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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 [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Inprise Corporation
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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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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Notes:
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[LOGO OF INPRISE]
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Notice of Annual Meeting of Stockholders
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TO OUR STOCKHOLDERS:
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WHAT: Our Annual Meeting of Stockholders for Calendar Year 1999
WHEN: June 4, 1999 at 10:00 a.m., local time
WHERE: Inprise Corporation
100 Enterprise Way
Scotts Valley, California
WHY: At this meeting, we plan to:
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1. Elect two Class I directors to serve on the Board of Directors for
a three-year term expiring upon the election of directors at the
2002 Annual Meeting of Stockholders.
2. Approve an amendment to the Inprise Corporation 1997 Stock Option
Plan to increase the number of shares of Common Stock reserved for
issuance thereunder by 1,500,000 shares.
3. Approve the Inprise Corporation 1999 Employee Stock Purchase Plan,
including the reservation of 800,000 shares of Common Stock
thereunder.
4. Ratify the appointment of PricewaterhouseCoopers LLP as
independent auditors for Inprise for the calendar year ending
December 31, 1999.
5. Transact any 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 April 10, 1999 will
receive notice of the Annual Meeting and be eligible to vote at the meeting.
Your vote is important. Whether or not you plan to attend the Annual
Meeting in person, we urge you to promptly sign, date and return the enclosed
proxy card to ensure you are represented at the Annual Meeting.
Please vote as soon as possible. We have enclosed a postage-prepaid envelope
for your convenience so you can return the enclosed Proxy card. Please note:
Any stockholder attending the Annual Meeting may vote in person, even though
you previously returned a proxy card.
By Order of the Board of Directors
/s/ Joanne M. Butler
JOANNE M. BUTLER
Vice President, General Counsel and
Secretary
Scotts Valley, California
May 10, 1999
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INPRISE CORPORATION
100 Enterprise Way
Scotts Valley, CA 95066
(831) 431-1000
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PROXY STATEMENT
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The Board of Directors (the "Board") of Inprise Corporation, a Delaware
corporation ("Inprise" or the "Company"), seeks your Proxy for use in voting
at the annual meeting of stockholders to be held at the Company's headquarters
at 100 Enterprise Way, Scotts Valley, California on Friday, June 4, 1999, at
10:00 a.m. local time or any postponements or adjournments thereof (the
"Annual Meeting"). Copies of solicitation material will be furnished to
brokerage houses, fiduciaries, and custodians to forward to beneficial owners
of common stock, par value $0.01 per share, of the Company ("Common Stock")
and beneficial owners of Series B Convertible Preferred Stock of the Company
(the "Series B Preferred Stock") held in their names. This Proxy Statement and
the accompanying form of proxy will be mailed on or about May 10, 1999,
together with the Company's Annual Report to Stockholders for the calendar
year ended December 31, 1998, to all holders of Common Stock and Series B
Preferred Stock entitled to vote at the Annual Meeting. Inprise will pay for
this solicitation. We have retained Georgeson & Company Inc. for approximately
$25,000, plus out-of-pocket expenses, to help distribute proxy materials and
secure votes. In addition, we will reimburse brokerage firms and other persons
representing beneficial owners of shares for reasonable expenses in sending
solicitation material to beneficial owners. Original solicitation of proxies
by mail may be supplemented by telephone, telegram, telecopy, internet and
personal solicitation by directors, officers or other regular employees of the
Company.
The Board recommends a vote FOR the election of Management's nominees to
the Board; FOR the amendment to the Inprise Corporation 1997 Stock Option
Plan; FOR the approval of the Inprise Corporation 1999 Employee Stock Purchase
Plan; and FOR the ratification of the appointment of PricewaterhouseCoopers
LLP as independent auditors. The shares represented by your Proxy will be
voted in accordance with your instructions. However, if no instructions are
given, your shares will be voted in accordance with the recommendations of the
Board.
VOTING AND SOLICITATION
Stockholders of record as of the close of business on April 10, 1999 (the
"Record Date"), will receive notice of, and may vote at the Annual Meeting.
Eligible stockholders may vote by submission of the enclosed Proxy card or by
attending the Annual Meeting and voting in person.
If your Inprise shares are held in "street name," only your broker or bank
can vote such shares. If your Inprise shares are held in street name, deliver
the enclosed Proxy card to your broker or bank and contact the person
responsible for your account to vote on your behalf and to submit a properly
executed Proxy card on your behalf.
If you have any questions or need assistance in voting your shares, please
call:
GEORGESON & COMPANY INC.
Wall Street Plaza
New York, New York 10005
Banks and Brokers Call Collect: (212) 440-9800
All Others Call Toll Free: 1-800-223-2064
There were 47,204,909 shares of our Common Stock and 738 shares of our
Series B Preferred Stock issued and outstanding on the Record Date. See the
section titled "Security Ownership of Certain Beneficial Owners and
Management" below on page 27 for information about owners of more than 5% of
our outstanding Common Stock.
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On each proposal that will come before the Annual Meeting, each share of
Common Stock is entitled to one vote and each share of Series B Preferred
Stock is entitled to 16,667 votes. A majority of the votes represented by
outstanding shares of Common Stock and Series B Preferred Stock will
constitute a quorum at the Annual Meeting (the "Quorum"). Shares that are
voted "FOR", "AGAINST" or "ABSTAIN" in a matter together with broker non-votes
are treated as being present at the Annual Meeting for purposes of
establishing the Quorum.
REVOKING YOUR PROXY
Any Proxy may be revoked at any time before it is actually voted at the
Annual Meeting. You may revoke your Proxy by doing one of the following:
. File a written notice of revocation, dated later than the Proxy, before
the vote is taken at the Annual Meeting.
. Execute a later dated Proxy before the vote is taken at the Annual
Meeting.
. Vote in person at the Annual Meeting (your attendance at the Annual
Meeting, in and of itself, will not revoke the earlier Proxy).
Any written notice of revocation, or later dated Proxy, should be delivered
to:
Inprise Corporation
100 Enterprise Way
Scotts Valley, CA 95060
Attention: Secretary
Alternatively, you may hand deliver a written revocation notice, or a later
dated Proxy, to our Secretary at the Annual Meeting before we begin voting.
DEADLINE FOR STOCKHOLDER PROPOSALS FOR THE YEAR 2000 ANNUAL MEETING
Stockholders of the Company who wish to present proper proposals intended
to be included in our Calendar Year 2000 Proxy Statement and presented at
Inprise's Year 2000 Annual Meeting must submit their proposals in writing to
the Secretary of the Company. Such proposals must be received no later than
January 11, 2000, and must otherwise comply with the requirements of Rule 14a-
8 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), in
order to be included in the proxy statement and form of proxy relating to that
meeting. In order for a stockholder proposal made outside of Rule 14a-8 to be
timely within the meaning of Rule 14a-4(c) of the Exchange Act, a
stockholder's notice must be delivered to or mailed to the Secretary of the
Company not less than thirty (30) days prior to the Year 2000 Annual Meeting;
provided, however, that in the event that less than forty (40) days' notice or
prior public disclosure of the date of such annual meeting is given or made to
stockholders, notice by the stockholder to be timely must be received not
later than the close of business on the tenth day following the day on which
such notice of the date of such annual meeting was mailed or such public
disclosure was made. To be in proper written form pursuant to the Company's
By-Laws, a stockholder's notice to the Secretary of the Company shall set
forth in writing as to each matter the stockholder proposes to bring before
the annual meeting (a) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting, (b) the name and address, as they appear on the
Company's books, of the stockholder proposing such business, (c) the class and
number of shares of the Company which are beneficially owned by the
stockholder and (d) any material interest of the stockholder in such business.
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PROPOSAL 1
ELECTION OF DIRECTORS
OVERVIEW
The Board is divided into three classes. One class of directors is elected
each year for a three-year term. Management's nominees for Class I directors
are C. Robert Coates and Stephen J. Lewis. The Class I directors elected in
1999 will serve for a term of three years, which term expires upon the
election of directors at the Company's 2002 Annual Meeting of Stockholders. It
is intended that the persons named as Proxies will vote for Messrs. Coates and
Lewis for election to the Board.
Mr. Coates and Mr. Lewis are at present available for election. However, if
either or both nominee(s) should for any reason be unable or unwilling to
serve, the Proxies will be voted for such substitute nominee(s) as management
may designate.
If the named nominees are elected by the Company's stockholders at the
Annual Meeting, the Board will consist of seven directors, of whom six,
Messrs. Coates, Heller, Hooper, Lewis, Miller and Saal, have principal
occupations outside the Company. George Hara, who has served as a director of
Inprise since 1990, is retiring as a director and is not standing for
reelection at the Annual Meeting.
On April 13, 1999, C. Robert Coates, who beneficially owns approximately
6.3% of the Company's outstanding shares of Common Stock, submitted a notice
to the Company in which he nominated himself to stand for election as a
director for election at the Annual Meeting. Previously, Management Insights,
Inc. ("MII"), a privately-held company controlled by Mr. Coates, submitted to
the Company a stockholder proposal (the "Stockholder Proposal") pursuant to
Rule 14a-8 under the Exchange Act.
On May 7, 1999, following discussions between representatives of the
Company and Mr. Coates, the Company entered into an agreement (the
"Agreement") with Mr. Coates and MII (together, the "Coates Group"). Pursuant
to the Agreement, the Company and the Coates Group agreed to support for
election to the Board at the Annual Meeting the slate of Board nominees
including Mr. Coates. The Coates Group also agreed to withdraw the Stockholder
Proposal and to vote all shares owned by them in favor of the election of each
of the agreed-upon nominees at the Annual Meeting and in favor of each of the
other matters being voted on at the Annual Meeting. The Coates Group also
agreed to support and vote all their shares in favor of each of the persons
nominated by the Board to stand for election as directors at the Company's
2000 Annual Meeting of Stockholders.
Under the Agreement, the Coates Group agreed to certain restrictions for
the period commencing on May 7, 1999 and ending after the Company's 2000
Annual Meeting. The restrictions provide, among other things, that, without
the prior written consent of a majority of the members of the Board other than
Mr. Coates, the Coates Group will not, and will cause their respective
affiliates and associates not to, (i) engage, or in any way participate in any
solicitation of proxies or consents (whether or not relating to the election
or removal of directors), seek to advise, encourage or influence any person
with respect to the voting of any voting securities of the Company, initiate,
propose or otherwise solicit stockholders of the Company for the approval of
stockholder proposals or induce or attempt to induce any other person to
initiate a stockholder proposal; (ii) form, join or in any way participate in
any "group" (within the meaning of Section 13(d)(3) of the Exchange Act) with
respect to any voting securities of the Company other than with existing
members of the Coates Group; (iii) otherwise act, alone or in concert with
others, to control or seek to control or influence or seek to influence the
management, Board or policies of the Company; (iv) seek, alone or in concert
with others, representation on the Board or the removal of any member of the
Board; (v) make any publicly disclosed proposal or enter into any discussion
regarding any of the foregoing, or make any proposal, statement or inquiry, or
disclose any intention, plan or arrangement inconsistent with the foregoing,
or make or disclose any request to waive or terminate any provision of the
Agreement; or (vi) take any action inconsistent with the foregoing. The
Agreement
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also provides that the foregoing restrictions do not prohibit or limit Mr.
Coates from engaging in lawful acts in his fiduciary capacity as a director.
REQUIRED VOTE
The plurality of the votes represented by outstanding shares of Common Stock
and Series B Convertible Preferred Stock, treated as a single class on an as-
if-converted basis, present or represented by Proxy and entitled to vote at the
Annual Meeting, will be required to elect Messrs. Coates and Lewis. Abstentions
and broker non-votes will have no effect on the vote.
BIOGRAPHICAL INFORMATION
Certain biographical information about the Company's directors and director-
nominees is set forth below:
CLASS I NOMINEES FOR ELECTION
C. Robert Coates Age 55
Mr. Coates is the founder and since 1980 has been the Chief Executive Officer
and President of Management Insights, Inc., a tax consulting firm specializing
in tax credits and incentives. Mr. Coates also serves on the board of directors
for Junior Achievement.
Stephen J. Lewis Director Since 1993 Age 41
Mr. Lewis is the CEO of All Bases Covered, an information technology consulting
company serving the needs of small business. From 1994 to 1998, Mr. Lewis was
the Managing Director of Generation Ventures, a China focused venture capital
firm. From 1993 to 1994, Mr. Lewis was a managing director of SCM International
Ltd., an international investment bank.
Class II Directors Serving a Three-Year Term Expiring at the 2000 Annual
Meeting
Dale Fuller Officer and Director Since 1999 Age 40
Mr. Fuller joined Inprise in April 1999 as President and Chief Executive
Officer. Prior to joining Inprise, Mr. Fuller was a private investor from 1998
to 1999. From 1996 to 1998 Mr. Fuller served as Chief Executive Officer at
WhoWhere? Inc., a leading Internet site. From 1995 to 1996 Mr. Fuller served as
General Manager and Vice President of the PowerBooks Division at Apple
Computer, a personal computer manufacturer. Prior to joining Apple Computer,
Mr. Fuller served as General Manager and Vice President of the Portables
Division at NEC, a personal computer manufacturer, from 1993 to 1995.
William Hooper Director Since 1999 Age 43
Mr. Hooper has been the President of the Woodside Hotels & Resorts Group
Services Corporation, Monterey Plaza Hotel Corporation, and Hillsdale Park
Hotel Corporation, since 1993. Mr. Hooper also serves on the board of directors
for several non-profit organizations.
Class III Directors Serving a Three-Year Term Expiring at the 2001 Annual
Meeting
David Heller Director Since 1984 Age 54
Mr. Heller is a founder and has served as a director and the President since
1982, of Pacific Technology Capital Corporation, a corporate finance advisory
firm. Mr. Heller also serves as a director of America West Golf Manufacturing,
Inc., a golf club manufacturing company, and Intelliseek Corporation, an
Internet software company.
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William F. Miller Director Since 1996 Age 73
Dr. Miller has been the Herbert Hoover Professor Emeritus, Graduate School of
Business, Stanford University since 1997 and President Emeritus of SRI
International since 1990. He has also been the Professor Emeritus of Computer
Science, School of Engineering, Stanford University since 1997. In 1990, Dr.
Miller retired after 11 years as President and CEO of SRI International. Until
recently he served on the board of directors of Wells Fargo Bank and Co.,
Varian Associates, Pacific Gas and Electric Company, First Interstate Bancorp,
and Fireman's Fund Insurance Company. Dr. Miller serves on the board of
directors of Sentius Corporation and Women.com, several other private companies
and Commerce Net and Institute For Research on Learning, non-profit
organizations.
Harry J. Saal Director Since 1996 Age 54
From 1995 to 1998 Dr. Saal served as a director of Network Associates, a
network management and analysis company. In 1986, Dr. Saal founded Network
General Corporation and was chairman of Network General Corporation prior to
its acquisition by McAffee Associates in December 1997. From 1993 through 1995,
Dr. Saal served as President and CEO of Smart Valley, Inc., a non-profit
organization. Dr. Saal is also chairman of Imaging Technologies Corporation, a
designer of controllers for laser printers and related devices. Dr. Saal also
serves on the board of directors of several non-profit organizations.
DIRECTOR COMPENSATION
Inprise paid fees to each non-employee director of the Company serving on
the Board during 1998. Fees paid to non-employee directors of the Company
include an annual retainer of $24,000, plus $1,000 for attendance at each
meeting of the Board and for each meeting of a committee of the Board on which
each non-employee director serves. In addition, the Company reimbursed non-
employee directors for their expenses in connection with their service on the
Board. Employee-directors receive no compensation for their services on the
Board.
Non-employee directors also participate in the Company's 1997 Stock Option
Plan, which provides options to purchase 30,000 shares of Common Stock as of
the date an individual becomes a non-employee director. In addition, at every
annual meeting of the stockholders of the Company each then-serving non-
employee director will receive an option to purchase 7,500 shares. All options
granted under the Company's 1997 Stock Option Plan have a ten-year term and an
exercise price equal to 100% of the fair market value of the underlying stock
on the date of grant. These options may not be exercised until the non-employee
director has served as a member of the Board for one year from the date such
option is granted.
On June 5, 1998, options were granted to each of Messrs. Hara, Heller,
Lewis, Miller and Saal to purchase 7,500 shares of the Company's Common Stock
at an exercise price of $8.375 per share, the fair market value of the
Company's Common Stock on the date of the grant.
CALENDAR YEAR 1998 MEETINGS
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Board of Directors/Regular............... 6
Board of Directors/Special............... 2
Special Committee........................ 4
Audit Committee.......................... 4
Organization and Compensation Committee.. 7
Executive Committee...................... 0
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COMMITTEE MEMBERSHIPS
Directors Stephen Lewis and William Miller serve on the Special Committee.
Directors George Hara, Stephen Lewis and David Heller serve on the Audit
Committee.
Directors Stephen Lewis and David Heller serve on the Organization and
Compensation Committee.
Directors Stephen Lewis, William Miller and David Heller serve on the
Executive Committee.
COMMITTEE RESPONSIBILITIES
Special Committee
Reviews and investigates certain business matters on behalf of the
Board.
Audit Committee
Recommends the independent auditors to the Board.
Meets with the independent auditors, with and without the presence of
Inprise's management, to review and discuss various matters including
Inprise's financial statements, the report of the independent auditors
on the results, scope and approach of their work, and their
recommendations concerning the Company's financial practices and
procedures.
Organization and Compensation Committee
Administers Inprise's stock option and stock purchase plans, approves
salaries, bonuses and other compensation arrangements for Inprise's
officers.
Approves loans to or loan guarantees for the Inprise officers and
employees.
Executive Committee
Has the authority to take all actions with full power of the Board
except as specifically limited by law.
Inprise does not have a standing Nominating Committee.
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 calendar year and (ii) the total number of meetings held by
any committee of the Board upon which such director served.
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE
ELECTION OF ITS NOMINEES.
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PROPOSAL 2
APPROVAL OF ADDITIONAL SHARES FOR THE INPRISE CORPORATION
1997 STOCK OPTION PLAN
PLAN OVERVIEW
The Inprise Corporation 1997 Stock Option Plan (the "Option Plan") provides
for the grant of stock options to employees, directors and consultants of the
Company (the "stock options"). Inprise believes that its ability to offer
stock options is an important factor in attracting, retaining and motivating
employees and other service providers in a competitive marketplace.
A stock option enables its recipient (an "optionee") to purchase a
specified number of shares of Common Stock at a price determined at the time
the stock option is granted. If the Company's stock price increases, the
optionee may benefit by "exercising" the stock option to purchase shares of
Common Stock at the fixed price and selling them at the higher market price.
Stock options are often said to align the optionees' interests with those of
the stockholders because they are intended to motivate optionees to act in
ways that increase the value of the Common Stock. In addition, because stock
options typically become exercisable in periodic installments over a number of
years of continued service, they provide optionees with an incentive to
continue to provide services to the Company.
The Option Plan enables Inprise to grant stock options on a discretionary
basis to employees, directors and consultants of the Company. It also
establishes a program of periodic, automatic grants of stock options to the
non-employee members of the Board. The key terms of these non-employee
director options are specified by the Option Plan and are non-discretionary.
Stock options granted under the Option Plan may be incentive stock options
governed by Section 422 of the Internal Revenue Code of 1986, as amended (the
"Internal Revenue Code") or nonstatutory stock options. See the section titled
"Federal Income Tax Information."
PROPOSED AMENDMENT
To ensure that the Company will continue to have a reasonable number of
shares available for future stock option grants, the Board has adopted an
amendment to the Option Plan, subject to stockholder approval, to increase the
number of shares of Common Stock authorized for issuance under the Option Plan
by 1,500,000 shares. Inprise now seeks stockholder approval of this amendment.
As of March 31, 1999, there were 1,247,054 shares of Common Stock available
for future grants under the Option Plan, not including the shares subject to
this proposal. The Board believes that this number will not be sufficient to
meet the Company's anticipated needs.
REQUIRED VOTE
The majority of the votes represented by outstanding shares of Common Stock
and Series B Preferred Stock, treated as a single class on an as-if-converted
basis, present or represented by Proxy and entitled to be voted at the Annual
Meeting, is required for approval of this proposal. Abstentions shall have the
same effect as a negative vote and broker non-votes shall have no effect on
the outcome of the vote.
DESCRIPTION OF OPTION PLAN
The following summary is qualified by the specific language of the Option
Plan, a copy of which is available to any stockholder of the Company upon
written request to the Secretary of the Company at the Company's principal
executive offices.
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Shares Authorized
Stockholders of the Company have previously authorized the issuance of a
maximum of 5,700,000 shares of Common Stock under the Option Plan. If this
proposal is approved by the stockholders of the Company, the maximum aggregate
number of shares of Common Stock that could be issued under the Option Plan
will be increased to 7,200,000 shares, of which 4,452,946 shares have been
issued upon the exercise of or remain subject to previously granted options.
To enable Inprise to deduct in full, for United States federal income tax
purposes, the compensation recognized by certain executive officers in
connection with stock options granted under the Option Plan, the Option Plan
is intended to qualify such compensation as "performance-based compensation"
within the meaning of Section 162(m) of the Internal Revenue Code. To comply
with Section 162(m), the Option Plan limits the number of shares for which
stock options may be granted to any employee in any fiscal year. No employee
may be granted options for more than 1,000,000 shares in any fiscal year,
except that Inprise may make an additional, one-time stock option grant to any
newly-hired employee for up to 2,000,000 shares (the "Grant Limits").
Appropriate adjustments will be made to the shares subject to the Option Plan,
the Grant Limits, the automatic, non-employee director grants discussed below
and to outstanding stock options upon any stock split or other change in the
capital structure of Inprise. If any outstanding stock option expires or if
option shares are repurchased by Inprise, the expired or repurchased shares
will be returned to the Option Plan and will again become available for grant.
Plan Administration
The Option Plan is currently administered by the Organization and
Compensation Committee of the Board (the "Committee"). Subject to the Option
Plan's provisions, the Committee determines the persons to whom stock options
are granted and all of their terms.
The Board may delegate to an officer the authority to grant stock options
for not more than 250,000 shares in any fiscal year to any eligible person who
is not an Inprise officer or director. Any such grant must comply with
guidelines established by the Board. The Committee or the Board will interpret
the Option Plan, and their determinations are final and binding. With certain
limitations, the Option Plan provides for indemnification of any director,
officer or employee of the Company against all reasonable expenses, including
attorneys' fees, incurred in any legal action arising from that person's
actions in administering the Option Plan.
Eligibility
Stock options may be granted to employees, directors and consultants of
Inprise or any parent or subsidiary corporation of Inprise. Stock options may
also be granted to prospective service providers in connection with written
employment offers, provided that they may not purchase shares before their
service starts. While any eligible person may be granted a nonstatutory stock
option, only employees of the Company or any parent or subsidiary corporation
of Inprise may be granted incentive stock options.
As of April 30, 1999, Inprise had approximately 803 employees, including 6
executive officers, 6 directors and 27 consultants who were eligible for
grants under the Option Plan.
Terms of Discretionary Options
The terms of each stock option are specified in a written agreement between
Inprise and the optionee. The per share exercise price of incentive stock
options must generally be at least equal to the fair market value of a share
of Common Stock on the date of grant. The per share exercise price of
nonstatutory stock options must be at least equal to 85% of such fair market
value. On April 30, 1999, the closing price of the Common Stock, as reported
on the Nasdaq National Market, was $4.0312 per share.
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Optionees generally may pay the exercise price of their stock options in
cash or in cash equivalent, by assigning to Inprise the proceeds of a sale or
loan with respect to some or all of the shares being purchased, or, if legally
permitted, by delivering to Inprise other shares of Common Stock having a fair
market value not less than the aggregate exercise price, or by any combination
of the foregoing. The Option Plan authorizes the Organization and Compensation
Committee to permit other lawful forms of payment or to restrict the forms of
payment permitted. Optionees must make adequate provision for any federal,
state, local or foreign tax withholding required before they may exercise
their stock options.
Stock options become exercisable at such time or times and are subject to
such conditions as the Committee may determine. However, the maximum term of
an incentive stock option is generally ten years. Unless an optionee's service
is terminated for cause, in which case his or her stock options will terminate
and cease to be exerciseable, his or her option generally will remain
exercisable for a period of three months following termination of service. If
an optionee dies or becomes disabled, his or her stock option generally will
remain exercisable for a period of 12 months following termination of service.
In any event, the option must be exercised before its expiration date.
Incentive stock options are nontransferable by the optionee other than by
will or by the laws of descent and distribution, and are exercisable during
the optionee's lifetime only by the optionee. Nonstatutory stock options may
be assigned or transferred if permitted by the Committee.
Terms of Automatic, Non-employee Director Stock Options
The Option Plan provides for the nondiscretionary, automatic grant of stock
options to directors who, at the time of grant, are not employees of Inprise.
Upon first joining the Board, non-employee directors receive options to
purchase 30,000 shares of Common Stock (an "Initial Option"). On the date of
each subsequent annual meeting of the stockholders, non-employee directors
remaining in office are granted options to purchase 7,500 shares of Common
Stock (an "Annual Option"). All non-employee directors' stock options have a
per share exercise price equal to the fair market value of a share of Common
Stock on the date of grant.
Initial Options become exercisable in full on their first anniversary of
the date of grant, while Annual Options become exercisable in full on the day
preceding the first annual meeting of the stockholders following the date of
grant. Non-employee director stock options generally remain exercisable for a
period of six months following the director's termination of service. However,
if a director dies or becomes disabled, his or her non-employee director stock
option remains exercisable for a period of twelve months following such
termination of service. In any event, the option must be exercised before its
expiration date. Non-employee director stock options expire ten years after
grant.
Change In Control
In the event of a merger of Inprise into another corporation or another
"change in control" transaction as described in the Option Plan, the surviving
corporation or its parent may assume Inprise's rights and obligations under
outstanding stock options or substitute substantially equivalent options. The
Option Plan authorizes the Committee to provide in any option agreement for
acceleration of exercisability upon such circumstances in connection with a
change in control as the Committee determines. Outstanding stock options not
assumed, replaced or exercised before a change in control will generally
terminate.
Termination or Amendment
The Option Plan will continue until terminated by the Committee or all
shares available for issuance under the Option Plan have been issued. However,
all incentive stock options must be granted within ten years of the date on
which the Board adopted the Option Plan. The Committee may terminate or amend
the Option Plan at any time, except that, without stockholder approval, the
Committee may not amend the Option Plan to increase the total number of shares
of Common Stock issuable, change the class of persons eligible to receive
incentive
9
<PAGE>
stock options, or effect any other change that requires stockholder approval
under any applicable law. No termination or amendment may adversely affect an
outstanding stock option without the consent of the optionee, unless the
amendment is required to preserve the stock option's status as an incentive
stock option or is necessary to comply with any applicable law.
FEDERAL INCOME TAX INFORMATION
The following summary is intended only as a general guide as to the United
States federal income tax consequences of Option Plan participation and does
not attempt to describe all possible federal or other tax consequences.
Incentive Stock Options
An optionee generally recognizes no taxable income for regular income tax
purposes as the result of the grant or exercise of an incentive stock option
qualifying under Section 422 of the Internal Revenue Code. Optionees who
neither dispose of their shares within two years after the option grant date
nor within one year after the exercise date normally will recognize a long-
term capital gain or loss equal to the difference, if any, between the sale
price and the purchase price of the shares. If an optionee satisfies such
holding periods, the Company will not be entitled to any deduction for federal
income tax purposes. If an optionee disposes of the shares within two years
after the option grant date or within one year after the exercise date (a
"disqualifying disposition"), then generally the difference between the fair
market value of the shares on the exercise date and the option exercise price
(not to exceed the gain realized on the sale if the disposition is a
transaction with respect to which a loss, if sustained, would be recognized)
will be taxed as ordinary income at the time of disposition. Any gain in
excess of that amount will be treated as a capital gain. If a loss is
recognized, there will be no ordinary income, and such loss will be treated as
a capital loss. A capital gain or loss will be long-term if the optionee's
holding period is more than 12 months. Any ordinary income recognized by the
optionee upon the disqualifying disposition of the shares generally should be
deductible by the Company for federal income tax purposes, except to the
extent such deduction is limited by applicable provisions of the Internal
Revenue Code.
Generally, the difference between the option exercise price and the fair
market value of the shares on the exercise date of an incentive stock option
is an adjustment item in computing the optionee's alternative minimum taxable
income and may be subject to an alternative minimum tax, which is paid if such
tax exceeds the regular tax for the year. Special rules may apply to certain
subsequent sales of the shares in a disqualifying disposition, certain basis
adjustments for purposes of computing the alternative minimum taxable income
on a subsequent sale of the shares and certain tax credits which may arise
with respect to optionees subject to the alternative minimum tax.
Nonstatutory Stock Options
An optionee generally recognizes no taxable income as the result of the
grant of a nonstatutory stock option. Upon the exercise of a nonstatutory
stock option, the optionee normally recognizes ordinary income equal to the
difference between the option exercise price and the fair market value of the
shares on the exercise date. If the optionee is an employee of the Company,
such ordinary income generally is subject to withholding of income and
employment taxes. Upon the sale of stock acquired by the exercise of a
nonstatutory stock option, any gain or loss, generally based on the difference
between the sale price and the fair market value on the exercise date, will be
taxed as capital gain or loss. A capital gain or loss will be long-term if the
optionee's holding period is more than 12 months. The Company generally should
be entitled to a deduction equal to the amount of ordinary income recognized
by the optionee as a result of the exercise of a nonstatutory stock option,
except to the extent such deduction is limited by applicable provisions of the
Internal Revenue Code.
AMENDED PLAN BENEFITS AND ADDITIONAL INFORMATION
With the exception of the automatic grant of stock options to non-employee
directors, future grants under the Option Plan will be made at the discretion
of the Committee, and, accordingly, are not yet determinable. In
10
<PAGE>
addition, benefits under the Option Plan will depend on a number of factors,
including the fair market value of the Common Stock on future dates and the
exercise decisions made by the optionees. Consequently, it is not possible to
determine the benefits that might be received by optionees receiving
discretionary grants under the Option Plan.
The following table sets forth the non-discretionary grants of stock
options that will be received under the Option Plan during calendar year 1999
by each of the persons and groups indicated, provided that, in the case of all
current directors who are not executive officers, as a group, all such persons
remain directors.
Amended Plan Benefits
<TABLE>
<CAPTION>
No. Shares
Underlying Options to
Name Position Be Granted in 1999
---- -------- ---------------------
<C> <S> <C>
Delbert W. Yocam.......................... Former Chairman of the
Board and former Chief
Executive Officer 0
Hobart McK. Birmingham.................... Chief Administrative
Officer 0
Kathleen M. Fisher........................ Former Vice President.,
Finance and former Chief
Financial Officer 0
John Floisand............................. President, borland.com
division 0
Richard A. LeFaivre....................... Former Senior Vice
President, Research and
Development 0
Executive Group (6 persons)............... 0
Non-Executive Director Group (6 persons).. 45,000
Non-Executive Officer Employee Group
(803 persons)............................ 0
</TABLE>
The numbers of shares of Common Stock subject to options granted to certain
persons under the Option Plan since its inception are as follows: Messrs.
Yocam, Birmingham, Fisher, Floisand, and LeFaivre were granted options to
purchase 1,019,578 shares, 140,000 shares, 115,000 shares, 195,000 shares and
170,000 shares, respectively; all current executive officers as a group were
granted options to purchase an aggregate of 963,000 shares; all current
directors who are not executive officers as a group were granted options to
purchase an aggregate of 62,500 shares; Messrs. Hara, Heller, Miller, Lewis
and Saal were each granted options to purchase 7,500 shares; and all
employees, including all officers who are not executive officers, as a group
were granted options to purchase an aggregate of 2,588,447 shares. Since the
inception of the Option Plan, no option has been granted to any associate of
any current director who is not an executive officer, of any nominee or of any
executive officer, and no person other than those individuals set forth above
was granted five percent or more of the total amount of options granted under
the Option Plan since its inception.
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF ADDITIONAL SHARES
TO THE INPRISE CORPORATION 1997 STOCK OPTION PLAN
11
<PAGE>
PROPOSAL 3
APPROVAL OF INPRISE CORPORATION'S
1999 EMPLOYEE STOCK PURCHASE PLAN
PLAN OVERVIEW
The Inprise Corporation 1999 Employee Stock Purchase Plan (the "Purchase
Plan") is intended to provide employees of the Company with an opportunity to
purchase shares of Common Stock through payroll deductions. Inprise believes
that its continued ability to provide this purchase opportunity assists the
Company in attracting, retaining and motivating qualified employees.
The Purchase Plan is intended to qualify as an "employee stock purchase
plan" within the meaning of Section 423 of the Internal Revenue Code. Each
participant in the Purchase Plan may purchase through accumulated payroll
deductions up to a number of shares of Common Stock determined on the first
day of the offering under the plan in which he or she is participating. A
participant automatically purchases shares on each purchase date under the
Purchase Plan until he or she withdraws from the plan or ceases to be eligible
to participate.
PROPOSED APPROVAL OF PURCHASE PLAN
The stockholders are being asked to approve the Purchase Plan to replace
the Company's 1997 Employee Stock Purchase Plan (the "Prior Plan"). As of
April 30, 1999, a total of 201,636 shares of Common Stock remained available
for purchase under the Prior Plan. The Board has determined that very few, if
any, shares will remain available for future purchase under the Prior Plan
after the purchase date scheduled to occur on May 31, 1999. Therefore, the
Board has elected to cancel all offerings that would commence under the Prior
Plan after May 31, 1999 and instead to seek stockholder approval of the new
Purchase Plan. In order to continue to provide the Company's employees with a
stock purchase opportunity, the Purchase Plan authorizes the sale of up to
800,000 shares of Common Stock.
REQUIRED VOTE
The majority of the votes represented by outstanding shares of Common Stock
and Series B Preferred Stock, treated as a single class on an as-if-converted
basis, present or represented by proxy and entitled to be voted at the Annual
Meeting, is required for approval of this proposal. Abstentions shall have the
same effect as a negative vote and broker non-votes shall have no effect on
the outcome of the vote.
DESCRIPTION OF PURCHASE PLAN
The following summary is qualified by the specific language of the Purchase
Plan, a copy of which is available to any stockholder upon written request to
the Secretary of the Company at the Company's principal executive offices.
Shares Authorized
A maximum of 800,000 shares of Common Stock may be issued under the
Purchase Plan. Appropriate adjustments will be made to the shares of Common
Stock subject to the Purchase Plan and to outstanding purchase rights upon any
stock split or other change in the capital structure of Inprise. If any
purchase right expires, the expired shares will be returned to the Purchase
Plan and again become available for sale.
Plan Administration
The Purchase Plan will be administered by the Organization and Compensation
Committee of the Board. Subject to the Purchase Plan's provisions, the
Committee determines the terms of purchase rights granted under
12
<PAGE>
the Purchase Plan. The Committee or the Board will interpret the Purchase
Plan, and their determinations are final and binding. With certain
limitations, the Purchase Plan provides for indemnification of any director,
officer or employee against all reasonable expenses, including attorneys'
fees, incurred in any legal action arising from that person's actions in
administering the Purchase Plan.
Eligibility
Any employee of Inprise or of any parent or subsidiary corporation of
Inprise designated by the Committee for inclusion in the Purchase Plan is
eligible to participate so long as the employee is regularly employed for at
least 20 hours per week and more than five months per calendar year. However,
a person who owns or holds options to acquire, or as a result of participation
in the Purchase Plan would own rights to acquire, five percent or more of the
total combined voting power or value of all classes of stock of Inprise or of
any parent or subsidiary corporation of Inprise may not participate in the
Purchase Plan. As of April 30, 1999, Inprise had approximately 803 employees,
including 6 executive officers who were eligible to participate in the
Purchase Plan.
Offerings
Opportunities to purchase shares under the Purchase Plan normally will be
provided through two series of offerings. A twelve-month "Annual Offering
Period" generally begins on or about December 1 of each year, and a six-month
"Half-Year Offering Period" generally begins on or about June 1 of each year.
An employee may not participate simultaneously in more than one offering under
the Purchase Plan. Generally, each Annual Offering Period has two purchase
dates, occurring on or about the last days of May and November of each year,
while each Half-Year Offering Period has a single purchase date, occurring on
or about the last day of November of each year. Provided that the Purchase
Plan is approved by the stockholders at the Annual Meeting, the Committee
intends to commence an initial offering on or about July 1, 1999, having a
single purchase date on or about November 30, 1999 (the "Initial Offering
Period"). The Committee is authorized to establish a different term for one or
more offerings or different offering commencement or purchase dates, provided
that no offering may have a term exceeding 27 months.
Participation and Purchase of Shares
Participation in an offering under the Purchase Plan is limited to eligible
employees who authorize payroll deductions prior to the first day of the
offering (the "Offering Date"). Payroll deductions may not exceed 15% (or such
other rate as the Organization and Compensation Committee may determine) of an
employee's compensation on any payday during the offering. An employee who
becomes a participant in the Purchase Plan automatically participates in each
subsequent offering beginning immediately after the last purchase date of the
offering in which he or she is a participant until the employee withdraws from
the Purchase Plan, becomes ineligible to participate, or terminates employment
with the Company.
Subject to any uniform limitations or notice requirements imposed by
Inprise, a participant may increase or decrease his or her rate of payroll
deductions or withdraw from the Purchase Plan at any time during an offering.
Upon withdrawal, Inprise will refund without interest the participant's
accumulated payroll deductions not previously applied to the purchase of
shares. Once a participant withdraws from an offering, that participant may
not again participate in the same offering. If the fair market value of a
share of Common Stock on the Offering Date of an Annual Offering Period in
which employees are participating is greater than such fair market value on
the Offering Date of the concurrent Half-Year Offering Period, then, unless a
participant elects otherwise, each participant will be automatically withdrawn
from the current Annual Offering Period after purchasing shares and enrolled
in the new Half-Year Offering Period.
Subject to certain limitations, each participant in an offering is
generally granted a right (a "Purchase Right") to purchase a number of whole
shares determined by dividing (i) $2,083.33 multiplied by the number of months
in the offering by (ii) the fair market value of a share of Common Stock on
the Offering Date, provided
13
<PAGE>
that, generally, the maximum number of shares a participant may purchase in
any offering is equal to 208.33 multiplied by the number of months in the
offering. However, the amount of participants' Purchase Rights for the Initial
Offering Period will be determined as if that offering had a duration of six
months. As a further limitation, no participant may purchase shares of Common
Stock under the Purchase Plan or any other employee stock purchase plan having
a fair market value exceeding $25,000 in any calendar year (measured by the
fair market value of Common Stock on the first day of the Offering Period in
which the shares are purchased). Purchase Rights are nontransferable and may
only be exercised by the participant.
On each purchase date during an offering, Inprise issues to each
participant in the offering the number of shares of Common Stock determined by
dividing the amount of payroll deductions accumulated for the participant by
the purchase price, limited in any case by the number of shares subject to the
participant's Purchase Right for that offering. The price at which shares are
sold under the Purchase Plan is established by the Committee but may not be
less than 85% of the lesser of the fair market value per share of Common Stock
on the Offering Date or on the purchase date. The fair market value of the
Common Stock on any relevant date generally will be the closing price per
share as reported on the Nasdaq National Market. On April 30, 1999, the
closing price per share was $4.0312. Any payroll deductions under the Purchase
Plan not applied to the purchase of shares will be returned to the participant
without interest, unless the amount remaining is less than the amount
necessary to purchase another whole share, in which case the remaining amount
may be applied to the next purchase.
Change in Control
In the event of a merger of Inprise into another corporation or another
"change in control" transaction as described in the Purchase Plan, the
surviving corporation or its parent may assume Inprise's rights and
obligations under the Purchase Plan. However, if such corporation does not
assume the outstanding Purchase Rights, the next scheduled purchase date will
be accelerated to a date before the change in control specified by the
Committee. Any Purchase Rights not assumed or exercised prior to the change in
control will generally terminate.
Termination or Amendment
The Purchase Plan will continue until terminated by the Committee or until
all of the shares available for issuance under the Purchase Plan have been
issued. The Committee may at any time amend or terminate the Purchase Plan,
except that the approval of Inprise stockholders is required within twelve
months of the adoption of any amendment increasing the number of shares
authorized for issuance under the Purchase Plan, or changing the definition of
the corporations which may be designated by the Committee as corporations
whose employees may participate.
14
<PAGE>
FEDERAL INCOME TAX INFORMATION
The following summary is intended only as a general guide as to the United
States federal income tax consequences of Purchase Plan participation and does
not attempt to describe all possible federal or other tax consequences.
Generally, there are no tax consequences to an employee of either becoming
a participant in the Purchase Plan or purchasing shares under the Purchase
Plan. The tax consequences of a disposition of shares vary depending on the
period such stock is held before its disposition. If a participant disposes of
shares within two years after the Offering Date or within one year after the
purchase date (a "disqualifying disposition"), the participant will recognize
ordinary income in the year of disposition in an amount equal to the
difference between the fair market value of the shares on the purchase date
and the purchase price. Such income may be subject to withholding of tax. Any
additional gain or resulting loss recognized by the participant from the
disposition of the shares is a capital gain or loss. If the participant
disposes of shares at least two years after the Offering Date and at least one
year after the purchase date, the participant will recognize ordinary income
in the year of disposition in an amount equal to the lesser of (i) the
difference between the fair market value of the shares on the date of
disposition and the purchase price or (ii) the excess of the fair market value
of the shares on the Offering Date over the purchase price determined as if
the Purchase Right were exercised on the Offering Date. Any additional gain
recognized by the participant on the disposition of the shares is a capital
gain. If the fair market value of the shares on the date of disposition is
less than the purchase price, there is no ordinary income, and the loss
recognized is a capital loss.
If the exercise of a Purchase Right does not constitute an exercise
pursuant to an "employee stock purchase plan" under Section 423 of the
Internal Revenue Code, the exercise of the Purchase Right will be treated as
the exercise of a nonstatutory stock option. The participant would therefore
recognize ordinary income on the Purchase Date equal to the excess of the fair
market value of the shares acquired over the purchase price. Such income is
subject to withholding of income and employment taxes. Any gain or loss
recognized on a subsequent sale of the shares, as measured by the difference
between the sale proceeds and the sum of (i) the purchase price for such
shares and (ii) the amount of ordinary income recognized on the exercise of
the Purchase Right, would be treated as a capital gain or loss, as the case
may be.
If the participant disposes of the shares in a disqualifying disposition,
Inprise should be entitled to a deduction equal to the amount of ordinary
income recognized by the participant as a result of the disposition, except to
the extent such deduction is limited by applicable provisions of the Internal
Revenue Code. In all other cases, no deduction is allowed to Inprise.
NEW PLAN BENEFITS
Because benefits under the Purchase Plan will depend on employees'
elections to participate and the fair market value of Common Stock at various
future dates, it is not possible to determine the benefits that will be
received by executive officers and other employees if the Purchase Plan is
approved by the stockholders. Nonemployee directors are not eligible to
participate in the Purchase Plan.
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF INPRISE
CORPORATION'S 1999 EMPLOYEE STOCK PURCHASE PLAN
15
<PAGE>
PROPOSAL 4
RATIFICATION OF INDEPENDENT AUDITORS
The Board, upon the recommendation of the Audit Committee, has appointed
PricewaterhouseCoopers LLP as the Company's independent auditors, to audit the
consolidated financial statements of the Company for the calendar year ending
December 31, 1999. PricewaterhouseCoopers LLP has audited the Company's
consolidated financial statements since the fiscal period ended March 31,
1987. The Board recommends that the stockholders of the Company vote FOR
ratification of the appointment of PricewaterhouseCoopers LLP as the Company's
independent auditors for the succeeding year. A representative of
PricewaterhouseCoopers LLP will be present at the Annual Meeting and will be
available to respond to appropriate questions from the stockholders and will
be given an opportunity to make a statement if he or she desires to do so.
REQUIRED VOTE
The majority of the votes represented by outstanding shares of Common Stock
and Series B Preferred Stock, treated as a single class on an as-if-converted
basis, present or represented by proxy and entitled to be voted at the Annual
Meeting, is required for approval of this proposal. Abstentions shall have the
same effect as a negative vote and broker non-votes shall have no effect on
the outcome of the vote.
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF
PRICEWATERHOUSECOOPERS LLP AS INPRISE'S
INDEPENDENT AUDITORS.
16
<PAGE>
ADDITIONAL INFORMATION
EXECUTIVE OFFICERS
Officers are appointed annually by the Board and serve at the discretion of
the Board. Set forth below is information regarding the current executive
officers of Inprise:
<TABLE>
<CAPTION>
Name Position
---- --------
<S> <C>
Dale Fuller............. Interim President, Chief Executive Officer and Director
Hobart McK. Birmingham.. Chief Administrative Officer
JoAnne M. Butler........ Vice President, General Counsel and Secretary
John Floisand........... President, borland.com division
Jay Leite............... Chief Financial Officer
James B. Weil........... President, Inprise division
</TABLE>
<TABLE>
<S> <C> <C>
Dale Fuller Officer Since 1999 Age 40
</TABLE>
Joined Inprise in April 1999 as Interim President and Chief Executive Officer.
Prior to joining Inprise, Mr. Fuller was a private investor from 1998 to 1999.
From 1996 to 1998 Mr. Fuller served as Chief Executive Officer at WhoWhere?
Inc., a leading Internet site. From 1995 to 1996 Mr. Fuller served as General
Manager and Vice President of the PowerBooks Division at Apple Computer, a
personal computer manufacturer. Prior to joining Apple Computer, Mr. Fuller
served as General Manager and Vice President of the Portables Division at NEC,
a personal computer manufacturer, from 1993 to 1995.
<TABLE>
<S> <C> <C>
Hobart McK. Birmingham Officer Since 1997 Age 54
</TABLE>
Joined Inprise in February 1997 as Vice President and General Counsel, and was
appointed Secretary in March 1997. Mr. Birmingham held these positions until
April 1999, at which time he was promoted to Chief Administrative Officer.
Prior to joining Inprise, Mr. Birmingham served as Senior Director and
Associate General Counsel at Apple Computer, from 1995 to 1997. From 1988 to
1995 Mr. Birmingham was a partner with the law firm of Graham & James.
<TABLE>
<S> <C> <C>
JoAnne M. Butler Officer Since 1999 Age 44
</TABLE>
Joined Inprise's legal staff in February 1992. Ms. Butler was promoted to
Associate Corporate Counsel in 1993 and served as Associate Corporate Counsel
until 1997. In 1997, Ms. Butler was promoted to Corporate Counsel. In April
1999, Ms. Butler was promoted to Vice President, General Counsel and
Secretary.
<TABLE>
<S> <C> <C>
John Floisand Officer Since 1997 Age 54
</TABLE>
Joined Inprise in April 1997 as Vice President, U.S. Sales. He was promoted to
Vice President, Worldwide Sales in July 1997, to Senior Vice President in
January 1998, and to President of borland.com in March 1999. Prior to joining
Inprise, Mr. Floisand served in a variety of executive management positions
for 11 years at Apple Computer, most recently as Senior Vice President of
Worldwide Sales.
<TABLE>
<S> <C> <C>
Jay Leite Officer Since 1999 Age 51
</TABLE>
Joined Inprise in August 1998 as Vice President of Business Development. He
was promoted to Chief Financial Officer in April 1999. Prior to joining
Inprise, Mr. Leite was a partner since 1978 in Leite, Baird and Associates, a
private accounting and consulting practice.
<TABLE>
<S> <C> <C>
James B. Weil Officer Since 1999 Age 52
</TABLE>
Joined Inprise in November 1996 as Vice President-Sales. He was promoted to
President of Inprise's InterBase subsidiary in April 1997. From January 1996
until November 1996, Mr. Weil was Vice President-Field Operations for Ramco
Systems, an application software developer. From June 1994 through January
1995, Mr. Weil was Vice President-World Wide Sales for MDIS Systems, an
application software developer.
17
<PAGE>
EXECUTIVE OFFICER COMPENSATION
This table reflects compensation paid to or accrued during (i) the calendar
year ended December 31, 1998, (ii) the nine-month period ended December 31,
1997 and (iii) the fiscal year ended March 31, 1997, for the following
individuals (hereinafter referred to as the "Named Executive Officers"):
. The Company's former Chief Executive Officer ("CEO"), who served as CEO
during 1998.
. The Company's four other most highly compensated executive officers other
than the CEO who served as executive officers of Inprise as of December
31, 1998 and whose salary plus bonus exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
Awards
------------
Annual Compensation
-------------------------------------------
Other Annual Securities All Other
Name and Compensation Underlying Compensation
Principal Position Year Salary Bonus ($) Options(#) ($)(1)
------------------ ------ -------- ---------- ------------ ------------ ------------ ---
<S> <C> <C> <C> <C> <C> <C> <C>
Delbert W. Yocam(2).... 1998 $399,538 $ 247,600 $ 14,759(11) 520,000(4) $4,311
Former Chairman of the
Board 1997* 276,923 240,000 55,333(3) 580,000(4) 2,077
and former Chief 1996** 110,769 3,864,184(5) 3,849,908(6) 1,100,000 --
Executive Officer
Hobart McK.
Birmingham............ 1998 219,653 53,672 18,250(7) 140,000(4) 3,575
Chief Administrative
Officer 1997* 146,154 57,000 15,506(8) 140,000 1,425
1996** 21,923 -- -- 175,000 --
Kathleen M.
Fisher(2)(9).......... 1998 219,769 59,400 -- 315,000(4) 4,241
Former Vice President, 1997* 130,769 66,665 -- 315,000 808
Finance and former
Chief 1996** -- -- -- -- --
Financial Officer
John Floisand(9)....... 1998 274,711 79,372 7,199(11) 420,000(4) 4,368
President, borland.com 1997* 181,506 275,000(10) 5,261(11) 420,000 1,250
division 1996** -- -- -- -- --
Richard A.
LeFaivre(2)(9)........ 1998 274,711 79,372 -- 420,000(4) 4,052
Former Sr. Vice
President 1997* 167,308 191,665(12) -- 420,000 1,790
Research and
Development 1996** -- -- -- -- --
</TABLE>
- -------
*Represents the nine-month period ended December 31, 1997.
**Represents the fiscal year ended March 31, 1997.
(1) Unless otherwise noted, consists of the Company's matching payments under
its 401(k) Plan.
(2) Individual is a former executive officer of Inprise. See the section
titled "Employment Contracts, Termination of Employment and Change in
Control Agreements."
(3) Consists of relocation expenses.
(4) Includes options amended on August 17, 1998 to reduce the exercise price
to $6.50, the market closing price on such date. Excludes options for
equal number of shares that may be deemed canceled on such date as a
consequence of the repricing. See the section titled "Board Organization
and Compensation Committee Report on Repricing of Options" and the table
titled "Ten Year Option Repricings" for additional information.
(5) Includes a $3,744,184 one time sign-on bonus.
(6) Includes a $3,827,364 payment for the purchase of a residence. See the
section titled "Employment Contracts, Termination of Employment and Change
in Control Agreements."
(7) Consists of housing allowance and relocation expenses.
(8) Consists of housing allowance.
(9) The person indicated was not an executive officer of the Company during
fiscal year ended March 31, 1997.
(10) Includes a $200,000 one time sign-on bonus.
(11) Consists of car allowance.
(12) Includes a $125,000 one time sign-on bonus.
18
<PAGE>
STOCK OPTION/SAR GRANTS IN THE
LAST FISCAL YEAR TO NAMED EXECUTIVE OFFICERS
This table shows individual grants made during the calendar year ended
December 31, 1998 to Named Executive Officers and hypothetical gains for the
options at the end of their respective ten (10) year terms. Inprise has
assumed annualized growth rates of the market price of the Company's Common
Stock over the exercise price of the option of five percent (5%) and ten
percent (10%), running from the date the option was granted to the end of the
option term. Actual gains, if any, on option exercises depend on the future
performance of Inprise's Common Stock and overall market conditions.
<TABLE>
<CAPTION>
Individual Grants (1)
---------------------------------------------------
Number of Potential Realizable Value at
Securities % of Total Assumed Annual Rates of
Underlying Options Exercise Stock Price Appreciation
Options Granted to or Base for Option Term
Granted Employees in Price Expiration ------------------------------
Name (#)(2) Fiscal Year(3) ($/sh.) Date(4) 5% ($) 10% ($)
---- ---------- -------------- -------- ---------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Delbert W. Yocam(5).... 580,000(6) 5.52% 6.500 09/5/07 2,093,380 5,163,676
Former Chairman of the
Board 520,000(7) 4.95% 6.500 2/27/08 2,001,244 5,004,002
and former Chief
Executive
Officer
Hobart McK.
Birmingham............ 140,000(8)(9) 1.33% 6.500 10/21/07 514,028 1,272,463
Chief Administrative
Officer
Kathleen M. Fisher(5).. 200,000(10) 1.91% 6.500 05/05/07 688,884 1,683,208
Former Vice President,
Finance 115,000(10) 1.10% 6.500 10/21/07 422,237 1,045,237
and former Chief
Financial
Officer
John Floisand.......... 225,000(8)(11) 2.14% 6.500 04/07/07 766,636 1,869,160
President, borland.com
division 195,000(8)(12) 1.86% 6.500 10/21/07 715,968 1,772,359
Richard A.
LeFaivre(5)........... 250,000(13) 2.38% 6.500 04/30/07 859,445 2,099,144
Former Sr. Vice
President 170,000(13) 1.62% 6.500 10/21/07 624,177 1,545,133
Research and
Development
</TABLE>
- --------
(1) Inprise did not grant any stock appreciation rights during the year ended
December 31, 1998.
(2) The Company's option plans are currently administered by the Organization
and Compensation Committee of the Board of Directors. The Organization
and Compensation Committee determines the eligibility of employees and
consultants, the number of shares to be granted, and the terms of such
grants. All options granted during the year ended December 31, 1998 have
an exercise price equal to the fair market value on the date of grant,
except to the extent the option exercise price was subsequently amended
to an amount less than the fair market value on the date of grant.
Options generally vest 25% one year from the date of grant and ratably
over the remaining three years either on a daily or a monthly basis.
Certain options have been granted that vest daily or monthly over a
specified vesting period from the date of grant. Options expire at the
earlier of either three months after termination of employment or ten
years after the date of grant.
(3) The Company granted options to purchase an aggregate of 10,533,280 shares
to all employees and consultants for the year ended December 31, 1998.
(4) 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.
(5) Individual is a former executive officer of Inprise. See the section
titled "Employment Contracts, Termination of Employment and Change in
Control Agreements."
19
<PAGE>
(6) Option exercise price amended from $8.875 to $6.50 on August 17, 1998.
All unvested options vested in full on March 31, 1999 upon termination of
optionee's status as an employee of Inprise. Options to purchase 80,422
shares of Common Stock granted under the Company's 1992 Stock Option Plan
are exercisable on or before June 30, 1999. Options to purchase 499,578
shares of Common Stock granted under the Company's 1997 Stock Option Plan
are exercisable on or before July 11, 1999. See the section titled
"Employment Contracts, Termination of Employment and Change in Control
Agreements."
(7) Stock options granted under the Company's 1997 Stock Option Plan. Option
price amended from $9.3125 to $6.50 on August 17, 1998. All unvested
options vested in full on March 31, 1999 upon termination of optionee's
status as an employee of Inprise. Options are exercisable on or before
July 11, 1999.
(8) Upon an acquisition or a change in control of the Company the vesting of
all options will be accelerated and shall be exercisable in full.
(9) Twenty-five percent of the options vested on February 10, 1998, with the
remaining 75% of the options vesting over the remaining three years on a
daily basis. Option price amended from $10.375 to $6.50 on August 17,
1998.
(10) Twenty-five percent of the options vested on April 30, 1998, with the
remaining 75% of the options vesting over the remaining three years on a
daily basis. The option price to purchase 200,000 shares of Inprise
Common Stock was amended from $7.0625 to $6.50 on August 17, 1998. The
option price to purchase 115,000 shares of Common Stock was amended from
$10.3750 to $6.50 on August 17, 1998. As of March 31, 1999, the date
optionee's status as an employee of Inprise terminated, 149,907 options
were vested. Such vested options are exercisable on or before June 30,
1999.
(11) Stock options granted under the Company's 1992 Stock Option Plan. Options
vest in accordance with a three year vesting schedule (one-third of the
shares vested on the anniversary of the grant date April 7, 1997, with
the remaining two-thirds vesting over the remaining two years on a daily
basis). Option price amended from $6.8125 to $6.50 on August 17, 1998.
(12) Approximately 16% of the options vested on April 7, 1998, thereafter 30%
vest daily for two years with the remaining 54% vesting daily from April
8, 2000 through April 7, 2001. Option price amended from $10.3750 to
$6.50 on August 17, 1998.
(13) Twenty-five percent of the options vested on May 5, 1998, with the
remaining 75% of the options vesting over the remaining three years on a
daily basis. The option price to purchase 250,000 shares of Common Stock
was amended from $6.8125 to $6.50 on August 17, 1998. The option price to
purchase 170,000 shares of Common Stock was amended from $10.3750 to
$6.50 on August 17, 1998. As of May 30, 1999, the date optionee's options
will cease to vest, 218,559 options will have vested. Such options are
exercisable on or before August 31, 1999.
20
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN THE LAST FISCAL YEAR
AND YEAR END OPTION/SAR VALUES
The following table shows all stock options exercised by the Named
Executive Officers for the fiscal year ended December 31, 1998. No options
were exercised during the fiscal year ended December 31, 1998 and no options
were in the money at the end of such fiscal year based on the market value of
underlying securities (the closing price of the Company's Common Stock on
December 31, 1998 on the Nasdaq National Market System of $5.50), minus the
exercise price.
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised
Options at Fiscal Year End
------------------------------
Name Exercisable Unexercisable
- ---- -------------- --------------
<S> <C> <C>
Delbert W. Yocam(1)............................ 1,804,415 395,585
Hobart McK. Birmingham......................... 138,823 176,177
Kathleen M. Fisher(1).......................... 130,501 184,499
John Floisand.................................. 181,545 238,455
Richard A. LeFaivre(1)......................... 175,441 244,559
</TABLE>
- --------
(1) Individual is a former executive officer of Inprise. See the section
titled "Employment Contracts, Termination of Employment and Change in
Control Agreements."
21
<PAGE>
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND
CHANGE-IN-CONTROL ARRANGEMENTS
Hobart McK. Birmingham
Mr. Birmingham entered into an at will employment agreement with the
Company dated February 1997. Mr. Birmingham is the Chief Administrative
Officer. Mr. Birmingham's salary package is as follows: (i) a current annual
base salary of $232,000, (ii) an annual performance bonus of up to 40% of base
salary, (iii) a housing allowance not to exceed $1,500 per month and (iv) all
standard benefits available to our other executives. Mr. Birmingham's
employment agreement also provides him with a severance payment equal to
twelve months of base salary. Mr. Birmingham was granted options to purchase
175,000 shares of Common Stock at a price of $6.375 per share under the
Company's 1992 Stock Option Plan. In addition, Mr. Birmingham was granted
options to purchase 140,000 shares of Common Stock at a price of $10.375 per
share under the Company's 1997 Stock Option Plan. The option price was amended
from $10.375 to $6.50 on August 17, 1998.
John Floisand
Mr. Floisand entered into an at will employment agreement with the Company
dated March 1997. Mr. Floisand is the President of borland.com. Mr. Floisand's
salary package is as follows: (i) an annual base salary of $275,000, (ii) an
annual performance bonus of up to 40% of such base salary, (iii) a signing
bonus of $200,000, (iv) a car allowance and (v) all standard benefits
available to our other executives. Mr. Floisand's employment agreement also
provides him with a severance payment equal to twelve months of base salary.
Mr. Floisand was granted options to purchase 225,000 shares of Common Stock at
a price of $6.8125 per share under the Company's 1992 Stock Option Plan. In
addition, Mr. Floisand was granted options to purchase 195,000 shares of
Common Stock at a price of $10.375 per share under the Company's 1997 Stock
Option Plan. The option price of both options was amended to $6.50 on August
17, 1998.
Delbert Yocam
Mr. Yocam is the former Chairman of the Board and former Chief Executive
Officer. Mr. Yocam entered into an at will employment agreement with the
Company, dated November 1996 (as amended, the "Agreement"). Mr. Yocam's salary
package was as follows: (ii) an annual base salary of $360,000 during the term
of the Agreement, (ii) an annual performance bonus ranging from 50% to 300% of
Mr. Yocam's base salary and (iii) all standard benefits available to other
executives of the Company. Mr. Yocam received a signing bonus in an amount
calculated to provide Mr. Yocam $2,000,000 after taxes, corresponding to a
gross payment by the Company of approximately $3,744,184. Under the Agreement
and the accompanying nonstatutory stock option agreement, Mr. Yocam was
granted an option to purchase 1,100,000 shares of the Company's Common Stock
at a price of $5.50 per share. This option became vested in full upon the
termination of Mr. Yocam's status as an employee of the Company on March 31,
1999.
Mr. Yocam was awarded an option to purchase an aggregate of 580,000 shares
of Common Stock of the Company at a price of $8.875 per share under the
Company's 1992 and 1997 Stock Option Plans. In addition, Mr. Yocam was awarded
an option to purchase 520,000 shares of Common Stock at a price of $9.3125 per
share. The option price of each of these options was amended from $9.3125 to
$6.50 on August 17, 1998. Each of these options became vested in full upon the
termination of Mr. Yocam's status as an employee of the Company on March 31,
1999.
The Agreement further provided for an unsecured, interest free loan in the
amount of $2,000,000 which was paid to Mr. Yocam to assist with the purchase
of a new residence in California. The Company agreed to forgive the entire
loan balance as of February 28, 1997 and to pay all income and other tax
liabilities of Mr. Yocam associated with such forgiveness, resulting in a
gross payment by the Company of approximately $3,827,364. The Agreement also
required the Company to reimburse Mr. Yocam for all moving and other
relocation expenses in connection with relocating his residence to California
and for temporary living expenses,
22
<PAGE>
up to a maximum of $200,000. On July 22, 1997, the Company entered into a
second amendment to the Agreement pursuant to which the allocation of the
$200,000 was revised such that the relocation and temporary residence benefits
payable to Mr. Yocam were reduced from $150,000 to $125,000, and his
reasonable living and travel expenses were increased from $50,000 to $75,000.
On September 5, 1997, the Company entered into a third amendment to the
Agreement pursuant to which the Agreement was amended to extend the term of
the Agreement to December 31, 2000.
Mr. Yocam's status as an employee ended on March 31, 1999. On April 12,
1999, Mr. Yocam resigned as Chairman of the Board. Pursuant to the Agreement,
Mr. Yocam is entitled to receive, among other things, continued salary
payments, plus bonus payments up to 50% of his annual base salary through
December 31, 2000.
Kathy Fisher
Ms. Fisher is the former Vice President, Finance and former Chief Financial
Officer. Ms. Fisher entered into an at will employment agreement with the
Company dated May 1997. Ms. Fisher's salary package was as follows: (i) an
annual base salary package of $220,000, (ii) an annual base performance bonus
of up to 50% of base salary and (iii) all standard benefits available to our
other executives. Ms. Fisher was granted options to purchase an aggregate of
200,000 shares of Common Stock at a price of $7.0625 per share under the
Company's 1992 Stock Option Plan. In addition, Ms. Fisher was granted options
to purchase an aggregate of 115,000 shares of Common Stock at a price of
$10.3750 under the Company's 1997 Stock Option Plan. The option price of both
options was amended from $10.3750 to $6.50 on August 17, 1998. On March 31,
1999 Ms. Fisher resigned as Vice President, Finance and Chief Financial
Officer of the Company. Ms. Fisher's employment agreement entitled her to a
severance payment equal to twelve (12) months of base salary.
Richard LeFaivre
Mr. LeFaivre is the former Senior Vice President, Research and Development,
Inprise division. Mr. LeFaivre entered into an at will employment agreement
with the Company, dated April 1997. Mr. LeFaivre's salary package was as
follows: (i) an annual base salary package of $250,000, (ii) an annual base
performance of up to 40% of base salary, (iii) a sign-on bonus of $125,000 and
(iv) all standard benefits available to our other executives. Mr. LeFaivre was
granted options to purchase an aggregate of 250,000 shares of Common Stock at
a price of $6.8125 per share under the Company's 1992 and 1993 Stock Option
Plans. In addition, Mr. LeFaivre was granted options to purchase an aggregate
of 170,000 shares of Common Stock at a price of $10.3750 under the 1997 Stock
Option Plan. The option price of both options was amended from $10.3750 to
$6.50 on August 17, 1998. On March 31, 1999 Mr. LeFaivre's position as Senior
Vice President, Research and Development, Inprise division was terminated due
to a Company restructuring. Mr. LeFaivre's employment agreement entitled him
to a severance payment equal to twelve (12) months of base salary. In lieu of
notice, Mr. LeFaivre received a lump sum payment equal to his salary for sixty
(60) calendar days on March 31, 1999. Mr. LeFaivre will continue to receive
all standard benefits available to other executives paid by the Company until
May 30, 1999. Mr. LeFaivre's stock options will continue to vest through May
30, 1999, in accordance with the terms of his stock option agreements.
Change in Control Agreements
The Company entered into Change in Control Agreements with Messrs.
Birmingham and Floisand. The Change in Control Agreements provide each officer
with certain severance benefits, in case of his termination following a change
in control. The Change in Control Agreements provide each officer with
enhanced financial security and sufficient incentive and encouragement to
remain with the Company following a change in control. Upon occurrence of a
change in control, each officer with unvested options to purchase shares of
Common Stock shall become immediately vested in full in such options. If an
officer is involuntarily terminated following a change in control, the officer
shall receive pay in an amount equal to his annual base salary. The severance
pay shall be paid in a lump sum within thirty days of termination. The Company
will continue said officer's existing
23
<PAGE>
health insurance coverage. If not permitted by law to continue such health
insurance coverage, the Company will reimburse the officer for any COBRA
premiums paid by him for health coverage. This benefit shall continue until
the earlier of (i) twelve (12) months or (ii) commencement of new employment.
If the officer is terminated for cause or voluntarily resigns following a
change in control, he will not be entitled to receive any severance pay or
benefits.
Options
The options granted to Mr. Birmingham are subject to the Company's 1992 and
1997 Stock Option Plans, with one quarter of the options vesting one year
after the date of the grant, and the remaining options vesting daily over the
following three years. Mr. Floisand's options vest periodically. In case of a
change in control, the vesting will be fully accelerated.
CERTAIN TRANSACTIONS WITH MANAGEMENT
On March 31, 1999, James B. Weil, the Company's current President of its
Inprise division and formerly President of its InterBase Software subsidiary
("InterBase"), agreed to forfeit options to acquire 2,500,000 shares of
InterBase common stock exercisable at $0.075 per share. In consideration for
the forfeiture of such options, Mr. Weil was paid $0.683 for each outstanding
option ($1,707,500 in the aggregate).
24
<PAGE>
10-YEAR OPTION/SAR REPRICINGS
The following table sets forth historical information about the repricing
during the last ten completed fiscal years of stock options granted to the
Company's current and former executive officers.
<TABLE>
<CAPTION>
Number of Length of
Securities Exercise Original Term
Underlying Market Price of Price at Remaining at
Options/SARS Stock at Time Time of New Date of
Repriced or of Repricing or Repricing or Exercise Repricing or
Name Date Amended(#) Amendment($) Amendment($) Price($) Amendment*
---- -------- ------------ --------------- ------------ -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Delbert W. Yocam(2)..... 8/17/98 520,000 6.5000 9.3125 6.5000 114 months
Former Chairman of the
Board 8/17/98 580,000 6.5000 8.8750 6.5000 108 months
and Chief Executive
Officer
Hobart McK. Birmingham.. 8/17/98 140,000 6.5000 10.3750 6.5000 110 months
Chief Administrative
Officer
JoAnne M. Butler........ 8/17/98 7,000 6.5000 6.8125 6.5000 104 months
Vice President, General 8/17/98 8,600 6.5000 7.2188 6.5000 113 months
Counsel
and Secretary 8/17/98 3,400 6.5000 7.2188 6.5000 113 months
2/3/97 3,000 6.4375 15.5000 6.4375 107 months
2/3/97 1,500 6.4375 7.0000 6.4375 113 months
John Floisand........... 8/17/98 195,000 6.5000 10.3750 6.5000 110 months
President, borland.com
division 8/17/98 225,000 6.5000 6.8125 6.5000 104 months
Kathleen M. Fisher(2)... 8/17/98 200,000 6.5000 7.0625 6.5000 104 months
Former Vice President, 8/17/98 115,000 6.5000 10.3750 6.5000 110 months
Finance
and Chief Financial
Officer
Richard A. LeFaivre(2).. 8/17/98 170,000 6.5000 10.3750 6.5000 110 months
Former Sr. Vice
President 8/17/98 250,000 6.5000 6.8125 6.5000 104 months
Research and
Development
David McGlaughlin(2).... 2/3/97 20,000 6.4375 7.00 6.4375 114 months
Former Vice President, 2/3/97 20,191 6.4375 9.00 6.4375 88 months
International Sales and
Operations 2/3/97 59,482 6.4375 6.875 6.4375 95 months
6/7/94 903 9.0000 17.6764 9.0000 84 months
6/7/94 452 9.0000 17.6829 9.0000 73 months
6/7/94 18,836 9.0000 17.8750 9.0000 104 months
6/7/94 5,000 9.0000 17.8750 9.0000 97 months
11/11/93 5,000 17.8750 39.6250 17.8750 105 months
4/23/92 10,000 50.0000 71.7500 50.0000 116 months
5/19/92 10,000 43.0000 50.0000 43.0000 119 months
7/24/92 10,000 39.6250 43.0000 39.6250 118 months
Paul Emery(2)........... 2/3/97 250,000 6.4375 7.6875 6.4375 115 months
Former Vice President
and
Chief Financial Officer
Philippe Kahn(2)........ 6/7/94 500,000(3) 9.00 39.625 9.00 97 months
Former President, Chief 6/7/94 50,000(3) 9.00 30.00 9.00 78 months
Executive Officer and
Chairman 6/7/94 500,000 9.00 17.875 9.00 104 months
of the Board 7/24/92 500,000 39.625 49.00 39.625 111 months
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
Number of Length of
Securities Exercise Original Term
Underlying Market Price of Price at Remaining at
Options/SARs Stock at Time Time of New Date of
Repriced or of Repricing or Repricing or Exercise Repricing or
Name Date Amended(#) Amendment($) Amendment($) Price($) Amendment*
---- -------- ------------ --------------- ------------ -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert H. Kohn(2)....... 2/3/97 191,500 6.4375 9.00 6.4375 88 months
Former Sr. Vice 2/3/97 25,000 6.4375 6.875 6.4375 95 months
President
Corporate Affairs and 2/3/97 20,000 6.4375 7.00 6.4375 114 months
Secretary
6/7/94 30,000(3) 9.00 39.625 9.00 97 months
6/7/94 20,000(3) 9.00 30.00 9.00 78 months
6/7/94 100,000 9.00 17.875 9.00 104 months
7/24/92 30,000 39.625 49.00 39.625 111 months
12/21/88 140,000 1.13 2.14 1.13 101 months
12/21/88 46,311 1.13 1.84 1.13 109 months
12/21/88 53,689 1.13 1.87 1.13 108 months
Whitney Lynn(2)......... 2/3/97 25,356 6.4375 6.5000 6.4375 116 months
Former Acting Chief 2/3/97 14,644 6.4375 6.500 6.4375 44 months
Executive Officer
Richard Schwartz(2)..... 6/7/94 30,000(3) 9.00 39.625 9.00 97 months
Former Vice President, 6/7/94 40,000 9.00 17.875 9.00 104 months
Chief
Technical Officer 6/7/94 40,000 9.00 16.875 9.00 72 months
7/24/94 30,000 39.625 49.00 39.625 111 months
12/21/88 100,000 1.13 1.87 1.13 108 months
Gary Wetsel(2).......... 2/3/97 200,000 6.4375 6.8750 6.4375 95 months
Former President and
Chief 2/3/97 235,000 6.4375 10.7500 6.4375 93 months
Executive Officer
</TABLE>
- --------
* Options may terminate before their expiration date upon the termination of
optionee's status as an employee, director or consultant of the Company or
upon optionee's death or disability. The vesting schedule for repriced
options was not affected.
(1) Unless otherwise noted, repriced options were granted on a one for one
basis.
(2) Individual no longer provides services for the Company.
(3) Repriced options were granted on a one to four basis.
SECTION 16 (a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than ten percent of a registered
class of the Company's equity securities ("ten percent holders"), to file
reports of ownership and changes in ownership with the SEC and the Nasdaq
National Market. Directors, executive officers, and 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 the year ended December 31, 1998, all filing requirements under Section
16(a) applicable to its directors, executive officers and ten percent holders
were met.
26
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, as of April 19, 1999, with
respect to the beneficial ownership of the Company's Common Stock by (i) each
stockholder known to the Company to be the beneficial owner of more than five
percent (5%) of the Common Stock; (ii) each current director and director-
nominee; (iii) each Named Executive Officer; and (iv) all current executive
officers and directors 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. No holder of the Series B
Preferred Stock owns more than five percent (5%) of the Common Stock as of
April 19, 1999, on an as-if-converted basis and none of the executive officers
and directors beneficially owns any shares of Series B Preferred Stock.
<TABLE>
<CAPTION>
Amount and
Nature of Beneficial Percent of
Name Ownership Class
- ---- -------------------- ----------
<S> <C> <C>
5% Stockholders:
Merrill Lynch & Co., Inc.(1).................. 6,384,800 13.32%
Neuberger & Berman, LLC(2).................... 4,558,100 9.51%
Executive Officers, Directors and Director-
Nominees:
Delbert W. Yocam(3)(4)........................ 2,200,000 4.32%
Dale Fuller(5)................................ 333,333 *
C. Robert Coates(6)........................... 3,015,500 6.30%
George Hara(7)................................ 127,500 *
David Heller(8)............................... 212,500 *
Stephen J. Lewis(9)........................... 103,140 *
William F. Miller(10)......................... 120,000 *
Harry J. Saal(11)............................. 82,500 *
John Floisand(12)............................. 164,370 *
Richard A. LeFaivre(3)(13).................... 218,559 *
Hobart McK. Birmingham(14).................... 177,977 *
Kathleen M. Fisher(3)(15)..................... 167,933 *
All current directors and executive officers
as a group (10 persons)(16).................. 1,369,949 2.81%
</TABLE>
- --------
*Less than 1%
(1) Information is based on a Schedule 13G/A filed February 11, 1999. 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 filed February 11, 1999. Number of
shares which may be deemed beneficially owned includes shares held by
various funds related to or managed by Neuberger & Berman LLC and
Neuberger & Berman Management Inc. The address of Neuberger & Berman is
605 Third Ave., New York, New York 10158.
(3) Individual is no longer an executive officer of Inprise.
(4) Represents options exercisable within 60 days of April 19, 1999 to
acquire 2,200,000 shares.
(5) Represents options exercisable within 60 days of April 19, 1999 to
acquire 333,333 shares.
(6) Information is based on a Schedule 13D filed April 19, 1999 by Robert
Coates and Management Insights, Inc., of which Robert Coates and Suzanne
Coates are the sole stockholders, and other stockholder ownership
information available to the Company. The address of Management Insights,
Inc. is 5501 LBJ Freeway, Suite 815, Dallas, TX 75240.
(7) Represents options exercisable within 60 days of April 19, 1999 to
acquire 127,500 shares.
(8) Represents options exercisable within 60 days of April 19, 1999 to
acquire 212,500 shares.
(9) Includes options exercisable within 60 days of April 19, 1999 to acquire
97,500 shares.
(10) Represents options exercisable within 60 days of April 19, 1999 to
acquire 120,000 shares.
(11) Represents options exercisable within 60 days of April 19, 1999 to
acquire 82,500 shares.
(12) Represents options exercisable within 60 days of April 19, 1999 to
acquire 164,370 shares.
(13) Represents options exercisable within 60 days of April 19, 1999 to
acquire 218,559 shares.
(14) Includes options exercisable within 60 days of April 19, 1999 to acquire
177,422 shares.
(15) Includes options exercisable within 60 days of April 19, 1999 to acquire
166,933 shares.
(16) Includes options exercisable within 60 days of April 19, 1999 to acquire
1,363,402 shares.
27
<PAGE>
ORGANIZATION AND COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The following is the Report of the Organization and Compensation Committee
of the Board, describing the compensation policies and rationale applicable to
the Company's executive officers with respect to compensation paid to such
executive officers for the calendar period ended December 31, 1998. The
information contained in this report 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 Exchange Act of 1934, as
amended, except to the extent that the Company specifically incorporates it by
reference into such filing.
The Company's executive compensation program is administered by the
Organization and Compensation Committee (the "Committee") of the Board. The
role of the Committee, which is comprised entirely of outside, non-employee
directors, is to review and approve salaries, bonuses and stock option grants
to the directors, executive officers and employees of the Company. The goal of
the Committee is to align compensation packages with the long-term interests
of the Company's stockholders. In structuring compensation programs, the
Committee has been particularly mindful of the financial performance of the
Company in recent years, the extremely competitive environment for attracting
senior level management in the technology sector, and the continuous and
extraordinary efforts which have been made by competitors of the Company to
lure away management and other key personnel. The Committee believes it is
critical to the long-term prospects of the Company to establish compensation
programs which will allow the Company to attract management possessing the
type of experience necessary for the Company to realize upon its strategic
objectives and to retain such management for a sufficient period of time.
During 1998, the Committee's approach emphasized rewarding executive
officers and key employees for achieving performance based goals.
Compensation Philosophy
The Committee believes that the compensation of the executive officers and
other key employees of the Company should result in the creation of long-term
stockholder value and be based on the Company's and the individual's
performance. Consistent with this philosophy, the Company's compensation
programs include a combination of salary, bonus and stock options aimed at the
retention, reward and motivation of individuals within the Company.
Base Salary. The base salary of most of the Company's current officers was
individually negotiated at the time each officer joined the Company, or
assumed his or her current position. The Committee reviews each executive
officer's base salary annually, and when doing so, the Committee considers
individual and corporate performance, levels of responsibility, prior
experience, breadth of knowledge and competitive pay practices. The Committee
approved changes in the compensation packages for senior management, effective
January 1, 1998. The Committee believes that the current executive salaries
are comparable to the salaries in effect at companies that compete with the
Company for executive talent.
Bonus. The Company's bonus plans provide for quarterly bonuses to be
awarded to executive officers and key employees based on the achievement of
specific goals set by the Company, and the level of contribution made by these
individuals. In calculating bonus awards, certain Company performance
objectives are considered, including operating, strategic and financial goals
necessary for the achievement of the Company's short and long-term objectives.
The Committee approved in 1998 an Executive Bonus Incentive Program to provide
appropriate incentives to management and periodically reviews the actions to
be taken pursuant to such program.
Options. The purpose of the Company's stock option plans is to provide
employees of the Company with an opportunity to share, along with stockholders
of the Company, in the long-term performance of the Company. The Committee
makes periodic grants of stock options to eligible employees, generally upon
commencement of
28
<PAGE>
employment or following a significant change in job responsibilities. Stock
options usually vest over four years and expire ten years from the date of
grant. The exercise price of stock options is normally 100% of fair market
value of the underlying stock on the date of grant. In awarding stock options,
the Committee considers individual performance, overall contribution to the
Company, retention, the number of unvested stock options and the total number
of stock options to be awarded. In 1998, the Company made discretionary grants
to executive officers and other key employees directed at maintaining a high
level of motivation among these individuals.
In addition to the criteria discussed above, the Committee considered the
executive officer's current position, comparable grants made to other
executive officers and the individual's potential for growth within the
Company. The grants were set at levels deemed appropriate to create the
opportunity for substantial stock ownership, thus aligning management and
stockholders' interests.
CEO Compensation. The annual base salary and performance bonus of Mr.
Yocam, the former Chairman of the Board and Chief Executive Officer, was
determined according to an employment agreement entered into in November 1996.
Pursuant to his employment agreement, during the year ended December 31, 1998,
Mr. Yocam received a base salary of approximately $399,538.32 and performance
bonuses totaling $247,600. Mr. Yocam's total compensation for the year ended
December 31, 1998 was $669,808.51, including base salary, bonuses, 401(k)
matching payments, group life term premiums paid and a car allowance.
Section 162(m) of the Internal Revenue Code imposes limitations on the
deductibility for federal income tax purposes of compensation in excess of $1
million paid to certain executive officers of the Company in any fiscal year.
Compensation in excess of $1 million may be deducted if it is "performance-
based compensation" within the meaning of Section 162(m) of the Internal
Revenue Code. Given the attention to the overall challenges faced by the
Company in recruiting and retaining key management, the Committee has not yet
established a policy for determining which forms of incentive compensation
awarded to its executive officers shall be designed to qualify as
"performance-based compensation" other than any stock options that may be
granted under the 1997 Stock Option Plan. The Committee intends to continue to
evaluate the effects of the statute and any Treasury regulations and to comply
with Internal Revenue Code Section 162(m) in the future to the extent
consistent with the best interests of the Company.
Organization and Compensation
Committee
Stephen J. Lewis
David Heller
29
<PAGE>
ORGANIZATION AND COMPENSATION COMMITTEE REPORT
ON REPRICING OF OPTIONS
On August 17, 1998, the Organization and Compensation Committee (the
"Committee") considered the stock options held by the Company's employees,
including executive officers, and the fact that a broad decline in the price
of the Common Stock had resulted in a substantial number of stock options
granted pursuant to the Company's stock option plans having exercise prices
above the recent trading prices of the Company's Common Stock (the "Underwater
Options"). On August 17, 1998 the Committee approved a repricing of options
held by all employees who remained in active service with the Company on
August 17, 1998, the effective date of the repricing.
The Committee reviewed the impact of the decline in the market price of the
Company's Common Stock on the incentive afforded by the Underwater Options and
determined that such stock options were significantly less likely to serve
their purposes of retaining and motivating employees whose contributions are
important to the Company's future success. The Committee also determined that,
unless an adjustment was made, longer term employees holding Underwater
Options would perceive a substantial inequity in comparison to more recently
hired employees granted options with exercise prices set at the then lower
fair market value of the Common Stock, and the morale of such longer term
employees would suffer as a consequence. The Committee believed that the
future success of the Company would depend in large part on its ability to
retain and motivate its highly skilled employees for whom competition in the
marketplace is intense, and the loss of such employees could have a
significant adverse impact on the Company's business. The Committee believed
that providing equity incentives to employees of the Company to further
increase the Company's performance and the value of the Company for its
stockholders was both important and cost effective. The Committee considered
other alternatives, such as granting new options selectively to then employed
key employees, but determined that the size of the additional options that
would be required to offset the decline in the market price of the Common
Stock would result in significant dilution to the the Company's stockholders.
Considering these factors, the Committee determined that it was in the best
interests of the Company and its stockholders to restore the incentives for
employees and executive officers holding Underwater Options to remain with the
Company by adopting a stock option repricing program whereby the exercise
price of outstanding options held by eligible employees holding Underwater
Options was amended to an exercise price equal to the closing price of the
Company's Common Stock quoted on the Nasdaq National Market on August 17,
1998, the effective date of the repricing. All repriced Underwater Options
maintain the same vesting schedule as provided in the original stock option
grants. Options covering a total of 6,452,541 shares with exercise prices in
excess of $6.50 per share were amended to an exercise price of $6.50.
Organization and Compensation
Committee
Stephen J. Lewis
David Heller
ORGANIZATION AND COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
No member of the Committee has a relationship that would constitute an
interlocking relationship with executive officers or director of another
entity.
30
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph compares the change in Inprise's cumulative total
stockholder return on our Common Stock with 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 for the five-year period
commencing on March 31, 1993, and ending December 31, 1998.
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 Exchange
Act, except to the extent that the Company specifically incorporates it by
reference into such filing. The comparisons in the graph below are based upon
historical data and are not indicative of, nor intended to forecast, future
performance of the Company's Common Stock.
[STOCK PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
3/93 3/94 3/95 3/96 3/97 12/97 12/98
---- ---- ---- ---- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
INPRISE CORPORATION (INPR)................ 100 65 40 83 33 34 25
NASDAQ STOCK MARKET (U.S.)................ 100 108 120 163 181 235 331
NASDAQ COMPUTER & DATA PROCESSING......... 100 102 138 196 283 283 507
</TABLE>
- --------
* The graph assumes that $100.00 was invested in Inprise's Common Stock and in
each index on March 31, 1993. The total return for Inprise's Common Stock
and the indices used assumes the reinvestment of dividends, even though
dividends have not been declared on Inprise's Common Stock.
31
<PAGE>
OTHER MATTERS
The Board knows of no other matters that have been submitted on a timely
basis for voting at this Annual Meeting. If any other matters come before the
stockholders at this Annual Meeting, the persons named on the enclosed Proxy
card intend to vote the shares they represent as the Board may recommend.
The Company's Annual Report including its Annual Report on Form 10-K for
the fiscal year ended December 31, 1998 is being mailed to the Company's
stockholders herewith.
By Order of the Board of Directors
/s/ JoAnne M. Butler
JoAnne M. Butler
Vice President, General Counsel
and Secretary
Scotts Valley, California
May 10, 1999
32
<PAGE>
INPRISE CORPORATION
1999 EMPLOYEE STOCK PURCHASE PLAN
1. Establishment, Purpose and Term of Plan.
---------------------------------------
1.1 Establishment. The Inprise Corporation 1999 Employee Stock Purchase
Plan (the "Plan") is hereby established effective as of the date on which it is
approved by the stockholders of the Company (the "Effective Date").
1.2 Purpose. The purpose of the Plan is to advance the interests of
Company and its stockholders by providing an incentive to attract, retain and
reward Eligible Employees of the Participating Company Group and by motivating
such persons to contribute to the growth and profitability of the Participating
Company Group. The Plan provides such Eligible Employees with an opportunity to
acquire a proprietary interest in the Company through the purchase of Stock. The
Company intends that the Plan qualify as an "employee stock purchase plan" under
Section 423 of the Code (including any amendments or replacements of such
section), and the Plan shall be so construed.
1.3 Term of Plan. The Plan shall continue in effect until the earlier of
its termination by the Board or the date on which all of the shares of Stock
available for issuance under the Plan have been issued.
2. Definitions and Construction.
----------------------------
2.1 Definitions. Any term not expressly defined in the Plan but defined
for purposes of Section 423 of the Code shall have the same definition herein.
Whenever used herein, the following terms shall have their respective meanings
set forth below:
(a) "Board" means the Board of Directors of the Company. If one or
more Committees have been appointed by the Board to administer the Plan, "Board"
also means such Committee(s).
(b) "Code" means the Internal Revenue Code of 1986, as amended, and
any applicable regulations promulgated thereunder.
(c) "Committee" means a committee of the Board duly appointed to
administer the Plan and having such powers as specified by the Board. Unless the
powers of the Committee have been specifically limited, the Committee shall have
all of the powers of the Board granted herein, including, without limitation,
the power to amend or terminate the Plan at any time, subject to the terms of
the Plan and any applicable limitations imposed by law.
(d) "Company" means Inprise Corporation, a Delaware corporation, or
any successor corporation thereto.
<PAGE>
(e) "Compensation" means, with respect to any Offering Period, base
wages or salary, overtime, bonuses, commissions, shift differentials, payments
for paid time off, payments in lieu of notice, and compensation deferred under
any program or plan, including, without limitation, pursuant to Section 401(k)
or Section 125 of the Code. Compensation shall be limited to amounts actually
payable in cash or deferred during the Offering Period. Compensation shall not
include moving allowances, payments pursuant to a severance agreement,
termination pay, relocation payments, sign-on bonuses, any amounts directly or
indirectly paid pursuant to the Plan or any other stock purchase or stock option
plan, or any other compensation not included above.
(f) "Eligible Employee" means an Employee who meets the requirements
set forth in Section 5 for eligibility to participate in the Plan.
(g) "Employee" means a person treated as an employee of a
Participating Company for purposes of Section 423 of the Code. A Participant
shall be deemed to have ceased to be an Employee either upon an actual
termination of employment or upon the corporation employing the Participant
ceasing to be a Participating Company. For purposes of the Plan, an individual
shall not be deemed to have ceased to be an Employee while on any military
leave, sick leave, or other bona fide leave of absence approved by the Company
of ninety (90) days or less. If an individual's leave of absence exceeds ninety
(90) days, the individual shall be deemed to have ceased to be an Employee on
the ninety-first (91st) day of such leave unless the individual's right to
reemployment with the Participating Company Group is guaranteed either by
statute or by contract. The Company shall determine in good faith and in the
exercise of its discretion whether an individual has become or has ceased to be
an Employee and the effective date of such individual's employment or
termination of employment, as the case may be. For purposes of an individual's
participation in or other rights, if any, under the Plan as of the time of the
Company's determination, all such determinations by the Company shall be final,
binding and conclusive, notwithstanding that the Company or any governmental
agency subsequently makes a contrary determination.
(h) "Fair Market Value" means, as of any date, if the Stock is then
listed on a national or regional securities exchange or market system or is
regularly quoted by a recognized securities dealer, the closing sale price of a
share of Stock (or the mean of the closing bid and asked prices if the Stock is
so quoted instead) as quoted on the Nasdaq National Market, the Nasdaq SmallCap
Market or such other national or regional securities exchange or market system
constituting the primary market for the Stock, or by such recognized securities
dealer, as reported in The Wall Street Journal or such other source as the
-----------------------
Company deems reliable. If the relevant date does not fall on a day on which the
Stock has traded on such securities exchange or market system or has been quoted
by such securities dealer, the date on which the Fair Market Value is
established shall be the last day on which the Stock was so traded or quoted
prior to the relevant date, or such other appropriate day as determined by the
Board, in its discretion. If, on the relevant date, the Stock is not then listed
on a national or regional securities exchange or market system or regularly
quoted by a recognized securities dealer, the Fair Market Value of a share of
Stock shall be as determined in good faith by the Board.
<PAGE>
(i) "Offering" means an offering of Stock as provided in Section 6.
(j) "Offering Date" means, for any Offering, the first day of the
Offering Period.
(k) "Offering Period" means a period established in accordance with
Section 6.1, including an Annual Offering Period and a Half-Year Offering Period
as provided in Section 6.1.
(l) "Parent Corporation" means any present or future "parent
corporation" of the Company, as defined in Section 424(e) of the Code.
(m) "Participant" means an Eligible Employee who has become a
participant in an Offering Period in accordance with Section 7 and remains a
participant in accordance with the Plan.
(n) "Participating Company" means the Company or any Parent
Corporation or Subsidiary Corporation designated by the Board as a corporation
the Employees of which may, if Eligible Employees, participate in the Plan. The
Board shall have the sole and absolute discretion to determine from time to time
which Parent Corporations or Subsidiary Corporations shall be Participating
Companies.
(o) "Participating Company Group" means, at any point in time, the
Company and all other corporations collectively which are then Participating
Companies.
(p) "Purchase Date" means, for any Purchase Period, the last day of
such period.
(q) "Purchase Period" means a period established in accordance with
Section 6.2.
(r) "Purchase Price" means the price at which a share of Stock may be
purchased under the Plan, as determined in accordance with Section 9.
(s) "Purchase Right" means an option granted to a Participant pursuant
to the Plan to purchase such shares of Stock as provided in Section 8, which the
Participant may or may not exercise during the Offering Period in which such
option is outstanding. Such option arises from the right of a Participant to
withdraw any accumulated payroll deductions of the Participant not previously
applied to the purchase of Stock under the Plan and to terminate participation
in the Plan at any time during an Offering Period.
(t) "Stock" means the common stock of the Company, as adjusted from
time to time in accordance with Section 4.2.
<PAGE>
(u) "Subscription Agreement" means a written agreement in such form as
specified by the Company, stating an Employee's election to participate in the
Plan and authorizing payroll deductions under the Plan from the Employee's
Compensation.
(v) "Subscription Date" means the last business day prior to the
Offering Date
of an Offering Period or such earlier date as the Company shall establish.
(w) "Subsidiary Corporation" means any present or future "subsidiary
corporation" of the Company, as defined in Section 424(f) of the Code.
2.2 Construction. Captions and titles contained herein are for convenience
only and shall not affect the meaning or interpretation of any provision of the
Plan. Except when otherwise indicated by the context, the singular shall include
the plural and the plural shall include the singular. Use of the term "or" is
not intended to be exclusive, unless the context clearly requires otherwise.
3. Administration.
--------------
3.1 Administration by the Board. The Plan shall be administered by the
Board. All questions of interpretation of the Plan, of any form of agreement or
other document employed by the Company in the administration of the Plan, or of
any Purchase Right shall be determined by the Board and shall be final and
binding upon all persons having an interest in the Plan or the Purchase Right.
Subject to the provisions of the Plan, the Board shall determine all of the
relevant terms and conditions of Purchase Rights; provided, however, that all
Participants granted Purchase Rights shall have the same rights and privileges
within the meaning of Section 423(b)(5) of the Code. All expenses incurred in
connection with the administration of the Plan shall be paid by the Company.
3.2 Authority of Officers. Any officer of the Company shall have the
authority to act on behalf of the Company with respect to any matter, right,
obligation, determination or election that is the responsibility of or that is
allocated to the Company herein, provided that the officer has apparent
authority with respect to such matter, right, obligation, determination or
election.
3.3 Policies and Procedures Established by the Company. The Company may,
from time to time, consistent with the Plan and the requirements of Section 423
of the Code, establish, change or terminate such rules, guidelines, policies,
procedures, limitations, or adjustments as deemed advisable by the Company, in
its discretion, for the proper administration of the Plan, including, without
limitation, (a) a minimum payroll deduction amount required for participation in
an Offering, (b) a limitation on the frequency or number of changes permitted in
the rate of payroll deduction during an Offering, (c) an exchange ratio
applicable to amounts withheld in a currency other than United States dollars,
(d) a payroll deduction greater than or less than the amount designated by a
Participant in order to adjust for the Company's delay or mistake in processing
a Subscription Agreement or in otherwise effecting a Participant's election
under the Plan or as advisable to comply with the requirements of Section 423 of
the Code, and
<PAGE>
(e) determination of the date and manner by which the Fair Market Value of a
share of Stock is determined for purposes of administration of the Plan.
4. Shares Subject to Plan.
----------------------
4.1 Maximum Number of Shares Issuable. Subject to adjustment as provided
in Section 4.2, the maximum aggregate number of shares of Stock that may be
issued under the Plan shall be eight hundred thousand (800,000) and shall
consist of authorized but unissued or reacquired shares of Stock, or any
combination thereof. If an outstanding Purchase Right for any reason expires or
is terminated or canceled, the shares of Stock allocable to the unexercised
portion of that Purchase Right shall again be available for issuance under the
Plan.
4.2 Adjustments for Changes in Capital Structure. In the event of any
stock dividend, stock split, reverse stock split, recapitalization, combination,
reclassification or similar change in the capital structure of the Company, or
in the event of any merger (including a merger effected for the purpose of
changing the Company's domicile), sale of assets or other reorganization in
which the Company is a party, appropriate adjustments shall be made in the
number and class of shares subject to the Plan and each Purchase Right and in
the Purchase Price. If a majority of the shares of the same class as the shares
subject to outstanding Purchase Rights are exchanged for, converted into, or
otherwise become (whether or not pursuant to an Ownership Change Event) shares
of another corporation (the "New Shares"), the Board may unilaterally amend the
outstanding Purchase Rights to provide that such Purchase Rights are exercisable
for New Shares. In the event of any such amendment, the number of shares subject
to, and the Purchase Price of, the outstanding Purchase Rights shall be adjusted
in a fair and equitable manner, as determined by the Board, in its discretion.
Notwithstanding the foregoing, any fractional share resulting from an adjustment
pursuant to this Section 4.2 shall be rounded down to the nearest whole number,
and in no event may the Purchase Price be decreased to an amount less than the
par value, if any, of the stock subject to the Purchase Right. The adjustments
determined by the Board pursuant to this Section 4.2 shall be final, binding and
conclusive.
5. Eligibility.
-----------
5.1 Employees Eligible to Participate. Each Employee of a Participating
Company is eligible to participate in the Plan and shall be deemed an Eligible
Employee, except the following:
(a) Any Employee who is customarily employed by the Participating
Company Group for less than twenty (20) hours per week; or
(b) Any Employee who is customarily employed by the Participating
Company Group for not more than five (5) months in any calendar year.
5.2 Exclusion of Certain Stockholders. Notwithstanding any provision of
the Plan to the contrary, no Employee shall be granted a Purchase Right under
the Plan if,
<PAGE>
immediately after such grant, the Employee would own or hold options to
purchase stock of the Company or of any Parent Corporation or Subsidiary
Corporation possessing five percent (5%) or more of the total combined voting
power or value of all classes of stock of such corporation, as determined in
accordance with Section 423(b)(3) of the Code. For purposes of this Section
5.2, the attribution rules of Section 424(d) of the Code shall apply in
determining the stock ownership of such Employee.
6. Offerings.
---------
6.1 Offering Periods. Except as otherwise set forth below, the Plan shall
be implemented by two series of Offerings. One series shall be of sequential
Offerings of approximately twelve (12) months duration or such other duration as
the Board shall determine (an "Annual Offering Period"). The second series shall
be of Offerings of approximately six (6) months duration or such other duration
as the Board shall determine (a "Half-Year Offering Period"). Annual Offering
Periods shall commence on or about December 1 of each year and end on or about
the first November 30 occurring thereafter. Half-Year Offering Periods shall
commence on or about June 1 of each year and end on or about the first November
30 occurring thereafter. However, provided that the Effective Date occurs on or
before July 1, 1999, an initial Offering (the "Initial Offering Period") shall
commence on or about July 1, 1999 and end on or about November 30, 1999.
Notwithstanding the foregoing, the Board may establish a different duration for
one or more Offering Periods or different commencing or ending dates for such
Offering Periods; provided, however, that no Offering Period may have a duration
exceeding twenty-seven (27) months. If the first or last day of an Offering
Period is not a day on which the national securities exchanges or Nasdaq Stock
Market are open for trading, the Company shall specify the trading day that will
be deemed the first or last day, as the case may be, of the Offering Period.
6.2 Purchase Periods. Each Annual Offering Period shall consist of two (2)
consecutive Purchase Periods of approximately six (6) months duration, or such
other number or duration as the Board determines. A Purchase Period commencing
on or about December 1 shall end on or about the next May 31. A Purchase Period
commencing on or about June 1 shall end on or about the next November 30. Each
Half-Year Offering Period shall consist of a single Purchase Period of
approximately six (6) months duration coterminous with such Offering Period.
However, provided that the Effective Date occurs on or before July 1, 1999, the
Initial Offering Period shall consist of a single Purchase Period ending on or
about November 30, 1999. Notwithstanding the foregoing, the Board may establish
a different duration for one or more Purchase Periods or different commencing or
ending dates for such Purchase Periods. If the first or last day of a Purchase
Period is not a day on which the national securities exchanges or Nasdaq Stock
Market are open for trading, the Company shall specify the trading day that will
be deemed the first or last day, as the case may be, of the Purchase Period.
7. Participation in the Plan.
-------------------------
7.1 Initial Participation. An Eligible Employee may become a Participant
in an Offering Period by delivering a properly completed Subscription Agreement
to the office
<PAGE>
designated by the Company not later than the close of business for such office
on the Subscription Date established by the Company for that Offering Period.
An Eligible Employee who does not deliver a properly completed Subscription
Agreement to the Company's designated office on or before the Subscription
Date for an Offering Period shall not participate in the Plan for that
Offering Period or for any subsequent Offering Period unless the Eligible
Employee subsequently delivers a properly completed Subscription Agreement to
the appropriate office of the Company on or before the Subscription Date for
such subsequent Offering Period. An Employee who becomes an Eligible Employee
after the Offering Date of an Offering Period shall not be eligible to
participate in that Offering Period but may participate in any subsequent
Offering Period provided the Employee is still an Eligible Employee as of the
Offering Date of such subsequent Offering Period.
7.2 Continued Participation. A Participant shall automatically participate
in the next Offering Period commencing immediately after the final Purchase Date
of each Offering Period in which the Participant participates provided that the
Participant remains an Eligible Employee on the Offering Date of the new
Offering Period and has not either (a) withdrawn from the Plan pursuant to
Section 12.1 or (b) terminated employment as provided in Section 13. A
Participant who may automatically participate in a subsequent Offering Period,
as provided in this Section, is not required to deliver any additional
Subscription Agreement for the subsequent Offering Period in order to continue
participation in the Plan. However, a Participant may deliver a new Subscription
Agreement for a subsequent Offering Period in accordance with the procedures set
forth in Section 7.1 if the Participant desires to change any of the elections
contained in the Participant's then effective Subscription Agreement. Eligible
Employees may not participate simultaneously in more than one Offering under the
Plan. Accordingly, a Participant in an Annual Offering Period may not
participate simultaneously in the Half-Year Offering Period commencing during
the term of an Annual Offering Period.
8. Right to Purchase Shares.
------------------------
8.1 Grant of Purchase Right. Except as set forth below, on the Offering
Date of each Offering Period, each Participant in that Offering Period shall be
granted automatically a Purchase Right determined as follows:
(a) Annual Offering Period. Each Purchase Right granted on the
Offering Date of an Annual Offering Period shall consisting of an option to
purchase the lesser of (i) that number of whole shares of Stock determined by
dividing Twenty-Five Thousand Dollars ($25,000) by the Fair Market Value of a
share of Stock on the Offering Date or (ii) two thousand five hundred (2,500)
shares of Stock.
(b) Half-Year Offering Period. Each Purchase Right granted on the
Offering Date of a Half-Year Offering Period shall consist of an option to
purchase the lesser of (i) that number of whole shares of Stock determined by
dividing Twelve Thousand Five Hundred Dollars ($12,500) by the Fair Market Value
of a share of Stock on the Offering Date or (ii) one thousand two hundred fifty
(1,250) shares of Stock.
<PAGE>
(c) Initial Offering Period. Each Purchase Right granted on the
Offering Date of the Initial Offering Period shall consist of an option to
purchase the lesser of (i) that number of whole shares of Stock determined by
dividing Twelve Thousand Five Hundred Dollars ($12,500) by the Fair Market Value
of a share of Stock on the Offering Date or (ii) one thousand two hundred fifty
(1,250) shares of Stock.
No Purchase Right shall be granted on an Offering Date to any person who
is not, on such Offering Date, an Eligible Employee.
8.2 Pro Rata Adjustment of Purchase Right. Notwithstanding the provisions
of Section 8.1, if the Board establishes an Offering Period (other than the
Initial Offering Period) of any duration other than twelve months or six months,
then (a) the dollar amount in Section 8.1 shall be determined by multiplying
$2,083.33 by the number of months (rounded to the nearest whole month) in the
Offering Period and rounding to the nearest whole dollar, and (b) the share
amount in Section 8.1 shall be determined by multiplying 208.33 shares by the
number of months (rounded to the nearest whole month) in the Offering Period and
rounding to the nearest whole share.
8.3 Calendar Year Purchase Limitation. Notwithstanding any provision of
the Plan to the contrary, no Participant shall be granted a Purchase Right which
permits his or her right to purchase shares of Stock under the Plan to accrue at
a rate which, when aggregated with such Participant's rights to purchase shares
under all other employee stock purchase plans of a Participating Company
intended to meet the requirements of Section 423 of the Code, exceeds Twenty-
Five Thousand Dollars ($25,000) in Fair Market Value (or such other limit, if
any, as may be imposed by the Code) for each calendar year in which such
Purchase Right is outstanding at any time. For purposes of the preceding
sentence, the Fair Market Value of shares purchased during a given Offering
Period shall be determined as of the Offering Date for such Offering Period. The
limitation described in this Section 8.3 shall be applied in conformance with
applicable regulations under Section 423(b)(8) of the Code.
9. Purchase Price.
--------------
The Purchase Price at which each share of Stock may be acquired in an
Offering Period upon the exercise of all or any portion of a Purchase Right
shall be established by the Board; provided, however, that the Purchase Price
shall not be less than eighty-five percent (85%) of the lesser of (a) the Fair
Market Value of a share of Stock on the Offering Date of the Offering Period or
(b) the Fair Market Value of a share of Stock on the Purchase Date. Unless
otherwise provided by the Board prior to the commencement of an Offering Period,
the Purchase Price for that Offering Period shall be eighty-five percent (85%)
of the lesser of (a) the Fair Market Value of a share of Stock on the Offering
Date of the Offering Period, or (b) the Fair Market Value of a share of Stock on
the Purchase Date.
<PAGE>
10. Accumulation of Purchase Price through Payroll Deduction.
--------------------------------------------------------
Shares of Stock acquired pursuant to the exercise of all or any portion of
a Purchase Right may be paid for only by means of payroll deductions from the
Participant's Compensation accumulated during the Offering Period for which such
Purchase Right was granted, subject to the following:
10.1 Amount of Payroll Deductions. Except as otherwise provided herein,
the amount to be deducted under the Plan from a Participant's Compensation on
each payday during an Offering Period shall be determined by the Participant's
Subscription Agreement. The Subscription Agreement shall set forth the
percentage of the Participant's Compensation to be deducted on each payday
during an Offering Period in whole percentages of not less than one percent (1%)
(except as a result of an election pursuant to Section 10.3 to stop payroll
deductions effective following the first payday during an Offering) or more than
fifteen percent (15%). Notwithstanding the foregoing, the Board may change the
foregoing limits on payroll deductions effective as of any future Offering Date.
10.2 Commencement of Payroll Deductions. Payroll deductions shall commence
on the first payday following the Offering Date and shall continue to the end of
the Offering Period unless sooner altered or terminated as provided herein.
10.3 Election to Change or Stop Payroll Deductions. During an Offering
Period, a Participant may elect to increase or decrease the rate of or to stop
deductions from his or her Compensation by delivering to the Company's
designated office an amended Subscription Agreement authorizing such change on
or before the "Change Notice Date." The "Change Notice Date" shall be a date
prior to the beginning of the first pay period for which such election is to be
effective as established by the Company from time to time and announced to the
Participants. A Participant who elects, effective following the first payday of
an Offering Period, to decrease the rate of his or her payroll deductions to
zero percent (0%) shall nevertheless remain a Participant in the current
Offering Period unless such Participant withdraws from the Plan as provided in
Section 12.1.
10.4 Administrative Suspension of Payroll Deductions. The Company may, in
its sole discretion, suspend a Participant's payroll deductions under the Plan
as the Company deems advisable to avoid accumulating payroll deductions in
excess of the amount that could reasonably be anticipated to purchase the
maximum number of shares of Stock permitted (a) under the Participant's Purchase
Right or (b) during a calendar year under the limit set forth in Section 8.3.
Payroll deductions shall be resumed at the rate specified in the Participant's
then effective Subscription Agreement at the beginning, respectively, of (a) the
next Offering Period or (b) the next Purchase Period the Purchase Date of which
falls in the following calendar year, unless the Participant has either
withdrawn from the Plan as provided in Section 12.1 or has ceased to be an
Eligible Employee.
10.5 Participant Accounts. Individual bookkeeping accounts shall be
maintained for each Participant. All payroll deductions from a Participant's
Compensation shall
<PAGE>
be credited to such Participant's Plan account and shall be deposited with the
general funds of the Company. All payroll deductions received or held by the
Company may be used by the Company for any corporate purpose.
10.6 No Interest Paid. Interest shall not be paid on sums deducted from a
Participant's Compensation pursuant to the Plan.
10.7 Voluntary Withdrawal from Plan Account. A Participant may withdraw
all or any portion of the payroll deductions credited to his or her Plan account
and not previously applied toward the purchase of Stock by delivering to the
Company's designated office a written notice on a form provided by the Company
for such purpose. A Participant who withdraws the entire remaining balance
credited to his or her Plan account shall be deemed to have withdrawn from the
Plan in accordance with Section 12.1. Amounts withdrawn shall be returned to the
Participant as soon as practicable after the Company's receipt of the notice of
withdrawal and may not be applied to the purchase of shares in any Offering
under the Plan. The Company may from time to time establish or change
limitations on the frequency of withdrawals permitted under this Section,
establish a minimum dollar amount that must be retained in the Participant's
Plan account, or terminate the withdrawal right provided by this Section.
11. Purchase of Shares.
------------------
11.1 Exercise of Purchase Right. On each Purchase Date of an Offering
Period, each Participant who has not withdrawn from the Plan and whose
participation in the Offering has not otherwise terminated before such Purchase
Date shall automatically acquire pursuant to the exercise of the Participant's
Purchase Right the number of whole shares of Stock determined by dividing (a)
the total amount of the Participant's payroll deductions accumulated in the
Participant's Plan account during the Offering Period and not previously applied
toward the purchase of Stock by (b) the Purchase Price. However, in no event
shall the number of shares purchased by the Participant during an Offering
Period exceed the number of shares subject to the Participant's Purchase Right.
No shares of Stock shall be purchased on a Purchase Date on behalf of a
Participant whose participation in the Offering or the Plan has terminated
before such Purchase Date.
11.2 Pro Rata Allocation of Shares. If the number of shares of Stock which
might be purchased by all Participants in the Plan on a Purchase Date exceeds
the number of shares of Stock available in the Plan as provided in Section 4.1,
the Company shall make a pro rata allocation of the remaining shares in as
uniform a manner as practicable and as the Company determines to be equitable.
Any fractional share resulting from such pro rata allocation to any Participant
shall be disregarded.
11.3 Delivery of Certificates. As soon as practicable after each Purchase
Date, the Company shall arrange the delivery to each Participant, as
appropriate, of a certificate representing the shares acquired by the
Participant on such Purchase Date; provided that the Company may deliver such
shares to a broker designated by the Company that will hold such shares for the
benefit of the Participant. Shares to be delivered to a Participant under the
Plan
<PAGE>
shall be registered in the name of the Participant, or, if requested by the
Participant, in the name of the Participant and his or her spouse, or, if
applicable, in the names of the heirs of the Participant.
11.4 Return of Cash Balance. Any cash balance remaining in a Participant's
Plan account following any Purchase Date shall be refunded to the Participant as
soon as practicable after such Purchase Date. However, if the cash balance to be
returned to a Participant pursuant to the preceding sentence is less than the
amount that would have been necessary to purchase an additional whole share of
Stock on such Purchase Date, the Company may retain the cash balance in the
Participant's Plan account to be applied toward the purchase of shares of Stock
in the subsequent Purchase Period or Offering Period, as the case may be.
11.5 Tax Withholding. At the time a Participant's Purchase Right is
exercised, in whole or in part, or at the time a Participant disposes of some or
all of the shares of Stock he or she acquires under the Plan, the Participant
shall make adequate provision for the federal, state, local and foreign tax
withholding obligations, if any, of the Participating Company Group which arise
upon exercise of the Purchase Right or upon such disposition of shares,
respectively. The Participating Company Group may, but shall not be obligated
to, withhold from the Participant's compensation the amount necessary to meet
such withholding obligations.
11.6 Expiration of Purchase Right. Any portion of a Participant's Purchase
Right remaining unexercised after the end of the Offering Period to which the
Purchase Right relates shall expire immediately upon the end of the Offering
Period.
11.7 Provision of Reports and Stockholder Information to Participants.
Each Participant who has exercised all or part of his or her Purchase Right
shall receive, as soon as practicable after the Purchase Date, a report of such
Participant's Plan account setting forth the total payroll deductions
accumulated prior to such exercise, the number of shares of Stock purchased, the
Purchase Price for such shares, the date of purchase and the cash balance, if
any, remaining immediately after such purchase that is to be refunded or
retained in the Participant's Plan account pursuant to Section 11.4. The report
required by this Section may be delivered in such form and by such means,
including by electronic transmission, as the Company may determine. In addition,
each Participant shall be provided information concerning the Company equivalent
to that information provided generally to the Company's common stockholders.
12. Withdrawal from Offering or Plan.
--------------------------------
12.1 Voluntary Withdrawal from the Plan. A Participant may withdraw from
the Plan by signing and delivering to the Company's designated office a written
notice of withdrawal on a form provided by the Company for such purpose. Such
withdrawal may be elected at any time prior to the end of an Offering Period;
provided, however, that if a Participant withdraws from the Plan after a
Purchase Date, the withdrawal shall not affect shares of Stock acquired by the
Participant on such Purchase Date. A Participant who voluntarily withdraws from
the Plan is prohibited from resuming participation in the Plan in the same
Offering from which he or she withdrew, but may participate in any subsequent
Offering by again satisfying the
<PAGE>
requirements of Sections 5 and 7.1. The Company may impose, from time to time,
a requirement that the notice of withdrawal from the Plan be on file with the
Company's designated office for a reasonable period prior to the effectiveness
of the Participant's withdrawal.
12.2 Automatic Withdrawal from an Offering. If the Fair Market Value of a
share of Stock on the Offering Date of the Half-Year Offering Period commencing
immediately following the first Purchase Date of the concurrent Annual Offering
Period is less than the Fair Market Value of a share of Stock on the Offering
Date of such concurrent Annual Offering Period, then every Participant in such
concurrent Annual Offering Period automatically shall be (a) withdrawn from the
concurrent Annual Offering Period after the acquisition of shares of Stock on
the Purchase Date and (b) enrolled in the new Half-Year Offering Period
effective on its Offering Date. A Participant may elect not to be automatically
withdrawn from an Annual Offering Period pursuant to this Section 12.2 by
delivering to the Company's designated office not later than the close of
business on Offering Date of the new Half-Year Offering Period a written notice
indicating such election.
12.3 Return of Payroll Deductions. Upon a Participant's voluntary
withdrawal from the Plan pursuant to Sections 12.1 or automatic withdrawal from
an Offering pursuant to Section 12.2, the Participant's accumulated payroll
deductions which have not been applied toward the purchase of shares of Stock
(except, in the case of an automatic withdrawal pursuant to Section 12.2, for an
amount necessary to purchase an additional whole share as provided in Section
11.4) shall be refunded to the Participant as soon as practicable after the
withdrawal, without the payment of any interest, and the Participant's interest
in the Plan or the Offering, as applicable, shall terminate. Such accumulated
payroll deductions to be refunded in accordance with this Section may not be
applied to any other Offering under the Plan.
13. Termination of Employment or Eligibility.
----------------------------------------
Upon a Participant's ceasing, prior to a Purchase Date, to be an Employee
of the Participating Company Group for any reason, including retirement,
disability or death, or upon the failure of a Participant to remain an Eligible
Employee, the Participant's participation in the Plan shall terminate
immediately. In such event, the Participant's accumulated payroll deductions
which have not been applied toward the purchase of shares shall, as soon as
practicable, be returned to the Participant or, in the case of the Participant's
death, to the Participant's legal representative, and all of the Participant's
rights under the Plan shall terminate. Interest shall not be paid on sums
returned pursuant to this Section 13. A Participant whose participation has been
so terminated may again become eligible to participate in the Plan by satisfying
the requirements of Sections 5 and 7.1.
<PAGE>
14. Change in Control.
-----------------
14.1 Definitions.
(a) An "Ownership Change Event" shall be deemed to have occurred if
any of the following occurs with respect to the Company: (i) the direct or
indirect sale or exchange in a single or series of related transactions by the
stockholders of the Company of more than fifty percent (50%) of the voting stock
of the Company; (ii) a merger or consolidation in which the Company is a party;
(iii) the sale, exchange, or transfer of all or substantially all of the assets
of the Company; or (iv) a liquidation or dissolution of the Company.
(b) A "Change in Control" shall mean an Ownership Change Event or a
series of related Ownership Change Events (collectively, the "Transaction")
wherein the stockholders of the Company immediately before the Transaction do
not retain immediately after the Transaction, in substantially the same
proportions as their ownership of shares of the Company's voting stock
immediately before the Transaction, direct or indirect beneficial ownership of
more than fifty percent (50%) of the total combined voting power of the
outstanding voting stock of the Company or the corporation or corporations to
which the assets of the Company were transferred (the "Transferee
Corporation(s)"), as the case may be. For purposes of the preceding sentence,
indirect beneficial ownership shall include, without limitation, an interest
resulting from ownership of the voting stock of one or more corporations which,
as a result of the Transaction, own the Company or the Transferee
Corporation(s), as the case may be, either directly or through one or more
subsidiary corporations. The Board shall have the right to determine whether
multiple sales or exchanges of the voting stock of the Company or multiple
Ownership Change Events are related, and its determination shall be final,
binding and conclusive.
14.2 Effect of Change in Control on Purchase Rights. In the event of a
Change in Control, the surviving, continuing, successor, or purchasing
corporation or parent corporation thereof, as the case may be (the "Acquiring
Corporation"), may assume the Company's rights and obligations under the Plan.
If the Acquiring Corporation elects not to assume the Company's rights and
obligations under outstanding Purchase Rights, the Purchase Date of the then
current Purchase Period shall be accelerated to a date before the date of the
Change in Control specified by the Board, but the number of shares of Stock
subject to outstanding Purchase Rights shall not be adjusted. All Purchase
Rights which are neither assumed by the Acquiring Corporation in connection with
the Change in Control nor exercised as of the date of the Change in Control
shall terminate and cease to be outstanding effective as of the date of the
Change in Control.
15. Nontransferability of Purchase Rights.
-------------------------------------
Neither payroll deductions credited to a Participant's Plan account nor a
Participant's Purchase Right may be assigned, transferred, pledged or otherwise
disposed of in any manner other than as provided by the Plan or by will or the
laws of descent and distribution. Any such attempted assignment, transfer,
pledge or other disposition shall be without effect,
<PAGE>
except that the Company may treat such act as an election to withdraw from the
Plan as provided in Section 12.1. A Purchase Right shall be exercisable during
the lifetime of the Participant only by the Participant.
16. Compliance with Securities Law.
------------------------------
The issuance of shares under the Plan shall be subject to compliance with
all applicable requirements of federal, state and foreign law with respect to
such securities. A Purchase Right may not be exercised if the issuance of shares
upon such exercise would constitute a violation of any applicable federal, state
or foreign securities laws or other law or regulations or the requirements of
any securities exchange or market system upon which the Stock may then be
listed. In addition, no Purchase Right may be exercised unless (a) a
registration statement under the Securities Act of 1933, as amended, shall at
the time of exercise of the Purchase Right be in effect with respect to the
shares issuable upon exercise of the Purchase Right, or (b) in the opinion of
legal counsel to the Company, the shares issuable upon exercise of the Purchase
Right may be issued in accordance with the terms of an applicable exemption from
the registration requirements of said Act. The inability of the Company to
obtain from any regulatory body having jurisdiction the authority, if any,
deemed by the Company's legal counsel to be necessary to the lawful issuance and
sale of any shares under the Plan shall relieve the Company of any liability in
respect of the failure to issue or sell such shares as to which such requisite
authority shall not have been obtained. As a condition to the exercise of a
Purchase Right, the Company may require the Participant to satisfy any
qualifications that may be necessary or appropriate, to evidence compliance with
any applicable law or regulation, and to make any representation or warranty
with respect thereto as may be requested by the Company.
17. Rights as a Stockholder and Employee.
------------------------------------
A Participant shall have no rights as a stockholder by virtue of the
Participant's participation in the Plan until the date of the issuance of a
certificate for the shares purchased pursuant to the exercise of the
Participant's Purchase Right (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company). No
adjustment shall be made for dividends, distributions or other rights for which
the record date is prior to the date such certificate is issued, except as
provided in Section 4.2. Nothing herein shall confer upon a Participant any
right to continue in the employ of the Participating Company Group or interfere
in any way with any right of the Participating Company Group to terminate the
Participant's employment at any time.
18. Legends.
-------
The Company may at any time place legends or other identifying symbols
referencing any applicable federal, state or foreign securities law restrictions
or any provision convenient in the administration of the Plan on some or all of
the certificates representing shares of Stock issued under the Plan. The
Participant shall, at the request of the Company, promptly present to the
Company any and all certificates representing shares acquired pursuant to a
<PAGE>
Purchase Right in the possession of the Participant in order to carry out
the provisions of this Section. Unless otherwise specified by the Company,
legends placed on such certificates may include but shall not be limited to
the following:
"THE SHARES EVIDENCED BY THIS CERTIFICATE WERE ISSUED BY THE CORPORATION
TO THE REGISTERED HOLDER UPON THE PURCHASE OF SHARES UNDER AN EMPLOYEE STOCK
PURCHASE PLAN AS DEFINED IN SECTION 423 OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED. THE TRANSFER AGENT FOR THE SHARES EVIDENCED HEREBY SHALL NOTIFY THE
CORPORATION IMMEDIATELY OF ANY TRANSFER OF THE SHARES BY THE REGISTERED HOLDER
HEREOF. THE REGISTERED HOLDER SHALL HOLD ALL SHARES PURCHASED UNDER THE PLAN IN
THE REGISTERED HOLDER'S NAME (AND NOT IN THE NAME OF ANY NOMINEE)."
19. Notification of Disposition of Shares.
-------------------------------------
The Company may require the Participant to give the Company prompt notice
of any disposition of shares acquired by exercise of a Purchase Right within two
years from the date of granting such Purchase Right or one year from the date of
exercise of such Purchase Right. The Company may require that until such time as
a Participant disposes of shares acquired upon exercise of a Purchase Right, the
Participant shall hold all such shares in the Participant's name (or, if elected
by the Participant, in the name of the Participant and his or her spouse but not
in the name of any nominee) until the lapse of the time periods with respect to
such Purchase Right referred to in the preceding sentence. The Company may
direct that the certificates evidencing shares acquired by exercise of a
Purchase Right refer to such requirement to give prompt notice of disposition.
20. Notices.
-------
All notices or other communications by a Participant to the Company under
or in connection with the Plan shall be deemed to have been duly given when
received in the form specified by the Company at the location, or by the person,
designated by the Company for the receipt thereof.
21. Indemnification.
---------------
In addition to such other rights of indemnification as they may have as
members of the Board or officers or employees of the Participating Company
Group, members of the Board and any officers or employees of the Participating
Company Group to whom authority to act for the Board or the Company is delegated
shall be indemnified by the Company against all reasonable expenses, including
attorneys' fees, actually and necessarily incurred in connection with the
defense of any action, suit or proceeding, or in connection with any appeal
therein, to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan, or any right
granted hereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel selected
<PAGE>
by the Company) or paid by them in satisfaction of a judgment in any such
action, suit or proceeding, except in relation to matters as to which it shall
be adjudged in such action, suit or proceeding that such person is liable for
gross negligence, bad faith or intentional misconduct in duties; provided,
however, that within sixty (60) days after the institution of such action,
suit or proceeding, such person shall offer to the Company, in writing, the
opportunity at its own expense to handle and defend the same.
22. Amendment or Termination of the Plan.
------------------------------------
The Board may at any time amend or terminate the Plan, except that (a)
such termination shall not affect Purchase Rights previously granted under the
Plan, except as permitted under the Plan, and (b) no amendment may adversely
affect a Purchase Right previously granted under the Plan (except to the extent
permitted by the Plan or as may be necessary to qualify the Plan as an employee
stock purchase plan pursuant to Section 423 of the Code or to obtain
qualification or registration of the shares of Stock under applicable federal,
state or foreign securities laws). In addition, an amendment to the Plan must be
approved by the stockholders of the Company within twelve (12) months of the
adoption of such amendment if such amendment would authorize the sale of more
shares than are authorized for issuance under the Plan or would change the
definition of the corporations that may be designated by the Board as
Participating Companies.
IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies
that the foregoing sets forth the Inprise Corporation 1999 Employee Stock
Purchase Plan as duly adopted by the Board May 5, 1999.
/s/ JoAnne Butler
-----------------
Secretary
<PAGE>
[X] Please mark votes
as in this example
This proxy when properly executed will be voted in the manner directed below.
If no direction is made, this proxy will be voted "FOR" Proposals 1, 2, 3 and
4. The proxies are hereby authorized to vote in their discretion upon such
other matters as may properly come before the meeting or any postponements or
adjournments thereof.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
The Board of Directors recommends a vote "FOR" Proposals 1, 2, 3 and 4.
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1. Election of Directors: To elect two 2. To approve an amendment to the
Class 1 directors to serve for a FOR WITHHELD Inprise Corporation 1997 FOR AGAINST ABSTAIN
three-year term. [_] [_] Employee Stock Option Plan. [_] [_] [_]
C. Robert Coates and Stephen J. Lewis
3. To approve the Inprise
(To withhold authority to vote for any Corporation 1999 Employee FOR AGAINST ABSTAIN
individual nominee named above, check the Stock Purchase Plan. [_] [_] [_]
"FOR" box above and write that nominee's
name on the line below.) 4. To ratify the appointment of
PricewaterhouseCoopers LLP as FOR AGAINST ABSTAIN
------------------------------------------ independent auditors. [_] [_] [_]
Date: , 1999
----------------------------------------
---------------------------------------------------
---------------------------------------------------
Signature(s)
IMPORTANT: Please sign exactly as name(s) appear(s)
hereon. If you are acting as attorney-in-fact,
corporate officer or in a fiduciary capacity in
which you are signing.
</TABLE>
<PAGE>
INPRISE CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
for the Annual Meeting of Stockholders on June 4, 1999
P The undersigned hereby appoints JoAnne M. Butler and Jay Leite, and each of
them, with full power of substitution, as the proxy or proxies of the
R undersigned to vote all shares of Common Stock and Series B Convertible
Preferred Stock of Inprise Corporation which the undersigned is entitled to
O vote at the Annual Meeting of Stockholders of Inprise Corporation to be
held on June 4, 1999 at 10:00 a.m., and at any postponements and
X adjournments thereof, with all powers that the undersigned would have if
personally present thereat.
Y
IMPORTANT--TO BE SIGNED AND DATED ON REVERSE SIDE
------------------
SEE REVERSE SIDE
------------------
