will consider a proposal to ratify the selection of Coopers &
Lybrand as independent auditors for the fiscal year ending March
31, 1996.
Where a choice has been specified on the proxy with
respect to the foregoing matters, the shares represented by the
proxy will be voted in accordance with the specification
indicated and will be voted FOR if no specification is indicated.
The Board of Directors of the Company knows of no other matter to
be presented at the Meeting. If any other matter should be
presented at the Meeting upon which a vote may properly be taken,
the shares of capital stock represented by all proxies received
by the Board of Directors will be voted with respect thereto in
accordance with the judgment of the persons named as attorneys in
the proxies.
The representation in person or by proxy of at least a
majority of the outstanding shares of Common Stock and Series C
Preferred Stock is necessary to establish a quorum for the
transaction of business. Votes withheld from any nominee,
abstentions and broker non-votes are counted as present or
represented for purposes of determining the presence or absence
of a quorum. A Non-Vote occurs when a broker holding shares for
a beneficial owner votes on one proposal, but does not vote on
another proposal because the broker does not have discretionary
voting power and has not received instructions from the
beneficial owner. Directors are elected by a plurality of the
votes cast by stockholders entitled to vote at the Meeting. The
holders of a majority of the outstanding shares of Series C
Preferred Stock, voting separately as a class, also have the
right to elect two directors. All other matters being submitted
to stockholders require the affirmative vote of the majority of
shares present in person or represented by proxy at the Meeting
(following the determination of a quorum). An automated system
administered by the Company's transfer agent tabulates the votes.
The vote on each matter submitted to stockholders is tabulated
separately. Abstentions are included in the number of shares
present or represented and voting on each matter. Broker
Non-Votes are not so included.
An Annual Report to Stockholders, containing financial
statements for the fiscal year ended March 31, 1995, is being
mailed with this Proxy Statement to all stockholders entitled to
vote. This proxy statement and the form of proxy were first
mailed to the Company's stockholders on or about September 14,
1995.
<PAGE>
MANAGEMENT AND PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table sets forth as of September 1, 1995,
the record date, the beneficial ownership of shares of capital
stock of (i) each person known by the Company to own beneficially
more than 5% of the 7,443,748 shares of Common Stock outstanding
on that date, (ii) the name of each director or nominee, and
(iii) the name of each executive officer identified in the
Summary Compensation Table, both with respect to the number of
shares owned by each person and the percentage of the outstanding
shares represented thereby, and also sets forth such information
for directors, nominees and executive officers as a group.
AMOUNT AND
NATURE OF
NAME AND ADDRESS OF BENEFICIAL PERCENT
BENEFICIAL OWNER OWNERSHIP (1) OF CLASS
Edison Venture Fund I, L. P. (2) 1,774,780 23.3%
Edison Venture Fund II, L.P.
Edison Venture Fund II-PA, L.P.
c/o Edison Venture Funds
997 Lenox Drive, #3
Lawrenceville, NJ 08648
Euclid Partners III, L.P. (3) 650,803 8.6%
Euclid Partners Corporation
50 Rockefeller Plaza, Suite 1022
New York, NY 10020
Brinson Trust Company (4) 865,393 11.5%
c/o Brinson Partners, Inc.
3 National Plaza
9th Floor, Suite 114
Chicago, IL 60602
Stephen L. Watson (5) 311,250 4.0%
Aaron Kleiner (6) 21,000 *
Milton J. Pappas (7) 680,553 8.9%
c/o Euclid Partners Corporation
50 Rockefeller Plaza, Suite 1022
New York, NY 10020
Gustav H. Koven (8) 1,787,322 23.4%
c/o Edison Venture Funds
997 Lenox Drive, #3
Lawrenceville, NJ 08648
Ralph B. Wagner (9) 26,000 *
Barry N. Bycoff (10) 303,750 3.9%
Michael L. Mark (11) 53,053 *
All executive officers and
directors as a group
(9 persons) (12) 3,244,368 38.0%
* less than 1%
(1) Except as otherwise noted below, the Company believes each
beneficial owner has the sole voting and investment power with
respect to all shares of Common Stock (or options, warrants or
other securities convertible into or exchangeable for Common
Stock) shown as beneficially owned by him. All numbers and
percentages, except as otherwise noted, do not assume the
exercise of outstanding options or warrants. Pursuant to the
rules of the Securities and Exchange Commission, shares of Common
Stock which an individual or group has a right to acquire within
60 days of September 1, 1995 pursuant to the exercise of
presently exercisable or outstanding options, warrants or
conversion privileges are deemed to be outstanding for the
purpose of computing the percentage ownership of such individual
or group, but are not deemed to be outstanding for the purpose of
computing the percentage ownership of any other person shown in
the table.
(2) Edison Venture Fund I, L.P., Edison Venture Fund II, L.P.
and Edison Venture Fund II-PA, L.P. (collectively, the Edison
Venture Funds) hold collectively 1,603,386 shares of Common
Stock. In addition, the Edison Venture Funds collectively hold
an aggregate of 171,394 shares of Series C Preferred Stock,
convertible at any time into 171,394 shares of Common Stock.
The Edison Venture Funds have sole voting and investment power
with respect to the 1,603,386 shares of Common Stock and 171,394
shares of Series C Preferred Stock. Mr. Koven, a director of the
Company, is also a general partner of each of the general
partners of the Edison Venture Funds and may be deemed to
share beneficial ownership of the securities held by such
entities. Mr. Koven disclaims such beneficial ownership.
(3) Euclid Partners III, L.P. (Euclid) holds 483,098 shares of
Common Stock. In addition, Euclid holds 84,619 shares of Series
C Preferred Stock, convertible at any time into 84,619 shares of
Common Stock. Also included in this amount are 83,086 shares of
Common Stock issuable upon exercise of a warrant held by Euclid.
Mr. Pappas, a director of the Company, is the president of the
sole corporate general partner of Euclid and may be deemed
the beneficial owner of the 650,803 shares beneficially owned by
Euclid. Mr. Pappas disclaims beneficial ownership of such
shares.
<PAGE>
(4) Includes 722,225 shares of Common Stock held by The First
National Bank of Chicago as agent for the Brinson Trust Company
as Trustee to the Institutional Venture Capital Fund II (Brinson)
and 57,471 shares of Common Stock held by Monroe and Company for
the benefit of Brinson. In addition, Brinson holds 85,697 shares
of Series C Preferred Stock, convertible into 85,697 shares of
Common Stock.
(5) Includes the presently exercisable portion (i.e., 220,000
shares) of stock options to purchase up to 271,000 shares of
Common Stock. Also includes 40,500 shares of Common Stock held
directly by Mr. Watson and 50,000 shares of Series C Preferred
Stock, convertible at any time into 50,000 shares of Common
Stock.
(6) Represents the presently exercisable portion (i.e., 21,000
shares) of non-qualified stock options to purchase up to 36,750
shares of Common Stock.
(7) Represents the presently exercisable portion (i.e., 29,750
shares) of non-qualified stock options to purchase up to 45,500
shares of Common Stock. Also includes the 650,803 shares of
Common Stock and Series C Preferred Stock deemed to be owned by
Euclid, of which shares Mr. Pappas may be deemed a beneficial
owner. Mr. Pappas disclaims beneficial ownership of such shares.
See footnote 3.
(8) Represents the presently exercisable portion (i.e., 12,542
shares) of non-qualified stock options to purchase up to 40,542
shares of Common Stock. Also includes the 1,774,780 shares of
Common Stock and Series C Preferred Stock deemed to be owned by
the Edison Venture Funds, of which shares Mr. Koven may be deemed
a beneficial owner. Mr. Koven disclaims beneficial ownership of
such shares. See footnote 2.
(9) Represents the presently exercisable portion (i.e., 21,000
shares) of non-qualified stock options to purchase up to 45,500
shares of Common Stock and also includes 5,000 shares of Common
Stock held directly.
(10) Includes the presently exercisable portion (i.e., 293,750
shares) of stock options to purchase up to 500,000 shares of
Common Stock. Also includes 10,000 shares of Common Stock owned
by Mr. Bycoff's children.
(11) Includes 23,193 shares of Common Stock held directly and
26,360 shares of Series C Preferred Stock, convertible into
26,360 shares of Common Stock, and includes options to purchase
3,500 shares of Common Stock.
<PAGE>
(12) Includes 663,732 shares which all officers and current
directors as a group have the right to acquire within 60 days
after September 1, 1995, upon exercise of the presently
exercisable portion of outstanding stock options held by current
directors and officers. Also includes: (i) 483,098 shares of
Common Stock, 84,619 shares of Series C Preferred Stock,
convertible at any time into 84,619 shares of Common Stock, and
83,086 shares issuable upon exercise of warrants deemed to be
owned by Euclid, of which shares Mr. Pappas, a director, may be
deemed a beneficial owner; (ii) 1,603,386 shares of Common
Stock and 171,394 shares of Series C Preferred Stock, convertible
at any time into 171,394 shares of Common Stock, deemed to be
owned by the Edison Venture Funds, of which shares Mr. Koven, a
director, may be deemed a beneficial owner; (iii) 50,000 shares
of Series C Preferred Stock, convertible at any time into 50,000
shares of Common Stock, owned by Mr. Watson, a director; and
(iv) 26,360 shares of Series C Preferred Stock, convertible at
any time into 26,360 shares of Common Stock, owned by Mr. Mark, a
director.
ELECTION OF DIRECTORS
At the meeting, seven directors are to be elected
(constituting the entire Board of Directors). The directors of
the Company are elected annually and hold office for the ensuing
year until the next annual meeting of stockholders and until
their successors have been elected and qualified.
No proxy may be voted for more people than the number of
nominees listed below. Shares represented by all proxies
received by the Board of Directors and not so marked as to
withhold authority to vote for any individual director (by
writing that individual director's name where indicated on
the proxy) or for all directors will be voted FOR the election of
all the nominees named below (unless one or more nominees are
unable or unwilling to serve). The Board of Directors knows of
no reason why any such nominee would be unable or unwilling to
serve, but if such should be the case, proxies may be voted for
the election of some other person.
The Board of Directors held eight meetings during the
fiscal year ended March 31, 1995. All of the directors, Messrs.
Bycoff, Watson, Wagner, Koven, Pappas, and Kleiner, attended more
than 75% of all meetings of the Board of Directors held during
the 1995 fiscal year during their respective tenures as
directors. Mr. Mark became a director of the Company in October,
1994.
<PAGE>
The Compensation and Stock Option Committee of the Board
of Directors (the Compensation Committee), of which Messrs.
Pappas, Koven and Wagner are currently members, determines who
should receive stock options under the Company's various stock
plans and also reviews and recommends officer compensation,
including salary and bonus plans. The Compensation Committee
held three meetings during the fiscal year ended March 31, 1995.
The Audit Committee of the Board of Directors at year end
was composed of Messrs. Watson, Pappas and Koven. The principal
functions of the Audit Committee include overseeing the
performance and reviewing the scope of the audit function of the
Company's independent auditors. The Audit Committee also
reviews, among other things, audit plans and procedures, various
accounting and financial reporting issues, and changes in
accounting policies. The Audit Committee held three meetings
during the fiscal year ended March 31, 1995.
Messrs. Watson, Pappas, Koven and Wagner attended more
than 75% of all committee meetings held during the 1995 fiscal
year of which each was a member.
All nominees have served as directors of the Company
during the last fiscal year. Mr. Watson has served on the Board
of Directors since March 1986; Mr. Kleiner, since July 1988; Mr.
Pappas, since July 1990; Mr. Wagner, since September 1992; Mr.
Bycoff, since April 1993; Mr. Koven, since August 1993; and Mr.
Mark, since October 1994.
The following table sets forth the positions currently
held by each director nominee with the Company.
NOMINEE'S NAME AND
YEAR NOMINEE FIRST POSITIONS AND OFFICES
BECAME DIRECTOR WITH THE COMPANY
Barry N. Bycoff President, Chief Executive
April, 1993 Officer and Director
Stephen L. Watson Chairman of the Board
March, 1986
Aaron Kleiner Director
July, 1988
Milton J. Pappas Director
July, 1990
Ralph B. Wagner Director
September, 1992
<PAGE>
Gustav H. Koven Director
August, 1993
Michael L. Mark Director
October, 1994
The By-laws of the Company provide that the Board of
Directors are elected annually. All directors of the Company
hold office until the next annual meeting of stockholders or
until their successors have been elected and qualified. Officers
are elected by, and serve at the discretion of, the Board of
Directors.
DIRECTOR DESIGNATION RIGHTS OF SERIES C PREFERRED STOCK
Voting as a separate class, the holders of a majority of
the outstanding shares of Series C Preferred Stock are entitled
to nominate and elect two directors. Mr. Koven and Mr. Pappas
have been nominated to serve as the director representatives of
the Series C Preferred Stock.
OCCUPATIONS AND BIOGRAPHIES OF DIRECTORS AND NOMINEES
Barry N. Bycoff, 46, was appointed President and Chief
Executive Officer and a Director of the Company in April 1993.
From December 1991 to December 1992, during his tenure at MapInfo
Corporation, a provider of desktop mapping software, he held
positions as Chief Operating Officer, Senior Vice President
of Sales and Marketing, and a Director. From January 1984 to
October 1991, he successfully ran a number of business units for
Prime Computer Inc., a manufacturer of mainframe and minicomputer
systems, holding such positions as Vice President-Marketing in
the Computer Systems Business Unit, Vice President-General
Purpose Product Line, Vice President-Prime Information
Business Group, Director-Finance and Administration/Worldwide
Sales and Director-Corporate Planning and Analysis. Prior to
that, Mr. Bycoff held various management positions at Gillette
Company from November 1973 to December 1983.
Stephen L. Watson, 54, currently serves as Chairman of the
Board and served as President and Chief Operating Officer of the
Company from March 1991 to April 1993 when Mr. Bycoff joined the
Company. In May 1991, Mr. Watson became Chief Executive Officer
of the Company and served in that capacity until May 1993. He
has also served as a director of the Company since March 1986.
From June 1989 to March 1991 he was a private investor. From
July 1988 to June 1989, he was President of California Micro
Solutions, Inc., a franchisee of Computerland Corporation. From
April 1987 to July 1988, he was Senior Vice President of
Computerland Corporation, a retailer of personal computer
software and hardware systems. From July 1984 to April 1987, he
was a private investor. From 1979 to July 1984, he was President
of Computer Centers of New England, a retailer of personal
computer systems. From 1970 to 1979, Mr. Watson was employed in
various management positions at Digital Equipment Corporation, a
manufacturer of mainframe and minicomputer systems. Mr. Watson
is a director of several privately-held companies. Mr. Watson is
currently Chairman and co-founder of ScanCenters of America, a
document imaging and conversion services company.
Aaron Kleiner, 48, became a director of the Company in
July 1988. He is currently a partner of Kurzweil Technologies, a
firm specializing in the disposition of patents and technology
assets. From 1992 to 1995, he was Vice-Chairman of Kurzweil
Applied Intelligence, Inc., a developer, manufacturer and
marketer of voice recognition technology for medical reporting
applications. He also co-founded Kurzweil Computer Products in
1974, which developed, manufactured and marketed optical
character recognition systems for reading machines for the blind
and other commercial products and which was acquired by Xerox in
1980. Mr. Kleiner is on the Board of Advisors of a privately
held company and is a co-founder and past Chairman of the MIT
Enterprise Forum.
Milton J. Pappas, 66, became a director of the Company in
July 1990. He is currently Chairman of Euclid Partners
Corporation (since 1983), a management company providing services
to Euclid Partners, a venture capital investment fund. From 1983
to the present, he has been a General Partner of Euclid Partners
Associates II, L.P.; Euclid Partners Associates III, L.P.; and
Euclid Partners Associates IV, L.P., general partners to Euclid
Partners II, L.P.; and Euclid Partners III, L.P.; and Euclid
Partners IV, L.P., private venture capital investment funds.
From 1970 to 1986, he was a General Partner of Euclid Partners, a
private venture capital firm. Mr. Pappas also serves on
the Board of Directors of Therion Corporation and Sys-Tech
Solutions, Inc. Mr. Pappas is admitted to the Ohio Bar and serves
on the Board of Directors as the representative of the holders of
the Series C Preferred Stock.
Ralph B. Wagner, 61, became a director of the Company in
September 1992. He is a co-founder and a director of Keyfile
Corporation, a manufacturer and marketer of document image
software products for use on personal computers. Mr. Wagner is a
principal of Wagner Resources, a consulting and investment
firm. Since 1983 Mr. Wagner has served as a director of several
private companies including Alpha Software, a developer,
manufacturer and marketer of software programs, and Pure Speech,
a software developer specializing in speech recognition.
Gustav H. Koven III, 52, became a director of the Company
in August 1993; he serves on the Board of Directors as a
representative of the holders of the Series C Preferred Stock.
Since April 1990, he has been a general partner of Edison
Partners, L.P., which is the general partner of Edison
Venture Fund, L.P., and since October 1990, a general partner of
Edison Partners II, L.P., which is the general partner of Edison
Venture Fund II, L.P. and Edison Venture Fund II-PA, L.P.
(together with Edison Venture Fund, L.P., the Edison Funds),
private venture capital investment firms. Since January 1994,
Mr. Koven has been a General Partner of Edison Partners III,
L.P., which is the general partner of Edison Venture Fund III,
L.P. From 1985 until he joined Edison, Mr. Koven was President
of Chase Manhattan Capital Corporation, a venture capital
subsidiary of the bank. From 1980 to 1985 he was a Vice
President in Corporate Development and Vice President in
Corporate Planning at Chase Manhattan Bank. Before joining
Chase, he held marketing and corporate development positions at
Union Carbide. Mr. Koven serves as a director of ECCS, Inc., a
publicly-held provider of systems integration services and mass
storage products for networked computers, and five other
private companies.
Michael L. Mark, 49, became a director of the Company in
October 1994. He is President of Refined Reports, Inc., an
electronic publishing software development company he founded in
1990. Prior to that, Mr. Mark served as Vice President, System
Integration at Interleaf, Inc., an electronic publishing software
developer, and was Vice-President and co-founder of Cadmus
Computer Corporation, a workstation manufacturer. He also serves
as a director of Progress Software Corporation, a manufacturer of
software development tools and two other private companies.
OCCUPATIONS AND BIOGRAPHIES OF EXECUTIVE OFFICERS
Stephen A. Orenberg, 45, has been employed by the Company
since August 1991. He is currently Vice President of Sales, and
was Vice President of New Business Development from February 1994
to July 1994. Prior to that he was Vice President of Channel
Marketing. Before joining the Company, from 1990 to 1991, Mr.
Orenberg was with AICorp, a developer of expert system software,
as Manager of Corporate Sales responsible for selling the
company's Knowledge Base and Expert System tools to the OS/2, DOS
and VAX/VMS markets. From 1988 to 1990 he was Manager of Cognos
Direct, a division of Cognos Corporation, an international
manufacturer of fourth generation programming languages.
Frederick W. Haigis, 43, joined the Company in February
1994 as Vice President of Marketing. From 1985 to 1993 he held
senior level positions, most recently as President and Chief
Operating Officer, of the Giardini/Russell Group, a
communications and public relations agency. In late 1993
Giardini/Russell merged with Rossin Greenberg Seronick where
Mr. Haigis was retained as Executive Vice President.
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On November 21, 1990, the Company received a loan of
$300,000 from Watson Investments, Inc., a family-owned private
investment firm of which Stephen L. Watson was a director and
treasurer. Mr. Watson is a director of the Company and currently
its Chairman of the Board. The Company issued to Watson
Investments, Inc. its Secured Subordinated Term Note, due
December 1, 1993, in the principal amount of $300,000. This note
bore interest at 16% per year, with interest payable monthly in
arrears, and was secured by substantially all of the tangible
assets of the Company. In December 1991, the investment company
was dissolved, and Mr. Watson and his spouse became joint holders
of the Note. The note was subordinated to indebtedness of the
Company, to commercial banks and other institutional lenders,
including the Company's existing $2,000,000 line of credit
facility. On October 19, 1993, the Company exchanged and
extended the $300,000 loan. The principal of $300,000 was
extended to December 1996, with interest accruing at 12% per
annum, payable quarterly in arrears. In any month which the
Company does not make a profit, the interest will be deferred and
paid to the extent of profits in the following months without
compounding unpaid interest. The new note is subordinated to any
commercial bank or other financial institution debt up to
$4,000,000.
On October 19, 1993 the Company completed a private
placement of Series C Preferred Stock and a recapitalization
transaction. Private investors purchased 905,968 shares of
Series C Preferred Stock at a price of $ 1.00 per share,
resulting in net proceeds of approximately $781,000. The
Series C Preferred Stock is convertible into Common Stock on a
one-for-one basis (for an aggregate of 905,968 shares) and votes
with Common Stock on the same basis. The Series C Preferred
Stock contains a number of features including a fixed
liquidation preference of $2.00 per share (for an aggregate
liquidation preference of $1,812,000), anti-dilution rights and
two (2) Board of Director seats. The recapitalization
transaction involved the exchange of all of the Company's Series
A Preferred Stock and Series B Senior Preferred Stock for
4,288,890 shares of Common Stock, increasing the total number of
shares of Common Stock issued and outstanding to 7,292,453. This
recapitalization removed the liquidation preference, including
cumulative dividends, to the preferred holders of approximately
$7,000,000, and terminated all prior agreements with the holders
of the Series A Preferred Stock and the Series B Senior Preferred
Stock, while retaining certain registration rights.
<PAGE>
As part of the transaction, the holders of the Series C
Preferred Stock entered into a Voting Agreement pursuant to which
such holders agreed to vote their shares of Series C Preferred
Stock in favor of two designated representatives to the Company's
Board of Directors. The holders of the Series C Preferred Stock
have the right to elect two representatives to the Company's
Board of Directors under the Company's Restated Certificate of
Incorporation, as amended. One of the designees is the
representative of Edison Venture Funds and another is the
representative of Euclid.
Currently, these two designated representatives are Gustav H.
Koven III, a general partner of the general partners of Edison
Venture Funds, and Milton J. Pappas, Chairman of Euclid Partners
Corp., a management company providing services to Euclid. Edison
Venture Funds acquired 171,394 shares of Series C Preferred
Stock and Euclid acquired 84,619 shares of Series C Preferred
Stock as part of the financing and recapitalization transaction.
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
CONCERNING DIRECTORS AND OFFICERS
EXECUTIVE COMPENSATION
The following table sets forth the annual and long-term
compensation for services in all capacities to the Company for
the fiscal years ended March 31, 1995, 1994 and 1993, of those
persons who (i) served as the Chief Executive Officer of the
Company during any part of the fiscal year ended March 31,
1995, and (ii) the other 4 most highly compensated executive
officers of the Company at March 31, 1995 whose annual
compensation and bonus exceeded $100,000 (the Named Officers):
SUMMARY COMPENSATION TABLE
ANNUAL LONG-TERM COMP-
COMPENSATION(1) ENSATION AWARD(2)
RESTR- STOCK
FISCAL OPTIONS/ ICTED(3) AWARD
YEAR SALARY($) BONUS($) SARS(#) ($)(3)
Barry N. Bycoff 1995 $156,770 $10,000 350,000 0
Chief Executive 1994 138,667 7,500 150,000 0
Officer, President 1993 0 0 0 0
& Director
Stephen L. Watson 1995 $ 10,385 $ 0 17,500 0
(former Chief 1994 97,482 0 250,000 0
Executive Officer 1993 167,062 15,300 50,000 0
& President)
& Director
Dennis M. Mackie 1995 $109,039 $0 94,800 0
(former Vice 1994 58,277 0 0 0
President & Chief 1993 0 0 0 0
Financial Officer)
Stephen A. Orenberg 1995 $103,131 $ 0 30,000 0
Vice President of 1994 85,933 0 10,000 0
Sales 1993 84,732 1,218 15,000 0
(1) Excludes perquisites and other personal benefits, the
aggregate annual amount of which for each officer was less than
the lesser of $50,000 or 10% of the total salary and bonus
reported.
(2) The Company did not grant any restricted stock awards or
stock appreciation rights (SARs) or make any long-term incentive
plan payouts during the fiscal years ended March 31, 1995, 1994
and 1993.
(3) Includes bonus payments earned by the Named Officers in
the year indicated, for services rendered in such year, which
were paid in the next subsequent year. Mr. Mackie left the
Company in July 1995.
EMPLOYMENT AGREEMENT, BARRY N. BYCOFF
In April 1993, Barry N. Bycoff joined the Company as
President, Chief Executive Officer and a director. Pursuant to
the terms of his employment agreement, Mr. Bycoff currently
receives an annual salary of $160,000, with a bonus potential of
up to 50% of base salary under a bonus program to be established
from time to time by the Board of Directors. No bonus was paid
to Mr. Bycoff during the March 31, 1995 fiscal year. In
addition, Mr. Bycoff, in connection with his initial employment
in April 1993, received an option to purchase 150,000 shares of
Common Stock at an exercise price of $1.00 per share, the fair
market value on the date of grant. A total of 37,500 shares
were immediately exercisable upon grant, with the balance
becoming exercisable on a quarterly basis following the grant.
As of June 30, 1995, a total of 121,875 shares have become
exercisable. The Company has the right to terminate Mr. Bycoff
at any time, without cause, but must pay a severance payment,
including benefits, for a period of 13 weeks following his
termination. If Mr. Bycoff is unable to find new employment at a
comparable salary and benefit level after the end of the 13-week
period, the Company is also obligated to pay Mr. Bycoff his
salary and benefits for an additional 13 weeks or until Mr.
Bycoff finds new employment, whichever occurs first.
OPTION GRANTS IN THE LAST FISCAL YEAR
The following table sets forth grants of stock options
pursuant to the Company's 1987 Amended Stock Plan and 1994 Stock
Plan during the fiscal year ended March 31, 1995 to the Named
Officers which are reflected in the Summary Compensation Table
above.
% OF
TOTAL
OPTION/
SARS POTENITAL REAL-
GRANTED IZABLE VALUE
TO EXER- AT ASSUMED
EMPLO CISE ANNUAL RATES
-YEES OR OF STOCK PRICE
OPTIONS IN BASE EXPIR- APPRECIATION
/SARS FISCAL PRICE/ ATION OPTION TERM(1)
GRANT(#) YEAR SHARE DATE 5%($) 10%($)
Barry N. Bycoff 350,000 41.4% 1.00 2005 $244,344 $389,061
Stephen L. Watson 17,500 2.1% 0.78 2004 22,234 35,405
Dennis M. Mackie 94,800 11.2% 1.00 2004 154,412 245,887
Stephen A. Orenberg 30,000 3.6% 1.33 2004 64,993 103,490
(1) Amounts reported in these columns represent amounts that
may be realized upon exercise of the options immediately prior to
the expiration of their term assuming the specified compounded
rates of appreciation (5% and 10%) on the Company's Common Stock
over the term of the options. These numbers are calculated based
on rules promulgated by the Securities and Exchange Commission
and do not reflect the Company's estimate of future stock
price growth. Actual gains, if any, on stock option exercises
and Common Stock holdings are dependent on the timing of such
exercise and the future performance of the Company's Common
Stock. There can be no assurance that the rates of appreciation
assumed in this table can be achieved or that the amounts
reflected will be received by the individuals.
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth information with respect to
options to purchase the Company's Common Stock granted under the
1987 Amended Stock Plan and 1994 Stock Plan including (i) the
number of shares purchased upon exercise of options in the most
recent fiscal year, (ii) the net value realized upon such
exercise, (iii) the number of unexercised options outstanding at
March 31, 1995, and (iv) the value of such unexercised options at
March 31, 1995:
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND MARCH 31,1995 OPTION VALUES
NUMBER OF NUMBER OF
SHARES OPTIONS AT OPTIONS AT
ACQUIRED MARCH 31, 1995 MARCH 31, 1995(1)
ON
EXER- VALUE (#) (#) ($) ($)
CISE REAL- EXERC- UNEXER- EXERC- UNEXERC-
NAME (#) ZED($) ISABLE CISALBE ISABLE CISABLE
Barry Bycoff 0 $0.00 263,000 237,000 $147,000 $133,000
Stephen Watson 0 0.00 200,500 67,000 112,280 37,500
Dennis Mackie 0 0.00 28,440 66,360 15,926 37,162
Stephen Orenberg 0 0.00 14,000 46,000 930 10,570
(1) Value is based on the difference between option exercise
price and the fair market value at 1995 fiscal year-end ($1.56
per share, the average of the closing bid and ask prices on the
Boston Stock Exchange on March 31, 1995) multiplied by the number
of shares underlying the option.
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's executive compensation program is
administered by the Compensation and Stock Option Committee of
the Board of Directors, currently consisting of Milton Pappas, as
Chairman, Gustav Koven and Ralph Wagner (the Compensation
Committee). All members of the Compensation Committee are non-
employee directors. Pursuant to the authority delegated by the
Board of Directors, the Compensation Committee establishes each
year the compensation of senior management, including approval of
annual salaries and bonuses, the review and approval of bonus
plans for executive officers, as well as the grant of stock
options to officers, employees and consultants.
One of the Company's primary business objectives is to
maximize long-term stockholder returns. To achieve this
objective, the Company believes it is necessary to attract,
retain and motivate qualified executives in a competitive
industry. The Compensation Committee and the Board of Directors
therefore apply the philosophy that compensation of executive
officers, specifically including that of the Chief Executive
Officer and President, should be linked to revenue growth,
profitability, earnings per share performance, and long-term
increase in stock price and quality of earnings.
Establishing compensation programs generally and
determining the compensation of individual executive officers are
complex matters involving numerous issues and a variety of data.
The approach of the Compensation Committee is primarily
subjective in nature. The Compensation Committee identifies
relevant factors to be considered, such as the need to be
competitive in the market for executive talent, retain and
motivate existing officers with competitive salary and option
programs, and to provide incentives and rewards for individual
and corporate performance. However, the Compensation Committee
maintains a flexible approach that is based on the exercise of
judgment and discretion and reflects the Company's
entrepreneurial operating environment and long-term performance
orientation. Precise formulas, targets or goals are not utilized
and specific weights are not assigned to the various factors.
The Compensation Committee focuses on the Company's goal of
long-term enhancement of stockholder value by stressing
long-term goals and by using stock-based incentive programs with
extended vesting schedules (typically five years from the initial
grant of options). The Compensation Committee believes the use
of such incentives to retain and motivate individuals who have
developed the skills and expertise required to lead the Company
is key to the Company's success.
<PAGE>
Under the supervision of the Compensation Committee, the
Company has developed and implemented certain compensation
policies. The Compensation Committee's executive compensation
policies are designed to (i) enhance profitability of the Company
and shareholder value, (ii) integrate compensation with the
Company's annual and long-term performance goals, (iii) reward
corporate performance, (iv) recognize individual initiative,
achievement and hard work, (v) assist the Company in attracting
and retaining qualified executive officers, and (vi) retain and
motivate existing officers to perform. Compensation under the
executive compensation program is comprised of cash compensation
in the form of annual base salary and performance-based bonuses,
and long-term incentive compensation in the form of stock
options.
In setting cash compensation levels for executive officers
(including the Chief Executive Officer), the Compensation
Committee prepares a salary review annually. The base salaries
are fixed at levels comparable to the amounts paid to senior
executives with comparable qualifications, experience and
responsibilities at other companies of similar size and engaged
in similar businesses to that of the Company. In addition, the
base salaries take into account the Company's relative
performance as compared to comparable companies. Although the
Compensation Committee reviews such information for general
guidance, it does not specifically target compensation of the
executive officers to compensation levels at other companies.
The cash compensation program for the Chief Executive
Officer and the President of the Company is designed to reward
performance that enhances shareholder value. Financial goals are
based on the achievement of significant increases in net income
as specified in the Company's annual operating plan. The plan
establishes milestones for revenue growth and operating expenses.
The cash compensation package is comprised of base pay and with
an opportunity for a bonus based on the achievement of certain
profitability milestones. Both components are affected by the
Company's revenue growth, market share growth, profitability,
quality of earnings, and growth in earnings per share. During
fiscal 1995, the Company did not operate at an acceptable level
of profitability. Accordingly, no cash bonuses or other
performance payments were paid to the Chief Executive Officer for
the last fiscal year. At the beginning of the 1995 fiscal year,
the President and Chief Executive Officer did receive options to
purchase 350,000 shares of Common Stock at an exercise price of
$1.00. These options vest over 2 and 3 years an are exercisable
in installments.
<PAGE>
The compensation program for the remaining members of the
executive group is based upon the attainment of objectives for
profitability similar to the Chief Executive Officer. Bonus
amounts are predicated upon improvement in Company operating
performance as well as attainment of planned objectives. In
the past, the Chief Executive Officer and President makes
recommendations to the Compensation Committee regarding the
planned objectives and executive compensation levels. The
overall plans and operating performance levels upon which
management compensation is based are approved by the Compensation
Committee on an annual basis. Because the Company's performance
targets were not achieved, no bonuses were paid to the other
executive officers during the last fiscal year.
The Compensation Committee relies on incentive
compensation in the form of performance-based bonuses and stock
options to retain and motivate executive officers. Incentive
compensation in the form of performance-based bonuses for the
Chief Executive Officer and the Company's other executive
officers is based upon management's success in meeting the
Company's financial and strategic goals. Financial goals are
based on the achievement of significant increases in net income
as specified in the Company's annual operating plan. The plan
establishes milestones for revenue growth and operating expenses.
Strategic goals focus on increasing market share and Company
growth and improving the Company's strategic position in the
market and the quality of earnings. Because the Company did not
achieve the financial performance milestones set forth in the
plan, the Committee determined not to pay cash bonuses to
executive officers for the 1995 fiscal year.
Incentive compensation in the form of stock options is
designed to provide long-term incentives to executive officers
and other employees, to encourage the executive officers and
other employees to remain with the Company and to enable
optionees to develop and maintain a significant, long-term stock
ownership position in the Company's Common Stock, which in turn
motivates the recipient to focus on long-term enhancement in
stockholder value. The Company's 1987 Stock Option Plan and 1994
Stock Plan, administered by the Compensation Committee, are the
vehicles for the granting of stock options.
The stock option plans permit the Compensation Committee
to grant stock options to eligible employees, including executive
officers. During fiscal 1995, the Compensation Committee granted
stock options to various employees. Options become exercisable
based upon a vesting schedule tied to years of future service to
the Company. The value realizable from exercisable options is
dependent upon the extent to which the Company's performance is
reflected in the market price of the Company's Common Stock at
any particular point in time. Generally, options granted to
officers and employees vest over five years and expire after a
10-year period. In addition, the Compensation Committee has a
policy of awarding stock options at not less than the fairmarket
value at the date of grant. As a result of this policy,
executives and other employees are rewarded economically only to
the extent that the stockholders also benefit through
appreciation in the market price of the Company's stock.
Factors reviewed by the Compensation Committee in
determining whether to grant options are similar to those
considered in determining salaries and bonuses described above.
Several other factors, however, such as an employee's individual
initiative, achievement and performance are also considered by
the Compensation Committee. In making specific grants to
executives, the Compensation Committee evaluates each officer's
total equity compensation package. The Compensation Committee
generally reviews the option holdings of each of the executive
officers including vesting and exercise price and the then
current value of such unvested options. The Compensation
Committee considers equity compensation to be an integral part of
a competitive executive compensation package, a way to reinforce
the individual's commitment to the Company and an important
mechanism to align the interests of management with those of the
Company's stockholders.
The Compensation Committee is satisfied that the executive
officers of the Company are dedicated to achieving significant
improvements in the long-term financial performance of the
Company and that the compensation policies and programs
implemented and administered have contributed and will continue
to contribute towards achieving this goal.
This report has been submitted by the members of the
Compensation and Stock Option Committee: Milton J. Pappas,
Chairman, Ralph B. Wagner, and Gustav H. Koven, III.
<PAGE>
PERFORMANCE GRAPH
The following table (which can be developed into a
performance graph) provides data for a five-year comparison of
cumulative total stockholder return among the Company, the
University of Chicago's Center for Research in Security Prices
(CRSP) Index for the Nasdaq Stock Market and the CRSP Index
for the Nasdaq Computer Software Industry Index. The comparison
assumes $100 was invested on January 26, 1990 (the date of the
Company's initial public offering) in the Company's Common Stock
and in each of the foregoing indices and assumes reinvestment of
dividends, if any.
NASDAQ SOFTWARE
COMPUTER & DEVELOPER'S
NASDAQ SOFTWARE COMPANY
1990
01/26/90 125.555 159.962 100.
02/28/90 128.597 170.868 99.9953
03/30/90 132.234 181.738 128.9944
04/30/90 127.789 175.042 160.8806
05/31/90 140.167 208.326 202.9125
06/29/90 141.281 217.123 205.8113
07/31/90 134.530 189.139 188.4188
08/31/90 117.671 164.422 156.5325
09/28/90 106.739 146.993 143.4881
10/31/90 102.481 144.263 146.3869
11/30/90 111.577 168.661 127.5450
12/31/90 116.335 177.193 98.5575
1991
01/31/91 128.721 215.601 86.4987
02/28/91 141.047 231.314 106.4189
03/28/91 150.522 243.877 96.3776
04/30/91 151.455 236.760 83.7275
05/31/91 158.443 251.181 81.9535
06/28/91 149.168 229.847 98.3372
07/31/91 157.928 251.797 95.2645
08/30/91 165.460 281.006 87.6234
09/30/91 166.280 287.732 96.6675
10/31/91 171.779 315.703 115.1268
11/29/91 166.060 308.540 102.6158
12/31/91 185.688 357.124 77.6517
1992
01/31/92 196.814 380.468 66.7872
02/28/92 201.197 388.263 86.5799
03/31/92 191.885 360.227 75.3675
04/30/92 183.697 336.924 81.1650
05/29/92 186.063 347.483 69.5700
06/30/92 178.866 316.184 63.7725
07/31/92 184.836 325.886 69.5700
08/31/92 179.314 317.682 63.7725
NASDAQ SOFTWARE
COMPUTER & DEVELOPER'S
NASDAQ SOFTWARE COMPANY
1992
09/30/92 185.633 339.102 63.7725
10/30/92 192.563 368.327 60.8737
11/30/92 207.646 388.442 52.1775
12/31/92 215.444 384.238 49.2787
1993
01/29/93 221.856 401.439 40.5825
02/26/93 223.894 382.089 38.5534
03/31/93 220.352 402.655 46.3800
04/30/93 211.535 375.095 31.8862
05/28/93 224.260 405.887 18.8535
06/30/93 225.701 402.880 26.0887
07/30/93 226.102 370.311 37.6837
08/31/93 237.868 381.692 28.9875
09/30/93 244.534 404.653 30.4485
10/29/93 250.189 411.652 26.0887
11/30/93 242.309 409.297 24.6510
12/31/93 249.442 406.691 23.1900
1994
01/31/94 257.387 428.788 23.9089
02/28/94 254.660 432.226 26.0887
03/31/94 239.034 412.313 23.1900
04/29/94 235.908 411.960 18.1183
05/31/94 236.203 430.684 18.1183
06/30/94 226.915 403.492 14.4937
07/29/94 232.286 404.868 11.5950
08/31/94 246.410 448.275 11.5950
09/30/94 246.075 450.057 11.5950
10/31/94 250.332 496.284 15.9431
11/30/94 241.613 488.686 16.6678
12/30/94 241.326 495.232 16.6678
1995
01/31/95 242.306 483.484 35.5097
02/28/95 254.855 520.785 40.5825
03/31/95 261.919 555.489 36.2344
04/28/95 269.569 585.439 38.4096
05/31/95 276.478 595.715 37.6837
06/30/95 297.724 661.782 25.3641
07/31/95 317.857 701.117 31.8862
<PAGE>
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected the firm of Coopers &
Lybrand, independent auditors, to serve as its auditors for the
fiscal year ending March 31, 1996. The Board of Directors
recommends a vote FOR the ratification of this selection.
Approval of Coopers & Lybrand as auditors will require the
affirmative vote of stockholders holding a majority of the
outstanding shares of Common Stock and Series C Preferred Stock,
voting together as a class. Coopers & Lybrand has served as the
Company's auditors for the fiscal years ended March 31, 1993,
March 31, 1994 and March 31, 1995.
It is expected that a member of the firm of Coopers &
Lybrand will be present at the Meeting. This member will have
the opportunity to make a statement, if Coopers & Lybrand
desires, and will be available to respond to appropriate
questions.
COMPENSATION OF DIRECTORS
As compensation for serving on the Board of Directors,
each non-employee director is paid his expenses by the Company
for each meeting attended. In addition, effective October 1,
1992, the Company adopted a policy to compensate each
non-employee director at a rate of $1,500 for each calendar
quarter of service on the Board of Directors. During the last
fiscal year, however, no cash compensation has been paid to
non-employee directors pursuant to this policy, although the
Company had accrued for such compensation on its books.
Each non-employee director of the Company also
participates in the Company's 1988 Non-Employee Director Stock
Option Plan, 1991 Non-Employee Director Stock Option Plan, 1993
Non-Employee Director Stock Option Plan, and 1994 Non-Employee
Director Plan (the Director Plans). The Director Plans authorize
grants of stock options to each member of the Company's Board of
Directors who is neither an employee or officer of the Company.
In fiscal 1995, Messrs. Watson, Wagner, Kleiner, Pappas, Koven,
and Mark received grants of stock options for a total of 135,042
shares of Common Stock.
SECTION 16 REQUIREMENTS
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 (collectively, Reporting Persons), to
file initial reports of ownership and reports of changes in
ownership of Common Stock of the Company with the Securities and
Exchange Commission (the SEC). Such persons are required by SEC
regulations to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on its review of the copies of such forms
received by it with respect to fiscal 1995, or written
representations from certain reporting persons, the Company
believes that all Reporting Persons complied with all Section
16(a) filing requirements in 1995.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended for inclusion in the
proxy statement to be furnished to all stockholders entitled to
vote at the next annual meeting of the Company must be received
at the Company's principal executive offices not later than May
14, 1996. In order to curtail controversy as to the date on
which a proposal was received by the Company, it is suggested
that proponents submit their proposals by Certified Mail, Return
Receipt Requested.
OTHER BUSINESS
The Board of Directors knows of no business that will be
presented for consideration at the Meeting other than those items
stated above. If any other business should before the Meeting,
votes may be cast pursuant to proxies in respect to any such
business in the best judgment of the person or persons acting
under the proxies.
EXPENSES AND SOLICITATION
The cost of solicitation of proxies will be borne by the
Company, and in addition to soliciting stockholders by mail
through its regular employees, the Company may request banks,
brokers and other custodians, nominees and fiduciaries to solicit
their customers who have stock of the Company registered in the
names of a nominee and, if so, will reimburse such banks, brokers
and other custodians, nominees and fiduciaries for their reasonable
out-of-pocket costs. Solicitation by officers and employees of the
Company may also be made of some stockholders in person or by mail,
telephone or telegraph following the original solicitation.
