<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 (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 Rule 14a-11(c) or Rule 14a-12
COMPUWARE CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
COMPUWARE CORPORATION
- --------------------------------------------------------------------------------
(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)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
COMPUWARE CORPORATION
- ---------------------------------------------------------------
Corporate Headquarters
31440 NORTHWESTERN HIGHWAY, FARMINGTON HILLS, MICHIGAN 48334-2564
(248) 737-7300 Compuware Logo
July 16, 1999
Dear Compuware Shareholder:
You are cordially invited to attend the 1999 Annual Meeting of Shareholders
of Compuware Corporation to be held at 3:00 p.m., Eastern Daylight Time on
Tuesday, August 24, 1999. The meeting will be held at Compuware's corporate
offices, 31440 Northwestern Highway, Farmington Hills, Michigan 48334-2564.
The following pages contain the formal Notice of the Annual Meeting and the
Proxy Statement. You may wish to review this material for information concerning
the business to be conducted at the meeting and the nominees for election as
directors.
If your shares are currently held in the name of your broker, bank or other
nominee and you wish to attend the meeting, you should obtain a letter from your
broker, bank or other nominee indicating that you are the beneficial owner of a
stated number of shares of stock as of the July 1, 1999 record date. This will
help facilitate registration at the meeting.
Your vote is important. Whether you plan to attend the meeting or not, we
urge you to complete, sign and return your proxy card as soon as possible. This
will ensure representation of your shares in the event you are unable to attend
the meeting. You may, of course, revoke your proxy and vote in person at the
meeting if you so desire.
Sincerely,
Peter Karmanos, Jr.
Peter Karmanos, Jr.
Chairman & Chief Executive Officer
<PAGE> 3
COMPUWARE CORPORATION
31440 NORTHWESTERN HIGHWAY
FARMINGTON HILLS, MICHIGAN 48334-2564
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD AUGUST 24, 1999
To the Shareholders:
Please take notice that the Annual Meeting of Shareholders of Compuware
Corporation (the "Company") will be held at the Company's corporate offices at
31440 Northwestern Highway, Farmington Hills, Michigan 48334-2564 on Tuesday,
August 24, 1999 at 3:00 p.m., Eastern Daylight Time, to consider and act upon
the following matters:
(1) The election of eleven directors to serve until the next Annual Meeting
of Shareholders and until their successors shall have been elected and
qualified.
(2) Such other business as may properly come before the meeting.
Only shareholders of record at the close of business on July 1, 1999 will
be entitled to vote at the meeting.
Your attention is called to the attached Proxy Statement and the
accompanying proxy card. You are requested to sign and return the proxy card in
the enclosed envelope. If you attend the meeting, you may withdraw your proxy
and vote your shares.
A copy of the Annual Report of the Company for the fiscal year ended March
31, 1999 accompanies this notice.
By Order of the Board of Directors,
Thomas Costello, Jr.
Thomas Costello, Jr., Secretary
Farmington Hills, Michigan
July 16, 1999
<PAGE> 4
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
OF
COMPUWARE CORPORATION
INTRODUCTION
This Proxy Statement, the 1999 Annual Report to Shareholders and the
accompanying proxy card are first being mailed on or about July 16, 1999, to
shareholders of record on July 1, 1999 of Compuware Corporation ("Compuware" or
the "Company") in connection with the solicitation by the Company's Board of
Directors of proxies from holders of Compuware Common Stock, $.01 par value per
share ("Common Stock"), for use at the 1999 Annual Meeting of Shareholders to be
held at 3:00 p.m., Eastern Daylight Time, on August 24, 1999, at Compuware
Corporation, 31440 Northwestern Highway, Farmington Hills, Michigan 48334-2564,
and at any adjournment or adjournments thereof. Farmington Hills is a suburb of
Detroit.
We urge you to sign, date and mail your proxy card promptly to make certain
that your shares will be voted at the meeting.
A proxy given pursuant to this solicitation may be revoked at any time
before it is voted by filing with the Secretary of Compuware a written notice of
revocation bearing a date later than the proxy, by duly executing a subsequent
proxy relating to the same shares and delivering it to the Secretary of
Compuware, or by attending the Annual Meeting and voting in person. Attendance
at the Annual Meeting will not in and of itself operate to revoke a proxy. Any
written notice of revocation should be sent to: Secretary, Compuware
Corporation, 31440 Northwestern Highway, Farmington Hills, Michigan 48334-2564.
The principal executive offices of Compuware are located at 31440
Northwestern Highway, Farmington Hills, Michigan 48334-2564, and the telephone
number is (248) 737-7300. All references herein to fiscal 1999 mean the 12
months ended March 31, 1999.
GENERAL INFORMATION
The expense of soliciting proxies, including the cost of preparing,
printing and mailing the Notice of the 1999 Annual Meeting of Shareholders, the
Proxy Statement, the Annual Report and the accompanying proxy card, will be
borne by the Company. In addition to the use of the mails, proxies may be
solicited by personal interview, telephone or facsimile, by directors, officers
and regular employees of the Company, without special compensation therefor. The
Company has also retained Corporate Investor Communications, Inc., 111 Commerce
Road, Carlstadt, New Jersey 07072-2586 to assist in the solicitation of proxies,
for an approximate cost of $6,000, plus reasonable expenses. Brokers and other
persons holding stock in their names, or in the names of nominees, will be
requested to forward proxy material to the beneficial owners of the stock and to
obtain proxies, and the Company will defray reasonable expenses incurred in
forwarding such material.
Holders of shares of Common Stock of record at the close of business on
July 1, 1999 are entitled to notice of, and to vote at the 1999 Annual Meeting
of Shareholders. There were outstanding on July 1, 1999, 355,712,053 shares of
Common Stock, the only class of stock outstanding. Each share is entitled to one
vote.
All proxies signed and returned to the Company will be voted, if not
otherwise specified thereon, for approval of the directors described herein.
Management of the Company knows of no other matters to come before the 1999
Annual Meeting. If any other matters requiring a shareholder vote properly come
before the meeting, the persons appointed as proxies on the enclosed proxy card
will vote with respect to such matters in accordance with their best judgment.
2
<PAGE> 5
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
BOARD OF DIRECTORS
The Board of Directors is responsible for the overall affairs of the
Company. The Board of Directors held six meetings this past year. Each of the
directors attended at least 75% of the meetings of the Board of Directors and
the Committees to which he or she belongs.
AUDIT COMMITTEE
The Audit Committee consists of three directors, Messrs. Grabe, Halling and
Weicker, none of whom has ever been an employee of the Company. The Audit
Committee met twice during this past year. The Audit Committee has the
responsibility to review, with the Company's independent auditors, the Company's
financial statements, the scope and findings of the auditor's examinations, and
the internal accounting controls and practices of the Company.
COMPENSATION COMMITTEE
The Compensation Committee consists of three independent directors, Messrs.
Goldsmith, Halling and Weicker. The Compensation Committee administers the
Company's executive compensation and stock option programs. The Compensation
Committee met once during the year and held discussions in lieu of additional
meetings. The Committee makes recommendations to the Board of Directors on
organization, succession and compensation, including stock option programs and
benefit plans, individual salary rates, supplemental compensation and management
special awards, the election of officers, consultantships and similar matters
where Board approval is required.
3
<PAGE> 6
SECURITY OWNERSHIP OF MANAGEMENT
The following table shows as of July 1, 1999 the beneficial ownership of
Compuware Common Stock by each current director, by each named executive
officer, by all directors and executive officers as a group and by holders of 5%
or more.
<TABLE>
<CAPTION>
BENEFICIAL PERCENT
NAME OWNERSHIP(1) OF CLASS
---- ------------ --------
<S> <C> <C>
Stephen H. Fagan............................................ 795,216(2) *%
Henry A. Jallos............................................. 344,358(3) *
Peter Karmanos, Jr. ........................................ 22,924,820(4) 6.4
Joseph A. Nathan............................................ 1,679,730(5) *
W. James Prowse............................................. 1,859,386(6) *
John N. Shevillo............................................ 162,910(7) *
Elizabeth A. Chappell....................................... 28,524(8) *
Elaine K. Didier............................................ 23,500(9) *
Bernard M. Goldsmith........................................ 291,428(10) *
William O. Grabe............................................ 172,500(11) *
William R. Halling.......................................... 106,500(12) *
G. Scott Romney............................................. 173,797(13) *
Thomas Thewes............................................... 12,323,292(14) 3.5
Lowell P. Weicker, Jr. ..................................... 55,300(15) *
By all executive officers and directors as a group (18
persons).................................................. 41,988,101(16) 11.7
Massachusetts Financial Services............................ 33,019,992(17) 9.3
FMR Corp. .................................................. 39,910,680(18) 11.2
</TABLE>
- -------------------------
* Less than 1%.
(1) Except as otherwise noted, each beneficial owner identified in this table
has sole investment power with respect to the shares shown in the table to
be owned by the person or entity.
(2) Includes (i) 4,478 shares owned directly by Mr. Fagan; (ii) 538 shares held
for Mr. Fagan through the Company's ESOP; and (iii) 790,200 option shares
which are fully vested.
(3) Includes (i) 4,778 shares owned directly by Mr. Jallos; (ii) 33,230 shares
held for Mr. Jallos through the Company's ESOP; and (iii) 306,350 option
shares which are fully vested.
(4) Includes (i) 5,550 shares owned directly by Mr. Karmanos; (ii) 9,798,857
shares held by Mr. Karmanos's trusts; (iii) 7,440,567 shares held by Mr.
Karmanos's Stock Limited Partnership; (iv) 3,648,000 shares Mr. Karmanos is
entitled to vote pursuant to shareholder agreements with certain
shareholders; (v) 377,600 shares held for Mr. Karmanos through the
Company's ESOP; (vi) 1,033,188 shares held by Mr. Karmanos's wife (under
voting agreement, dated July 1, 1997); and (vii) 621,058 option shares
which are fully vested. The shareholder group referenced in (iv) above
includes certain shares beneficially owned by Thomas Thewes and the Thewes
entities.
(5) Includes (i) 688,081 shares owned directly by Mr. Nathan; (ii) 183,054
shares held for Mr. Nathan through the Company's ESOP; and (iii) 808,595
shares which are fully vested.
(6) Includes (i) 1,407,907 shares held by Mr. Prowse's trust; (ii) 272,240
shares held for Mr. Prowse through the Company's ESOP; and (iii) 179,239
option shares which are fully vested.
(7) Includes (i) 4,994 shares held directly by Mr. Shevillo; (ii) 77,916 shares
held for Mr. Shevillo through the Company's ESOP; and (iii) 80,000 option
shares which are fully vested.
(8) Includes (i) 7,523 shares held directly by Ms. Chappell; (ii) 24 shares
held by Ms. Chappell's child; and (iii) 20,977 option shares which are
fully vested.
(9) Includes (i) 2,600 shares held directly by Ms. Didier; and (ii) 20,900
option shares which are fully vested.
4
<PAGE> 7
(10) Includes (i) 38,928 shares owned directly by Mr. Goldsmith; and (ii)
252,500 option shares which are fully vested.
(11) Includes (i) 60,000 shares owned directly by Mr. Grabe; and (ii) 112,000
option shares which are fully vested.
(12) Includes (i) 4,000 shares held directly by Mr. Halling; (ii) 62,500 option
shares which are fully vested; and (iii) 40,000 option shares which will
vest within 60 days.
(13) Includes (i) 30,500 shares owned directly by Mr. Romney; (ii) 2,000 shares
owned by Mr. Romney's wife; and (iii) 141,297 option shares which are fully
vested.
(14) Includes (i) 9,557,445 shares held by Mr. Thewes's trusts; (ii)
non-controlling minority interest in 1,000,000 shares held by The Thewes
Family Limited Partnership; (iii) non-controlling minority interest in
1,500,000 shares held by The Thewes GST Limited Partnership; (iv) 236,272
shares held for Mr. Thewes through an IRRA; and (v) 29,575 option shares
which are fully vested.
(15) Includes 3,048 shares held by Mr. Weicker; (ii) 2,000 shares held by Mr.
Weicker's wife; (iii) 10,252 option shares which are fully vested; and (vi)
40,000 option shares which will vest within 60 days.
(16) Includes 4,417,543 vested options and all options which vest within 60
days.
(17) Shares listed are from 13F dated March 31, 1999. The address for
Massachusetts Financial Services is 500 Boylston Street, 25th Floor,
Boston, Massachusetts 02116.
(18) Shares listed are from 13G/A dated April 9, 1999. The address for FMR Corp.
is 82 Devonshire Street, Boston, Massachusetts 02109-3614.
5
<PAGE> 8
I. ELECTION OF DIRECTORS
NOMINEES
Eleven directors, constituting the entire Board of Directors, are proposed
to be elected to hold office until the 2000 Annual Meeting and until their
successors are elected and qualified.
All nominees for election have indicated their willingness to serve, but if
any of them should decline or be unable to serve as a director, it is intended
that the enclosed proxy will be voted for the election of such person or persons
as are nominated as replacements by the Board of Directors in accordance with
the Bylaws of the Company.
A brief summary of each nominee's principal occupation and other
information follows:
PETER KARMANOS, JR.
Mr. Karmanos, age 56, a founder of the Company, has served as a director of
the Company since its inception, as Chairman of the Board since November 1978,
and as Chief Executive Officer since July 1987. From January 1992 until October
1994, Mr. Karmanos served as President of the Company.
JOSEPH A. NATHAN
Mr. Nathan, age 46, has served as a director of the Company since September
1990 and as President and Chief Operating Officer since October 1994. From
December 1990 to October 1994, Mr. Nathan served as Senior Vice President and
Chief Operating Officer, Products Division.
ELIZABETH A. CHAPPELL
Ms. Chappell, age 41, has served as a director of the Company since October
1997. Ms. Chappell is the Chief Executive Officer of The Chappell Group, Inc., a
consulting firm. From September 1979 to September 1994, Ms. Chappell served as a
Vice President with AT&T Corp. Ms. Chappell is also a director of Handleman
Company.
ELAINE K. DIDIER
Ms. Didier, age 51, has served as a director of the Company since October
1997. Effective August 30, 1999, Ms. Didier will serve as Dean of the University
Library and Professor at Oakland University. Ms. Didier served as the Interim
Director of Academic Outreach at the University of Michigan until March 1999.
Prior to her assignment as Interim Director, Ms. Didier held other positions
with the University, including Director of Information Resources.
BERNARD M. GOLDSMITH
Mr. Goldsmith, age 55, has served as a director of the Company since July
1992. Mr. Goldsmith has been the Managing Director of Updata Capital, Inc., an
investment banking firm, since 1986.
WILLIAM O. GRABE
Mr. Grabe, age 61, has served as a director of the Company since April
1992. Mr. Grabe is a Managing Member of General Atlantic Partners, LLC and has
been affiliated with General Atlantic Partners, LLC or its predecessor since
April 1992. From 1984 until March 1992, Mr. Grabe was an IBM Vice President. Mr.
Grabe is also a director of Baan Company N.V., Exact Holding N.V., Gartner
Group, Inc., LHS Group, Inc., Meta4 N.V., and TDS GmbH along with a number of
privately held companies in which General Atlantic Partners, LLC is an investor.
WILLIAM R. HALLING
Mr. Halling, age 60, has served as a director of the Company since October
1996. Mr. Halling is the President of The Economic Club of Detroit. Mr. Halling
was with KPMG Peat Marwick from 1961 through 1993, where he served as a Managing
Partner and member of the Board of Directors. Mr. Halling is also a director of
Detroit Legal News.
6
<PAGE> 9
W. JAMES PROWSE
Mr. Prowse, age 56, has served as a director of the Company since December
1986 and as Executive Vice President from February 1998 through March 31, 1999.
From January 1992 through January 1998, Mr. Prowse served as Senior Vice
President.
G. SCOTT ROMNEY
Mr. Romney, age 58, has served as a director of the Company since January
1996. Mr. Romney has been a partner at Honigman Miller Schwartz and Cohn, a law
firm, since 1977. The law firm serves as counsel to the Company.
THOMAS THEWES
Mr. Thewes, age 67, a founder of the Company, has served as a director of
the Company since its inception, and has served as Vice Chairman of the Board
since March 1988. Mr. Thewes served as Treasurer from May 1988 until May 1995.
Mr. Thewes served as Senior Vice President from March 1988 until March 1995 and
as Secretary from April 1973 until May 1995.
LOWELL P. WEICKER, JR.
Mr. Weicker, age 68, has served as a director of the Company since October
1996. Mr. Weicker is presently a visiting professor at the University of
Virginia in Charlottesville, Virginia, and currently serves on the Board of
Directors of HPSC, Inc. UST Corporation, and Phoenix Duff & Phelps Mutual Funds.
From 1990 through 1994, Mr. Weicker served as the Governor of Connecticut, and
from 1970 through 1988, as a U.S. Senator from Connecticut. From 1962 through
1968, Mr. Weicker served as a Connecticut State Representative.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THESE NOMINEES.
7
<PAGE> 10
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
SUMMARY COMPENSATION TABLE
The following table sets forth information for each of the fiscal years
ended March 31, 1999, 1998 and 1997 concerning the compensation of Compuware's
Chief Executive Officer and of each of Compuware's other four most highly
compensated executive officers whose total annual salary and bonus exceeded
$100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION ---------------------
FISCAL ------------------------ SECURITIES UNDERLYING
NAME AND PRINCIPAL POSITIONS YEAR SALARY BONUS OPTION AWARDS
---------------------------- ------ ------ ----- ---------------------
<S> <C> <C> <C> <C>
Peter Karmanos, Jr.(1)..................... 1999 $600,000 $1,600,000 1,261,058
Chairman of the Board and 1998 600,000 1,600,000 1,280,000
Chief Executive Officer 1997 500,000 1,330,000 1,064,000
Joseph A. Nathan........................... 1999 500,000 1,333,335 650,379
President and 1998 500,000 1,333,333 1,066,666
Chief Operating Officer 1997 400,000 1,064,000 851,200
Stephen H. Fagan........................... 1999 330,000 927,169 352,000
Senior Vice President 1998 315,000 933,006 672,000
Strategic Relationships, Europe 1997 300,000 798,000 638,400
John N. Shevillo........................... 1999 320,000 908,735 341,335
Senior Vice President 1998 300,000 841,715 640,000
Strategic Accounts 1997 300,000 798,000 638,400
Henry A. Jallos............................ 1999 350,000 933,335 373,335
Executive Vice President 1998 330,000 880,000 704,000
Products Division 1997 300,000 798,000 638,400
</TABLE>
- -------------------------
(1) In fiscal 1999, 1998 and 1997, Compuware paid premiums of approximately
$185,000 in each year in connection with a split dollar life insurance
arrangement maintained on the life of Mr. Karmanos. In connection with that
arrangement, the insurance premiums paid with respect to term life insurance
and a portion of the whole life insurance were paid by Mr. Karmanos's
children or trusts for their benefit. The premiums paid by Compuware will be
repaid to it upon the earliest to occur of Mr. Karmanos's death or
retirement, the cancellation of the policies or the transfer of the policies
to Mr. Karmanos's children or trusts for their benefit. It is currently
anticipated that such premiums will be repaid to Compuware in approximately
four years, when the policies, if still outstanding, will be transferred to
Mr. Karmanos's children or trusts for their benefit. At that time, the cash
surrender value of the policies is expected to be equal to the aggregate
premiums to be repaid to Compuware.
8
<PAGE> 11
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning the number of options
granted, exercise price and potential realized value at assumed annual rates of
stock price appreciation for the option term for grants to each of the executive
officers named in the Summary Compensation Table for the year ended March 31,
1999. The information presented below reflects the executive stock option grant
of 4,265,685 shares on April 8, 1999.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------- POTENTIAL REALIZED VALUE
PERCENTAGE OF AT ASSUMED ANNUAL RATES
TOTAL OPTIONS OF STOCK PRICE APPRECIATION
GRANTED TO FOR OPTION TERM
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION ---------------------------
NAME GRANTED FISCAL 1999 PRICE DATE 5%($) 10%($)
---- ------- ------------- -------- ---------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Peter Karmanos, Jr. ........ 640,000 6.99% $17.813 4/8/09 $7,169,599 $18,169,174
588,740 6.43% 27.781 11/2/02 3,209,244 6,865,142
32,318 0.35% 27.781 10/25/05 345,456 798,773
Joseph A. Nathan............ 533,335 5.82% 17.813 4/8/09 5,974,685 15,141,025
79,968 0.87% 19.875 10/7/02 342,517 737,623
37,076 0.40% 27.969 10/7/02 223,475 481,261
Stephen H. Fagan............ 352,000 3.84% 17.813 4/8/09 3,943,280 9,993,045
John N. Shevillo............ 341,335 3.73% 17.813 4/8/09 3,823,805 9,690,273
Henry A. Jallos............. 373,335 4.08% 17.813 4/8/09 4,182,285 10,598,732
</TABLE>
AGGREGATED OPTION EXERCISES AND FISCAL 1999 OPTION VALUE TABLE
The following table sets forth information concerning the number of options
exercised, value realized (market price less the exercise price) and the value
of unexercised in-the-money stock options held by each of the executive officers
named in the Summary Compensation Table above as of March 31, 1999:
AGGREGATED OPTION EXERCISES IN FISCAL 1999
AND OPTION VALUES AT MARCH 31, 1999
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
MARCH 31, 1999(#) MARCH 31, 1999($)
SHARES --------------------- -----------------------
ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE(1)
---- ----------- -------- ------------- ----------------
<S> <C> <C> <C> <C>
Peter Karmanos, Jr. ...... 3,809,600 $85,321,246 621,058/3,488,000 $ 0/$35,804,394
Joseph A. Nathan.......... 902,100 21,760,003 1,416,544/3,169,066 28,258,272/ 35,741,515
Stephen H. Fagan.......... 815,000 23,479,044 790,200/2,168,800 17,000,931/ 25,116,136
John N. Shevillo.......... 354,800 9,344,454 80,000/2,076,800 1,690,000/ 23,848,636
Henry A. Jallos........... 469,250 12,805,182 506,350/2,220,800 10,907,194/ 25,538,636
</TABLE>
- -------------------------
(1) Represents the amount by which the market price of the Company's common
stock exceeded the exercise price of the outstanding options on March 31,
1999. Market price is based on the closing price on The Nasdaq Stock Market,
Inc. on that date of $23.875.
9
<PAGE> 12
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors has issued the
following report on executive compensation:
OBJECTIVES AND POLICIES
The Compensation Committee works with senior management of the Company to
develop and implement compensation policies, plans and programs designed to
provide strong incentives for the achievement of corporate and individual
performance goals. The Compensation Committee seeks to:
- provide rewards which are closely linked to Company and individual
performance;
- align the interests of the Company's employees with those of its
shareholders through potential stock ownership; and
- ensure that compensation and benefits are at levels which enable the
Company to attract and retain the high quality employees it needs.
Consistent with these objectives and in keeping with the long-term focus
required for the Company's business, it is the policy of the Compensation
Committee to make a high proportion of executive officer compensation and awards
under stock ownership programs dependent on long-term performance and enhancing
shareholder value.
The Company employs a formal system for developing measures of and
evaluating executive officer performance. Executive officer base salary and
individual bonus awards are determined with reference to Company-wide,
divisional and individual performance for the previous fiscal year, based on a
wide range of quantitative and qualitative measures which permit comparisons
with competitors' performance and internal targets set before the start of each
fiscal year. Quantitative measures include earnings and revenue growth. In
addition to Company-wide measures of performance, the Company considers
subjective performance factors particular to each executive officer, such as
individual managerial accomplishments and the performance of the division or
divisions for which such officer had management responsibility.
Within the total number of shares authorized by shareholders, the
Compensation Committee aims to provide stock option awards broadly and deeply
throughout the organization. Individual executive officer stock option awards
are based on level of position, individual contribution and the Company's stock
ownership objectives for executives. The Company's long-term performance
ultimately determines compensation from stock options, since stock option value
is entirely dependent on the long-term growth of the Company's stock price.
CURRENT EXECUTIVE COMPENSATION
Certain executive officers are parties to an employment agreement with the
Company. The agreements contain certain provisions which prohibit the executive
officers from competing with the Company or soliciting the Company's employees
upon the officer's termination of employment. The employment agreements also
prohibit the use of the Company's confidential information upon termination of
employment.
Messrs. Karmanos and Nathan executed employment agreements which expire on
March 31, 2000. Messrs. Fagan, Jallos and Shevillo executed employment
agreements which expired on March 31, 1999. Executive base salary for each of
the executive officers for fiscal 2000 is as follows: Mr. Karmanos -- $700,000;
Mr. Nathan -- $600,000; Mr. Fagan -- $250,000; Mr. Shevillo -- $250,000; and Mr.
Jallos -- $400,000. Further, under the current agreements, incentive goals were
increased by altering the bonus structure from one based on a fraction of the
executive's salary to one based on a multiple of the executive's salary. The
executive officers are now eligible to receive an annual bonus only if earnings
per share and performance targets for the Company as a whole are achieved.
Bonuses were paid to the executive officers in fiscal 1997, 1998 and fiscal
1999.
10
<PAGE> 13
Executive officers were granted option shares in March 1997, April 1998 and
April 1999. Fifty percent of the option shares will vest under the terms of the
plan on the third anniversary date of the grant; 25% of the option shares will
vest under the terms of the plan on the fourth and fifth anniversary dates of
the grant.
COMPENSATION COMMITTEE
Bernard M. Goldsmith
William R. Halling
Lowell P. Weicker, Jr.
11
<PAGE> 14
PERFORMANCE GRAPH
The following line graph compares (i) the cumulative total shareholder
return on the Company's Common Stock, with (ii) the Total Return Index for The
Nasdaq Stock Market, Inc., and with (iii) the Total Return Index for Nasdaq
Computer and Data Processing Services Stocks for the periods ended March 31,
1994, March 31, 1995, March 31, 1996, March 31, 1997, March 31, 1998 and March
31, 1999 using $100 invested in Compuware Common Stock and each of the two
Nasdaq indexes.
The graph displayed below is presented in accordance with SEC requirements.
Shareholders are cautioned against drawing any conclusions from the data
contained therein, as past results are not necessarily indicative of future
performance. This graph does not necessarily reflect the Company's forecast of
future financial performance.
COMPARISON OF CUMULATIVE TOTAL RETURN
PERIOD ENDING MARCH 31, 1999
<TABLE>
<CAPTION>
NASDAQ STOCK MARKET
COMPUWARE NASDAQ INDUSTRY INDEX INDEX
--------- --------------------- -------------------
<S> <C> <C> <C>
'3/31/94' 100.00 100.00 100.00
'3/31/95' 87.83 134.79 111.25
'3/31/96' 54.60 190.89 151.05
'3/31/97' 148.96 208.90 167.85
'3/31/98' 468.82 365.23 254.76
'3/31/99' 453.38 593.53 342.53
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
3/31/94 3/31/95 3/31/96 3/31/97 3/31/98 3/31/99
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Compuware 100.00 87.83 54.60 148.96 468.82 453.38
Nasdaq Industry Index 100.00 134.79 190.89 208.90 365.23 593.53
Nasdaq Stock Market Index 100.00 111.25 151.05 167.85 254.76 342.53
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE> 15
COMPENSATION OF DIRECTORS
Under the Non-Employee Director Stock Option Plan, non-employee directors
receive a one-time grant of options to purchase 20,000 shares of Common Stock
and an annual grant of 40,000 option shares. Further, each non-employee director
will receive options to purchase 2,000 option shares for each Board of Directors
meeting attended in person, 1,000 option shares for each Board of Directors
Committee meeting attended in person, 500 option shares for each Board of
Directors meeting attended by telephone, and 250 option shares for each Board of
Directors Committee meeting attended by telephone. All option shares become
exercisable over a four year period. Except for the grant of option shares,
members of the Board receive no other payment other than the reimbursement for
out-of-pocket expenses incurred in connection with attendance at Board of
Director and Committee meetings.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As of March 31, 1999 and March 31, 1998, Messrs. Goldsmith, Halling, and
Weicker served as members of the Company's Compensation Committee. Mr. Goldsmith
resigned from the Compensation Committee effective April 1, 1999. As of March
31, 1997, Messrs. Karmanos, Goldsmith, Halling and Weicker served as members of
the Company's Compensation Committee. Messrs. Goldsmith, Halling and Weicker
have never been officers or employees of the Company or any of its subsidiaries.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act ("Section 16(a)") 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 Commission
initial reports of ownership and reports of changes in ownership of Common Stock
and other equity securities of the Company. Officers, directors and greater than
10% shareholders are required by Commission regulation to furnish the Company
with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations, for fiscal year
1999, a Form 4 was not filed in a timely manner for (i) Mr. Goldsmith, a
director, (ii) Ms. Didier, a director, and (iii) Mr. Lobsinger, party to a
Voting Agreement, dated November 5, 1992, under which Mr. Karmanos voted the
shares of certain shareholders of the Company. The voting Agreement was
terminated effective March 1, 1999. Other than the forms referenced, during the
fiscal year ended March 31, 1999, all Section 16(a) filing requirements
applicable to its officers, directors and greater than 10% beneficial owners
were complied with.
RELATED PARTY TRANSACTIONS
George Karmanos, the brother of Peter Karmanos, Jr., owns Karmanos Printing
and Graphics, which provides certain printing services to the Company, including
the printing of Company brochures, stationery, envelopes, business cards,
invoices and other office supplies. For fiscal 1999, the Company paid $948,822
to such company for printing costs. The Company believes that such printing
services were provided to the Company on terms that were no less favorable to
the Company than could have been obtained from unaffiliated third parties.
Peter Karmanos, Jr. owns 67% of the common stock of Compuware Sports
Corporation ("CSC"), which operates an amateur hockey program in southeastern
Michigan. Thomas Thewes, a director of the Company, owns 33% of the common stock
of CSC. One of CSC's teams, the Plymouth Whalers, plays in the Ontario Hockey
League and supplies players to the National Hockey League ("NHL"), the other
team, the Compuware Junior Ambassadors, plays in the North American Junior
Hockey League ("NAJHL"), which primarily supplies players to leading college
hockey programs. On September 8, 1992, Compuware entered into a one year
Promotion Agreement with CSC to promote and sponsor Compuware's business
("Promotion Agreement"). The Promotion Agreement automatically renews for
successive one year terms, unless terminated with 60 days prior notice by either
party.
13
<PAGE> 16
The CSC teams play their home games at the Compuware Arena in Plymouth,
Michigan. The Compuware Arena is owned and managed by entities controlled by
interests of Peter Karmanos, Jr. and interests of Thomas Thewes. On December 1,
1996 Compuware entered into an Advertising Agreement with the Arena to promote
and sponsor Compuware's business, including but not limited to the right for the
Arena to be named "Compuware Arena" and the placement of fixed advertising in
and about the Arena. The Advertising Agreement will terminate by its terms on
November 30, 2016. Pursuant to the Promotion and Advertising Agreements, the
Company paid an aggregate of $1,235,000 in fiscal 1999.
The Company, pursuant to a Promissory Note dated April 8, 1999, provided
four loans in the total amount of $9,000,000 to Peter Karmanos, Jr., Chief
Executive Officer and Chairman of the Board. All of the loans were payable in
full on or before June 30, 1999. The loans were subject to annual interest at
the Applicable Federal Rate in effect at the time the loan was made (4.87% -
4.99%). As of the date of this Proxy Statement, all loans to Mr. Karmanos have
been repaid.
The Company, pursuant to a Promissory Note dated March 18, 1999, provided a
secured loan in the amount of $1,384,685 to Eliot Stark, Executive Vice
President. As provided in the Promissory Note, the loan is payable in full on or
before March 17, 2000, is subject to the annual accrual of interest at the
Applicable Federal Rate (4.6%), compounded monthly, and becomes immediately due
and payable should Mr. Stark's employment terminate with the Company for any
reason prior to the loan being paid in full.
G. Scott Romney, a director of the Company, is a partner in the law firm of
Honigman Miller Schwartz & Cohn ("Honigman"). Honigman was engaged by the
Company to perform legal services in fiscal 1999, and it is anticipated that
Honigman will continue to be so engaged in fiscal 2000.
SHAREHOLDER PROPOSALS
Shareholders may submit proposals to be considered for shareholder action
at the 2000 Annual Meeting if they do so in accordance with the appropriate
regulations of the Securities and Exchange Commission. Any such proposals must
be submitted to the Company's Secretary no later than March 24, 2000.
<PAGE> 17
/X/ PLEASE MARK VOTES
AS IN THIS EXAMPLE
<TABLE>
<S> <C>
- ----------------------------------------- MANAGEMENT RECOMMENDS A VOTE FOR THE ELECTION OF DIRECTORS.
COMPUWARE CORPORATION 1. Election of Directors.
- ----------------------------------------- For All With- For All
Nominees hold Except
ELIZABETH A. CHAPPELL PETER KARMANOS, JR. [ ] [ ] [ ]
ELAINE K. DIDIER JOSEPH A. NATHAN [ ] [ ] [ ]
BERNARD M. GOLDSMITH W. JAMES PROWSE [ ] [ ] [ ]
WILLIAM O. GRABE G. SCOTT ROMNEY
WILLIAM R. HALLING THOMAS THEWES
LOWELL P. WEICKER, JR.
CONTROL NUMBER: NOTE: If you do not wish your shares voted FOR a particular nominee, mark
RECORD DATE SHARES: the For All Except box and strike a line through the nominee's name. Your
shares will be voted for the remaining nominees.
Please be sure to sign and Date
date this Proxy. Mark box at right if address change or comments have been noted [ ]
- ----------------------------------------------- on the reverse side of this card. [ ]
Shareholder sign here Co-owner sign here
- -----------------------------------------------
DETACH CARD DETACH CARD
</TABLE>
COMPUWARE CORPORATION
Dear Shareholder,
The enclosed proxy card relates to the 1999 Annual Meeting of Shareholders
of Compuware Corporation. Also enclosed is a Notice of Meeting, a Proxy
Statement and a 1999 Annual Report of Compuware Corporation.
Your vote counts, and you are strongly encouraged to exercise your right to
vote your shares.
Please mark the boxes on the proxy card to indicate how your shares will be
voted. Then sign the card, detach it and return your proxy card in the
enclosed postage paid envelope.
Your vote must be received prior to the Annual Meeting of Shareholders on
August 24, 1999.
Thank you in advance for your prompt consideration of this matter.
Sincerely,
Compuware Corporation
<PAGE> 18
COMPUWARE CORPORATION
The undersigned hereby appoints as Proxies, Thomas Costello, Jr. or Laura
Fournier, with Power of Substitution, to vote the shares of Common Stock which
the undersigned is entitled to vote at the Annual Meeting of Shareholders of
Compuware Corporation, to be held on August 24, 1999 and at any adjournment(s)
thereof.
THE PROXY WILL VOTE YOUR SHARES IN ACCORDANCE WITH YOUR DIRECTIONS ON THIS CARD.
IF YOU DO NOT INDICATE YOUR CHOICES ON THIS CARD, THE PROXY WILL VOTE YOUR
SHARES FOR THE PROPOSAL.
- --------------------------------------------------------------------------------
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY USING THE ENCLOSED
ENVELOPE.
- --------------------------------------------------------------------------------
Please sign exactly as your name(s) appear(s) on the books of the Company.
Joint owners should each sign personally. Trustees, custodians, and other
fiduciaries should indicate the capacity in which they sign, and where more than
one name appears, a majority must sign. If shareholder is a corporation, the
signature should be that of an authorized officer who should indicate his or
her title.
- --------------------------------------------------------------------------------
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
- ----------------------------------- ----------------------------------
- ----------------------------------- ----------------------------------
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