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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
[_] CONFIDENTIAL, FOR USE OF THE
Check the appropriate box: COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(e)(2))
[_] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
BORLAND INTERNATIONAL, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange ActRule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[LOGO OF BORLAND INTERNATIONAL, INC.]
BORLAND INTERNATIONAL, INC.
100 BORLAND WAY
SCOTTS VALLEY, CALIFORNIA 95066
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 5, 1996
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Annual
Meeting") of Borland International, Inc., a Delaware corporation (the
"Company"), will be held at the Hotel Sofitel, 223 Twin Dolphin Drive, Redwood
City, California on September 5, 1996, at 10:00 a.m. local time, for the
following purposes:
1. To elect two Class I directors to serve until the 1999 Annual Meeting of
Stockholders or until their successors are duly elected.
2. To approve an amendment to the Company's 1990 Employee Stock Purchase
Plan that will increase the number of shares of Common Stock available
for grant under the plan by 250,000 shares.
3. To approve an amendment to the Company's 1992 Stock Option Plan that
will increase the number of shares of Common Stock available for grant
under the plan by 1,000,000 shares.
4. To approve the amendments to the Company's Non-Employee Directors' Stock
Option Plan that (a) will increase the number of shares of Common Stock
available for grant under the plan by 250,000 shares and (b), upon
election of a Non-Employee Director as Chairman of the Board of the
Company, grant a further option to such person for the purchase of
30,000 shares.
5. To ratify the appointment of Price Waterhouse as the Company's
independent accountants for the current fiscal year.
6. To transact such other business as may properly come before the Annual
Meeting or any adjournments or postponements thereof.
Only stockholders of record at the close of business on July 9, 1996 will be
entitled to notice of and to vote at the Annual Meeting and any adjournments
or postponements thereof.
By Order of the Board of Directors
/s/ ROBERT H. KOHN
------------------------------------
ROBERT H. KOHN, Secretary
Scotts Valley, California
August 5, 1996
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN
PERSON. HOWEVER, TO ENSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, YOU ARE
URGED TO MARK, SIGN, AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN
THE POSTAGE PREPAID ENVELOPE ENCLOSED FOR THAT PURPOSE. ANY STOCKHOLDER
ATTENDING THE MEETING MAY VOTE IN PERSON, EVEN THOUGH HE OR SHE HAS RETURNED A
PROXY.
YOUR VOTE IS IMPORTANT.
IN ORDER TO ENSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE REQUESTED TO
COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE AND RETURN
IT IN THE ENCLOSED ENVELOPE.
<PAGE>
[LOGO OF BORLAND INTERNATIONAL, INC.]
BORLAND INTERNATIONAL, INC.
100 BORLAND WAY
SCOTTS VALLEY, CALIFORNIA 95066
AUGUST 5, 1996
Re: 1996 Annual Meeting
Dear Borland Stockholders:
On behalf of the Board of Directors, I cordially invite you to attend the
1996 Annual Meeting of the stockholders of Borland International, Inc. to be
held at 10:00 a.m. local time, on Thursday, September 5, 1996, at the Hotel
Sofitel, 223 Twin Dolphin Drive, Redwood City, California.
The matters expected to be acted upon at the meeting are described in the
attached Proxy Statement. In addition, we will report to you on the Company's
progress during the year and receive your questions and comments concerning
the Company.
Your vote is important regardless of how many shares you own. Please take a
few minutes now to review the proxy statement and to sign and date your proxy
card and return it in the envelope provided. You may attend the meeting and
vote in person even if you have previously returned your proxy card.
To assist us in our preparation for the meeting, please mark your proxy card
in the space provided if you plan to attend the meeting. No admittance tickets
will be required.
We are gratified by our stockholders' continued interest in the Company and
pleased that in the past so many of you have voted your shares either in
person or by proxy. We hope that you will continue to do so and urge you to
return your proxy card as soon as possible.
I look forward to seeing you at the meeting.
Very truly yours,
/s/ WILLIAM F. MILLER
-------------------------------
WILLIAM F. MILLER
Chairman of the Board
<PAGE>
BORLAND INTERNATIONAL, INC.
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited by the Board of Directors of Borland
International, Inc. (the "Company") for use at the Annual Meeting of
Stockholders (the "Annual Meeting") to be held at the Hotel Sofitel, 223 Twin
Dolphin Drive, Redwood City, California on September 5, 1996, at 10:00 a.m.
local time, or at any adjournment or postponement of the Annual Meeting, for
the purposes set forth in this Proxy Statement and the foregoing Notice of
Annual Meeting. Copies of solicitation material will be furnished to brokerage
houses, fiduciaries, and custodians to forward to beneficial owners of Common
Stock of the Company ("Common Stock") held in their names. The cost of
solicitation of proxies, including expenses in connection with preparing and
mailing this Proxy Statement will be borne by the Company. The Company has
retained Georgeson & Company Inc. to assist it in connection with the
solicitation, at an estimated fee of $6,500, plus reimbursement of out-of-
pocket expenses. In addition, the Company will reimburse brokerage firms and
other persons representing beneficial owners of shares for their expenses in
forwarding solicitation material to such beneficial owners. Original
solicitation of proxies by mail may be supplemented by telephone, telegram,
and personal solicitation by directors, officers or other regular employees of
the Company. No additional compensation will be paid to directors, officers or
other regular employees for such services. This Proxy Statement and
accompanying proxy will be mailed on or about August 7, 1996 to all
stockholders entitled to vote at the Annual Meeting.
VOTING RIGHTS AND OUTSTANDING SHARES
Only stockholders of record at the close of business on July 9, 1996 will be
entitled to notice of, and to vote at, the Annual Meeting. As of July 9, 1996,
the Company had outstanding 31,352,938 shares of Common Stock. Each share of
Common Stock has one vote on each proposal that will come before the Annual
Meeting. A majority of the outstanding shares will constitute a quorum at the
Annual Meeting. Abstentions and broker non-votes are counted for purposes of
determining the presence or absence of a quorum for the transaction of
business. Abstentions are counted in tabulations of votes cast on proposals
presented to stockholders, whereas broker non-votes are not counted for
purposes of determining whether a proposal has been approved.
Any stockholder giving a proxy has the power to revoke it at any time before
it is exercised. A stockholder may revoke a proxy by filing an instrument of
revocation or a duly executed proxy bearing a later date with the Secretary of
the Company, at its principal executive office. A stockholder may also revoke
a proxy by attendance at the Annual Meeting and election to vote in person.
The Company's principal executive office is located at 100 Borland Way,
Scotts Valley, California 95066 and the telephone number is (408) 431-1000.
STOCKHOLDER PROPOSALS
Stockholders of the Company who wish to present proposals at the Company's
1997 Annual Meeting of Stockholders must submit proposals to the Secretary of
the Company no later than April 10, 1997 in order to be included in the proxy
statement and form of proxy relating to that meeting.
1
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PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors is divided into three classes. One class of directors
is elected each year for a three-year term. The term of the Company's Class I
directors will expire at the Annual Meeting. The nominees for the Class I
directors are George Hara and Stephen J. Lewis. The Class I directors elected
in 1996 will serve for a term of three years which expires at the Company's
1999 Annual Meeting of Stockholders or when their successors are elected and
qualified. It is intended that the persons named as Proxies will vote for
Messrs. Hara and Lewis for election to the Board of Directors as Class I
directors.
Messrs. Hara and Lewis are at present available for election. The
affirmative vote of the holders of a majority of the Common Stock present or
represented by proxy and entitled to vote at the Annual Meeting will be
required to elect Messrs. Hara and Lewis. If Messrs. Hara and Lewis are
elected by the Company's stockholders at the Annual Meeting, the Board of
Directors will consist of six directors each of whose principal occupations
are outside the Company.
MANAGEMENT RECOMMENDS A VOTE IN FAVOR OF THE NAMED NOMINEES
BIOGRAPHICAL INFORMATION
Certain biographical information about the Company's directors is set forth
below:
NOMINEES FOR ELECTION FOR A THREE-YEAR TERM EXPIRING AT THE 1999 ANNUAL
MEETING
GEORGE HARA, age 43. Mr. Hara has served as a director of the Company
since April 1990. Mr. Hara is a Partner of DEFTA Partners and Accel Japan,
L.P., venture capital firms with which he has been affiliated since 1985.
He is founder of Data Control Ltd., a computer network provider, for which
he has served as President since 1984. Mr. Hara is also a director of
PictureTel,Co. Ltd., a video conference system manufacturer; Pixera, a 3D
scanner and digital camera manufacturer and Unify Co., Ltd., a 4GL and UNIX
database company.
STEPHEN J. LEWIS, age 38. Mr. Lewis has served as a director of the
Company since October 1993. Mr. Lewis has been a managing director of
Generation Ventures, L.L.C., a China focused venture capital firm, since
November 1994. Mr. Lewis was a managing director of SCM International Ltd.,
an international investment bank, from 1993 to 1994. Mr. Lewis was employed
with Booz-Allen & Hamilton, Inc. a management consulting and technology
firm, from 1981 to 1993, most recently serving as a Vice President and
Partner in the operations management practice. Mr. Lewis is also a director
of Invision Interactive, Inc., a multimedia sound company.
DIRECTORS CONTINUING IN OFFICE UNTIL THE 1997 ANNUAL MEETING
PHILIPPE KAHN, age 44. Mr. Kahn served as the Company's Chairman of the
Board from its inception in May 1983 until January 1996 and served as its
Chief Executive Officer and President from May 1983 to January 1995. Mr.
Kahn is also the President and Chairman of Starfish Software, Inc., a
software development company.
DIRECTORS CONTINUING IN OFFICE UNTIL THE 1998 ANNUAL MEETING
DAVID HELLER, age 51. Mr. Heller has served as a director of the Company
since April 1984. Mr. Heller is a founder, a director and the President of
Pacific Technology Capital Corporation, a financial advisory and investment
banking firm, a director of Tie Rack US, Inc., a clothing accessory
company, and a director of Power Computing Corporation, a computer
manufacturing company, and America West Golf Manufacturing, Inc., a golf
club manufacturing company.
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WILLIAM F. MILLER, age 70. Mr. Miller has served as the Company's
Chairman since January 1996. He is currently professor of public and
private management, Graduate School of Business at Stanford University, and
president emeritus of SRI International, a research institute. He is also
professor of computer science, School of Engineering, and senior fellow,
Institute of International Studies. In 1990, Dr. Miller retired following
11 years as president and CEO of SRI International. He is a member of the
board of directors of Wells Fargo Bank and Co., an interstate bank, and has
served as director and chairman of the executive committee of Varian
Associates, and as a director of Pacific Gas and Electric Company, First
Interstate Bancorp and Fireman's Fund Insurance Company.
HARRY J. SAAL, age 52. Dr. Saal has served as a director of the Company
since January 1996. Since 1986, Dr. Saal has been chairman of Network
General Corporation, a network management and analysis company. Prior to
founding Network General, Dr. Saal founded Nestar Systems, Inc. a local
area network systems company. Dr. Saal is also Chairman of Personal
Computer Products, Inc., a designer of controllers for laser printers and
related devices, and of AssureNet Pathways Inc., a network securities
products company. He is a director of GlobalNet Systems, Inc., an internet
service provider, and serves on the board of several non-profit
organizations.
BOARD COMMITTEES AND MEETINGS
During the fiscal year ended March 31, 1996, the Board of Directors held
eighteen meetings. The Board of Directors has a standing Audit Committee,
Organization and Compensation Committee, Nominating Committee and Technology
Committee.
The Audit Committee recommends the independent public accountants to the
Board of Directors. The independent public accountants meet with the Audit
Committee, with and without the presence of the Company's management, to
review and discuss various matters including the Company's financial
statements, the report of the independent public accountants on the results,
scope and approach of their work, and their recommendations concerning
financial practices and procedures. During fiscal year 1996 the Audit
Committee consisted of three non-employee directors, Messrs. Hara, Heller and
Lewis. The Audit Committee met eight times during fiscal 1996.
The Organization and Compensation Committee (the "Compensation Committee")
administers the Company's stock option and stock purchase plans, approves
salaries, bonuses and other compensation arrangements for the Company's
officers, and approves loans to, or loan guarantees for, the Company's
officers and employees. During fiscal 1996 the Compensation Committee
consisted of three non-employee directors, Messrs. Hara, Heller and Lewis. The
Compensation Committee met four times and took action by unanimous written
consent eleven times during fiscal 1996.
The Nominating Committee makes proposals to the full Board of Directors for
candidates to be nominated by the Board of Directors to fill vacancies or for
new directorship positions, if any, which may be created from time to time. No
procedure has been established for the consideration of nominees recommended
by stockholders. During fiscal year 1996 the Nominating Committee consisted of
three non-employee directors, Messrs. Hara, Heller and Lewis. The Nominating
Committee met four times during fiscal 1996.
The Technology Committee reviews the Company's technology-related strategic
planning and development and offers recommendations to the Board of Directors
on technological matters. During fiscal year 1996 the Technology Committee
consisted of three non-employee directors, Messrs. Kahn, Miller, and Saal. The
Technology Committee met once during fiscal 1996.
No incumbent director attended fewer than 75% of the aggregate of (i) the
total number of meetings of the Board which such director was eligible to
attend during the fiscal year and (ii) the total number of meetings held by
any committee of the Board upon which such director served.
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DIRECTOR COMPENSATION
Directors who are employees of the Company do not receive additional
compensation for serving as directors of the Company. Prior to January 1, 1996
each non-employee director (an "Eligible Director") received annual
compensation of $25,000 payable in January, less any amounts which such
directors otherwise received in compensation for services to the Company.
Effective January 1, 1996, each Eligible Director receives an annual retainer
of $20,000 payable in four equal quarterly installments. In addition, each
Eligible Director receives $500 for attending each meeting of the Board of
Directors, $250 for attending each Committee Meeting of the Board of Directors
on which he serves and $1,000 for serving as the chairman of a particular
Committee of the Board of Directors. An Eligible Director who serves as
Chairman of the Board of Directors of the Company receives an additional
$20,000 annual retainer and an Eligible Director who serves as Chairman of the
Board of Directors of Borland Company, Ltd. (Japan) receives an additional
$10,000 annual retainer, with such retainers payable in equal quarterly
installments. Mr. Hara also received $25,000 in director fees from Borland
Company, Ltd. (Japan) during fiscal year 1996.
In addition, Eligible Directors receive stock options under the Non-Employee
Directors' Stock Option Plan (the "Directors' Plan"). The Directors' Plan
provides that upon their initial election or appointment to the Board of
Directors, Eligible Directors are automatically issued non-statutory options
to purchase 30,000 shares of the Company's Common Stock and at every annual
meeting of the stockholders of the Company each then-serving Eligible Director
will receive an additional option to purchase 7,500 shares. All options
granted under the Directors' Plan have a ten-year term and an exercise price
equal to 100% of the fair market value on the date of grant. The option may
not be exercised until the Eligible Director has served as a member of the
Board of Directors for one year from the date the option is granted. Subject
to stockholder approval, the Board of Directors has approved amendents to the
Directors' Plan which, among other things, would provide a further option of
30,000 shares to an Eligible Director upon his or her election as Chairman of
the Board.
On September 20, 1995, pursuant to the Directors' Plan options were granted
to George Hara, David Heller, and Stephen J. Lewis to purchase 7,500 shares of
the Company's Common Stock at an exercise price of $ 15.75 per share, the fair
market value on the date of grant. On January 2, 1996, upon their appointment
to the Board of Directors, the Company granted an initial option to William F.
Miller, an Eligible Director and Chairman, and to Harry J. Saal to purchase
60,000 shares and 30,000 shares, respectively, of the Company's Common Stock
at an exercise price of $16.25 per share. Of Mr. Miller's option grant, 30,000
shares are subject to stockholder approval of the amendments to the Directors'
Plan discussed under Proposal 4.
The Directors' Plan is discussed in more detail under Proposal 4.
4
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PROPOSAL 2
APPROVAL OF AN AMENDMENT TO THE COMPANY'S 1990 EMPLOYEE
STOCK PURCHASE PLAN
The Company's 1990 Employee Stock Purchase Plan (the "ESP Plan") was adopted
by the Board of Directors in January 1990 and approved by the stockholders in
July 1990. A total of 400,000 shares of the Company's Common Stock was
initially reserved for issuance thereunder. By subsequent amendment to the ESP
Plan, the number of shares reserved for issuance thereunder was increased to
600,000.
PROPOSED AMENDMENT TO THE ESP PLAN
On April 26, 1996, the Board of Directors approved an amendment to the ESP
Plan to further increase the aggregate number of shares of Common Stock
authorized for issuance thereunder by 250,000 shares, bringing the total
number of shares reserved for issuance under the ESP Plan to 850,000 shares.
Proposal 2 seeks stockholder approval of this amendment.
The Board considers the increase in shares necessary to meet the Company's
current needs. The Board further believes that the ESP Plan is an integral
part of the Company's benefits program that is intended to provide employees
with an incentive to exert maximum effort for the success of the Company and
to participate in that success through the acquisition of the Company's Common
Stock.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the Company's Common
Stock present or represented by proxy and entitled to vote at the Annual
Meeting will be required to approve the amendment to the ESP Plan. The Board
recommends that the stockholders vote for approval of this amendment to the
ESP Plan. Proxies solicited by the Board will be so voted unless stockholders
specify otherwise in those proxies.
MANAGEMENT RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 2.
The essential features of the ESP Plan are outlined below.
Purposes
The purpose of the ESP Plan is to attract and retain the best available
personnel, to provide additional incentives to the employees of the Company
and its subsidiaries, to promote the success of the Company's business, and to
enable the employees to share in the growth and prosperity of the Company by
providing them with an opportunity to purchase stock in the Company on
favorable terms through payroll deductions.
Administration
The ESP plan is administered by the Board of Directors which may delegate
administration of the ESP Plan to a Committee composed of not less than three
members of the Board of Directors. The Board has delegated its authority to
administer the ESP Plan to the Compensation Committee of the Board of
Directors. Members of the Compensation Committee are ineligible to participate
under the ESP Plan. All questions of interpretation of the ESP Plan are
determined in the sole discretion of the Compensation Committee, and its
determinations are final and binding upon all participants.
Eligibility
Any person who is employed by the Company (or any of its majority-owned
subsidiaries) at least 20 hours per week and more than five months in a
calendar year, with the exception of College Interns, as that term is defined
by the Compensation Committee, is eligible to participate in the ESP Plan,
provided that the employee is employed on the first day of an offering period
and subject to certain limitations imposed by section 423(b) of
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the Internal Revenue Code of 1986, as amended (the "Code"). As of April 19,
1996, there were approximately 937 employees eligible to participate in the
ESP Plan, of whom approximately 223 were participants.
Offering Period
The ESP Plan is implemented by establishing offering periods. Generally,
there is one offering during each six-month period of the ESP Plan with
offering periods commencing on April 1 and October 1 of each year. The Board
of Directors may alter the duration of the offering periods without
stockholder approval.
Purchase Price
The purchase price per share at which shares are sold under the ESP Plan is
85% of the lower of the fair market value of the Company's Common Stock (a) on
the date immediately preceding the date an option is granted or (b) on the
date immediately preceding the date of purchase. The determination of the fair
market value of the Common Stock on the grant date is based upon the closing
price listed on a stock exchange or on the NASDAQ National Market System as of
such date or the immediately preceding trading day, if the applicable
valuation date is not a trading date.
Payment of Purchase Price; Payroll Deductions
The purchase price of the shares is accumulated by payroll deductions during
the offering period. The ESP Plan provides that the aggregate of such payroll
deductions during the offering period shall not exceed fifteen percent (15%)
of a participant's eligible compensation. Eligible compensation is interpreted
to mean total compensation, including bonuses and commissions, but excluding
special payments (such as moving expenses) and income with respect to stock
options or other stock purchases. Payroll deductions generally commence on the
first payday following the offering date, and continue at the same rate until
the last payday of the offering period unless sooner terminated as provided in
the ESP Plan.
Purchase of Stock; Exercise of Option
The maximum number of shares placed under option to a participant in an
offering is that number determined by dividing the amount of the participant's
total payroll deductions which are accumulated during the offering period (not
to exceed an amount equal to 15% of the participant's actual eligible
compensation during the offering period) by the lower of 85% of the fair
market value of the Common Stock at the beginning or the end of the offering
period, and subject to the further limitation that the number of shares
subject to any option granted to an employee shall not exceed the maximum
number of shares set by the Board of Directors prior to the beginning of the
offering period.
Notwithstanding the foregoing, no employee will be permitted to subscribe
for shares under the ESP Plan if, immediately after the grant of the option,
the employee would own 5% or more of the voting power or value of all classes
of stock of the Company or of a parent or of any of the subsidiaries
(including stock which may be purchased under the ESP Plan or pursuant to
other options), nor shall any employee be granted an option which would permit
the employee to accrue at a rate in excess of $25,000 worth of stock
(determined at the fair market value of the shares at the time the option is
granted) per calendar year.
Withdrawal
A participant's interest in a given offering may be terminated in whole, but
not in part, by signing and delivering to the Company a notice of withdrawal
from the plan. Such withdrawal may be elected at any time prior to the end of
the applicable offering period. Any withdrawal by a participant of accumulated
payroll deductions for a given offering automatically terminates such
participant's participation in that offering. The failure to remain in the
continuous employ of the Company for at least 20 hours per week during an
offering period will be deemed a withdrawal from that offering. In the event
of withdrawal, payroll deductions will be returned to a participant, without
interest.
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Capital Changes
In the event any change is made in the Company's capitalization, such as a
stock split or stock dividend, which results in an increase or decrease in the
number of outstanding shares of Common Stock without receipt of consideration
by the Company, appropriate adjustments will be made by the Board of Directors
in the shares subject to purchase under the ESP Plan and in the purchase price
per share.
Non-Assignability
No rights or accumulated payroll deductions of a participant under the ESP
Plan may be pledged, assigned, or transferred for any reason and any such
attempt may be treated by the Company as an election to withdraw from the ESP
Plan.
Amendment and Termination of the Plan
The Board of Directors may at any time amend or terminate the ESP Plan,
except that such termination shall not affect options previously granted nor
may any amendment make any change in an option granted prior thereto which
adversely affects the rights of any participant. No amendment may be made to
the ESP Plan without prior approval of the stockholders of the Company if such
amendment would increase the number of shares reserved under the plan,
materially modify the eligibility requirements, or materially increase the
benefits which may accrue under the plan.
Federal Tax Information
The following is only a summary of the effect of federal income tax laws
upon the participant and the Company with respect to the shares purchased
under the ESP Plan. Reference should be made to the applicable provisions of
the Code. In addition, the summary does not discuss the tax consequences of a
participant's death or the income tax laws of any state or foreign country in
which the participant may reside. Each participating employee is encouraged to
seek the advice of a qualified tax advisor regarding the tax consequences of
participation in the ESP Plan.
The ESP Plan, and the right of participants to make purchases thereunder, is
intended to qualify under the provisions of Sections 421 and 423 of the Code.
Under these provisions, no income will be taxable to a participant until the
shares purchased under the ESP Plan are sold or otherwise disposed of. Upon
sale or other disposition of the shares, the participant will be subject to
tax and the amount of tax will depend upon the holding period. If the shares
are sold or otherwise disposed of by the participant more than two (2) years
after the date of option grant (the beginning of the offering period) and at
least one (1) year after the date of option exercise (the date on which the
shares were purchased by the participant), the lesser of (a) the excess of the
fair market value of the shares at the time of such sale or disposition over
the purchase price, or (b) the excess of the fair market value of the shares
on the purchase date and the purchase price will be treated as ordinary
income, and any further gain will be treated as long-term capital gain. If the
shares are sold or otherwise disposed of before the expiration of these
holding periods, the participant will recognize ordinary income measured as
the excess of the fair market value of the shares on the date the shares are
purchased over the purchase price. Any further gain or loss will be long-term
or short-term capital gain or loss, depending on the holding period. The
Company is not entitled to a deduction for amounts taxed as ordinary income or
capital gain to a participant, except to the extent of ordinary income
recognized by participants upon a sale or disposition of shares prior to the
expiration of the holding period(s) described above and subject to the
limitation on deductability set forth in Section 162 (m) of the Code. Under
current law, the maximum marginal rate at which ordinary income is taxed to
individuals is 39.6% and the maximum rate at which long-term capital gains are
taxed is 28%. Capital gains may be offset against capital losses and up to
$3,000 of capital losses may be offset annually against ordinary income.
Special considerations apply to optionees who are reporting persons for
purposes of Section 16 (a) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and such optionees should consult with their tax and/or
legal advisors with respect to the treatment of such options.
7
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Participation in the Purchase Plan
Participation in the ESP Plan is voluntary and is dependent on each eligible
employee's election to participate and his or her respective determination as
to the level of payroll deductions. Accordingly, future purchases under the
plan are not determinable. The following table sets forth information with
respect to shares purchased under the ESP Plan during the last fiscal year by
(i) the executive officers named in the Summary Compensation table (the "Named
Officers"), (ii) all current executive officers as a group, and (iii) all
other employees as a group who participated in the ESP Plan.
AMENDED PLAN BENEFITS
1990 EMPLOYEE STOCK PURCHASE PLAN
<TABLE>
<CAPTION>
NAME OF INDIVIDUAL OR AGGREGATE NUMBER OF AGGREGATE DOLLAR VALUE AT
IDENTITY OF GROUP SHARES PURCHASED EXERCISE DATE($)(1)
--------------------- ------------------- -------------------------
<S> <C> <C>
Frank Vaculin................ 1,410 $ 22,403
Vice President and General
Manager of Desktop Lan Tools
All current executive
officers as a group (7
persons).................... 1,410 $ 22,403
All other employees as a
group....................... 104,343 $1,676,130
</TABLE>
- --------
(1) Dollar value is based on the closing price listed on the NASDAQ National
Market System on the exercise date.
PROPOSAL 3
APPROVAL OF AN AMENDMENT TO THE COMPANY'S
1992 STOCK OPTION PLAN
The 1992 Stock Option Plan (the "1992 Plan") was adopted by the Board of
Directors and approved by the stockholders in 1992 and 2,500,000 shares of the
Company's Common Stock were reserved for issuance thereunder.
Stock options play a key role in the Company's ability to recruit, reward
and retain executives and key employees. Technology companies have
historically used stock options as an important part of recruitment and
retention packages. The Company competes directly with other technology
companies for experienced executives and engineers and must be able to offer
comparable packages to attract and retain the caliber of individual the
Company believes is necessary to provide the growth that shareholders desire.
The ability to attract and retain key employees of the Company by providing
ongoing incentives and to maintain an option pool for use in future recruiting
is vital to the Company's growth.
PROPOSED AMENDMENT TO THE 1992 PLAN
On June 13, 1996, the Board of Directors approved an amendment increasing
the number of shares of Common Stock reserved for issuance under the 1992 Plan
by 1,000,000 shares, bringing the number of shares reserved for issuance under
the 1992 Plan to 3,500,000 shares. Proposal 3 seeks stockholder approval of
this amendment.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the Company's Common
Stock present or represented by proxy and entitled to vote at the Annual
Meeting will be required to approve the amendment to the 1992 Plan. The Board
recommends that the stockholders vote for approval of this amendment to the
1992 Plan. Proxies solicited by the Board will be so voted unless stockholders
specify otherwise in those proxies.
MANAGEMENT RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 3.
8
<PAGE>
The essential features of the 1992 Plan are outlined below.
Purposes
The purpose of the 1992 Plan is to advance the interests of the Company and
it stockholders by providing a means by which the Company and its Subsidiaries
shall be able to attract and retain qualified employees and consultants and
provide such individuals with an opportunity to participate in increases in
value of the Company which their effort, initiative and skill have helped
produce.
Administration
The 1992 Plan is administered by the Board which has the authority to
determine the persons to whom options are granted, the number of shares
covered by each option, the type of option, the times at which an option may
be exercised, the exercise price, the method of payment and certain other
terms. The Board may delegate the administration of the 1992 Plan to a
committee composed of not less than three members of the Board, none of whom
is eligible to participate in the 1992 Plan while serving on the Committee.
The interpretations and construction of any provision of the 1992 Plan is
within the sole discretion of the Board or its committee, whose determination
is final and binding. The Board has delegated its authority to administer the
1992 Plan to the Compensation Committee.
Eligibility
The 1992 Plan provides that options may be granted to any person, including
officers and directors, employed by the Company or its majority-owned
subsidiaries and to consultants to the Company. The Compensation Committee
selects the optionees and determines the number of shares to be subject to
each option granted under the 1992 Plan. In making such determination, the
Compensation Committee considers the duties and responsibilities of the
employee, the value of the employee's services, his or her present and
potential contributions to the success of the Company and other relevant
factors. As of April 19, 1996, there were approximately 937 employees
currently eligible to participate in the 1992 Plan, and approximately 306
employees and one consultant holding outstanding options under the 1992 Plan.
Terms of Options
Options granted under the 1992 Plan may be either incentive stock options (
"ISOs") as defined in Section 422A of the Code or nonstatutory stock options
("NSOs") and become exercisable in accordance with terms established at the
time of grant. Subject to the provisions of the 1992 Plan, all options granted
are exercisable on such terms and conditions as the Compensation Committee
determines. Each option is evidenced by a stock option agreement between the
Company and the optionee setting forth the terms and conditions of the option.
The term of an option granted under the plan may not exceed ten years. The
maximum term of ISOs granted to holders of more than 10% of the outstanding
stock of the Company is five years. Each Option becomes exercisable in
installments as approved by the Compensation Committee, and may be exercised
on a cumulative basis at any time before expiration. The Company's current
standard form of stock option agreement provides for the vesting of the shares
subject to the option over a four-year period with one-quarter vesting one
year following the date of grant and the remainder vesting on a daily basis
over the succeeding three-year period. The Compensation Committee may at any
time or from time to time accelerate the vesting of any outstanding option.
The Company has however, from time to time, granted options with vesting
schedules that are different from the standard vesting described above.
The exercise price for incentive stock options may not be less than 100% of
the fair market value of a share of the Company's common stock on the date of
grant. If the Optionee, at the time an ISO is granted, owns stock possessing
more than 10% of the total voting power of all classes of stock, the exercise
price may not be less than 110% of the fair market value on the date of grant.
The exercise price for nonstatutory options granted under the 1992 Plan may
not be less than 85% of the fair market value of a share of the Company's
common stock on the date of grant. Although the 1992 Plan allows for the grant
of nonstatutory options at 85% of the fair
9
<PAGE>
market value on the date of grant, the Compensation Committee has never
granted nonstatutory options at less than 100% of fair market value on the day
of grant. The Compensation Committee currently has no intent of granting
nonstatutory options at less than 100% of fair market value on the day of
grant. The 1992 Plan permits the payment of the exercise price in cash or
other property acceptable to the Compensation Committee (including shares of
the Company's stock).
The 1992 Plan provides that options are nonassignable and nontransferable,
other than by will or the laws of descent and distribution, and may be
exercised only by the employee while he or she is employed by the Company, or
within three months after termination of employment, or within 12 months
following termination of employment due to a permanent and total disability,
or by the employee's estate within 12 months after his or her death, provided
that such options were exercisable on the date of death or termination of
employment. An employee who is "discharged for cause" including, but not
limited to, conviction of a felony, damage to the Company and gross
negligence, must exercise options within 30 days of discharge.
Capital Changes
The 1992 Plan provides for appropriate adjustments of the number of shares
subject to outstanding options, the exercise price thereof, and the number of
shares available for future grants, in the event the Company's shares are
changed by reason of a subdivision or consolidation of shares, stock split, or
other similar corporate transaction. If the Company merges with or into
another corporation, and is not the surviving corporation, and each
outstanding option under the 1992 Plan is not assumed by the continuing or
surviving corporation, then each option will terminate immediately prior to
the consummation of such transaction.
Amendment and Termination of the 1992 Plan
The 1992 Plan terminates on July 20, 2002, or the date when all shares
subject to, or which may become subject to, the 1992 Plan have been purchased
under options granted under the 1992 Plan, whichever is earlier, and no
further awards of options may be made after that date. However, all options
granted under the 1992 Plan will remain in effect until such options have been
satisfied by the issuance of shares or terminated in accordance with the 1992
Plan.
The Board may from time to time suspend, terminate, or amend the 1992 Plan
in any respect; provided, however, that the Board may not, without the consent
of the optionee, amend any outstanding option, or without the approval of the
stockholders, increase the number of shares subject to the plan, materially
increase the benefits accruing to participants under the 1992 Plan or
materially modify the requirements as to eligibility for participation in the
1992 Plan.
Federal Income Tax Information
The following is only a summary of the effect of federal income tax laws
upon the participant and the Company with respect to stock options granted
under the 1992 Plan. Reference should be made to the applicable provisions of
the Code. In addition, the summary does not discuss the tax consequences of a
participant's death or the income tax laws of any state or foreign country in
which the participant may reside. Each participating employee is encouraged to
seek the advice of a qualified tax advisor regarding the tax consequences of
participation in the 1992 Plan.
If an option granted under the 1992 Plan is an ISO, an optionee will
recognize no income upon grant and will incur no tax upon exercise of an ISO
unless the optionee is subject to alternative minimum tax. If the optionee
holds the shares purchased upon exercise of the ISO for more than one (1) year
after the date the option was exercised and for more than two (2) years after
the option grant date, the optionee will realize long-term capital gain or
loss (rather than ordinary income or loss) upon disposition of the ISO shares.
This gain or loss will be equal to the difference between the amount realized
upon such disposition and the amount paid for the ISO shares.
10
<PAGE>
If the optionee disposes of the ISO shares prior to the expiration of either
required holding period, as described above ("a disqualifying disposition"),
then gain realized upon such disposition, up to the difference between the
option exercise price and the fair market value of the ISO shares on the date
of exercise (or, if less, the amount realized upon the sale of such ISO
shares), will be treated as ordinary income. Any additional gain will be long-
term or short-term capital gain, depending upon the amount of time the ISO
shares were held by the optionee. The Company, in the year of the
disqualifying disposition, is entitled to a deduction equal to the amount of
ordinary income recognized by the optionee. A different rule for measuring
ordinary income upon such a disqualifying disposition may apply if the
optionee is an officer, director or 10% stockholder of the Company.
If the optionee is subject to alternative minimum tax then the difference
between the exercise price and fair market value of the ISO shares on the date
of exercise is an adjustment to income for purposes of the alternative minimum
tax ("AMT"). The AMT (imposed to the extent it exceeds the taxpayer's regular
tax) is currently 26% of an individual taxpayer's alternative minimum taxable
income (28% percent in the case of alternative minimum taxable income in
excess of $175,000). Alternative minimum taxable income is determined by
adjusting regular taxable income for certain items, increasing that income by
certain tax preference items and reducing this amount by the applicable
exemption amount ($45,000 in the case of a joint return, subject to reduction
under certain circumstances). If a disqualifying disposition of the ISO shares
occurs in the same calendar year as the exercise of the ISO, there is no ATM
adjustment with respect to those ISO shares. Also, upon a sale of ISO shares
that is not a disqualifying disposition, alternative minimum taxable income is
reduced in the year of sale by the excess of the fair market value of the ISO
shares at exercise over the amount paid for the ISO shares. The Company will
not be allowed a deduction for federal income tax purposes as a result of the
exercise of an ISO regardless of the applicability of the alternative minimum
tax.
If an option granted under the 1992 Plan is a nonstatutory option, an
optionee will not recognize any taxable income at the time he or she is
granted a nonstatutory option. However, upon its exercise, the optionee will
recognize taxable income measured by the excess of the fair market value of
the shares purchased over the purchase price. Any taxable income recognized in
connection with an option exercise by an optionee who is also an employee of
the Company will be subject to tax witholding by the Company. In certain
circumstances, where the shares are subject to a substantial risk of
forfeiture when acquired, the date of taxation may be deferred unless the
optionee files an election with the Internal Revenue Service under Section
83(b) of the Code within 30 days after the date of exercise. Upon resale of
such shares by the optionee, any difference between the sale price and the
purchase price, to the extent not recognized as ordinary income as provided
above, will be treated as long-term or short-term capital gain or loss,
depending on the holding period. The Company will be entitled to a tax
deduction in the same amount as the ordinary income recognized by the optionee
with respect to shares acquired upon exercise of a nonstatutory option.
Special considerations apply to optionees who are reporting persons for
purposes of Section 16 (a) of the Exchange Act and such optionees should
consult with their tax and or legal advisors with respect to the treatment of
such options.
Participation in the 1992 Plan
The grant of options and stock purchase rights under the 1992 Plan to
eligible employees and consultants, including the Named Officers, is currently
subject to the discretion of the Compensation Committee. As of the date of
this proxy statement, there has been no determination by the Compensation
Committee with respect to future awards under the 1992 Plan. Accordingly,
future awards are not determinable. Non-employee directors are not eligible to
participate in the 1992 Plan. The following table sets forth information with
respect to options granted under the 1992 Plan during the last fiscal year to
(i) all current executive officers as a group and (ii) to all other employees
as a group. No Named Officer received options granted under the 1992 Plan
during the last fiscal year. The term of all options outstanding under the
1992 Plan is ten years from date of grant.
11
<PAGE>
AMENDED PLAN BENEFITS
1992 EMPLOYEES STOCK OPTION PLAN
<TABLE>
<CAPTION>
NUMBER
NAME OF INDIVIDUAL OR OF
IDENTITY OF GROUP SHARES EXERCISE PRICE(US$)
--------------------- ------- --------------------
<S> <C> <C>
All current executive officers as a group (7
persons).................................... 155,000 $16.875 -- $19.0625
All other employees as a group............... 208,900 $14.4375 -- $18.375
</TABLE>
PROPOSAL 4
APPROVAL OF AMENDMENTS TO THE COMPANY'S
NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
The Non-Employee Directors' Stock Option Plan (the "Directors' Plan") was
adopted by the Board of Directors in October 1991 and approved by stockholders
in September 1992. A total of 250,000 shares of the Company's Common Stock
were reserved for issuance thereunder.
PROPOSED AMENDMENT TO THE DIRECTORS' PLAN
On December 22, 1995, the Board of Directors authorized and approved
amendments to the Directors' Plan providing for (a) an increase in the number
of shares of Common Stock reserved for issuance under the Directors' Plan by
an additional 250,000 shares, bringing the total number of shares reserved for
issuance under the Directors' Plan to 500,000 and (b) the grant, upon election
of a Non-Employee Director as Chairman of the Board of the Company, to such
person a further option for the purchase of 30,000 shares. Proposal 4 seeks
stockholder approval of these amendments to the Directors' Plan.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the Company's Common
Stock present or represented by proxy and entitled to vote at the Annual
Meeting will be required to approve the amendments to the Directors' Plan. The
Board recommends that the stockholders vote for approval of the amendments to
the Directors' Plan. Proxies solicited by the Board will be so voted unless
stockholders specify otherwise in those proxies.
MANAGEMENT RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 4.
A summary of the principal provisions of the Directors' Plan are set forth
below:
Purpose
The purpose of the Directors' Plan is to secure for the Company and its
stockholders the benefits of the incentive inherent in increased Common Stock
ownership by the members of the Board who are not employees of the Company or
any of its subsidiaries.
Administration
The Directors' Plan is designed to work automatically. However, the Board of
Directors will provide administration when necessary or the Board may delegate
the administration of the Directors' Plan to a committee of the Board. The
Board has appointed the Compensation Committee to administer the Directors'
Plan. No discretion concerning decisions regarding the Directors' Plan is
afforded to any person who is not a "disinterested" person under Rule 16b-3
under the Exchange Act. The interpretation and construction of any provision
of the Directors' Stock Option Plan by the Compensation Committee is final and
conclusive. Members of the Board receive no additional compensation for their
services in connection with the administration of the Directors' Plan.
12
<PAGE>
Eligibility
The Directors' Plan provides for the grant of nonstatutory stock options to
non-employee directors of the Company. Each such director is granted an option
to purchase 30,000 shares of Common Stock upon the date on which such person
first becomes a director, whether through election by the stockholders or
appointment by the Board to fill a vacancy. On the date of the Annual Meeting,
each non-employee director will be granted an option to purchase an additional
7,500 shares of Common Stock. The Directors' Plan provides for neither a
maximum nor a minimum number of option shares that may be granted to any one
non-employee director, but does provide restrictions on the number of shares
which may be included in any grant and the method of making a grant.
Terms of Options
Each option is evidenced by a stock option agreement between the Company and
the optionee setting forth the terms and conditions of the option. The term of
an option granted under the plan may not exceed ten years. The option becomes
fully vested if the director continues in office for one year from the date
the option was granted.
The exercise price for nonstatutory options granted under the Directors'
Plan shall be the fair market value of a share of the Company's Common Stock
on the date of grant. The Directors' Plan permits the payment of the exercise
price in cash, in exchange for other shares of the Company's stock, by
promissory note or other property acceptable to the Board.
The Directors' Plan provides that options are nonassignable and
nontransferable, except pursuant to a qualified domestic relations order or by
will or the laws of descent and distribution, and may be exercised only by the
optionee. If the optionee ceases to be a Director for any reason other than
his or her death or disability, the optionee shall have the right to exercise
any option held at any time within six months after the date he or she ceases
to be a Director as to all or part of the shares that the optionee was
entitled to exercise at the date of such termination. In the event of the
death of an optionee, the option may be exercised at any time within five
years after death, but only to the extent that the option would have been
exercisable at the time of death. If an optionee is unable to continue his or
her service as a director of the Company as a result of his or her total and
permanent disability, the option may be exercised at any time within one year
after the date of his or her termination, but only to the extent he or she was
entitled to exercise it at the date of such termination.
Capital Changes
The Directors' Plan provides for appropriate adjustments of the number of
shares subject to outstanding options, the exercise price thereof, and the
number of shares available for future grants, in the event the Company's
shares of Common Stock are changed by reason of a subdivision or consolidation
of shares, stock split, or other similar corporate transaction.
Amendment and Termination of the Directors' Plan
The Directors' Plan terminates on October 24, 2001, or the date when all
shares subject to or which may become subject to the Directors' Plan have been
purchased under options granted under the Directors' Plan, whichever is
earlier, and no further awards of options may be made after that date.
However, all options granted under the Directors' Plan will remain in effect
until such options have been satisfied by the issuance of shares or terminated
in accordance with the Directors' Plan.
The Board may amend, alter, suspend or discontinue the Directors' Plan at
any time, but such amendment, alteration, suspension or discontinuation shall
not adversely affect any stock options then outstanding under the Directors'
Plan, without the optionee's consent. Stockholder approval is required for any
amendment to the Directors' Plan which would increase the number of shares
reserved under the plan, materially modify the eligibility requirements or
materially increase the benefits which may accrue under the plan. Except as
otherwise may be required under applicable tax, securities or corporate law,
other amendments may be adopted solely with the approval of the Board.
13
<PAGE>
Federal Income Tax Information
The following is only a summary of the effect of federal income tax laws
upon the participant and the Company with respect to stock options granted
under the Directors' Plan. Reference should be made to the applicable
provisions of the Code. In addition, the summary does not discuss the tax
consequences of a participant's death or the income tax laws of any state or
foreign country in which the participant may reside. Each participating
employee is encouraged to seek the advice of a qualified tax advisor regarding
the tax consequences of participation in the Directors' Plan.
Options granted under the Directors' Plan are nonstatutory options. An
optionee will not recognize any taxable income at the time he or she is
granted a nonstatutory option. However, upon its exercise, the optionee will
recognize taxable income measured by the excess of the fair market value of
the shares purchased over the purchase price. Any taxable income recognized in
connection with an option exercise by an optionee who is also an employee of
the Company will be subject to tax witholding by the Company. In certain
circumstances, where the shares are subject to a substantial risk of
forfeiture when acquired, the date of taxation may be deferred unless the
optionee files an election with the Internal Revenue Service under Section
83(b) of the Code within 30 days after the date of exercise. Upon resale of
such shares by the optionee, any difference between the sale price and the
purchase price, to the extent not recognized as ordinary income as provided
above, will be treated as long-term or short-term capital gain or loss,
depending on the holding period. The Company will be entitled to a tax
deduction in the same amount as the ordinary income recognized by the optionee
with respect to shares acquired upon exercise of a nonstatutory option.
Participation in the Directors' Plan
The grant of options under the Directors' Plan is determined by the
Directors' Plan with respect to automatic options and is subject to the
individual director's election, appointment or re-election to the Board. Only
non-employee directors are eligible to participate in the Directors' Plan. The
following table sets forth information with respect to options which would be
granted under the Directors' Plan during the current fiscal year to the non-
employee directors. The term of all options outstanding under the Directors'
Plan is ten (10) years from date of grant.
AMENDED PLAN BENEFITS
NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
<TABLE>
<CAPTION>
NAME OF INDIVIDUAL OR NUMBER OF SHARES TO BE GRANTED
IDENTITY OF GROUP AT 1996 ANNUAL MEETING
--------------------- ------------------------------
<S> <C>
William F. Miller............................ 15,000
Chairman
George Hara.................................. 7,500
David Heller................................. 7,500
Philippe Kahn................................ 7,500
Stephen J. Lewis............................. 7,500
Harry J. Saal................................ 7,500
All current non-employee directors as a group
(6 persons)................................. 52,500
</TABLE>
- --------
(1) The exercise price for the options to be granted on the date of the 1996
Annual Meeting will be determined on the date of the 1996 Annual Meeting.
14
<PAGE>
PROPOSAL 5
APPOINTMENT OF AUDITORS
The Board of Directors has appointed Price Waterhouse LLP, independent
accountants, to audit the Company's consolidated financial statements for the
fiscal year ending March 31, 1997 and recommends that stockholders vote for
the ratification of such appointment. A representative of Price Waterhouse LLP
will be present at the Annual Meeting and will be available to respond to
stockholders' questions and to make a statement if he or she desires to do so.
The affirmative vote of the holders of a majority of the Company's Common
Stock present or represented by proxy and entitled to vote at the Annual
Meeting will be required to ratify the selection of Price Waterhouse LLP.
MANAGEMENT RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 5
ADDITIONAL INFORMATION
EXECUTIVE OFFICERS
Officers are appointed annually by the Board of Directors and serve at the
discretion of the Board of Directors. Set forth below is information regarding
the current executive officers of the Company who are not directors of the
Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<C> <C> <S>
Michael Greenbaum....... 54 Vice President and General Manager of
Client/Server Development Tools and Corporate
Marketing
Paul H. Gross........... 35 Senior Vice President, Research and Development
William H. Jordan....... 42 Vice President, Business Development
Robert H. Kohn.......... 39 Senior Vice President, Corporate Affairs and
Secretary
David McGlaughlin....... 58 Vice President, International Sales and
Operations
David Mullin............ 43 Vice President and Chief Financial Officer
Frank Vaculin........... 38 Vice President and General Manager of Desktop and
PC-LAN Development Tools
</TABLE>
Mr. Greenbaum joined the Company in March 1996 as Vice President of
Marketing and General Manager of the Client/Server Development Tools Group.
Prior to joining the Company, Mr. Greenbaum spent two years with Bell Atlantic
Corporation, a communications company, where he was Vice President of Media
Ventures and Vice President of Business Development for Small Business
Services. Before joining Bell Alantic, Mr. Greenbaum spent ten years with
Prodigy, an on-line network company, in a variety of general management and
marketing roles.
Mr. Gross joined the Company in 1989 as Product Manager for Turbo C++ and
the Paradox Engine and became the Director of Languages R&D in December 1992.
In August 1993, Mr. Gross was appointed Vice President and General Manager of
the Languages Division. In January 1995, Mr. Gross was appointed Vice
President of Research and Development and was designated as an executive
officer of the Company in June 1995. In August 1995, Mr. Gross was appointed
Senior Vice President of Research and Development. Prior to joining the
Company, Mr. Gross held positions in product management, sales and software
development at Gold Hill Computers, a software development company, and
Infocom, a software development company.
Mr. Jordan joined the Company in September 1990 as OEM Account Manager and
was appointed Director of Business Development in May 1992. He was appointed
Senior Director of Business Development in August 1993. Mr. Jordan was
appointed Vice President of Business Development in October 1993 and was
designated as an executive officer of the Company in June 1995. Prior to
joining the Company, Mr. Jordan held a variety of management positions with
Microrim, Inc., a software development company, and Ashton-Tate Corporation, a
software development company.
15
<PAGE>
Mr. Kohn joined the Company in March 1987 as General Counsel, was appointed
Assistant Secretary in January 1988, Vice President, Corporate Affairs and
Secretary in July 1988 and Senior Vice President in April 1994.
Mr. McGlaughlin joined the Company in October 1991 as Country Manager of
Borland Canada Software, Inc. In July 1994, Mr. McGlaughlin was appointed Vice
President of InterContinental Subsidiaries and, in December 1994, Vice
President of International Sales and Operations. Mr. McGlaughlin was
designated an executive officer of the Company in June 1995. Prior to joining
the Company, Mr. McGlaughlin was President of Ashton-Tate Canada, a software
development company.
Mr. Mullin joined the Company in December 1995 as Vice President and Chief
Financial Officer. Prior to joining the Company, Mr. Mullin served in a
variety of positions for five years with Conner Peripherals, Inc., a
manufacturer of computer peripherals, most recently serving for two years in
three concurrent positions; Chief Financial Officer of Arcada Software Inc., a
majority-owned subsidiary; director of Corporate Financial Planning and
Analysis, and group controller of the Storage Systems Business. Mr. Mullin
also served Conner Peripherals as assistant corporate controller. Prior to
joining Conner Peripherals, Mr. Mullin was manager of Financial Planning and
Analysis at Sun Microsystems, Inc.
Mr. Vaculin joined the Company in October 1993 as Senior Director of Channel
Sales. In March 1994, Mr. Vaculin was appointed Vice President, U.S. Sales,
Technical Support and Customer Service and was designated an executive officer
of the Company in June 1995. In April 1996, Mr. Vaculin was appointed Vice
President and General Manager of Desktop Lan Tools. Prior to joining the
Company, Mr. Vaculin served as Senior Director of Software Sales for
Electronics For Imaging, a hardware and software development company. Between
1987 and 1993 Mr. Vaculin held a variety of positions with Software Publishing
Corporation, including management positions in marketing and sales, most
recently as Director of Developer and Solutions Marketing and Operations.
RECENT DEVELOPMENTS
On July 1, 1996, Mr. Wetsel resigned as President, Chief Executive Officer
and Director of the Company. The Company has initiated a search for a Chief
Executive Officer. Dr. William F. Miller, Chairman of the Company's Board of
Directors will serve as acting Chief Executive Officer until a replacement for
Mr. Wetsel is appointed. In addition, as an interim measure, the Company has
created an office of the President, reporting to Dr. Miller and consisting of
the following senior officers of the Company: Paul Gross, Senior Vice
President, Research and Development; Michael Greenbaum, Vice President of
Marketing and General Manager of Client/Server Tools; and David McGlaughlin,
Vice President, International Sales and Operations.
16
<PAGE>
SHARE OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS AND
CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information known to the Company
regarding the beneficial ownership of the Company's Common Stock as of June
28, 1996 (i) by each person (or group of affiliated persons) who is known to
the Company to be a beneficial owner of more than five percent (5%) of the
Company's outstanding Common Stock, (ii) by each of the Company's directors,
(iii) by each of the Company's four other most highly compensated executive
officers at March 31, 1996; and (iv) by all such directors and current
executive officers as a group. Except as indicated in the footnotes to this
table, the persons named in the table have sole voting and investment power
with respect to all shares shown as beneficially owned by them, subject to
community property laws where applicable.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY
NAME OWNED PERCENT
---- ---------------- -------
<S> <C> <C>
Merrill Lynch & Co., Inc. (1)...................... 3,281,095 10.5%
Friese Associates, Inc. (2)........................ 2,000,000 6.4%
William F. Miller (3).............................. -- *
George Hara (3)(4)................................. 52,500 *
David Heller (3)(5)................................ 142,507 *
Philippe Kahn (3)(6)............................... 291,773 *
Stephen J. Lewis (3)(7)............................ 37,500 *
Harry J. Saal (3).................................. -- *
Paul H. Gross (3)(8)............................... 152,069 *
David McGlaughlin (3)(9)........................... 22,308 *
Frank Vaculin (3)(10).............................. 24,482 *
Robert H. Kohn (3)(11)............................. 161,272 *
All directors and executive officers as a group
(12) (13 persons)................................. 926,088 3.0%
</TABLE>
- --------
* Less than 1%
(1) Information is based on a Schedule 13G filing dated June 10, 1996. Number
of shares which may be deemed beneficially owned includes shares held by
various funds related to or managed by Merrill Lynch & Co., Inc. The
address of Merrill Lynch & Co., Inc. is World Financial Center, North
Tower, 250 Vesey Street, New York, New York 10281.
(2) Information is based on a Schedule 13G filing dated February 5, 1996. The
address of Friese Associates, Inc. is 350 Broadway, Jackson, Wyoming
83001.
(3) The person indicated is an executive officer or director of the Company.
(4) Includes options exercisable within 60 days of June 28, 1996 to acquire
52,500 shares.
(5) Includes options exercisable within 60 days of June 28, 1996 to acquire
142,507 shares.
(6) Includes options exercisable within 60 days of June 28, 1996 to acquire
291,773 shares.
(7) Includes options exercisable within 60 days of June 28, 1996 to acquire
37,500 shares.
(8) Includes options exercisable within 60 days of June 28, 1996 to acquire
152,069 shares.
(9) Includes options exercisable within 60 days of June 28, 1996 to acquire
22,308 shares.
(10) Includes options exercisable within 60 days of June 28, 1996 to acquire
23,072 shares.
(11) Includes options exercisable within 60 days of June 28, 1996 to acquire
158,432 shares.
(12) Includes options exercisable within 60 days of June 28, 1996 to acquire
921,591 shares. Excludes shares beneficially owned by Gary A. Wetsel,
former Chief Executive Officer.
17
<PAGE>
COMPENSATION COMMITTEE REPORT
The following is the Report of the Compensation Committee of the Company,
describing the compensation policies and rationale applicable to the Company's
executive officers with respect to compensation paid to such executive
officers for the fiscal year ended March 31, 1996. The information contained
in this report shall not be deemed "soliciting material" or to be "filed" with
the Securities and Exchange Commission (the "SEC") nor shall such information
be incorporated by reference into any future filing under the Securities Act
of 1933, as amended, or the Exchange Act, except to the extent that the
Company specifically incorporates it by reference into such filing.
The Compensation Committee of the Board of Directors determines the
compensation of the Company's executive officers. The Compensation Committee
is composed of three members of the Board of Directors who are not employees
of or consultants to the Company. The annual compensation of the Company's
executive officers principally consists of a combination of salary, bonuses,
and stock options. The Compensation Committee takes into consideration a
variety of factors in determining the compensation packages for executive
officers, including how compensation compares to that paid by competing
companies, and the performance of each executive and the Company as a whole.
From time to time the Compensation Committee uses the services of outside
consulting firms for additional information regarding competitive pay
practices.
General Philosophy
The Company's position remains unchanged from recent years as the Company
continues to be under extreme pressure regarding the hiring and retention of
employees. In many cases, the Company must compete for employees directly
against some of the largest and most successful companies in the industry,
such as Microsoft and Oracle Corporation. In other cases, the Company competes
against rapidly growing small public companies or private companies which can
offer stock to employees at relatively low prices. As a result, the Company
must offer compensation arrangements competitive to these companies.
The Compensation Committee continues to rely heavily on stock option grants
as the best mechanism to retain and motivate executives and key employees,
while aligning their interests with the interests of stockholders generally.
The Company also uses cash bonus plans to incentivize and reward individual
performance.
President
Gary Wetsel, the Company's former President, was compensated during fiscal
year 1996 pursuant to a pre-existing employment agreement.
Deduction Limit For Executive Compensation
Section 162(m) of the Internal Revenue Code limits federal income tax
deductions for compensation paid to the Chief Executive Officer and the four
other most highly compensated officers of a public company to $1 million per
year, subject to an exception for performance based compensation arrangements
which satisfy certain conditions. The Compensation Committee has not yet made
any decisions as to whether any modifications of compensation arrangements are
necessary or appropriate. However, in approving the amount and form of
compensation for Company executives, the Compensation Committee will continue
to consider all elements of cost to the Company of providing such
compensation, including the potential impact of Section 162(m).
Overall, the Compensation Committee believes the compensation arrangements
for executives serve the long term interests of the Company and its
stockholders and that, in particular, grants of stock options are necessary to
retain and attract key executives. Nonetheless, as noted above, the
Compensation Committee intends to continue to review and analyze its policies
in light of the performance of the Company and the environment
18
<PAGE>
in which it competes for executives and to retain outside compensation
consultants from time to time to assist the Compensation Committee in such
review and analysis.
By the Compensation Committee
George Hara
David Heller
Stephen J. Lewis
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As indicated above, the Compensation Committee during fiscal year 1996
consisted of George Hara, David Heller and Stephen J. Lewis, none of whom are,
or have been at any time, officers or employees of the Company. No executive
officer of the Company served as a member of a compensation committee or board
of directors of any other entity which has an executive officer serving as a
member of the Company's Board of Directors or Compensation Committee.
19
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
Summary of Compensation
The following table shows for fiscal 1996, 1995, and 1994 certain
compensation, including salary, bonuses, stock options, and certain other
compensation, paid by the Company to its Chief Executive Officer, and its four
other most highly compensated executive officers at March 31, 1996, while
serving in their capacities as executive officers, collectively, (the "Named
Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
------------
AWARDS
ANNUAL COMPENSATION ------------
------------------------------------------ # OF STOCK
NAME AND PRINCIPAL OTHER ANNUAL OPTIONS ALL OTHER
POSITION YEAR SALARY($) BONUS($) COMPENSATION($) GRANTED GROUPS($)(1)
------------------ ---- --------- -------- --------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Gary A. Wetsel (2).................. 1996 $285,538 $99,300 -- $2,365
Former President and 1995 100,000 245,000(3) -- 450,000 577
Chief Executive Officer
David McGlaughlin (4)............... 1996 185,513 107,209 21,639(5) -- --
Vice President, International
Sales and Operations
Paul H. Gross (4)................... 1996 209,615 74,250 24,966(6) 75,000 2,296
Senior Vice President,
Research and Development
Frank Vaculin (4)................... 1996 164,711 100,000 -- 1,233
Vice President and General
Manager of Desktop Lan Tools
Robert H. Kohn...................... 1996 200,000 47,639 -- -- 1,984
Senior Vice President, 1995 197,577 40,750 -- 227,500(7) 1,864
Corporate Affairs and Secretary 1994 165,000 8,000 -- -- 1,360
</TABLE>
- --------
(1) Unless otherwise noted, consists of the Company's matching payments under
its 401(k) Plan.
(2) Mr. Wetsel resigned as President and Chief Executive Officer on July 1,
1996.
(3) Includes a $150,000 relocation bonus.
(4) The person indicated was not an executive officer of the Company during
fiscal years 1995 and 1994.
(5) The person indicated is a resident of Canada and an employee of the
Company's subsidiary, Borland Canada Software, Inc. Consists of car and
housing allowance.
(6) Includes $24,966 of indebtedness forgiven by the Company.
(7) Includes the grant of options in consideration for the cancellation of
options.
20
<PAGE>
Stock Option Grants
During fiscal 1996, only one Named Officer received a stock option grant.
The following table shows, as to such Named Officer, information concerning
stock options granted during the year ended March 31, 1996.
1996 OPTION GRANTS
<TABLE>
<CAPTION>
POTENTIAL REALIZED
VALUE AT ASSUMED
ANNUAL RATES OF STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM(4)
- ---------------------------------------------------------- ---------------------------
% OF TOTAL
OPTIONS
GRANTED TO EXERCISE
EMPLOYEES OR BASE
OPTIONS IN FISCAL PRICE EXPIRATION
NAME GRANTED(#)(1) YEAR(2) ($/SH) DATE(3) 5%($) 10%($)
---- ------------- ---------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Paul H. Gross........... 75,000(5) 3.523 13.00 8/23/05 1,588,172 2,528,899
</TABLE>
- --------
(1) The Company's option plans are currently administered by the Compensation
Committee of the Board of Directors. The Committee determines the
eligibility of employees and consultants, the number of shares to be
granted, and the terms of such grants. All options granted in fiscal year
1996 have an exercise price equal to the fair market value on the date of
grant and unless otherwise noted, options vest over a four year period
with 25% vesting on the first anniversary of the grant date and 75%
vesting daily over three years thereafter or daily over a four year
period.
(2) The Company granted options to purchase an aggregate of 2,128,750 shares
to all employees and consultants in fiscal 1996.
(3) Options may terminate before their expiration date upon the termination of
optionee's status as an employee or consultant or upon the optionee's
death or disability.
(4) Under rules promulgated by the SEC, the amounts in these two columns
represent the hypothetical gain that would exsist for options in this
table based on assumed stock price appreciation from the date of grant
until the end of such options' ten-year term at assumed annual rates of 5%
and 10%. Annual compounding results in total appreciation of 63% (at 5%
per year) and 159% (at 10% per year). If the price of a share of the
Company's Common Stock were to increase at such rates from the price at
the end of fiscal 1996 ($18.00 per share) over the next 10 years, the
resulting stock price at 5% and 10% appreciation would be $22.97 and
$29.32, respectively. The 5% and 10% assumed annual rates of appreciation
do not represent the Company's estimate or projection of future stock
price growth.
(5) The options vest over four years on a daily basis and one-half of the
shares not yet vested vest upon acquisition of the Company and termination
(other than for cause) of Mr. Gross's employment within six months after
such acquisition.
21
<PAGE>
Option Exercises and Holdings
The following table sets forth, as to the Named Officers, certain
information concerning stock options exercised during fiscal year 1996 and the
number of shares subject to both exercisable and unexercisable stock options
as of March 31, 1996. Also reported are values for "in-the-money" options that
represent the positive spread between the respective exercise prices of
outstanding stock options and the fair market value of the Company's Common
Stock as of March 31, 1996.
1996 AGGREGATED OPTION EXERCISES AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
SHARES NUMBER OF UNEXERCISED IN-THE-MONEY
ACQUIRED ON VALUE STOCK OPTIONS OPTIONS
NAME EXERCISE(#) REALIZED($) HELD AT FY END(#) AT FY END($)(1)
---- ----------- ----------- --------------------- ---------------
<S> <C> <C> <C> <C> <C>
Gary A. Wetsel.......... 15,000 $139,375 Exercisable 134,925 $1,216,948
Unexercisable 300,075 2,711,801
Paul H. Gross........... 40,000 325,894 Exercisable 122,137 1,057,879
Unexercisable 142,323 1,136,550
David McGlaughlin....... 45,518 384,096 Exercisable 9,694 103,366
Unexercisable 69,979 740,090
Frank Vaculin........... 43,139 323,522 Exercisable 10,350 111,006
Unexercisable 71,511 717,118
Robert H. Kohn.......... 30,000 302,048 Exercisable 137,471 1,253,604
Unexercisable 79,029 748,021
</TABLE>
- --------
(1) Market value of underlying securities based on the closing price of
Company's Common Stock on March 29, 1996 (the last trading day of fiscal
1996) on the NASDAQ National Market System of $18.00 minus the exercise
price.
EMPLOYMENT CONTRACTS AND CHANGE IN CONTROL ARRANGEMENTS
The Company entered into letter agreements dated February 6, 1995 with
Messrs. Gross, Jordan, Kohn and Vaculin which provide that in the event that
employment is terminated for any reason other than cause between the first and
second anniversary of each agreement, each shall be entitled to a severance
benefit of six months base salary. The Company's offer letter to Messrs.
Greenbaum and Mullin provides that each will be entitled to continue his base
salary for six months if his employment with the Company is terminated for any
reason other than cause. The Company's offer letter to Mr. McGlaughlin
provides that he will be entitled to continue his base salary for one year at
the end of his active assignment with the Company.
On July 1, 1996, Mr. Wetsel resigned as President, Chief Executive Officer
and Director of the Company. In connection with his resignation, the Company
modified its employment agreement with Mr. Wetsel and paid Mr. Wetsel a one
time severance payment of $600,000. Pursuant to the modified agreement, the
Company will employ Mr. Wetsel on a full time basis for three months following
July 1, 1996 with all compensation included within the one time severance
payment of $600,000. Thereafter, for the remaining nine months, the Company
will employ Mr. Wetsel part-time at the rate of $5,555 per month. Mr. Wetsel
will remain eligible for such general employee benefits as may be provided to
employees of the Company during such period and the continued vesting of stock
options previously granted to him.
CERTAIN TRANSACTIONS WITH MANAGEMENT
During fiscal 1996 the Company provided a guaranty to Comerica Bank-
California limited to an amount no greater than $550,000, in connection with a
bridge loan extended by said bank to Mr. Greenbaum. Mr.
22
<PAGE>
Greenbaum subsequently borrowed $437,430 from said bank. The Company paid Mr.
Greenbaum's loan origination fee of $5,000 and pays the interest on the loan.
The Company's offer letter to Mr. Greenbaum provides that the Company shall
reimburse Mr. Greenbaum up to the lesser of $100,000 or the extent to which
the gross proceeds from the sale of his residence in Maryland are less than
his basis in such residence.
Philippe Kahn was employed part-time at an annual salary of $125,000,
pursuant to an employment agreement with the Company which expired in January
1996. Pursuant to the employment agreement, Mr. Kahn was eligible for such
health insurance (including disability to the extent available to part-time
employees) and other related benefits as was provided to employees of the
Company during the term of the agreement and the continued vesting of stock
options previously granted to him.
In fiscal 1994, the Company provided Paul Gross, Senior Vice President,
Research and Development, with a forgiveable personal loan for the principal
sum of $24,963.13 for a term of five and one-half (5 1/2) years (the "First
Loan" and with a forgiveable personal loan for the principal sum of $40,000
for a term of six and one-half (6 1/2) years (the "Second Loan"). During
fiscal 1996 the largest aggregate amount of indebtedness outstanding under the
First Loan and Second Loan was $61,526. As of April 1, 1996, the First Loan
has been forgiven in full and a principal balance of $36, 560 remained
outstanding under the Second Loan.
23
<PAGE>
PERFORMANCE GRAPH
The graph below compares the cumulative total stockholder return on the
Company's Common Stock from March 1991 to March 1996 compared to the CRSP
Total Return Index for NASDAQ Stock Market US Companies and the CRSP Total
Return Index for NASDAQ Computer and Data Processing Services Stocks.
The information contained in the performance graph shall not be deemed
"soliciting material" or to be "filed" with the Securities and Exchange
Commission nor shall such information be incorporated by reference into any
future filing under the Securities Act of 1933, as amended, or the Securities
and Exchange Act of 1934, as amended, except to the extent that the Company
specifically incorporates it by reference into such filing. The stock price
performance on the following graph is not necessarily indicative of future
stock price performance.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL STOCKHOLDER RETURN
AMONG BORLAND, NASDAQ STOCK MARKET--US AND NASDAQ COMPUTER & DP
PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION>
BORLAND NASDAQ NASDAQ
Measurement Period INTERNATIONAL STOCK MARKET COMPUTER
(Fiscal Year Covered) INC. --US & DP
- ------------------- ---------- --------- ----------
<S> <C> <C> <C>
Measurement Pt-03/91 $100 $100 $100
FYE 03/92/ $ 91 $127 $148
FYE 03/93/ $ 38 $147 $165
FYE 03/94/ $ 24 $158 $169
FYE 03/95/ $ 15 $176 $228
FYE 03/96/ $ 31 $239 $323
</TABLE>
- --------
* The graph assumes that $100.00 was invested in the Company's Common Stock
and in each index on March 31, 1991. The total return for the Company's
Common Stock and the indices used assumes the reinvestment of dividends,
even though dividends have not been declared on the Company's Common Stock.
24
<PAGE>
SECTION 16 FILINGS
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than ten percent of a registered
class of the Company's equity securities, to file reports of ownership and
changes in ownership with the SEC and NASDAQ. Directors, executive officers,
and greater than ten percent holders 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 or written
representations from certain reporting persons, the Company believes that,
during fiscal 1996, all filing requirements under Section 16(a) applicable to
its directors and executive officers were met.
OTHER MATTERS
The Board of Directors does not know of any other matters which may come
before the Annual Meeting. If any other matters are properly presented to the
Annual Meeting, it is the intention of the persons named in the accompanying
proxy to vote, or otherwise to act, in accordance with their best judgment on
such matters.
ANNUAL REPORT
The Company's Annual Report on Form 10-K for the year ended March 31, 1996
is being mailed to the Company's stockholders herewith.
The Board of Directors hopes that stockholders will attend the Annual
Meeting. Whether or not you plan to attend, you are urged to complete, sign,
and return the enclosed proxy in the accompanying envelope. A prompt response
will greatly facilitate arrangements for the Annual Meeting, and your
cooperation will be appreciated. Stockholders who attend the Annual Meeting
may vote their shares personally even though they have sent in their proxies.
By Order of the Board of Directors
/s/ ROBERT H. KOHN
----------------------------
ROBERT H. KOHN, Secretary
Scotts Valley, CA
August 5, 1996
25
<PAGE>
[LETTERHEAD OF BORLAND]
August 5, 1996
Dear Stockholders:
During fiscal 1996, the Company continued to make progress in the strategic
direction the Company first announced in January 1995. During the year, we
continued to focus on the mission to provide technology and services that
serve software developers in the client/server and Internet/Intranet markets.
The transition to our new strategy has been challenging and we are continuing
to make adjustments in our business model. Our goal is to best position the
Company to take advantage of what we believe will be a high growth market in
client/server and Internet-based development.
During fiscal 1996, we successfully initiated the first step of our
developer focused strategy by introducing a new product, called Delphi, now
the industry's highest-performance visual Rapid Application Development (RAD)
tool. Since the product was released in February 1995, we have sold more than
450,000 units, making it the number two market leader in the Rapid Application
Development tools market. Delphi Client/Server Suite, our high-end Delphi
package, has gained significant market adoption among many Fortune 1000 and
government organizations. Delphi has received strong recognition and won
numerous awards. For example, in a readership survey by Computerworld
magazine, Delphi Client/Server was rated the number one application
development tool for overall customer satisfaction among client/server
customers. We believe that the success of Delphi will open new doors for
Borland in the client/server marketplace.
Continuing our efforts to provide developer solutions for the rapidly
growing Internet and Intranet developer tools market, we recently shipped our
first Internet products and fortified strategic relationships with Microsoft,
Netscape and Sun Microsystems for supporting their Internet standards. With
the shipment of Borland C+ + 5.0, we included Java development tools to allow
C+ + developers to get started using Java. In addition, the Borland C+ + 5.0
Development Suite includes the AppAccelerator, a just-in-time dynamic compiler
which increases the performance of Java applets and applications. Netscape
also licensed the AppAccelerator for inclusion in the Netscape Navigator. We
have also announced that we are developing a visual RAD tool, code named
Latte, which is specifically designed for Java developers and leverages many
of the strengths of Delphi. Feedback from industry analysts and customers who
have seen this product has been very favorable.
Another recent development was the announcement of our agreement to acquire
Open Environment Corporation, a pioneer in the development of highly-scalable
client/server solutions. This acquisition, which is expected to be completed
this summer or in early fall, is aimed at providing Borland with additional
resources to address the client/server and Internet/Intranet markets. Our
strategy is to leverage the distribution, support and technologies of Open
Environment to strengthen our presence in the decentralized IT market and
expand into centralized IT organizations seeking highly-scalable enterprise
client/server and Internet solutions. We believe that combining our heritage
of providing object-oriented language and compiler technology with Open
Environment Corporation's scalable Entera technology will enhance our ability
to fill needs for reliable client/server tools for the Internet.
<PAGE>
As expected, while we are making progress in focusing on the client/server
and Internet/Intranet markets, our desktop business is continuing to decline.
In particular, for the quarter ending June 30, 1996 (the first quarter of our
1997 fiscal year), we experienced a shortfall in revenue and significant
losses due to lower than expected sales in the United States. Despite this
setback, Borland is taking the necessary measures upon which to base a
recovery. Earlier this month, the Company announced it had initiated a CEO
search and I will continue to serve as acting CEO until a replacement is
appointed. Further, we will continue to execute our Internet/Intranet strategy
and look forward to delivering development tools solutions for these markets
later this year.
Despite the challenges of the first quarter in fiscal 1997, we remain
focused on the strategic initiatives we have been outlining over the past
year. For the past twelve years, Borland has consistently delivered some of
the industry's most advanced and innovative software technology, and we have
hundreds of thousands of loyal developer customers who continue to be
enthusiastic about Borland and its products. I am confident that the
combination of Borland's experience and leadership in development tools will
provide us with a key advantage in the emerging Internet and Intranet tools
business. Moving forward into fiscal 1997, I look forward to working closely
with the management team as we continue our focus on meeting the needs of our
customers.
Thank you for your continued interest in Borland.
Sincerely yours,
/s/ DR. WILLIAM F. MILLER
- ------------------------------
Dr. William F. Miller
Chairman of the Board
and Acting Chief Executive Officer
2
<PAGE>
PROXY
BORLAND
100 BORLAND WAY
SCOTTS VALLEY, CA 95066
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints William F. Miller, Robert H. Kohn and David
Mullin as Proxies, each with the power to appoint his substitute, and hereby
authorizes them to represent and to vote as designated below, all the shares
of common stock of Borland International, Inc. held of record by the
undersigned on July 9, 1996, at the 1996 Annual Meeting of Stockholders to be
held on September 5, 1996, and any adjournments or postponements thereof.
PLEASE MARK THIS PROXY AS INDICATED ON THE REVERSE SIDE TO VOTE ON ANY ITEM.
IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS'
RECOMMENDATIONS, PLEASE SIGN THE REVERSE SIDE; NO BOXES NEED TO BE CHECKED.
(CONTINUED AND TO BE SIGNED ON OTHER SIDE)
FOLD AND DETACH HERE
<PAGE>
[X] Please mark
your votes
as this
This proxy when properly executed, will be voted in the manner directed herein
by the undersigned stockholder. If no direction is made, this proxy will be
voted FOR Proposals 1, 2, 3, 4, and 5.
FOR all WITHOLD
Nominees AUTHORITY
1. Election of (two) 2 Class I Directors: [_] [_]
Nominees:
George Hara
Stephen J. Lewis
WITHHELD FOR: (Write that nominee's name
in the space provided below).
- ------------------------------------------
FOR AGAINST ABSTAIN
2. Approval of an amendment to the 1990 [_] [_] [_]
Employee Stock Purchase Plan to
increase the number of shares of Common
Stock available for grant under the
plan by 250,000 shares.
FOR AGAINST ABSTAIN
3. Approval of an amendment to the 1992 [_] [_] [_]
Stock Option Plan to increase the
number of shares of Common Stock available
for grant under the plan by 1,000,000 shares.
FOR AGAINST ABSTAIN
4. Approval of the amendments to the [_] [_] [_]
Non-Employee Directors' Stock Option Plan
that (a) will increase the number of
shares of Common Stock available for
grant under the plan by 250,000 shares
and (b) upon election of a Non-Employee
Director as Chairman of the Board of the
Company, grant a further option to such
person to purchase 30,000 shares.
FOR AGAINST ABSTAIN
5. Ratification of the appointment of [_] [_] [_]
Price Waterhouse LLP as independent
auditors for the 1997 fiscal year.
I plan to attend the meeting. [_]
Signature(s) ___________________________ Date _______________________________
NOTE: Please sign as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such
