<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:
<TABLE>
<S> <C>
[ ] 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
</TABLE>
Auspex Systems, Inc.
- --------------------------------------------------------------------------------
(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)(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.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
AUSPEX SYSTEMS, INC.
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 23, 1998
TO THE STOCKHOLDERS OF AUSPEX SYSTEMS, INC.:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders (the "Special
Meeting") of AUSPEX SYSTEMS, INC., a Delaware corporation (the "Company"), will
be held at 9:00 a.m., local time, on Thursday, April 23, 1998, at the Company's
headquarters, 2300 Central Expressway, Building B, Santa Clara, California
95050, for the following purposes:
1. To approve the adoption of the Company's 1997 Stock Plan and the
reservation of 1,250,000 shares of Common Stock for issuance thereunder.
2. To transact such other business as may come properly before the
meeting or any postponements or adjournments thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on March 12, 1998 are
entitled to notice of and to vote at the Annual Meeting.
All stockholders are cordially invited to attend the Annual Meeting in
person; however, to ensure your representation at the meeting you are urged to
mark, sign, date and return the enclosed proxy card as promptly as possible in
the postage prepaid envelope enclosed for that purpose. YOU MAY REVOKE YOUR
PROXY IN THE MANNER DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT AT ANY TIME
BEFORE IT HAS BEEN VOTED AT THE ANNUAL MEETING. ANY STOCKHOLDER ATTENDING THE
ANNUAL MEETING MAY VOTE IN PERSON EVEN IF HE OR SHE HAS RETURNED A PROXY.
By Order of the Board of Directors,
LOGO
Henry P. Massey, Jr.
Secretary
Santa Clara, California
March 19, 1998
<PAGE> 3
AUSPEX SYSTEMS, INC.
PROXY STATEMENT FOR
SPECIAL MEETING OF STOCKHOLDERS
------------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of AUSPEX SYSTEMS, INC., a
Delaware corporation (the "Company"), for use at a Special Meeting of
Stockholders (the "Special Meeting") to be held on Thursday, April 23, 1998 at
9:00 a.m., local time, or at any adjournment or postponement thereof, for the
purposes set forth herein and in the accompanying Notice of Special Meeting of
Stockholders. The Special Meeting will be held at the Company's headquarters,
2300 Central Expressway, Building B, Santa Clara, California 95050. The
telephone number at that location is (408) 566-2000. When proxies are properly
dated, executed and returned, the shares they represent will be voted at the
Special Meeting in accordance with the instructions of the stockholder. If no
specific instructions are given, the shares will be voted "FOR" the adoption of
the Company's 1997 Stock Plan and the reservation of 1,250,000 shares of Common
Stock for issuance thereunder and at the discretion of the proxy holders upon
such other business as may properly come before the Special Meeting or any
adjournment or postponement thereof.
These proxy solicitation materials were first mailed on or about March 19,
1998, to all stockholders entitled to vote at the meeting.
PURPOSE
The primary purpose of the Special Meeting is to seek stockholder approval
of the Company's 1997 Stock Plan. The Company's current stock plan expires in
April 1998 and, as is more fully described below, the Board of Directors of the
Company believes that the Company needs a new stock plan in order to attract and
retain qualified personnel. As of March 2, 1998, there were 1,138,276 shares of
Common Stock available for issuance under the Company's current stock plan. The
net effect of the expiration of that plan and the adoption of the 1997 Plan
would be to increase the number of shares of Common Stock available for issuance
by 112,000.
RECORD DATE AND VOTING SECURITIES
Stockholders of record at the close of business on March 12, 1998 (the
"Record Date") are entitled to notice of and to vote at the Special Meeting. At
the Record Date, 25,436,167 shares of the Company's Common Stock, $.001 par
value, were issued and outstanding. No shares of the Company's Preferred Stock
were outstanding.
REVOCABILITY OF PROXIES
Any proxy given pursuant to the solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by (i) filing
with the Secretary of the Company at or before the taking of the vote at the
Special Meeting a written notice of revocation bearing a later date than the
proxy, (ii) duly executing a later dated proxy relating to the same shares and
delivering it to the Secretary of the Company at or before the taking of the
vote at the Special Meeting or (iii) attending the Special Meeting and voting in
person (although attendance at the Special Meeting will not in and of itself
constitute a revocation of a proxy). Any written notice of revocation or
subsequent proxy should be delivered to the principal executive offices of the
Company at Auspex Systems, Inc., 2300 Central Expressway, Santa Clara,
California 95050, Attention: Secretary, or hand-delivered to the Secretary of
the Company at or before the taking of the vote at the Special Meeting.
VOTING AND SOLICITATION
On all matters, each share has one vote.
<PAGE> 4
The cost of soliciting proxies will be borne by the Company. The Company
expects to retain a proxy solicitation firm to assist in its solicitation of
proxies from brokers, nominees, institutions and individuals and estimates that
such service will cost not more than $7,500. Arrangements will also be made with
custodians, nominees and fiduciaries for forwarding of proxy solicitation
materials to beneficial owners of shares held of record by such custodians,
nominees and fiduciaries. The Company will reimburse such custodians, nominees
and fiduciaries for reasonable expenses incurred in connection therewith. In
addition, proxies may be solicited by directors, officers and employees of the
Company in person or by telephone, telegram or other means of communication. No
additional compensation will be paid for such services.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
The required quorum for the transaction of business at the Special Meeting
is a majority of the votes eligible to be cast by holders of shares of Common
Stock issued and outstanding on the Record Date. Shares that are voted "FOR" or
"AGAINST" on a matter are treated as being present at the meeting for purposes
of establishing a quorum and are also treated as shares entitled to vote at the
Special Meeting (the "Votes Cast") with respect to such matter.
While there is no definitive statutory or case law authority in Delaware as
to the proper treatment of abstentions, the Company believes that abstentions
should be counted for purposes of determining both (i) the presence or absence
of a quorum for the transaction of business and (ii) the total number of Votes
Cast with respect to a proposal (other than the election of directors). In the
absence of controlling precedent to the contrary, the Company intends to treat
abstentions in this manner. Accordingly, abstentions will have the same effect
as a vote against the proposal.
In a 1989 Delaware case, Berlin v. Emerald Partners, the Delaware Supreme
Court held that, while broker non-votes should be counted for the purpose of
determining the presence or absence of a quorum for the transaction of business,
broker non-votes should not be counted for the purpose of determining the number
of Votes Cast with respect to the particular proposal on which the broker has
expressly not voted. Accordingly, the Company intends to treat broker non-votes
in this manner. Thus, a broker non-vote will not affect the outcome of the
voting on a proposal.
PROPOSAL NO. 1
APPROVAL OF THE ADOPTION OF THE 1997 STOCK PLAN
At the Special Meeting, the stockholders are being requested to consider
and approve the adoption of the Company's 1997 Stock Plan (the "1997 Plan") and
the reservation of 1,250,000 shares of the Company's Common Stock for issuance
thereunder.
In September 1997, the Board of Directors adopted the 1997 Plan and
reserved 2,000,000 shares of Common Stock for issuance thereunder, subject to
stockholder approval. The Company sought stockholder approval of the 1997 Plan
at the Company's 1997 Annual Meeting of Stockholders but the proposal lost by a
narrow margin. In January 1998, the Board of Directors amended the 1997 Plan to
reduce the number of shares reserved thereunder to 1,250,000 and to place
certain restrictions on the terms of non-statutory options granted under the
1997 Plan.
The 1997 Plan is intended to replace the Company's 1988 Stock Option Plan,
as amended (the "1988 Plan"), which will terminate with respect to the grant of
any new option grants in April 1998. As of March 2, 1998, there were 1,138,276
shares of Common Stock available for issuance under the 1988 Plan. The issuance
of these shares pursuant to the 1988 Plan was approved by the stockholders of
the Company, but because federal tax laws require that qualified stock plans
terminate ten years after inception, these shares will not be available for
issuance after April 1998. The net effect, therefore, of the expiration of the
1988 Plan and shareholder approval of the 1997 Plan, will be that the number of
shares of Common Stock available for issuance pursuant to the Company's stock
plans will increase by approximately 112,000 shares. As with the 1988 Plan, the
1997 Plan will terminate ten years from the date of its approval by the
Company's Board of Directors.
2
<PAGE> 5
Section 162(m) of the Internal Revenue Code of 1986, as amended ("Section
162(m)"), limits the Company's deduction in any one fiscal year for federal
income tax purposes to $1,000,000 per person with respect to the Company's Chief
Executive Officer and its four other highest paid executive officers who are
employed on the last day of the fiscal year unless the compensation was not
otherwise subject to the deduction limit. Option grants under the 1997 Plan will
not be subject to the deduction limitation if the stockholders approve the
material provisions of the 1997 Plan (see Appendix A). The 1997 Plan allows for
the grant of incentive stock options to all employees of the Company and the
grant of nonstatutory stock options and restricted stock to employees, directors
and consultants of the Company. Incentive stock options must be granted with an
exercise price not less than the fair market value of the Company's Common Stock
on the date of grant. The exercise price for nonstatutory stock options and the
purchase price for restricted stock is determined by the administrator of the
1997 Plan subject to certain limitations (see Appendix A -- Exercise Price). The
1997 Plan provides that no employee of the Company may be granted, in any fiscal
year, options to purchase more than 750,000 shares of Common Stock. However,
notwithstanding this limit, in connection with such individual's initial
employment with the Company, the individual may be granted options to purchase
up to an additional 250,000 shares.
PURPOSE
The Board of Directors believes that it is in the best interests of the
Company and its stockholders to have a stock plan in place for several reasons.
First, the 1988 Plan expires by its terms in April 1998, and the Board of
Directors believes that having a stock plan in place is vital to retaining,
motivating and rewarding employees, executives and consultants by providing them
with long-term equity participation in the Company relating directly to the
financial performance and long-term growth of the Company. Second, the Board of
Directors believes that granting stock options to employees is an important
contributor to aligning the incentives of the Company's employees with the
interests of the Company's stockholders. Third, the number of shares reserved
for issuance under the 1997 Plan will provide the Company with an adequate pool
of options to compete effectively with other companies for existing and new
employees. Competition for qualified employees in the technology market is
extremely intense, and, due to the rapid growth of many successful companies in
this sector, such competition is increasing. The Board of Directors believes
that in order to remain competitive with other technology companies with regard
to its long-term incentive plans, the Company must continue to provide employees
with the opportunity to obtain equity in the Company and that an inability to
offer equity incentives to new and current employees would put the Company at a
severe competitive disadvantage with respect to attracting and retaining
qualified personnel. Finally, an adequate pool of options will enhance the
Company's ability to structure attractive offers to retain employees of
potential acquisition targets. A summary of the principal terms of the 1997 Plan
is located in Appendix A to this Proxy Statement.
3
<PAGE> 6
NEW 1997 PLAN BENEFITS
The Company cannot now determine the number of stock options to be granted
in the future to the Named Executive Officers, all current executive officers as
a group, all current directors who are not executive officers as a group or all
employees (including current officers who are not executive officers) as a
group. However, the following table sets forth information with respect to stock
option grants under the 1988 Plan during the fiscal year ended June 30, 1997 to
such persons:
NEW 1997 PLAN BENEFITS TABLE
<TABLE>
<CAPTION>
NUMBER OF SHARES
DOLLAR SUBJECT TO OPTIONS
NAME OF INDIVIDUAL OR IDENTITY OF GROUP VALUE($) GRANTED(#)
--------------------------------------- -------- ------------------
<S> <C> <C>
Bruce N. Moore........................................... -- --
Joseph G. Brown.......................................... --(1) 75,000
Paul R. Gifford.......................................... --(1) 100,000
Russell M. Lait.......................................... --(1) 50,000
Kent L. Robertson........................................ --(1) 25,000
Michael B. Stevens....................................... -- --
All executive officers as a group (6 total).............. --(1) 250,000
Non-Executive Director Group (3 total)................... -- --
All other employees as a group........................... $454,351(2) 1,378,750
</TABLE>
- ---------------
(1) The exercise prices of these options exceeded $9.625, the closing price of
the Company's Common Stock on June 30, 1997 as listed on The Nasdaq Stock
Market. None of such options were therefore in-the-money as of such date.
(2) This dollar value reflects the difference between $9.625 (the closing price
of the Company's Common Stock on June 30, 1997) and the exercise prices of
such options, multiplied by the number of shares subject to such options.
VOTE REQUIRED
The affirmative vote of a majority of the Votes Cast will be required to
approve the adoption of the Company's 1997 Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
ADOPTION OF THE COMPANY'S 1997 PLAN AND THE RESERVATION OF 1,250,000 SHARES OF
COMMON STOCK FOR ISSUANCE THEREUNDER.
4
<PAGE> 7
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of March 2, 1998 (except as set forth in
the footnotes) certain information with respect to the beneficial ownership of
the Company's Common Stock by (i) each person known by the Company to own
beneficially more than 5% of the outstanding shares of Common Stock, (ii) each
person who served as Chief Executive Officer of the Company during the Company's
last fiscal year and the four most highly compensated officers other than the
Chief Executive Officer who were serving as executive officers at the end of the
Company's last fiscal year ("Named Executive Officers"), (iii) each director of
the Company, and (iv) all directors and executive officers as a group. The
Company knows of no agreements among its stockholders which relate to voting or
investment power of its shares of Common Stock.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
BENEFICIALLY OWNED(1)
-----------------------
PERCENTAGE
FIVE PERCENT STOCKHOLDERS, EXECUTIVE OFFICERS AND DIRECTORS NUMBER OWNERSHIP
- ----------------------------------------------------------- --------- ----------
<S> <C> <C>
Neuberger & Berman, LLC(2).................................. 2,624,000 10.3%
605 Third Avenue
New York, NY 10158-3698
State of Wisconsin Investment Board(3)...................... 2,307,200 9.1%
P.O. Box 7842
Madison, WI 53702-0000
Nevis Capital Management, Inc.(4)........................... 1,397,350 5.5%
1119 St. Paul Street
Baltimore, MD 21202
Bruce N. Moore(5)........................................... 243,977 *
Joseph G. Brown(5)(6)(7).................................... 107,034 *
Paul R. Gifford(5).......................................... 37,249 *
Russell M. Lait(5).......................................... 57,476 *
Kent L. Robertson(6)........................................ 0 *
Michael B. Stevens(5)(6)(7)................................. 51,119 *
R. Stephen Cheheyl(5)....................................... 17,000 *
W. Frank King(5)............................................ 12,000 *
David F. Marquardt(5)....................................... 84,283 *
All current executive officers and directors as a group(7 451,985 1.8%
persons)(8)...............................................
</TABLE>
- ---------------
* Less than one percent.
(1) Applicable percentage of ownership is based on 25,415,601 shares of the
Company's Common Stock outstanding as of March 2, 1998 together with any
applicable stock options held by such stockholder. Beneficial ownership is
determined in accordance with the rules of the SEC, and includes voting and
investment power with respect to shares. Shares of Common Stock subject to
options currently exercisable or exercisable within 60 days of March 2, 1998
are deemed outstanding for computing the percentage ownership of the person
holding such options, but are not deemed outstanding for computing the
percentage of any other person.
(2) Neuberger & Berman, LLC claims shared dispositive power as to the 2,624,000
shares, shared voting power as to 1,072,600 shares and sole voting power as
to 1,539,000 shares. Information provided herein is based solely upon a
Schedule 13G filed with the SEC in February 1997.
(3) Information provided herein is based solely upon a Schedule 13F-E filed with
the SEC in January 1998.
(4) Information provided herein is based solely upon a Schedule 13F filed with
the SEC in February 1998.
(5) Includes shares of Common Stock issuable upon exercise of options
exercisable within 60 days of March 2, 1998 as follows: Bruce N. Moore,
239,166 shares; Paul R. Gifford, 36,249 shares; Russell M. Lait, 32,749
shares; R. Stephen Cheheyl, 12,000 shares; W. Frank King, 12,000 shares; and
David F. Marquardt, 16,000 shares. Also includes options for 105,832 shares
exercisable within 60 days of
5
<PAGE> 8
January 26, 1998 for Joseph Brown and options for 39,865 shares of Common Stock
exercisable within 60 day of September 2, 1997 for Michael Stevens.
(6) Mssr. Brown, Robertson and Stevens are no longer executive officers of the
Company.
(7) Mr. Brown's information is as of January 26, 1998 and Mr. Stevens
information is as of September 2, 1997.
(8) Includes 348,164 shares of Common Stock issuable upon exercise of stock
options exercisable within 60 days of March 2, 1998.
OTHER MATTERS
The Company knows of no other matters to be submitted to the Special
Meeting. If any other matters properly come before the Special Meeting, it is
the intention of the persons named in the enclosed Proxy to vote the shares they
represent as the Board of Directors may recommend.
THE BOARD OF DIRECTORS
LOGO
Henry P. Massey, Jr.
Secretary
Dated: March 19, 1998
6
<PAGE> 9
APPENDIX A
SUMMARY OF 1997 STOCK PLAN
General. The purposes of the 1997 Stock Plan (the "1997 Plan") are to
attract and retain the best available personnel for positions of substantial
responsibility with the Company, to provide additional incentive to the
employees, directors and consultants of the Company and to promote the success
of the Company's business. Options and stock purchase rights may be granted
under the 1997 Plan. Options granted under the Plan may be either "incentive
stock options," as defined in Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code"), or nonstatutory stock options.
Stock Subject to Plan. Subject to the adjustments described below, the
maximum aggregate number of share of Common Stock which may be issued pursuant
to the plan is 1,250,000.
Administration. The 1997 Plan may generally be administered by the Board of
Directors or the Committee appointed by the Board of Directors (as applicable,
the "Administrator").
Eligibility; Limitations. Nonstatutory stock options and stock purchase
rights may be granted under the 1997 Plan to employees, directors and
consultants of the Company and any parent or subsidiary of the Company.
Incentive stock options may be granted only to employees. The Administrator, in
its discretion, selects the employees, directors and consultants to whom options
and stock purchase rights may be granted, the time or times at which such
options and stock purchase rights shall be granted, and the number of shares
subject to each such grant.
Section 162(m) of the Code places limits on the deductibility for federal
income tax purposes of compensation paid to certain executive officers of the
Company. In order to preserve the Company's ability to deduct the compensation
income associated with options granted to such persons, the 1997 Plan provides
that no employee, director or consultant may be granted, in any fiscal year of
the Company, options to purchase more than 750,000 shares of Common Stock.
Notwithstanding this limit, however, in connection with such individual's
initial employment with the Company, he or she may be granted options to
purchase up to an additional 250,000 shares of Common Stock.
Terms and Conditions of Options. Each option is evidenced by a stock option
agreement between the Company and the optionee, and is subject to the following
additional terms and conditions:
(a) Exercise Price. The Administrator determines the exercise price of
options at the time the options are granted. The exercise price of an
incentive stock option may not be less than 100% of the fair market value
of the Common Stock on the date such option is granted; provided, however,
the exercise price of an incentive stock option granted to a greater than
10% stockholder may not be less than 110% of the fair market value of the
Common Stock on the date such option is granted. The exercise price of a
non-statutory option may be not be less than 75% of the fair market value
of the Common Stock on the date such option is granted. The fair market
value of the Common Stock is generally determined with reference to the
closing sale price for the Common Stock (or the closing bid if no sales
were reported) on the last market trading day prior to the date the option
is granted.
(b) Exercise of Option; Form of Consideration. The Administrator
determines when options become exercisable and may, in its discretion,
accelerate the vesting of any outstanding option. Stock options granted
under the 1997 Plan will generally vest and become exercisable over four
years. The means of payment for shares issued upon exercise of an option is
specified in each option agreement. The 1997 Plan permits payment to be
made by cash, check, promissory note, other shares of Common Stock of the
Company (with some restrictions), cashless exercises, a reduction in the
amount of any Company liability to the optionee, any other form of
consideration permitted by applicable law, or any combination thereof.
(c) Term of Option. The term of stock options may be no more than ten
(10) years from the date of grant; provided that in the case of an
incentive stock option granted to a greater than 10% stockholder, the term
of the option may be no more than five (5) years from the date of grant. No
option may be exercised after the expiration of its term.
A-1
<PAGE> 10
(d) Termination of Employment. If an optionee's employment or
consulting relationship terminates for any reason (other than death or
disability), the optionee may exercise his or her option within such period
of time as is specified in the option agreement to the extent that the
option is vested on the date of termination (but in no event later than the
expiration of the term of such option as set forth in the option
agreement). In the absence of a specified time in the option agreement, the
option shall remain exercisable for three (3) months following the
optionee's termination in the case of an incentive stock option, and six
(6) months following the optionee's termination in the case of a
non-statutory stock option.
(e) Death or Disability. If an optionee's employment or consulting
relationship terminates as a result of disability, the optionee may
exercise his or her option within such period of time as is specified in
the option agreement (but in no event later than the expiration of the term
of such option as set forth in the option agreement) to the extent that the
option is vested on the date of termination. In the absence of a specified
time in the option agreement, the option shall remain exercisable for six
(6) months following the optionee's termination. If an optionee's
employment or consulting relationship terminates as a result of death while
the optionee is an employee or consultant, the option may be exercised by
the optionee's estate or a person who acquired the right to exercise the
option by bequest or inheritance within such period of time as is specified
in the option agreement (but in no event later than the expiration of the
term of such option as set forth in the option agreement) to the extent
that the option would have vested had the optionee continued living and
working for the Company for an additional six (6) months. In the absence of
a specified time in the option agreement, the option shall remain
exercisable for twelve (12) months following the optionee's death. If an
optionee's employment or consulting relationship terminates as a result of
death occurring within 30 days of the optionee's termination of employment
or consultancy with the Company, the option may be exercised by the
optionee's estate or a person who acquired the right to exercise the option
by bequest or inheritance within such period of time as is specified in the
option agreement not to exceed three (3) months from the date of
termination (but in no event later than the expiration of the term of such
option as set forth in the option agreement) to the extent that the option
had vested on the date of termination.
(f) Nontransferability of Options and Stock Purchase Rights: Options
and stock purchase rights granted under the 1997 Plan are not transferable
other than by will or the laws of descent and distribution, and may be
exercised during the optionee's lifetime only by the optionee.
(g) Other Provisions: The stock option agreement may contain other
terms, provisions and conditions not inconsistent with the 1997 Plan as may
be determined by the Administrator.
Stock Purchase Rights. In the case of stock purchase rights, unless the
Administrator determines otherwise, the standard form of restricted stock
purchase agreement shall grant the Company a repurchase option exercisable upon
the voluntary or involuntary termination of the purchaser's employment with the
Company for any reason (including death or disability). The purchase price for
shares repurchased pursuant to the restricted stock purchase agreement shall be
the original price paid by the purchaser and may be paid by cancellation of any
indebtedness of the purchaser to the Company. The repurchase option shall lapse
at a rate determined by the Administrator.
Adjustments Upon Changes in Capitalization, Dissolution, Merger or Asset
Sale. In the event that the stock of the Company changes by reason of any stock
split, reverse stock split, stock dividend, combination, reclassification or
other similar change in the capital structure of the Company effected without
the receipt of consideration, appropriate adjustments shall be made in the
number and class of shares of stock subject to the 1997 Plan, the number and
class of shares of stock subject to any option or stock purchase right
outstanding under the 1997 Plan, and the exercise price of any such outstanding
option or stock purchase right.
In the event of a liquidation or dissolution, any unexercised options or
stock purchase rights will terminate. The Administrator may, in its discretion,
provide that each optionee shall have the right to exercise all of the
optionee's options and stock purchase rights, including those not otherwise
exercisable, until the date ten (10) days prior to the consummation of the
liquidation or dissolution.
A-2
<PAGE> 11
In connection with any merger, consolidation, acquisition of assets or like
occurrence involving the Company, each outstanding option or stock purchase
right, to the extent unvested, shall become vested and exercisable as to an
additional 1/16th of the shares subject to the option or stock purchase right
for each full year that such option or stock purchase right has been
outstanding. In addition, each outstanding option or stock purchase right may be
assumed or an equivalent option or right substituted by the successor
corporation. If the successor corporation refuses to assume the options and
stock purchase rights or to substitute substantially equivalent options and
stock purchase rights, the optionee shall have the right to exercise the option
or stock purchase right as to all the optioned stock, including shares not
otherwise exercisable. In such event, the Administrator shall notify the
optionee that the option or stock purchase right is fully exercisable for thirty
(30) days from the date of such notice and that the option or stock purchase
right terminates upon expiration of such period. In the event that the Company's
independent public accountants determine that the acceleration of vesting of
outstanding options (described above) upon a merger would preclude accounting
for such merger as a pooling of interests, and the Board of Directors desires to
approve such transaction which requires as a condition to the closing of such
transaction that it be accounted for as a pooling of interests, then any such
option acceleration shall be null and void, but only if the absence of such
option acceleration would preserve the pooling treatment.
Amendment and Termination of the Plan. The Board of Directors may amend,
alter, suspend or terminate the 1997 Plan, or any part thereof, at any time and
for any reason. However, the Company shall obtain stockholder approval for any
amendment to the 1997 Plan to the extent necessary to comply with Section 162(m)
and Section 422 of the Code, or any similar rule or statute. No such action by
the Board of Directors or stockholders may alter or impair any option or stock
purchase right previously granted under the 1997 Plan without the written
consent of the optionee. Unless terminated earlier, the 1997 Plan shall
terminate ten years from the date of its approval by the stockholders or the
Board of Directors of the Company, whichever is earlier.
FEDERAL INCOME TAX CONSEQUENCES
Incentive Stock Options. An optionee who is granted an incentive stock
option does not recognize taxable income at the time the option is granted or
upon its exercise, although the exercise may subject the optionee to the
alternative minimum tax. Upon a disposition of the shares more than two years
after grant of the option and one year after exercise of the option, any gain or
loss is treated as long-term capital gain or loss. If these holding periods are
not satisfied, the optionee recognizes ordinary income at the time of
disposition equal to the difference between the exercise price and the lower of
(i) the fair market value of the shares at the date of the option exercise or
(ii) the sale price of the shares. Any gain or loss recognized on such a
premature disposition of the shares in excess of the amount treated as ordinary
income is treated as long-term or short-term capital gain or loss, depending on
the holding period. A different rule for measuring ordinary income upon such a
premature disposition may apply if the optionee is also an officer, director, or
greater than 10% stockholder of the Company. The Company is entitled to a
deduction in the same amount as the ordinary income recognized by the optionee.
Nonstatutory Stock Options. An optionee does not recognize any taxable
income at the time he or she is granted a nonstatutory stock option. Upon
exercise, the optionee recognizes taxable income generally measured by the
excess of the then fair market value of the shares over the exercise price. Any
taxable income recognized in connection with an option exercise by an employee
of the Company is subject to tax withholding by the Company. The Company is
entitled to a deduction in the same amount as the ordinary income recognized by
the optionee. Upon a disposition of such shares by the optionee, any difference
between the sale price and the optionee's exercise price, to the extent not
recognized as taxable income as provided above, is treated as long-term or
short-term capital gain or loss, depending on the holding period.
Stock Purchase Rights. Stock purchase rights will generally be taxed in the
same manner as nonstatutory stock options. However, restricted stock is
generally purchased upon the exercise of a stock purchase right. At the time of
purchase, restricted stock is subject to a "substantial risk of forfeiture"
within the meaning of Section 83 of the Code. As a result, the purchaser will
not recognize ordinary income at the time of purchase. Instead, the purchaser
will recognize ordinary income on the dates when a stock ceases to be subject to
a
A-3
<PAGE> 12
substantial risk of forfeiture. The stock will generally cease to be subject to
a substantial risk of forfeiture when it is no longer subject to the Company's
right to repurchase the stock upon the purchaser's termination of employment
with the Company. At such times, the purchaser will recognize ordinary income
measured as the difference between the purchase price and the fair market value
of the stock on the date the stock is no longer subject to a substantial risk of
forfeiture.
The purchaser may accelerate to the date of purchase his or her recognition
of ordinary income, if any, and the beginning of any capital gain holding period
by timely filing an election pursuant to Section 83(b) of the Code. In such
event, the ordinary income recognized, if any, is measured as the difference
between the purchase price and the fair market value of the stock on the date of
purchase, and the capital gain holding period commences on such date. The
ordinary income recognized by a purchaser who is an employee will be subject to
tax withholding by the Company. Different rules may apply if the purchaser is
also an officer, director, or greater than 10% stockholder of the Company.
THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF FEDERAL INCOME TAXATION
UPON OPTIONEES, HOLDERS OF STOCK PURCHASE RIGHTS AND THE COMPANY WITH RESPECT TO
THE GRANT AND EXERCISE OF OPTIONS AND STOCK PURCHASE RIGHTS UNDER THE 1997 PLAN.
IT DOES NOT PURPORT TO BE COMPLETE, AND DOES NOT DISCUSS THE TAX CONSEQUENCES OF
THE EMPLOYEE'S OR CONSULTANT'S DEATH OR THE PROVISIONS OF THE INCOME TAX LAWS OF
ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH THE EMPLOYEE OR CONSULTANT
MAY RESIDE.
A-4
<PAGE> 13
ASX06 1 DETACH HERE
PROXY
AUSPEX SYSTEMS, INC.
2300 CENTRAL EXPRESSWAY, SANTA CLARA, CA 95050
SPECIAL MEETING OF STOCKHOLDERS
APRIL 23, 1998
The undersigned stockholder of Auspex Systems, Inc., a Delaware corporation
(the "Company"), hereby acknowledges receipt of the Notice of Special Meeting of
Stockholders and Proxy Statement each dated March 19, 1998 and hereby appoints
Bruce N. Moore and R. Marshall Case, or either of them, proxies and
attorneys-in-fact, with full power to each of substitution, on behalf and in the
name of the undersigned, to represent the undersigned at the 1998 Special
Meeting of Stockholders of the Company to be held on April 23, 1998 at 9:00 a.m.
local time, at the Company's headquarters, located at 2300 Central Expressway,
Building B, Santa Clara, California, and at any adjournment(s) thereof, and to
vote all shares of Common Stock which the undersigned would be entitled to vote
if then and there personally present, on the matters set forth below.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED BELOW, OR, IF
NO CONTRARY DIRECTION IS INDICATED, WILL VOTE FOR PROPOSALS 1 AND 2 AND AS SAID
PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE
MEETING.
- --------------- ---------------
| SEE REVERSE | CONTINUED AND TO BE SIGNED ON REVERSE SIDE | SEE REVERSE |
| SIDE | | SIDE |
- --------------- ---------------
<PAGE> 14
ASX06 1
DETACH HERE
Please mark
[X] votes as in
this example.
TO ENSURE YOUR REPRESENTATION AT THE SPECIAL MEETING, PLEASE MARK, SIGN AND
DATE THIS PROXY AND RETURN IT AS PROMPTLY AS POSSIBLE.
FOR AGAINST ABSTAIN
1. To approve the adoption of the Company's 1997
Stock Plan and the reservation of 1,250,000 shares [ ] [ ] [ ]
of Common Stock for Issuance thereunder.
2. To transact such other business as may properly come before the meeting or
any postponements or adjournments thereof.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
(This Proxy should be marked, dated, signed by the
stockholder(s) exactly as his or her name appears
hereon, and returned promptly in the enclosed
envelope. When shares are held by joint tenants,
both should sign. when signing as attorney,
executor, administrator, trustee or guardian,
please give full title as such. If a corporation,
please sign in full corporate name by president or
other authorized officer. If a partnership, please
sign in partnership name by authorized person.)
Signature: Date: Signature: Date:
------------- ------------ ----------- ------------
