<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
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[ ] 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 Rule 14a-11(c) or Rule 14a-12
Landmark Systems Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
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<PAGE> 2
LANDMARK SYSTEMS CORPORATION
8000 TOWERS CRESCENT DRIVE
VIENNA, VIRGINIA 22182
---------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 11, 1999
---------------------
To our stockholders:
NOTICE IS HEREBY GIVEN that the 1999 annual meeting of stockholders of
Landmark Systems Corporation will be held at the principal executive offices of
Landmark Systems Corporation, located at 8000 Towers Crescent Drive, Vienna,
Virginia 22182, on Tuesday, May 11, 1999, at 3:30 p.m., local time, for the
following purposes:
1. to elect seven directors of the Company for terms expiring at the
2000 annual meeting of stockholders;
2. to approve an amendment to the Company's 1994 Stock Incentive Plan
to increase by 1,500,000, to an aggregate of 4,500,000, the number of
shares of Common Stock authorized for issuance thereunder;
3. to ratify the selection by the Board of Directors of
PricewaterhouseCoopers LLP as independent accountants of the Company for
the Company's fiscal year ending December 31, 1999; and
4. to transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
Only stockholders of record at the close of business on April 5, 1999 will
be entitled to notice of, and to vote at, the annual meeting or any adjournment
or postponement thereof.
By order of the Board of Directors,
WORTH D. MACMURRAY
Secretary
Dated: April 12, 1999
YOUR VOTE IS VERY IMPORTANT.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING,
PLEASE SIGN AND DATE THE ENCLOSED PROXY AND MAIL IT
PROMPTLY IN THE POSTAGE-PAID ENVELOPE PROVIDED.
<PAGE> 3
LANDMARK SYSTEMS CORPORATION
8000 TOWERS CRESCENT DRIVE
VIENNA, VA 22182
---------------------
ANNUAL MEETING OF STOCKHOLDERS
MAY 11, 1999
---------------------
PROXY STATEMENT
---------------------
GENERAL INFORMATION
PROXY SOLICITATION
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Landmark Systems Corporation (the
"Company") for use at the 1999 annual meeting of stockholders to be held at the
principal executive offices of the Company, located at 8000 Towers Crescent
Drive, Vienna, Virginia 22182, on Tuesday, May 11, 1999, at 3:30 p.m., local
time. The purpose of the annual meeting and the matters to be acted upon are set
forth in the accompanying notice of annual meeting.
The Company is mailing its annual report for the fiscal year ended December
31, 1998, together with this proxy statement and the enclosed proxy, to
stockholders entitled to vote at the annual meeting. The annual report does not
form any part of the material for the solicitation of proxies.
The Company will pay the cost of all proxy solicitation. In addition to the
solicitation of proxies by use of the mails, officers and other employees of the
Company and its subsidiaries may solicit proxies by personal interview,
telephone and telegram. None of these individuals will receive compensation for
such services, which will be performed in addition to their regular duties. The
Company also has made arrangements with brokerage firms, banks, nominees and
other fiduciaries to forward proxy solicitation material for shares held of
record by them to the beneficial owners of such shares. The Company will
reimburse such persons for their reasonable out-of-pocket expenses in forwarding
such material.
This proxy statement and the enclosed proxy are first being mailed to the
Company's stockholders on or about April 12, 1999.
VOTING AND REVOCABILITY OF PROXIES
A proxy for use at the annual meeting and a return envelope are enclosed.
Shares of the Company's common stock, par value $0.01 per share (the "Common
Stock"), represented by a properly executed proxy, if such proxy is received in
time and not revoked, will be voted at the annual meeting in accordance with the
instructions indicated in such proxy. If no instructions are indicated, such
shares will be voted "FOR" the election of the seven director nominees named in
the proxy, "FOR" approval of the amendment to the Company's 1994 Stock Incentive
Plan to increase by 1,500,000, to an aggregate of 4,500,000, the number of
shares of Common Stock authorized for issuance thereunder, and "FOR" the
ratification of the selection by the Board of Directors of
PricewaterhouseCoopers LLP as the Company's independent accountants for fiscal
year 1999. Discretionary authority is provided in the proxy as to any matters
not specifically referred to therein. Management is not aware of any other
matters that are likely to be brought before the annual meeting. If any such
matters properly come before the annual meeting, however, the persons named in
the proxy are fully authorized to vote thereon in accordance with their judgment
and discretion.
A stockholder who has given a proxy may revoke it at any time prior to its
exercise at the annual meeting by (1) giving written notice of revocation to the
Secretary of the Company, (2) properly submitting to the
<PAGE> 4
Company a duly executed proxy bearing a later date or (3) voting in person at
the annual meeting. All written notices of revocation or other communications
with respect to revocation of proxies should be addressed as follows: Landmark
Systems Corporation, 8000 Towers Crescent Drive, Vienna, Virginia 22182,
Attention: Corporate Secretary.
VOTING PROCEDURE
All holders of record of the Common Stock of the Company at the close of
business on April 5, 1999 will be eligible to vote at the annual meeting. Each
holder of Common Stock is entitled to one vote at the annual meeting for each
share held by such stockholder. As of April 5, 1999, there were 12,237,536
shares of Common Stock outstanding.
The presence, in person or by proxy, of a majority of the outstanding
shares of Common Stock entitled to vote will constitute a quorum for the
transaction of business. Votes cast in person or by proxy, abstentions and
broker non-votes (as hereinafter defined) will be tabulated by the inspectors of
election and will be considered in the determination of whether a quorum is
present at the annual meeting. The inspectors of election will treat shares
represented by executed proxies which abstain as shares that are present and
entitled to vote for purposes of determining the approval of such matter. If,
with respect to any shares, a broker or other nominee submits a proxy indicating
that instructions have not been received from the beneficial owners or the
persons entitled to vote and that such broker or other nominee does not have
discretionary authority to vote such shares (a "broker non-vote") on one or more
proposals, those shares will not be treated as present and entitled to vote for
purposes of determining the approval of any such proposal.
2
<PAGE> 5
SECURITY OWNERSHIP
The following table sets forth, as of March 31, 1999, information regarding
the beneficial ownership of the Common Stock by (i) each person known to the
Company to be the beneficial owner of more than 5% of the Common Stock, (ii)
each director and each nominee to the Board of Directors, (iii) each of the
executive officers of the Company named in the Summary Compensation Table under
"Executive Compensation," and (iv) all directors and executive officers of the
Company as a group. Except as indicated, each person identified in the following
table has sole voting and investment power with respect to the shares shown. The
number of shares of Common Stock outstanding as of March 31, 1999 was
12,237,536. Beneficial ownership of the Common Stock has been determined for
this purpose in accordance with Rules 13d-3 and 13d-5 under the Securities
Exchange Act of 1934, as amended, which provide, among other things, that a
person is deemed to be the beneficial owner of the Common Stock if such person,
directly or indirectly, has or shares voting power or investment power in
respect of such stock or has the right to acquire such ownership within sixty
days. Accordingly, the amounts shown in the table do not purport to represent
beneficial ownership for any reason other than compliance with Securities and
Exchange Commission reporting requirements.
<TABLE>
<CAPTION>
PERCENTAGE OF
SHARES OF OUTSTANDING
COMMON STOCK SHARES
NAME OF BENEFICIAL OWNER(1) BENEFICIALLY OWNED BENEFICIALLY OWNED
--------------------------- ------------------------ ------------------
<S> <C> <C>
Patrick H. McGettigan(2)........................ 3,662,500 29.9%
Katherine K. Clark(3)........................... 2,138,661 17.4
Ralph E. Alexander(3)........................... 283,526 2.3
John D. Hunter(3)............................... 228,749 1.9
Andrew L. McCasker(3)........................... 57,782 *
Roger A. Philips(3)............................. 54,169 *
Jeffrey H. Bergman(4)........................... 423,542 3.5
T. Eugene Blanchard(3).......................... 20,500 *
Patrick W. Gross(3)............................. 19,650 *
Sudhakar V. Shenoy.............................. 0 *
All directors and executive officers as a group
(13 persons)(3)............................... 6,893,827 54.1
Lord, Abbett & Co.(5)........................... 1,420,745 11.6
</TABLE>
- ---------------
* Represents holdings of less than 1%.
(1) Unless otherwise specified in the footnotes to this table, the address of
each person set forth in the above table is 8000 Towers Crescent Drive,
Vienna, Virginia 22182.
(2) Includes 149,000 shares held by The Patrick H. McGettigan Foundation, of
which Mr. McGettigan and his two adult children are the trustees. The
trustees of this foundation share voting power.
(3) Includes shares which may be acquired within 60 days of March 31, 1999
pursuant to outstanding options by the person or persons listed, as follows:
Ms. Clark, 48,970; Mr. Alexander, 281,595; Mr. Hunter, 20,845; Mr. McCasker,
55,124; Mr. Philips, 52,100; Mr. Blanchard, 19,500; Mr. Gross, 19,500; all
directors and officers as a group, 494,634.
(4) Includes 1,500 shares which may be acquired within 60 days of March 31, 1999
pursuant to outstanding options. Does not include 86,743 shares held by the
Bergman Family Trust, as to which Mr. Bergman disclaims beneficial
ownership.
(5) Stock ownership is based on a Schedule 13G filed on February 16, 1999. Lord,
Abbett & Co. is an Investment Advisor registered under Section 203 of the
Investment Company Act of 1940. The address of Lord, Abbett & Co. is 767
Fifth Avenue, New York, New York 10153-0203.
3
<PAGE> 6
ELECTION OF DIRECTORS
(PROPOSAL 1)
NOMINEES FOR ELECTION AS DIRECTORS
The Company's Articles of Incorporation and Bylaws provide that the Board
of Directors (the "Board") is to be elected at the annual meeting of the
stockholders. The number of directors of the Board is currently seven.
If elected, the director nominees will serve a one-year term to expire at
the 2000 annual meeting of stockholders or until their successors are elected
and qualified or their earlier resignation or removal. The seven incumbent
directors standing for election to the Board are Patrick H. McGettigan,
Katherine K. Clark, Ralph E. Alexander, Jeffrey H. Bergman, T. Eugene Blanchard,
Patrick W. Gross and Sudhakar V. Shenoy.
Approval of the nominees requires the affirmative vote of a plurality of
the votes cast at the annual meeting. In the event that any nominee should
become unable or unwilling to serve as a director, it is the intention of the
persons named in the proxy to vote for the election of such substitute nominee
for the office of director as the Board of Directors may recommend. It is not
anticipated that any nominee will be unable or unwilling to serve as a director.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS OF THE
COMPANY VOTE "FOR" THE ELECTION OF THE NOMINEES TO SERVE AS DIRECTORS.
Biographical information concerning each of the nominees is presented on
the following pages.
NOMINEES FOR ELECTION FOR 1999 TERM
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE SINCE
---- --- --------
<S> <C> <C>
Patrick H. McGettigan....................... 57 1982
Katherine K. Clark.......................... 42 1983
Ralph E. Alexander.......................... 53 1997
Jeffrey H. Bergman.......................... 55 1983
T. Eugene Blanchard......................... 68 1997
Patrick W. Gross............................ 54 1997
Sudhakar V. Shenoy.......................... 51 1999
</TABLE>
PATRICK H. MCGETTIGAN, a co-founder of the Company, has served as Chairman
of the Board of Directors since 1982. Mr. McGettigan is the author of the
Company's initial product, The Monitor for CICS. Mr. McGettigan served as
President of the Company from 1982 to 1989 and as Chief Executive Officer from
1982 to 1994. Prior to founding the Company, Mr. McGettigan held a variety of
technical and systems programming positions over a 17-year career at Blue Cross
and Blue Shield of the National Capital Area.
KATHERINE K. CLARK, a co-founder of the Company, has headed product
development, technical support, finance and human resources at various times
over the Company's history, has been a director of the Company since 1983 and
from November 1993 to September 1997 was President of the Company. In 1994, Ms.
Clark assumed her current role as Chief Executive Officer of the Company and is
responsible for the long-term strategic direction of the Company.
RALPH E. ALEXANDER joined the Company in November 1995 as Chief Financial
Officer, became Chief Operating Officer in March 1996, a director in March 1997
and President in September 1997. Prior to his employment with the Company, Mr.
Alexander served as Executive Vice President and Chief Financial Officer of
Rational Software Corporation, a software development company, from 1994 to
1995. From 1991 to 1994, Mr. Alexander served as President and Chief Executive
Officer of Verdix Corporation, a software development company, which merged with
Rational in 1994.
4
<PAGE> 7
JEFFREY H. BERGMAN, a director of the Company since 1983, has served as a
principal of Interboard, a division of the Interface Group Ltd./Boyden, an
executive placement company, since 1996. From 1991 to 1996, Mr. Bergman was
President of Celodon Technologies, a technology consulting firm. From 1983 to
1991, Mr. Bergman held various positions within the Company, including that of
President.
T. EUGENE BLANCHARD has been associated with the Company as a member of the
Company's Advisory Board since 1993 and was elected to the Board in March 1997.
(The Advisory Board was terminated in October 1997.) From 1979 to February 1997,
Mr. Blanchard served as Senior Vice President, Chief Financial Officer and a
director of DynCorp, a provider of technical and professional services to
government agencies and the airline industry. Mr. Blanchard continues to serve
as a director of DynCorp.
PATRICK W. GROSS has been associated with the Company as a member of the
Advisory Board since 1993 and was elected to the Board in March 1997. Mr. Gross
is a founder of American Management Systems, Inc. ("AMS"), an international
business and information technology consulting firm, and has served as a
principal executive officer and a director of AMS since its founding in 1970.
Mr. Gross is currently Chairman of the Executive Committee of AMS, and also
serves as a director of Capital One Financial Corporation and Computer Network
Technology Corporation.
SUDHAKAR V. SHENOY was elected to serve as a director of the Company
effective April 1, 1999. He has served as Chairman and Chief Executive Officer
of Information Management Consultants, Inc., a private systems and software
development firm, since 1981.
BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
The Board held five meetings during the Company's 1998 fiscal year. Each
director attended at least 75% of the aggregate of the total number of meetings
of the Board held during the period he or she served as a director and the total
number of meetings held by each committee of the Board on which he or she served
(during the period for which he or she served). In addition, during 1998 the
Board took action two times by unanimous written consent.
The Board has a standing Audit Committee and a standing Compensation
Committee. The Board has no standing nominating committee or other committee
performing a similar function.
The Audit Committee, which met four times during 1998, consists of Messrs.
Bergman and Blanchard. The Committee is responsible for recommending to the full
Board the selection of the Company's independent public accountants, reviewing
the scope of the plans and the results of the audit engagement, reviewing the
independence of the public accountants, considering the range of audit and
non-audit fees, reviewing the adequacy of the Company's internal accounting
controls and exercising oversight with respect to the Company's code of conduct
and other policies and procedures regarding adherence with legal requirements.
The Compensation Committee, which met two times in 1998, consists of
Messrs. Blanchard and Gross. The Compensation Committee is responsible for
establishing salaries, bonuses and other compensation for, and administering the
Company's stock option and stock purchase plans as they relate to, the Company's
officers. The salaries, bonuses and other compensation for Ms. Clark and Mr.
Alexander are subject to ratification by the Board.
Each director, other than those who are employees of the Company, receives
from the Company $1,250 for each Board meeting attended, $500 for each Committee
meeting attended and reimbursement of expenses incurred in attending meetings.
Directors who are not employees of the Company are not eligible to participate
in any of the Company's stock incentive or stock purchase plans other than the
1996 Advisory Board and Directors Stock Incentive Plan (the "Board Plan"). Under
the Board Plan, nonqualified stock options are granted to members of the Board
who are not employees of the Company (each, a "designee"). Designees as of the
effective date of the Board Plan received a nonqualified stock option to
purchase the greater of 6,000 shares of Common Stock or the difference between
24,000 shares of Common Stock and the number of shares of Common Stock subject
to any option previously granted to such designee by the Company. As of the date
of each annual stockholders meeting, each designee who has not previously
received a grant during the calendar year receives a nonqualified stock option
to purchase 6,000 shares of Common Stock. The exercise
5
<PAGE> 8
price of each option is set at the fair market value of the Company's Common
Stock on the date of grant. The options vest over a four-year period.
In May, 1998, the Company granted options to purchase 6,000 shares of
Common Stock to each of Messrs. Barratt, Bergman, Blanchard and Gross pursuant
to the Board Plan.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid to the Chief Executive
Officer of the Company and to each of the other four most highly compensated
executive officers (the "Named Executive Officers") for fiscal years 1996, 1997
and 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------
---------------------------------------- NUMBER OF
OTHER ANNUAL SECURITIES ALL OTHER
NAME AND SALARY BONUS COMPENSATION UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($) OPTIONS (#) ($)
------------------ ---- -------- ------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Katherine K. Clark (1)....... 1998 $230,833 $52,500 -- 10,000 --
Chief Executive Officer 1997 $210,000 $ 5,000 -- 22,500 --
1996 $210,000 $12,500 -- -- --
Ralph E. Alexander (1)....... 1998 $216,667 $52,500 -- 25,625 $125,250(2)
President and Chief 1997 $175,000 $ 5,000 -- 22,500 --
Operating Officer 1996 $171,250 $12,500 -- 174,375 --
John D. Hunter............... 1998 $200,000 $35,833 -- 10,000 --
Vice President, Mainframe 1997 $200,000 $ 5,000 -- 22,500 $221,250(3)
Products 1996 $200,000 $12,500 -- -- --
Andrew L. McCasker........... 1998 $142,500 $28,667 -- 30,000 $ 61,819(2)
Vice President, Distributed 1997 $125,625 $ 4,000 -- 20,250 --
Products 1996 $109,234 $20,800 -- 43,500 $ 1,315(4)
Roger A. Philips............. 1998 $102,500 $69,433(5) -- 10,000 $ 30,192(2)
Vice President, 1997 $100,000 $43,578 -- 15,000 --
International
1996 $100,000 $65,042 -- 28,500 $ 2,384(4)
</TABLE>
- ---------------
(1) Ms. Clark was President from November 1993 to September 1997. Mr. Alexander
became President in September 1997.
(2) Represents the amount recognized as taxable income in connection with the
exercise of non-qualified stock options in 1998, equal to the difference
between the fair market value of the underlying securities at the date of
exercise and the exercise price.
(3) Represents the amount recognized as taxable income to Mr. Hunter, in
connection with the exercise of non-qualified stock options in 1997, equal
to the difference between the fair market value of the underlying securities
at the date of exercise and the exercise price.
(4) Represents the cost of a sales incentive award.
(5) Includes sales commissions in 1998, 1997 and 1996 of $57,266, $41,578 and
$64,104.
6
<PAGE> 9
STOCK OPTION GRANTS IN FISCAL YEAR 1998
The following table sets forth information concerning all stock options
granted during 1998 to the Named Executive Officers.
OPTION GRANTS IN FISCAL YEAR 1998
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
----------------------------------------------- VALUE AT ASSUMED
% OF TOTAL ANNUAL RATE OF STOCK
NUMBER OF OPTIONS PRICE APPRECIATION FOR
SECURITIES GRANTED TO OPTION TERM
UNDERLYING EMPLOYEES EXERCISE -----------------------
OPTIONS IN PRICE EXPIRATION 5% 10%
NAME GRANTED 1998(1) ($/SH) DATE ($) ($)
---- ---------- ---------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Katherine K. Clark................ 10,000 1.24 $8.625 2/23/08 $ 54,242 $137,460
Chief Executive Officer
Ralph E. Alexander................ 25,625 3.19 $8.625 2/23/08 $138,996 $352,242
President and Chief Operating
Officer
John D. Hunter.................... 10,000 1.24 $8.625 2/23/08 $ 54,242 $137,460
Vice President, Mainframe
Products
Andrew L. McCasker................ 30,000 3.73 $8.625 2/23/08 $162,726 $412,381
Vice President, Distributed
Products
Roger A. Philips.................. 10,000 1.24 $8.625 2/23/08 $ 54,242 $137,460
Vice President, International
</TABLE>
- ---------------
(1) Based on an aggregate of 803,875 options granted in 1998.
The following table sets forth information concerning the exercise of stock
options during fiscal year 1998 by the Named Executive Officers and the number
and value of unexercised stock options at December 31, 1998.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1998 AND
1998 FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
NUMBER OF OPTIONS AT FISCAL OPTIONS AT FISCAL
SHARES VALUE YEAR-END (#) YEAR-END ($)
ACQUIRED ON REALIZED --------------------------- ---------------------------
NAME EXERCISE ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Katherine K. Clark........ -- -- 228,345 26,875 $1,829,015 $145,234
Chief Executive Officer
Ralph E. Alexander........ 22,000 $125,250 204,051 123,949 $1,453,863 $764,621
President and Chief
Operating Officer
John D. Hunter............ -- -- 129,907 26,875 $1,045,707 $145,234
Vice President,
Mainframe Products
Andrew L. McCasker........ 10,500 $ 61,819 41,062 66,938 $ 293,147 $338,183
Vice President,
Distributed Products
Roger A. Philips.......... 5,000 $ 30,192 44,350 35,500 $ 323,165 $206,688
Vice President,
International
</TABLE>
7
<PAGE> 10
EXECUTIVE EMPLOYMENT CONTRACTS
In April 1997, the Company entered into an employment agreement with Mr.
Ralph E. Alexander, the Company's President and Chief Operating Officer. The
Agreement is for a term of three years and renews automatically thereafter for
consecutive terms of one year unless either party elects not to renew the
agreement by providing the other with 90 days prior written notice. The Company
has the right at any time to terminate Mr. Alexander's employment agreement for
convenience, provided the Company pays a severance amount equal to three-fourths
of the salary in effect at the time of termination during the nine-month period
following such termination.
REPORT OF THE COMPENSATION COMMITTEE AND THE BOARD
OF DIRECTORS OF LANDMARK SYSTEMS CORPORATION
ON EXECUTIVE COMPENSATION
In accordance with the rules of the Securities and Exchange Commission, the
Compensation Committee and the Board offer this report regarding the executive
compensation policy and compensation program for the Chief Executive Officer and
other executive officers of the Company in effect for fiscal year 1998. This
report, as well as the Performance Graph on page 13, are not soliciting
materials, are not deemed filed with the Securities and Exchange Commission and
are not incorporated by reference in any filing of the Company under the
Securities Act of 1933, as amended, or the Exchange Act, whether made before or
after the date of this proxy statement and irrespective of any general
incorporation language in any such filing.
OVERVIEW AND PHILOSOPHY
The Company's Compensation Committee is composed of Patrick W. Gross and T.
Eugene Blanchard, who are non-employee directors of the Company. Among other
responsibilities, the Compensation Committee is responsible for establishing
salaries, bonuses and other compensation for, and administering the Company's
stock option and stock purchase plans as they relate to, the Company's officers.
The salaries, bonuses and other compensation for Ms. Clark and Mr. Alexander are
subject to ratification by the Board. In general, the compensation policies
adopted by the Compensation Committee are intended to attract and retain
executives capable of enabling the Company to meet its business objectives and
motivate the Company's executives to enhance long-term stockholder value.
EXECUTIVE OFFICER COMPENSATION
The Company's executive officer compensation program is comprised of base
salary, annual cash incentive compensation in the form of a cash bonus and
long-term incentive compensation in the form of stock option grants.
The Compensation Committee intends to periodically review whether changes
in the executive compensation program are appropriate. In general, the
Compensation Committee intends to continue its present practice of recommending
that annual executive cash compensation (base salary and bonus) and option
grants be set at levels above the median levels in the software industry,
adjusted for the size of the Company, its stage of development, the highly
competitive and innovative nature of the software industry and the level of
responsibility, experience, performance and significant achievements of the
executive officers.
BASE SALARY
Over the past few years the Company has moved executive officer base salary
to competitive levels relative to the various markets from which the Company
attracts executive talent. Competition for senior level talent in the software
industry, particularly in the Northern Virginia market, continues to be high.
Because of this condition and due to the continuing growth of the Company, the
base salary for executive officers generally is set above the median level of
comparable companies.
8
<PAGE> 11
CASH INCENTIVE BONUS
The Company pays periodic bonuses to its executive officers based primarily
upon the Company's performance, taking into consideration, in certain instances,
individual performance and the other factors noted above.
STOCK OPTION GRANTS
The Company broadly grants stock options in order to provide long-term
incentives and align employee and stockholder long-term interests by creating a
direct link between compensation and stockholder return. Stock options are
granted at an option price equal to the fair market value of the Company's
Common Stock on the date of grant. In order to facilitate long-term incentives
through the option grants, options are subject to vesting over four years, with
25% of the shares vesting at the end of each of the first, second, third, and
fourth years following the date of grant. During 1998, 39.0% of the total
options granted by the Company were granted to executive officers of the
Company, including 10.6% of the total options granted to the Named Executive
Officers.
The option vesting period is designed to encourage employees to work with a
long-term view of the Company's welfare and to establish their long-term
affiliation with the Company. It is also designed to reduce employee turnover
and to retain the trained skills of valued staff.
Because a primary purpose of granting options is to provide incentives for
future performance and to secure retention of valued employees, the Committee
considers each individual's previously granted shares and the number of unvested
shares when granting additional stock options.
Section 162(m) of the Code limits the Company to a deduction for federal
income tax purposes of no more than $1 million of compensation paid to certain
Named Executive Officers in a taxable year. Compensation above $1 million may be
deducted if it is "performance-based compensation" within the meaning of the
Code. The Compensation Committee has determined that stock options granted by
the Compensation Committee under the Company's Stock Incentive Plans with an
exercise price at least equal to the fair market value of the Company's Common
Stock on the date of grant shall be treated as "performance-based compensation."
CHIEF EXECUTIVE OFFICER AND CHIEF OPERATING OFFICER COMPENSATION
During 1998, Katherine K. Clark, a founder of the Company and its Chief
Executive Officer, and Ralph E. Alexander, the President and Chief Operating
Officer (and until November 1998, Chief Financial Officer), led the Company
towards significant business and financial achievements. Financially, the
Company enjoyed strong growth and success: revenues for 1998 increased 19% over
1997 revenues and the Company generated $6.3 million of net income in 1998 as
compared to net income of $3.0 million in 1997. The Company's stock price was
23.6% higher on December 31, 1998 than at the beginning of the year. During
1998, Ms. Clark received a base salary of $235,000, a bonus of $52,500, and a
nonqualified stock option grant of 10,000 shares. Mr. Alexander received a base
salary of $225,000, a bonus of $52,500, and a nonqualified stock option grant of
25,625 shares. The Compensation Committee intends to evaluate the compensation
provided to Ms. Clark and Mr. Alexander during 1999.
<TABLE>
<S> <C>
BOARD OF DIRECTORS: COMPENSATION COMMITTEE:
Patrick H. McGettigan Patrick W. Gross
Katherine K. Clark T. Eugene Blanchard
Ralph E. Alexander
Jeffrey H. Bergman
T. Eugene Blanchard
Patrick W. Gross
Sudhakar V. Shenoy
</TABLE>
9
<PAGE> 12
APPROVAL OF AMENDMENT OF THE 1994 STOCK INCENTIVE
PLAN TO INCREASE THE TOTAL NUMBER OF SHARES WHICH
MAY BE ISSUED UNDER THE PLAN
(PROPOSAL 2)
The Company maintains the 1994 Stock Incentive Plan pursuant to which
incentive stock options, nonqualified stock options, restricted stock and bonus
stock may be granted to employees of the Company. The number of shares of Common
Stock reserved for issuance under the 1994 Stock Incentive Plan currently is
3,000,000. As of March 31, 1999, a total of 2,473,614 shares of Common Stock
were outstanding under this plan. Unless sooner terminated by action of the
Board, the 1994 Stock Incentive Plan terminates in September 2004.
Previously, the Company also maintained the First Amended and Restated 1989
Stock Incentive Plan and the 1992 Executive Stock Incentive Plan, which provided
benefits similar to those available under the 1994 Stock Incentive Plan. Each of
those plans, however, terminated by their respective terms in February 1999, for
the First Amended and Restated 1989 Stock Incentive Plan, and in March 1999, for
the 1992 Executive Stock Incentive Plan.
The Board of Directors of the Company has approved, subject to stockholder
approval, amending the 1994 Stock Incentive Plan to increase the aggregate
number of shares of Common Stock that may be issued under the 1994 Stock
Incentive Plan from 3,000,000 to 4,500,000. The purpose of the 1994 Stock
Incentive Plan is to offer employees additional incentive and encouragement to
remain in the service of the Company by increasing their personal participation
in the Company through stock ownership. The Board of Directors believes that the
proposed increase is essential to permit the Company to continue to provide
long-term, equity-based incentives to present and future employees.
Approval of the amendment to the 1994 Stock Incentive Plan requires the
affirmative vote of the holders of a majority of the votes cast at the meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS OF THE
COMPANY VOTE "FOR" THE APPROVAL OF THE AMENDMENT TO THE 1994 STOCK INCENTIVE
PLAN.
Set forth below is a summary of the material provisions of the 1994 Stock
Incentive Plan, to the extent not described above. The description reflects the
amendment to the 1994 Stock Incentive Plan proposed for approval by the
stockholders at the Annual Meeting.
The 1994 Stock Incentive Plan is administered by the Stock Option
Committee, which currently consists of Ms. Clark and Messrs. McGettigan and
Alexander, with respect to all non-officer employees. The Compensation Committee
administers the 1994 Stock Incentive Plan with respect to the Company's
officers. Grants under the 1994 Stock Incentive Plan to Ms. Clark and Mr.
Alexander are subject to ratification by the Board. The Board may amend the 1994
Stock Incentive Plan at any time. The Board (or the applicable committee) is
authorized to determine, consistent with the provision of the 1994 Stock
Incentive Plan, the employees to be granted stock options, restricted stock and
stock bonuses, and to determine the terms of each stock option and restricted
stock award granted, including (i) the number of shares subject to each option,
(ii) when the option becomes exercisable, (iii) the duration of the option, and
(iv) any other appropriate terms of the option agreement. The Board may also
accelerate the time at which any option may be exercised. The 1994 Stock
Incentive Plan provides that in the event of a merger in which the Company is
not the surviving corporation, the sale of 50 percent or more of the Company's
outstanding stock to persons who are not stockholders on the date of grant, or
the liquidation or dissolution of the Company, each outstanding option and
restricted stock award will automatically become vested immediately prior to the
effective date of such event.
The 1994 Stock Incentive Plan requires that the exercise price of each
incentive stock option be set at the fair market value of the Common Stock on
the date of grant. It also requires that the exercise price of each
10
<PAGE> 13
nonqualified stock option be set at no less than 85 percent of the fair market
value of the Common Stock on the date of grant.
The number of shares subject to the 1994 Stock Incentive Plan may be
adjusted by the Board in the event of a merger, consolidation, sale of all or
substantially all of the assets of the Company, reorganization,
reclassification, stock dividend, stock split, reverse stock split or similar
distribution with respect to the outstanding shares of Common Stock.
RATIFICATION OF THE SELECTION OF INDEPENDENT ACCOUNTANTS
(PROPOSAL 3)
In February 1999, the Board approved the selection of
PricewaterhouseCoopers LLP as independent accountants of the Company for the
fiscal year ending December 31, 1999. Audit services performed for the Company
during fiscal year ended December 31, 1998 included examination of the Company's
financial statements. PricewaterhouseCoopers LLP has informed the Company that
it has no material direct or indirect interest in the Company.
Price Waterhouse LLP, prior to its merger with Coopers & Lybrand LLP in
1998, served as the Company's independent accountants since 1985.
Representatives of PricewaterhouseCoopers LLP are expected to be present at the
annual meeting and will be afforded the opportunity to make a statement if they
so desire and to respond to appropriate questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS OF THE
COMPANY VOTE "FOR" THE RATIFICATION OF THE SELECTION OF PRICEWATERHOUSECOOPERS
LLP AS THE COMPANY'S INDEPENDENT ACCOUNTANTS.
11
<PAGE> 14
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION AND CERTAIN TRANSACTIONS
From January 1998 to November 1998, Henry D. Barratt, Jr., T. Eugene
Blanchard and Patrick W. Gross, none of whom is an employee of the Company,
served on the Compensation Committee of the Board. In November 1998, Mr. Barratt
resigned from the Board and the Compensation Committee. No member of the
Compensation Committee serves as a member of the board of directors or
compensation committee of any entity that has one or more executive officers
serving as a member of the Company's Board or the Compensation Committee.
12
<PAGE> 15
STOCKHOLDER RETURN PERFORMANCE GRAPH
The following graph and table show the cumulative total stockholder return
on the Company's Common Stock compared to the Nasdaq Stock Market (U.S.) Index
and the Nasdaq Computer & Data Processing Index for the period between November
18, 1997 (the date the Company's Common Stock began trading on the Nasdaq
National Market) and December 31, 1998 (the last trading day in fiscal year
1998). The graph assumes $100 was invested (1) in the Company's Common Stock,
(2) in the Nasdaq Stock Market (U.S.) Index and (3) in the Nasdaq Computer &
Data Processing Index, and assumes reinvestment of dividends.
[LINE GRAPH]
<TABLE>
<CAPTION>
LANDMARK SYSTEMS NASDAQ STOCK MARKET NASDAQ COMPUTER & DATA
CORPORATION (U.S.) PROCESSING
---------------- ------------------- ----------------------
<S> <C> <C> <C>
11/18/97 100.00 100.00 100.00
11/97 102.00 101.00 103.00
12/97 129.00 99.00 96.00
1/98 134.00 102.00 104.00
2/98 125.00 112.00 118.00
3/98 134.00 116.00 127.00
4/98 111.00 118.00 128.00
5/98 95.00 111.00 119.00
6/98 123.00 119.00 141.00
7/98 138.00 117.00 137.00
8/98 113.00 94.00 111.00
9/98 116.00 108.00 133.00
10/98 129.00 112.00 129.00
11/98 150.00 123.00 150.00
12/98 159.00 139.00 173.00
</TABLE>
The Nasdaq Stock Market (U.S.) Index has been selected as a broad equity
market index. The Nasdaq Computer & Data Processing Index was selected because
the Company believes that the index fairly represents the companies generally
engaged in the line of business similar to that of Landmark.
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 10% of a registered class of
the Company's equity securities to file with the Securities and Exchange
Commission and the Nasdaq Stock Market initial reports of ownership and reports
of changes in ownership of Common Stock and other equity securities of the
Company. In addition, under Section 16(a), trusts for which a reporting person
is a trustee and a beneficiary (or for which a member of his immediate family is
a beneficiary) may have a separate reporting obligation with regard to ownership
of the Common Stock and other equity securities of the Company. Such reporting
persons are required by rules of the Securities and Exchange Commission to
furnish the Company with copies of all Section 16(a) reports they file. In 1998,
the Company received Section 16(a) reports and written representations that
certain reports were not required. The Company believes that during 1998 all
reports that were required to be filed under Section 16 of the Exchange Act were
timely filed, except as follows: Theodore L. Cruse, a former executive
13
<PAGE> 16
officer of the Company, failed to timely report on Form 4 a stock option
exercise and subsequent sale, which report has subsequently been filed.
STOCKHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Pursuant to rules of the Securities and Exchange Commission, stockholder
proposals intended to be presented at the 2000 annual meeting of stockholders
must be received by the Secretary of the Company on or before December 14, 1999
in order to be included in the Company's proxy statement and form of proxy
relating to that meeting. Prior to June 1, 1999, proposals should be sent to
8000 Towers Crescent Drive, Vienna, Virginia 22182. After June 1, 1999,
proposals should be sent to 12700 Sunrise Valley Drive, Reston, Virginia 20191.
The submission by a stockholder of a proposal for inclusion in the proxy
statement does not guarantee that it will be included. Any stockholder proposal
not included in the proxy materials disseminated by the management of the
Company for the Company's 2000 annual meeting in accordance with Rule 14a-8
under the Securities Exchange Act of 1934 (the "Exchange Act") will be
considered untimely for the purposes of Rules 14a-4 and 14a-5 under the Exchange
Act if notice of the proposal is received after February 28, 2000. Management
proxies will be authorized to exercise discretionary authority with respect to
any stockholder proposal not included in the Company's proxy materials unless
(a) the Company receives notice of such proposal by February 28, 2000, and (b)
the conditions set forth in Rule 14-4(c)(2)(i)-(iii) under the Exchange Act are
met.
By order of the Board of Directors,
Worth D. MacMurray
Secretary
Dated: April 12, 1999
STOCKHOLDERS ARE REMINDED TO SIGN AND DATE THE ENCLOSED PROXY AND MAIL IT
PROMPTLY IN THE POSTAGE-PAID ENVELOPE PROVIDED.
14
<PAGE> 17
LANDMARK SYSTEMS CORPORATION
PROXY/VOTING INSTRUCTION CARD
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF LANDMARK SYSTEMS
CORPORATION FOR THE ANNUAL MEETING OF STOCKHOLDERS ON MAY 11, 1999.
The undersigned appoints Katherine K. Clark and Worth D. MacMurray, and each of
them, with full power of substitution in each, the proxies of the undersigned,
to represent the undersigned and vote all shares of Landmark Systems Corporation
Common Stock which the undersigned may be entitled to vote at the Annual Meeting
of Stockholders to be held on May 11, 1999, and at any adjournment or
postponement thereof, as indicated on the reverse side.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1,2 AND 3.
(Continued and to be dated and signed on the reverse side.)
Landmark Systems Corporation 8000 Towers Crescent Drive Vienna, Virginia 22182
SEE REVERSE
SIDE
<PAGE> 18
[X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE
<TABLE>
<S> <C> <C> <C>
NOMINEES: Patrick H. McGettigan, Katherine K. Clark,
1. Election of FOR WITHHELD * EXCEPTIONS Jeffrey H. Bergman, Ralph E. Alexander,
Directors [ ] [ ] [ ] Patrick W. Gross, T. Eugene Blanchard,
Sudhakar V. Shenoy
* Exceptions INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR
ANY INDIVIDUAL NOMINEE, MARK THE "EXCEPTIONS"
BOX AND WRITE THAT NOMINEE'S NAME IN THE SPACE
PROVIDED AT LEFT
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2. Approval of an amendment to the Company's 1994 Stock Incentive Plan to
increase by 1,500,000, to an aggregate of 4,500,000 shares, the number
of shares of Common Stock authorized for issuance thereunder.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. Ratification of selection of PricewaterhouseCoopers LLP as independent
accountants
</TABLE>
In Their Discretion, The Proxies Are Authorized To Vote Upon Such Other
Matters As May Properly Come Before The Meeting Or Any Adjournment Or
Postponement Thereof.
If you plan to attend meeting, please check here [ ]
Change of Address and/or Comments mark here [ ]
The signature on this Proxy should correspond exactly with
stockholder's name as printed to the left. In the case of joint
tenancies, co-executors, or co-trustees, both should sign. Persons
signing as Attorney, Executor, Administrator, Trustee or Guardian
should give their full title.
Vote must be indicated (X) in black or blue ink.
(PLEASE SIGN, DATE AND RETURN THIS PROXY IN
THE ENCLOSED POSTAGE PREPAID ENVELOPE.)
DATED:
SIGNATURE
SIGNATURE
