<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 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 19, 1998
TO THE STOCKHOLDERS OF AUSPEX SYSTEMS, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Annual
Meeting") of AUSPEX SYSTEMS, INC., a Delaware corporation (the "Company"), will
be held at 9:00 a.m., local time, on Thursday, November 19, 1998, at the
Company's headquarters, 2300 Central Expressway, Santa Clara, California, for
the following purposes:
1. To elect two (2) Class I directors of the Company to serve for a
two-year term.
2. To approve amendments to the Company's 1993 Directors' Stock Option
Plan to (i) increase the number of shares of Common Stock reserved for
issuance thereunder by 150,000 to a total of 325,000 and (ii) increase the
number of shares of Common Stock subject to the initial and annual option
grants automatically awarded to the Company's non-employee directors
thereunder from 16,000 and 4,000 to 25,000 and 8,000, respectively.
3. To ratify the appointment of Arthur Andersen LLP as independent
auditors of the Company for the fiscal year ending June 30, 1999.
4. 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 October 2, 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
October 16, 1998
<PAGE> 3
AUSPEX SYSTEMS, INC.
------------------------
PROXY STATEMENT FOR THE
1998 ANNUAL MEETING OF STOCKHOLDERS
------------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
AUSPEX SYSTEMS, INC., a Delaware corporation (the "Company"), for use at the
Annual Meeting of Stockholders (the "Annual Meeting") to be held on Thursday,
November 19, 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 Annual Meeting of Stockholders. The Annual Meeting will be held at the
Company's headquarters at 2300 Central Expressway, Santa Clara, California. 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
Annual Meeting in accordance with the instructions of the stockholder. If no
specific instructions are given, the shares will be voted "FOR": (i) the
election of the two (2) Class I nominees for director set forth herein; (ii) the
amendments to the 1993 Directors' Stock Option Plan increasing (A) the number of
shares of Common Stock reserved for issuance thereunder by 150,000 to a total of
325,000 and (B) the number of shares of Common Stock subject to the initial and
annual option grants automatically awarded to the Company's non-employee
directors thereunder from 16,000 and 4,000 to 25,000 and 8,000, respectively;
(iii) the ratification of the appointment of Arthur Andersen LLP as independent
auditors; and (iv) at the discretion of the proxy holders, upon such other
business as may properly come before the Annual Meeting or any adjournment or
postponement thereof.
These proxy solicitation materials and the Annual Report to Stockholders
for the fiscal year ended June 30, 1998, including financial statements, were
first mailed on or about October 16, 1998, to all stockholders entitled to vote
at the meeting.
RECORD DATE AND VOTING SECURITIES
Stockholders of record at the close of business on October 2, 1998 (the
"Record Date") are entitled to notice of and to vote at the Annual Meeting. At
the Record Date, 25,703,829 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 this 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
Annual 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 Annual Meeting or (iii) attending the Annual Meeting and voting in
person (although attendance at the Annual 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 Annual 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. Arrangements
will 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 Annual 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",
"AGAINST", or "WITHHELD FROM" 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 Annual 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.
STOCKHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
The Company currently intends to hold its 1999 Annual Meeting of
Stockholders in November 1999 and to mail proxy statements relating to such
meeting in October 1999. Stockholders are entitled to present proposals for
action at a forthcoming meeting if they comply with the requirements set forth
in the Company's Bylaws and in the proxy rules promulgated by the Securities and
Exchange Commission ("SEC"). The date by which stockholder proposals must be
received by the Company for inclusion in the proxy statement and form of proxy
for its 1999 Annual Meeting of Stockholders is June 16, 1999. Such stockholder
proposals should be submitted to Auspex Systems, Inc., 2300 Central Expressway,
Santa Clara, California 95050, Attention: Secretary.
The proxy card for the 1999 Annual Meeting of Stockholders will grant the
proxy holders discretionary authority to vote on any matter raised at the 1999
Annual Meeting of Stockholders. If a stockholder intends to submit a proposal at
the 1999 Annual Meeting of Stockholders which is not eligible for inclusion in
the proxy statement and the form of proxy relating to that meeting, the
stockholder must do so no later than August 30, 1999. If such stockholder fails
to comply with the foregoing notice provision, the proxy holders will be allowed
to use their discretionary voting authority when and if the proposal is raised
at the 1999 Annual Meeting of Stockholders.
The Company's Bylaws provide that only persons nominated by or at the
direction of the Board of Directors or by a stockholder who has given timely
written notice to the Secretary of the Company prior to the meeting will be
eligible for election as directors and that, at an annual meeting, only such
business may be conducted as has been brought before the meeting by or at the
direction of the Board of Directors or by a stockholder who has given timely
written notice to the Secretary of the Company. In all cases, to be timely,
notice must be received by the Company not less than twenty (20) days prior to
the meeting (or if fewer than thirty (30) days' notice or prior public
disclosure of the meeting date is given or made to stockholders, not later than
the tenth day following the day on which such notice was mailed or such public
disclosure was
2
<PAGE> 5
made). In the notice, the stockholder must provide his address and the class and
number of shares of the Company that are held by the stockholder. In addition,
if the stockholder proposes to make a nomination or nominations to the Board of
Directors, the stockholder must provide (i) as to each person whom the
stockholder proposes to nominate for election as a director (A) the name, age,
business address and residence address of such person, (B) the principal
occupation or employment of such person, (C) the class and number of shares of
the Company that are beneficially owned by such person, (D) any other
information relating to such person that is required by law to be disclosed in
solicitations of proxies for election of directors, and (E) such person's
written consent to being named as a nominee and to serving as a director if
elected; and (ii) as to the stockholder giving notice (A) the name and address,
as they appear on the Company's books, of such stockholder, (B) the class and
number of shares of the Company that are beneficially owned by such stockholder,
and (C) a description of all arrangements or understandings between the
stockholder making the nomination and each nominee and any other person or
persons (naming such person or persons) relating to the nomination. With respect
to each item of business other than a nomination to the Board of Directors that
a stockholder proposes to bring before a meeting, the stockholder must provide
(i) a brief description of the business desired to be brought before the annual
meeting and the reasons for conducting such business at the annual meeting, (ii)
the name and address of the stockholder proposing such business, (iii) the class
and number of shares of the Company that are beneficially owned by the
stockholder, (iv) any material interest of the stockholder in such business, and
(v) any other information that is required by law to be provided by the
stockholder in his capacity as proponent of a stockholder proposal.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
NOMINEES
Pursuant to the Company's Restated Certificate of Incorporation, the Board
of Directors is divided into two classes. The directors are elected to serve
staggered two-year terms, such that the term of one class of directors expires
each year. The Company currently has four directors divided among the two
classes as follows: Class I -- W. Frank King, David F. Marquardt and Bruce N.
Moore; and Class II -- R. Stephen Cheheyl. One of the Class I directors, Mr.
David F. Marquardt, will not be standing for re-election. The Board of
Directors, therefore, has approved an amendment to the Company's Bylaws that,
effective immediately prior to the voting at the Annual Meeting, reduces the
number of directors serving on the Company's Board of Directors to three (3).
Two (2) Class I directors have been nominated for election at the Annual Meeting
for a two-year term ending at the 2000 Annual Meeting of Stockholders or when
such directors' successors are elected.
Unless otherwise instructed, the proxy holders will vote the proxies
received by them for the Class I nominees named below. In the event that any of
such nominees is unable or declines to serve as a director at the time of the
Annual Meeting, the proxies will be voted for a nominee who shall be designated
by the present Board of Directors to fill the vacancy. In the event that
additional persons are nominated for election as director, the proxy holders
intend to vote all proxies received by them in such a manner as will assure the
election of as many of the nominees listed below as possible, and, in such
event, the specific nominees to be voted for will be determined by the proxy
holders. The Company is not aware that any of the nominees will be unable or
will decline to serve as a director. The directors elected at this Annual
Meeting will serve until the term of such directors' class expires or until such
directors' successors have been duly elected and qualified. The Board of
Directors will consider the names and qualifications of candidates for the Board
of Directors submitted by stockholders in accordance with the procedures set
forth in "Stockholder Proposals for Next Annual Meeting" above.
VOTE REQUIRED
The two (2) nominees in Class I receiving the highest number of affirmative
votes of the shares entitled to be voted shall be elected to the Board of
Directors. Votes withheld from any nominee will have no legal effect.
3
<PAGE> 6
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE NOMINEES
LISTED BELOW.
The names of the directors, certain information about them and their ages
as of September 30, 1998 are set forth below:
<TABLE>
<CAPTION>
DIRECTOR TERM
NAME OF DIRECTOR AGE POSITION(S) WITH THE COMPANY SINCE EXPIRES CLASS
---------------- --- -------------------------------------- -------- ------- -----
<S> <C> <C> <C> <C> <C>
NOMINEES FOR CLASS I DIRECTOR
W. Frank King................... 58 Director 1994 2000 I
Bruce N. Moore.................. 47 Chief Executive Officer, President and 1995 2000 I
Director
CLASS II DIRECTOR WHOSE TERM CONTINUES
R. Stephen Cheheyl.............. 52 Director 1995 1999 II
</TABLE>
Nominees for Class I Directors:
Dr. W. Frank King has served as a director of the Company since October
1994. Dr. King has been a private investor since October 1998. Prior to that
time, from October 1996 through October 1998, Dr. King served as President,
Chief Executive Officer and a Director of PSW Technologies, Inc., a software
services firm that provides high value solutions to technology vendors and
business end-users by mastering and applying critical emerging technologies.
From 1992 to October 1996, Dr. King served as President of Pencom Software, a
division of Pencom Systems, Inc. From 1988 to 1992, Dr. King was Senior Vice
President of the Software Business group of Lotus, a software publishing
company. Prior to joining Lotus, Dr. King was with IBM, a technology company,
for 19 years, where his last position was Vice President of Development for the
Personal Computing Division. Dr. King earned a doctorate in electrical
engineering from Princeton University, a master's degree in electrical
engineering from Stanford University and a bachelor's degree in electrical
engineering from the University of Florida. He also serves on the boards of
directors of Best Software, Inc., Excalibur Technologies Corporation, PSW
Technologies, Inc., SystemSoft, Inc., Cortelco Systems, Inc. and Natural
Microsystems, Inc.
Mr. Bruce N. Moore joined the Company in June 1995 as President, Chief
Operating Officer and a member of the Board of Directors. In January 1996, Mr.
Moore assumed the additional role of Chief Executive Officer and relinquished
the role of Chief Operating Officer. Mr. Moore joined the Company from Diasonics
Ultrasound, Inc., a provider of diagnostic ultrasound equipment, where he held
the positions of President and Chief Executive Officer. His eleven-year career
at Diasonics included various senior management positions in marketing and
business development. Mr. Moore started his career as a sales representative in
IBM's Data Processing Division in 1976.
Class II Director Whose Term Continues:
Mr. R. Stephen Cheheyl has served as a director of the Company since April
1995. From October 1994 until he retired in December 1995, Mr. Cheheyl served as
an Executive Vice President of Bay Networks, Inc., which was formed through the
merger of Wellfleet Communications, Inc. ("Wellfleet") and Synoptics
Communications Inc. From December 1990 to October 1994, Mr. Cheheyl served as
Senior Vice President, Finance and Administration at Wellfleet. He also serves
as a director of MCMS, Inc., Infinium Software, Inc. and Sapient Corporation.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of six (6) meetings
during the fiscal year ended June 30, 1998. No director attended fewer than 75%
of the sum of the total number of meetings of the Board of Directors and
committees thereof on which he served, held during the fiscal year or such
shorter period as he may have served as a director. The Board of Directors has
an Audit Committee, a Compensation Committee and a Stock Option Committee. The
Board of Directors does not have a nominating committee or any committee
performing similar functions.
4
<PAGE> 7
The Audit Committee, which consists of Dr. W. Frank King and Mr. R. Stephen
Cheheyl, held two (2) meetings during the fiscal year. This committee is
primarily responsible for approving the services performed by the Company's
independent auditors and for reviewing and evaluating the Company's accounting
principles and its system of internal accounting controls.
The Compensation Committee, which consists of Dr. W. Frank King and Mr.
David F. Marquardt (who will not stand for re-election), held a total of three
(3) meetings during the fiscal year and acted twice by unanimous written
consent. This committee reviews and approves the Company's executive
compensation policies and approves all stock option grants to executive
officers, stock option grants over 10,000 shares to new employees and all
subsequent stock option grants to existing employees.
The Stock Option Committee, which consists of Mr. Bruce N. Moore, held no
meetings during the fiscal year. This committee is primarily responsible for
approving all stock option grants of 10,000 shares or fewer to newly-hired
employees (other than executive officers).
BOARD OF DIRECTORS COMPENSATION
Directors who are not employees of the Company receive compensation for
their services as directors at the rate of $2,000 per quarter and $1,000 per
Board of Directors or committee meeting attended. Generally, Compensation
Committee meetings are held just prior to or just after regularly scheduled
Board of Directors meetings and directors are not separately compensated for
attending such committee meetings. Non-employee directors are automatically
granted an initial option to purchase 16,000 shares of the Company's Common
Stock and thereafter annual options to purchase 4,000 shares of the Company's
Common Stock pursuant to the terms of the Company's 1993 Directors' Stock Option
Plan. Pursuant to this plan, on July 1, 1998, Mr. Cheheyl, Dr. King and Mr.
Marquardt were each granted an annual option to purchase 4,000 shares of Common
Stock at an exercise price of $4.8125 per share, which options vest quarterly
over a period of four years. In addition, on August 5, 1998, Mr. Cheheyl, Dr.
King and Mr. Marquardt each were granted an option to purchase 12,000 shares of
Common Stock at an exercise price of $2.75 per share under the Company's 1997
Stock Plan, which options vest quarterly over a period of four years. For
information regarding certain proposed amendments to the 1993 Directors' Stock
Option Plan, see Proposal No. 2.
PROPOSAL NO. 2
APPROVAL OF AMENDMENTS TO THE
1993 DIRECTORS' STOCK OPTION PLAN
At the Annual Meeting, the stockholders are being requested to consider and
approve amendments to the Company's 1993 Directors' Stock Option Plan (the
"Directors' Plan") to (i) increase the number of shares of Common Stock reserved
for issuance thereunder by 150,000 to a total of 325,000 and (ii) increase the
number of shares of Common Stock subject to the initial and annual option grants
automatically awarded to the Company's non-employee directors thereunder from
16,000 and 4,000 to 25,000 and 8,000, respectively.
The Directors' Plan was adopted by the Board of Directors in March 1993 and
was approved by the stockholders in April 1993. A total of 175,000 shares of
Common Stock was reserved for issuance under the Directors' Plan. In August
1998, the Board of Directors approved amendments to the Directors' Plan to (i)
increase the number of shares of Common Stock reserved for issuance thereunder
by 150,000 to a total of 325,000 and (ii) increase the number of shares of
Common Stock subject to the initial and annual option grants from 16,000 and
4,000 to 25,000 and 8,000, respectively. As of September 2, 1998, options to
purchase 112,000 shares of Common Stock (net of lapsed and terminated options)
had been granted under the Directors' Plan, 63,000 shares remained available for
future option grants and options for the purchase of 16,000 shares had been
exercised. A summary of the principal terms of the Directors' Plan (which
assumes adoption of the proposed amendments) is located in Appendix A to this
Proxy Statement.
5
<PAGE> 8
PURPOSE AND EFFECT OF AMENDMENTS
The primary purposes of the proposed amendments to the Directors' Plan are
to (i) increase the number of shares available for issuance thereunder and (ii)
increase the number of shares of Common Stock subject to the initial and annual
option grants automatically awarded to the Company's non-employee directors
thereunder. The Directors' Plan currently provides that each new non-employee
director will automatically be granted an initial option to purchase sixteen
thousand (16,000) shares of the Company's Common Stock on the date on which such
person first becomes a member of the Board of Directors and thereafter annual
options to purchase four thousand (4,000) shares of the Company's Common Stock.
The Board of Directors believes that stock option grants are an essential
element in attracting and retaining qualified individuals to serve as directors
of the Company. The pool of individuals qualified to be directors of growing
technology companies is relatively small and the number of companies seeking
such expertise is increasing. In addition, many qualified individuals are
reluctant to serve on boards of directors unless appropriately compensated for
the responsibility and risk they assume. The Board of Directors believes that
most individuals it seeks as Board of Director members expect equity
compensation as an inducement for their services. Further, the Board of
Directors believes that equity compensation serves to better align the interests
of non-employee directors with those of the Company and its stockholders than
does cash compensation.
The Board of Directors believes that the proposed amendments to the
Directors' Plan are in the best interests of the Company and its stockholders
for several reasons. First, without the proposed increase in the number of
shares reserved for issuance under the Directors' Plan, the Company will deplete
the options available for grant thereunder within the next few years. Second,
the Board of Directors believes that increasing the number of shares subject to
the initial and annual option grants made to non-employee directors under the
Directors' Plan will make these options more valuable to the grantees and thus
will help to attract and retain qualified individuals to serve as directors of
the Company. Finally, the Board of Directors believes that providing
non-employee directors with an earlier opportunity to acquire a significant
ownership interest in the Company's Common Stock by increasing the number of
shares subject to the initial and annual option grants will help to incentivize
those directors to use their influence and talent to maximize stockholder value
for all stockholders.
AMENDED DIRECTORS' PLAN BENEFITS
The following table sets forth information with respect to stock option
grants to be made under the Directors' Plan to the Company's non-employee
directors for the fiscal year ending June 30, 1999, assuming adoption of the
proposed amendments. See Proposal No. 1 "Election of Directors -- Board of
Directors Compensation" regarding recent option grants to the Company's
non-employee directors under the Directors' Plan and the 1997 Stock Plan.
AMENDED DIRECTORS' PLAN BENEFITS TABLE
<TABLE>
<CAPTION>
NUMBER OF SHARES
DOLLAR SUBJECT TO OPTIONS
VALUE TO BE GRANTED
NAME OF INDIVIDUAL OR IDENTITY OF GROUP ($)(1) DURING FISCAL 1999 (#)
--------------------------------------- ------ ----------------------
<S> <C> <C>
R. Stephen Cheheyl....................................... -- 8,000
W. Frank King............................................ -- 8,000
All current directors who are not executive officers (2
persons)............................................... -- 16,000
</TABLE>
- ---------------
(1) Pursuant to the Directors' Plan and assuming the continued service of these
directors, these stock options will be automatically granted on July 1, 1999
at an exercise price equal to the closing price of the Company's Common
Stock on July 1, 1999 as listed on The Nasdaq Stock Market.
6
<PAGE> 9
VOTE REQUIRED
The affirmative vote of a majority of the Votes Cast will be required to
approve the proposed amendments to the Company's Directors' Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
PROPOSED AMENDMENTS TO THE DIRECTORS' PLAN TO (I) INCREASE THE NUMBER OF SHARES
OF COMMON STOCK RESERVED FOR ISSUANCE THEREUNDER BY 150,000 TO A TOTAL OF
325,000 AND (II) INCREASE THE NUMBER OF SHARES OF COMMON STOCK SUBJECT TO THE
INITIAL AND ANNUAL OPTION GRANTS AUTOMATICALLY AWARDED TO THE COMPANY'S
NON-EMPLOYEE DIRECTORS THEREUNDER FROM 16,000 AND 4,000 TO 25,000 AND 8,000,
RESPECTIVELY.
PROPOSAL NO. 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected Arthur Andersen LLP, independent
auditors, to audit the consolidated financial statements of the Company for the
fiscal year ending June 30, 1999, and recommends that stockholders vote for
ratification of such appointment. In the event of a negative vote on such
ratification, the Board of Directors will reconsider its selection.
Arthur Andersen LLP has audited the Company's financial statements since
1991. Its representatives are expected to be present at the Annual Meeting with
the opportunity to make a statement if they desire to do so and are expected to
be available to respond to appropriate questions.
VOTE REQUIRED
The affirmative vote of a majority of the Votes Cast will be required to
approve the ratification of the appointment of Arthur Andersen LLP as
independent auditors of the Company for the fiscal year ending June 30, 1999.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" RATIFICATION
OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE COMPANY'S INDEPENDENT AUDITORS.
7
<PAGE> 10
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information for the three most recently
completed fiscal years concerning the compensation of the Chief Executive
Officer of the Company and the four other most highly compensated executive
officers of the Company (collectively, the "Named Executive Officers") in the
fiscal year ended June 30, 1998:
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION SECURITIES ALL OTHER
FISCAL ------------------------ UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS($)(1) OPTIONS(#) ($)(2)
--------------------------- ------ ---------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Bruce N. Moore........................ 1998 $373,944 -- 100,000 $ 1,442(3)
Chief Executive Officer and 1997 350,000 $125,342 -- 1,285
President 1996 285,732 171,000 -- 1,833
R. Marshall Case(4)................... 1998 60,000 43,450(5) 100,000 213
Vice President of Finance
and Chief Financial Officer
Russell M. Lait(6).................... 1998 184,515 -- 25,000 409
Vice President of Operations 1997 156,533 39,470 107,500(7) 345
Joseph G. Brown(8).................... 1998 234,575 39,536(9) 20,000 1,392
1997 205,960 73,431(9) 100,000(10) 1,285
1996 186,383 30,000 -- 1,598
Paul R. Gifford(11)................... 1998 194,766 -- 50,000 1,182(12)
1997 145,385 88,852(13) 100,000 53,213(14)
</TABLE>
- ---------------
(1) Includes (in each fiscal year) bonuses earned during the fiscal year and
paid in the subsequent fiscal year.
(2) Represents group term life insurance premiums except as otherwise
indicated.
(3) Includes $50 health club reimbursement.
(4) Mr. Case was appointed as an executive officer of the Company on February
23, 1998.
(5) Includes a $25,000 sign-on bonus and a guaranteed bonus equal to 30% of Mr.
Case's fiscal year 1998 salary ($18,450) pursuant to the terms of his offer
letter for employment with the Company.
(6) Mr. Lait was appointed as an executive officer of the Company on August 1,
1996.
(7) Includes 57,500 options granted in exchange for cancellation of a like
number of previously granted options that were repriced on November 1,
1996.
(8) Mr. Brown was no longer an executive officer of the Company as of January
26, 1998, and his employment with the Company terminated on July 31, 1998.
(9) Includes $39,536 in sales commissions in fiscal years 1998 and 1997.
(10) Includes 25,000 options granted in exchange for cancellation of a like
number of previously granted options that were repriced on November 1,
1996.
(11) Mr. Gifford terminated his employment with the Company on April 1, 1998.
(12) Includes $82 of relocation expenses.
(13) Includes $50,000 sign-on bonus.
(14) Includes $52,394 of relocation expenses.
8
<PAGE> 11
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth each grant of stock options made during the
fiscal year ended June 30, 1998 to each of the Named Executive Officers:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
----------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM (4)
OPTIONS EMPLOYEES IN PRICE EXPIRATION ---------------------
NAME GRANTED(#)(1) FISCAL YEAR(2) ($/SHARE)(3) DATE 5%($) 10%($)
---- ------------- --------------- ------------ ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Bruce N. Moore.......... 100,000 3.93% $12.312 09/18/07 $774,295 $1,962,216
R. Marshall Case........ 100,000 3.93 9.500 03/05/08 597,450 1,514,055
Russell M. Lait......... 25,000 0.98 12.312 09/18/07 193,574 490,554
Joseph G. Brown......... 20,000 0.79 12.312 09/18/07 154,859 392,443
Paul R. Gifford......... 50,000 1.97 12.312 09/18/07 387,147 981,108
</TABLE>
- ---------------
(1) Under the terms of the Company's 1997 Stock Plan, the Board of Directors
retains discretion, subject to plan limits, to modify the terms of
outstanding options and to reprice the options.
(2) An aggregate of 2,552,818 options to purchase shares of the Company's Common
Stock was granted to employees and consultants during the fiscal year ended
June 30, 1998.
(3) The exercise price and tax withholding obligations related to exercise may
be paid by delivery of shares that are already owned or by offset of the
underlying shares, subject to certain conditions.
(4) These columns show the hypothetical gains or "option spreads" of the options
granted based on assumed annual compound stock appreciation rates of 5% and
10% over the full 10-year term of the option. The 5% and 10% assumed rates
of appreciation are mandated by the rules of the SEC and do not represent
the Company's estimate or projection of future Common Stock prices.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table provides certain information concerning option
exercises by the Named Executive Officers during the fiscal year ended June 30,
1998 and fiscal year-end option values:
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY
NUMBER OF UNDERLYING UNEXERCISED OPTIONS AT JUNE 30,
SHARES VALUE OPTIONS AT JUNE 30, 1998 1998($)(2)
ACQUIRED REALIZED --------------------------- ---------------------------
NAME ON EXERCISE(#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Bruce N. Moore............. -- -- 258,750 241,250 -- --
R. Marshall Case........... -- -- -- 100,000 -- --
Russell M. Lait............ -- -- 35,695 59,705 $31,219 --
Joseph G. Brown............ 24,918 $92,859 100,081 90,002 -- --
Paul R. Gifford............ -- -- -- -- -- --
</TABLE>
- ---------------
(1) Calculated by determining the difference between the closing price of the
Company's Common Stock on The Nasdaq National Market on the date of exercise
and the exercise price of the options, and multiplying such difference by
the number of shares.
(2) Calculated by determining the difference between the fair market value of
the Company's Common Stock underlying the options at June 30, 1998 (the
closing price of the Common Stock of the Company was listed on The Nasdaq
National Market at $4.5625 per share on June 30, 1998) and the exercise
price of the options, and multiplying such difference by the number of
shares subject to outstanding options.
9
<PAGE> 12
REPORT OF THE COMPENSATION COMMITTEE
The following is the Report of the Compensation Committee of the Company's
Board of Directors. It describes the compensation policies and rationale with
respect to the compensation paid to the Company's executive officers for the
fiscal year ended June 30, 1998. The information contained in the report shall
not be deemed to be "soliciting material" or to be "filed" with the SEC nor
shall such information be incorporated by reference into any future filing under
the Securities Act of 1933, as amended (the "Securities Act") or the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), except to the extent that
the Company specifically incorporates it by reference into such filing.
INTRODUCTION
The Compensation Committee administers the Company's executive compensation
programs. The Compensation Committee was comprised of two non-employee directors
of the Company, Dr. W. Frank King and Mr. David F. Marquardt, during the fiscal
year ended June 30, 1998. The Company's programs and policies are designed to
enhance stockholder values by closely linking executive rewards with the
Company's success.
The Company's executive compensation program has three elements:
- Base Salary
- Annual Cash Incentive Plan
- Stock Option Program
BASE SALARY
The base salaries for the Company's executive officers for the fiscal year
ended June 30, 1998 set forth in the Summary Compensation Table were determined
by the Compensation Committee. See "Executive Compensation -- Summary
Compensation Table." The Compensation Committee considers the recommendations
made by the Chief Executive Officer for the Company's officers other than the
Chief Executive Officer. In addition, the Compensation Committee retains the
services of an outside compensation consulting firm. In its deliberations, the
Compensation Committee takes into consideration:
- Salaries of officers in similar positions in similar sized and comparable
high technology companies. This peer group of companies may be different
than those of the companies incorporated in the stock performance graph
inasmuch as it represents competitors for executive talent, rather than
commercial competitors;
- Company performance as measured by achievement of goals and objectives
established at the start of the previous fiscal year; and
- Evaluations of each individual's contributions as made by the Chief
Executive Officer (the Chief Executive Officer's performance was
evaluated independently by the Committee).
ANNUAL CASH INCENTIVE PROGRAM
The annual cash incentive plan is designed to reward participants for
achievement of predetermined Company goals and objectives. These predetermined
goals and objectives are designed to drive Company performance toward enhanced
stockholder returns. During the fiscal year ended June 30, 1998, there were no
awards earned under this plan by the Company's officers because Company
performance objectives were not met.
STOCK OPTION PROGRAM
During the fiscal year ended June 30, 1998, the Compensation Committee
approved all stock option grants made to executive officers, employees and
consultants under the stockholder approved 1988 Stock Plan, which expired on
April 19, 1998, and the 1997 Stock Plan, except for stock option grants to
newly-hired
10
<PAGE> 13
employees who are non-executive officers receiving 10,000 or fewer shares (which
were approved by the Stock Option Committee). The stock option program is
designed to attract, retain and motivate the Company's officers and other
participants by providing them with a meaningful stake in the Company's
long-term success.
In making its determinations, the Compensation Committee takes into
consideration:
- Grants made to individuals in similar positions in comparable high
technology companies;
- Participants' contributions to the Company's performance, both short and
long-term;
- Prior stock option grants, especially as they relate to the number of
options vested and unvested; and
- Impact that total option grants made to all participants have on dilution
of current stockholder ownership and the Company's earnings.
Stock option grants made to the Named Executive Officers are set forth in
the table of option grants in the last fiscal year set forth above. See
"Executive Compensation -- Option Grants in Last Fiscal Year."
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Bruce N. Moore serves as the Company's Chief Executive Officer and
President. The Compensation Committee has independently reviewed the
compensation of the Chief Executive Officer. The Compensation Committee's
recommendation to the full Board of Directors regarding Mr. Moore's compensation
was based upon the same criteria used to evaluate the Company's other officers,
i.e., independent outside sources of compensation data, the Company's
performance, the individual's performance and the overall contribution to the
Company's short and long-term objectives.
Utilizing this criteria, in September 1997, the Compensation Committee
increased Mr. Moore's base salary by $25,000 for the fiscal year ended June 30,
1998 in order to recognize his contribution to the Company and to recognize his
level of responsibility versus that of other corporate officers of the Company.
In addition, in September 1997, Mr. Moore was granted 100,000 stock options. Mr.
Moore did not earn a bonus for the fiscal year ended June 30, 1998 under the
Company's annual cash incentive program.
All evaluation and consideration of adjustments in Mr. Moore's compensation
were made independently by the Compensation Committee during Mr. Moore's absence
from the proceedings.
The foregoing report has been furnished by the Compensation Committee of
the Board of Directors of the Company.
Compensation Committee
W. Frank King
David F. Marquardt
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended June 30, 1998, the Compensation Committee
consisted of Dr. W. Frank King and Mr. David F. Marquardt. The Company is not
aware of any interlocks or insider participation required to be disclosed under
applicable rules of the SEC.
11
<PAGE> 14
COMPANY PERFORMANCE
The following performance graph compares the cumulative total return to
stockholders of the Company's Common Stock since May 11, 1993 (the date the
Company first became subject to the reporting requirements of the Exchange Act)
to the cumulative total return over such period of (i) The Nasdaq Stock Market
(U.S. Companies) and (ii) the Hambrecht & Quist Technology Index. The
information contained in the performance graph below shall not be deemed to be
"soliciting material" or to be "filed" with the SEC, nor shall such information
be incorporated by reference into any future filing under the Securities Act or
the Exchange Act, except to the extent that the Company specifically
incorporates it by reference into such filing.
The performance graph assumes that $100 was invested on May 11, 1993 in the
Company's Common Stock at the initial public offering price of $12.00 per share
in each index, and that all dividends were reinvested. No dividends have been
declared or paid on the Company's Common Stock. Stockholder returns over the
period indicated should not be considered indicative of future stockholder
returns.
HAMBRECHT & QUIST PRODUCTS AND SERVICES:
1998 PROXY PERFORMANCE GRAPH DATA
<TABLE>
<CAPTION>
'ASPEX SYSTEMS, NASDAQ STOCK
INC.' H&Q TECHNOLOGY MARKET - U.S.
<S> <C> <C> <C>
5/11/93 100.00 100.00 100.00
JUN-94 42.55 102.21 100.96
JUN-95 106.38 180.82 134.78
JUN-96 127.66 211.32 173.04
JUN-97 81.91 275.98 210.36
JUN-98 46.28 349.59 277.56
</TABLE>
12
<PAGE> 15
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of September 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
of the Named Executive Officers of the Company listed in the Summary
Compensation Table above, (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>
State of Wisconsin Investment Board(2)...................... 3,687,200 14.3%
P.O. Box 7842
Madison, WI 53702-0000
The Crabbe Huson Group, Inc.(3)............................. 3,303,900 12.9%
121 SW Morrison, Suite 1400
Portland, OR 97204
Neuberger & Berman, LLC(4).................................. 1,529,300 6.0%
605 Third Avenue
New York, NY 10158-3698
Nevis Capital Management, Inc.(5)........................... 1,397,350 5.4%
1119 St. Paul Street
Baltimore, MD 21202
Bruce N. Moore(6)........................................... 322,727 1.3%
R. Marshall Case(6)......................................... 8,473 *
Russell M. Lait(6).......................................... 72,204 *
Joseph G. Brown(6).......................................... 997 *
Paul R. Gifford(6).......................................... -- --
R. Stephen Cheheyl(6)....................................... 17,250 *
W. Frank King(6)............................................ 16,250 *
David F. Marquardt(6)....................................... 88,533 *
All current executive officers and directors as a group (8
persons)(7)............................................... 526,434 2.1%
</TABLE>
- ---------------
* Less than one percent
(1) Applicable percentage of ownership is based on 25,703,829 shares of the
Company's Common Stock outstanding as of September 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 September 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) State of Wisconsin Investment Board claims sole voting and dispositive power
as to the 3,687,200 shares. Information provided herein is based solely upon
a Schedule 13G-A filed with the SEC in June 1998.
(3) The Crabbe Huson Group, Inc. claims shared dispositive and voting power as
to the 3,303,900 shares. Information provided herein is based solely upon a
Schedule 13G filed with the SEC in July 1998.
(4) Neuberger & Berman, LLC claims shared dispositive power as to the 1,529,300
shares, shared voting power as to 450,800 shares and sole voting power as to
749,400 shares. Information provided herein is based solely upon a Schedule
13G filed with the SEC in February 1998.
(5) Nevis Capital Management, Inc. claims sole voting and dispositive power as
to the 1,397,350 shares. Information provided herein is based solely upon a
Schedule 13G filed with the SEC in April 1998.
13
<PAGE> 16
(6) Includes shares of Common Stock issuable upon exercise of options
exercisable within 60 days of September 2, 1998 as follows: Bruce N. Moore,
291,666 shares; Russell M. Lait, 42,524 shares; R. Stephen Cheheyl, 12,250
shares; W. Frank King, 16,250 shares; and David F. Marquardt, 20,250 shares.
(7) Includes 382,940 shares of Common Stock issuable upon exercise of stock
options exercisable within 60 days of September 2, 1998.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act and regulations of the SEC thereunder
require the Company's executive officers and directors, and persons who own more
than 10% of a registered class of the Company's equity securities, to file
reports of initial ownership and changes in ownership with the SEC. Based solely
on its review of copies of such forms received by the Company, or on written
representations from certain reporting persons that no other reports were
required for such persons, the Company believes that, during or with respect to
the fiscal year ended June 30, 1998, all of the Section 16(a) filing
requirements applicable to its executive officers, directors and 10%
stockholders were complied with.
OTHER MATTERS
The Company knows of no other matters to be brought before the Annual
Meeting. If any other matters properly come before the Annual Meeting, it is the
intention of the persons named in the accompanying proxy to vote the shares
represented as the Board of Directors may recommend.
THE BOARD OF DIRECTORS
LOGO
Henry P. Massey, Jr.
Secretary
Dated: October 16, 1998
14
<PAGE> 17
APPENDIX A
SUMMARY OF THE 1993 DIRECTORS' STOCK OPTION PLAN
The Company's 1993 Directors' Stock Option Plan (the "Directors' Plan") was
adopted by the Board of Directors in March 1993 and was approved by the
stockholders in April 1993. Including the 150,000 shares reserved for issuance
by the Board of Directors in August 1998, a total of 325,000 shares of Common
Stock has been reserved for issuance under the Directors' Plan. This Summary
assumes adoption of the proposed amendments.
Purpose. The purposes of the Directors' Plan are to attract and retain the
best available personnel for service as directors of the Company, to provide
additional incentive to the outside directors of the Company to serve as
directors and to encourage their continued service on the Board of Directors.
Administration. Except as may otherwise be required pursuant to the terms
of the Directors' Plan or applicable law, the Directors' Plan is administered by
the Board of Directors. However, all options granted under the Directors' Plan
are automatic and nondiscretionary. All decisions, determinations and
interpretations of the Board of Directors shall be final and binding on all
participants.
Eligibility. Options may be granted only to the Company's outside
directors. An outside director who has been granted an option may, if he or she
is otherwise eligible, be granted an additional option or options in accordance
with such provisions. The Directors' Plan defines the term "outside director" as
a director of the Company's Board of Directors who is not otherwise an employee
or a consultant of the Company.
Terms of Options. Each new outside director will automatically be granted
an option to purchase twenty-five thousand (25,000) shares of Common Stock on
the date on which such person first becomes a member of the Board of Directors.
On the first business date of each fiscal year and during the term of the
Directors' Plan, each outside director will automatically receive a nonstatutory
stock option to purchase eight thousand (8,000) shares of Common Stock if he or
she has served on the Board of Directors for at least six (6) months.
The term of each option is ten (10) years from the date of grant.
Each option granted under the Directors' Plan shall be evidenced by a
written stock option agreement between the optionee and the Company and is
subject to the following terms and conditions:
Exercise Price. The exercise price of options granted under the Directors'
Plan shall be 100% of the fair market value per share on the date of grant. For
so long as the Company's Common Stock is listed on The Nasdaq National Market or
a stock exchange, the fair market value per share shall be the closing price on
such system or exchange on the date of the grant of the option, as reported in
the Wall Street Journal.
Exercise of Option. Except as described below, options granted under the
Directors' Plan are exercisable only while the optionee remains a director of
the Company. The first option granted under the Directors' Plan will become
exercisable as to 1/16th of the shares subject to such option on the last day of
each calendar quarter beginning with the first full calendar quarter after the
date of grant. Subsequent options shall become exercisable as to 1/16th of the
shares subject to such option on the last day of each calendar quarter beginning
with the calendar quarter in which the subsequent option is granted.
An option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
option by the person entitled to exercise the option and full payment for the
shares with respect to which the option is exercised has been received by the
Company. The consideration to be paid for the shares shall consist entirely of
cash, check, other shares of Common Stock which (i) either have been owned by
the optionee for more than six (6) months or were not acquired, directly or
indirectly, from the Company and (ii) have a fair market value on the date of
surrender equal to the aggregate exercise price of the shares as to which the
option granted under this Directors' Plan shall be exercised, delivery of a
properly executed exercise notice together with instructions to a broker to
deliver to the Company the amount of sale proceeds required to pay the exercise
price, or any combination of such methods of payment.
A-1
<PAGE> 18
Termination, Disability or Death. If an optionee ceases to serve as a
director, other than due to death or permanent disability, such optionee may,
but only within three (3) months after the date he or she ceases to be a
director of the Company, exercise his or her option to the extent that he or she
was entitled to exercise it at the date of such termination. To the extent that
the optionee was not entitled to exercise an option at the date of such
termination, or if the optionee does not exercise such option (which he or she
was entitled to exercise) within the time specified, the option shall terminate.
In the event an optionee is unable to continue service as a director as a
result of total and permanent disability (as defined in Section 22(e)(3) of the
Internal Revenue Code of 1986, as amended (the "Code")), such optionee may, but
only within six (6) months from the date of termination, exercise his or her
option to the extent he or she was entitled to exercise it at the date of such
termination. To the extent that the optionee was not entitled to exercise an
option at the date of termination, or if the optionee does not exercise such
option (which he or she was entitled to exercise) within the time specified, the
option shall terminate.
In the event of the death of an optionee while serving as a director for
the Company, the option may be exercised at any time within six (6) months
following the date of death by the optionee's estate or by a person who acquired
the right to exercise the option by bequest or inheritance, but only to the
extent of the right to exercise that would have accrued had the optionee
continued living and remained a director for six (6) months after the date of
death. If the optionee dies within three (3) months of termination of status as
a director, the option may be exercised at any time within six (6) months
following the date of death by the optionee's estate or by a person who acquired
the right to exercise the option by bequest or inheritance, but only to the
extent of the right to exercise that had accrued at the date of termination.
Nontransferability of Options. An option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the optionee, only by the optionee.
Adjustments Upon Changes in Capitalization or Merger. In the event any
change is made in the Company's capitalization, such as a stock split or stock
dividend, which results in an increase or decrease in the number of outstanding
shares of Common Stock without receipt of consideration by the Company,
appropriate adjustments will be made by the Board of Directors to the shares
subject to purchase under the Directors' Plan and in the purchase price per
share.
In the event of the proposed dissolution or liquidation of the Company, the
option will terminate immediately prior to the consummation of such proposed
action, unless otherwise provided by the Board of Directors. In the event of a
proposed sale of all or substantially all of the assets of the Company, or the
merger of the Company with or into another corporation, then each option shall
become vested and exercisable as to an additional 25% of the shares subject to
such option. If the successor corporation does not assume an outstanding option
or substitute an equivalent option, in addition to the shares that have already
vested as to such option, the optionee shall have the right to exercise the
option as to all of the optioned stock including shares as to which the option
would not otherwise be exercisable. If an option becomes exercisable in lieu of
assumption or substitution in the event of a merger or sale of assets, the
participant shall have fifteen (15) days to exercise such option. 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. The Board of Directors may amend or terminate
the Directors' Plan from time to time. Any such amendment or termination shall
not impair the rights of any optionee unless mutually agreed otherwise between
the optionee and the Company as evidenced in writing. The Company shall obtain
stockholder approval for any Directors' Plan amendment to the extent necessary
and desirable to comply with any applicable law, rule or regulation.
The Directors' Plan shall continue in effect until 2003 unless terminated
earlier by the Board of Directors.
A-2
<PAGE> 19
TAX INFORMATION
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. 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.
THE FOREGOING DOES NOT PURPORT TO BE A COMPLETE SUMMARY OF THE EFFECT OF
FEDERAL INCOME TAXATION UPON THE OPTIONEE AND THE COMPANY WITH RESPECT TO THE
GRANT OF OPTIONS AND PURCHASE OF SHARES UNDER THE DIRECTORS' PLAN, AND REFERENCE
SHOULD BE MADE TO THE APPLICABLE PROVISIONS OF THE CODE. IN ADDITION, THIS
SUMMARY DOES NOT DISCUSS THE PROVISIONS OF THE INCOME TAX LAWS OF ANY
MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH THE OPTIONEE MAY RESIDE.
A-3
<PAGE> 20
ATTACHMENT A
AUSPEX SYSTEMS, INC.
1993 DIRECTORS' STOCK OPTION PLAN
(AS AMENDED THROUGH AUGUST 1998)
1. Purposes of the Plan. The purposes of this Directors' Stock Option
Plan are to attract and retain the best available personnel for service as
Directors of the Company, to provide additional incentive to the Outside
Directors of the Company to serve as Directors, and to encourage their continued
service on the Board.
All options granted hereunder shall be "nonstatutory stock options".
2. Definitions. As used herein, the following definitions shall apply:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" shall mean the Common Stock of the Company.
(d) "Company" shall mean Auspex Systems, Inc., a Delaware
corporation.
(e) "Continuous Status as a Director" shall mean the absence of any
interruption or termination of service as a Director.
(f) "Director" shall mean a member of the Board.
(g) "Employee" shall mean any person, including officers and
Directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a director's fee by the Company shall not be sufficient in and of
itself to constitute "employment" by the Company.
(h) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(i) "Option" shall mean a stock option granted pursuant to the Plan.
(j) "Optioned Stock" shall mean the Common Stock subject to an
Option.
(k) "Optionee" shall mean an Outside Director who receives an Option.
(l) "Outside Director" shall mean a Director who is not an Employee.
(m) "Parent" shall mean a "parent corporation", whether now or
hereafter existing, as defined in Section 424(e) of the Code.
<PAGE> 21
(n) "Plan" shall mean this 1993 Directors' Stock Option Plan.
(o) "Share" shall mean a share of the Common Stock, as adjusted in
accordance with Section 11 of the Plan.
(p) "Subsidiary" shall mean a "subsidiary corporation", whether now
or hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 11 of
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 325,000 Shares (the "Pool") of Common Stock. The Shares may be
authorized, but unissued, or reacquired Common Stock.
If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were subject
thereto shall, unless the Plan shall have been terminated, become available for
future grant under the Plan. If Shares which were acquired upon exercise of an
Option are subsequently repurchased by the Company, such Shares shall not in any
event be returned to the Plan and shall not become available for future grant
under the Plan.
4. Administration of and Grants of Options under the Plan.
(a) Administrator. Except as otherwise required herein, the Plan
shall be administered by the Board.
(b) Procedure for Grants. All grants of Options hereunder shall be
automatic and nondiscretionary and shall be made strictly in accordance with the
following provisions:
(i) No person shall have any discretion to select which Outside
Directors shall be granted Options or to determine the number of Shares to be
covered by Options granted to Outside Directors.
(ii) Each current Outside Director and each Outside Director who
first becomes a member of the Board of Directors after the date the Company
first registers any class of any equity security pursuant to the Exchange Act
shall be automatically granted an Option to purchase 25,000 Shares (the "First
Option") on the date on which the later of the following events occurs: (A) the
effective date of this Plan, as determined in accordance with Section 6 hereof,
or (B) the date on which such person first becomes an Outside Director, whether
through election by the stockholders of the Company or appointment by the Board
of Directors to fill a vacancy.
(iii) Each Outside Director, whether first elected or appointed a
member of the Board of Directors before or after the Company first registers any
class of any equity security pursuant to the Exchange Act, shall be
automatically granted an Option to purchase 8,000 Shares (a
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<PAGE> 22
"Subsequent Option") on the first business day of the Company's fiscal year of
each year, if on such date, he or she shall have served on the Board for at
least six (6) months.
(iv) Notwithstanding the provisions of subsections (ii) and (iii)
hereof, in the event that a grant would cause the number of Shares subject to
outstanding Options plus the number of Shares previously purchased upon exercise
of Options to exceed the Pool, then each such automatic grant shall be for that
number of Shares determined by dividing the total number of Shares remaining
available for grant by the number of Outside Directors on the automatic grant
date. Any further grants shall then be deferred until such time, if any, as
additional Shares become available for grant under the Plan through action of
the stockholders to increase the number of Shares which may be issued under the
Plan or through cancellation or expiration of Options previously granted
hereunder.
(v) Notwithstanding the provisions of subsections (ii) and (iii)
hereof, any grant of an Option made before the Company has obtained stockholder
approval of the Plan in accordance with Section 17 hereof shall be conditioned
upon obtaining such stockholder approval of the Plan in accordance with Section
17 hereof.
(vi) The terms of a First Option granted hereunder shall be as
follows:
(A) the First Option shall be exercisable only while the
Outside Director remains a Director of the Company, except as set forth in
Section 9 hereof.
(B) the exercise price per Share shall be 100% of the fair
market value per Share on the date of grant of the First Option.
(C) the First Option shall become exercisable in
installments cumulatively as to 1/16th of the Shares subject to the First Option
on the last day of each calendar quarter beginning with the first full calendar
quarter after the date of grant of the First Option.
(vii) The terms of a Subsequent Option granted hereunder shall be
as follows:
(A) the Subsequent Option shall be exercisable only while
the Outside Director remains a Director of the Company, except as set forth in
Section 9 hereof.
(B) the exercise price per Share shall be 100% of the fair
market value per Share on the date of grant of the Subsequent Option.
(C) the Subsequent Option shall become exercisable in
installments cumulatively as to 1/16th of the Shares subject to the Subsequent
Option on the last day of each calendar quarter beginning with the calendar
quarter in which the Subsequent Option is granted.
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<PAGE> 23
(c) Powers of the Board. Subject to the provisions and restrictions
of the Plan, the Board shall have the authority, in its discretion: (i) to
determine, upon review of relevant information and in accordance with Section
8(b) of the Plan, the fair market value of the Common Stock; (ii) to determine
the exercise price per share of Options to be granted, which exercise price
shall be determined in accordance with Section 8(a) of the Plan; (iii) to
interpret the Plan; (iv) to prescribe, amend and rescind rules and regulations
relating to the Plan; (v) to authorize any person to execute on behalf of the
Company any instrument required to effectuate the grant of an Option previously
granted hereunder; and (vi) to make all other determinations deemed necessary or
advisable for the administration of the Plan.
(d) Effect of Board's Decision. All decisions, determinations and
interpretations of the Board shall be final and binding on all Optionees and any
other holders of any Options granted under the Plan.
(e) Suspension or Termination of Option. If the President or his or
her designee reasonably believes that an Optionee has committed an act of
misconduct, the President may suspend the Optionee's right to exercise any
option pending a determination by the Board of Directors (excluding the Outside
Director accused of such misconduct). If the Board of Directors (excluding the
Outside Director accused of such misconduct) determines an Optionee has
committed an act of embezzlement, fraud, dishonesty, nonpayment of an obligation
owed to the Company, breach of fiduciary duty or deliberate disregard of the
Company rules resulting in loss, damage or injury to the Company, or if an
Optionee makes an unauthorized disclosure of any Company trade secret or
confidential information, engages in any conduct constituting unfair
competition, induces any Company customer to breach a contract with the Company
or induces any principal for whom the Company acts as agent to terminate such
agency relationship, neither the Optionee nor his or her estate shall be
entitled to exercise any option whatsoever. In making such determination, the
Board of Directors (excluding the Outside Director accused of such misconduct)
shall act fairly and shall give the Optionee an opportunity to appear and
present evidence on Optionee's behalf at a hearing before the Board or a
committee of the Board.
5. Eligibility. Options may be granted only to Outside Directors. All
Options shall be automatically granted in accordance with the terms set forth in
Section 4(b) hereof. An Outside Director who has been granted an Option may, if
he or she is otherwise eligible, be granted an additional Option or Options in
accordance with such provisions.
The Plan shall not confer upon any Optionee any right with respect to
continuation of service as a Director or nomination to serve as a Director, nor
shall it interfere in any way with any rights which the Director or the Company
may have to terminate his or her directorship at any time.
6. Term of Plan; Effective Date. The Plan shall become effective on June
28, 1993. It shall continue in effect for a term of ten (10) years unless sooner
terminated under Section 13 of the Plan.
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<PAGE> 24
7. Term of Option. The term of each Option shall be ten (10) years from
the date of grant thereof.
8. Exercise Price and Consideration.
(a) Exercise Price. The per Share exercise price for the Shares to be
issued pursuant to exercise of an Option shall be 100% of the fair market value
per Share on the date of grant of the Option.
(b) Fair Market Value. The fair market value shall be determined by
the Board in its discretion; provided, however, that where there is a public
market for the Common Stock, the fair market value per Share shall be the mean
of the bid and asked prices of the Common Stock in the over-the-counter market
on the date of grant, as reported in The Wall Street Journal (or, if not so
reported, as otherwise reported by the National Association of Securities
Dealers Automated Quotation ("NASDAQ") System) or, in the event the Common Stock
is traded on the NASDAQ National Market System or listed on a stock exchange,
the fair market value per Share shall be the closing price on such system or
exchange on the date of grant of the Option, as reported in The Wall Street
Journal.
(c) Form of Consideration. The consideration to be paid for the
Shares to be issued upon exercise of an Option shall consist entirely of cash,
check, other Shares of Common Stock having a fair market value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised (which, if acquired from the Company, shall have been
held for at least six months), delivery of a properly executed exercise notice
together with instructions to a broker to deliver promptly to the Company the
amount of sale proceeds required to pay the exercise price, or any combination
of such methods of payment and/or any other consideration or method of payment
as shall be permitted under applicable corporate law.
9. Exercise of Option.
(a) Procedure for Exercise; Rights as a Stockholder. Any Option
granted hereunder shall be exercisable at such times as are set forth in Section
4(b) hereof; provided, however, that no Options shall be exercisable until
stockholder approval of the Plan in accordance with Section 17 hereof has been
obtained.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may consist of any consideration and method of payment
allowable under Section 8(c) of the Plan. Until the issuance (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company) of the stock certificate evidencing such Shares,
no right to vote or receive dividends or
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<PAGE> 25
any other rights as a stockholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. A share certificate for the
number of Shares so acquired shall be issued to the Optionee as soon as
practicable after exercise of the Option. No adjustment will be made for a divi
dend or other right for which the record date is prior to the date the stock
certificate is issued, except as provided in Section 11 of the Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Status as a Director. If an Outside Director
ceases to serve as a Director, he or she may, but only within three (3) months
(or such other period of time not exceed ing six (6) months as is determined by
the Board) after the date he or she ceases to be a Director of the Company,
exercise his or her Option to the extent that he or she was entitled to exercise
it at the date of such termination. Notwithstanding the foregoing, in no event
may the Option be exercised after its term set forth in Section 7 has expired.
To the extent that such Outside Director was not entitled to exercise an Option
at the date of such termination, or does not exercise such Option (which he or
she was entitled to exercise) within the time specified herein, the Option shall
terminate.
(c) Disability of Optionee. Notwithstanding the provisions of Section
9(b) above, in the event a Director is unable to continue his or her service as
a Director with the Company as a result of his or her total and permanent
disability (as defined in Section 22(e)(3) of the Internal Revenue Code), he or
she may, but only within six (6) months (or such other period of time not
exceeding twelve (12) months as is determined by the Board) from the date of
such termination, exercise his or her Option to the extent he or she was
entitled to exercise it at the date of such termination. Notwithstanding the
foregoing, in no event may the Option be exercised after its term set forth in
Section 7 has expired. To the extent that he or she was not entitled to exercise
the Option at the date of termination, or if he or she does not exercise such
Option (which he or she was entitled to exercise) within the time specified
herein, the Option shall terminate.
(d) Death of Optionee. In the event of the death of an Optionee:
(i) during the term of the Option who is, at the time of his or
her death, a Director of the Company and who shall have been in Continuous
Status as a Director since the date of grant of the Option, the Option may be
exercised, at any time within six (6) months (or such other period of time as is
determined by the Board) following the date of death, by the Optionee's estate
or by a person who acquired the right to exercise the Option by bequest or
inheritance, but only to the extent of the right to exercise that would have
accrued had the Optionee continued living and remained in Continuous Status as
Director for six (6) months (or such lesser period of time as is determined by
the Board) after the date of death. Notwithstanding the foregoing, in no event
may the Option be exercised after its term set forth in Section 7 has expired.
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<PAGE> 26
(ii) within three (3) months (or such lesser period of time as is
determined by the Board) after the termination of Continuous Status as a
Director, the Option may be exercised, at any time within six (6) months
following the date of death, by the Optionee's estate or by a person who
acquired the right to exercise the Option by bequest or inheritance, but only to
the extent of the right to exercise that had accrued at the date of termination.
Notwithstanding the foregoing, in no event may the option be exercised after its
term set forth in Section 7 has expired.
10. Nontransferability of Options. Unless otherwise provided for by the
Board, the Option may not be sold, pledged, assigned, hypothecated, transferred,
or disposed of in any manner other than by will or by the laws of descent or
distribution. The designation of a beneficiary by an Optionee does not
constitute a transfer. An Option may be exercised during the lifetime of an
Optionee only by the Optionee or a transferee permitted by this Section.
11. Adjustments Upon Changes in Capitalization or Merger.
(a) Change in Capitalization. Subject to any required action by the
stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock which have
been authorized for issuance under the Plan but as to which no Options have yet
been granted or which have been returned to the Plan upon cancellation or
expiration of an Option, as well as the price per share of Common Stock covered
by each such outstanding Option, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Com pany; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option.
(b) Dissolution; Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Option will terminate immediately
prior to the consummation of such proposed action, unless otherwise provided by
the Board. The Board may, in the exercise of its sole discretion in such
instances, declare that any Option shall terminate as of a date fixed by the
Board and give each Optionee the right to exercise his or her Option as to all
or any part of the Optioned Stock, including Shares as to which the Option would
not otherwise be exercisable.
(c) Merger; Asset Sale. In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, then, to the extent the Option is unvested,
the Option shall become vested and exercisable as to an additional 25% of the
Shares subject to such Option, in addition to any Shares which may have already
vested under such Option (up to a maximum of 100% of the Optioned Stock
originally granted). In addition, the outstanding Options may be assumed or an
equivalent option may be
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<PAGE> 27
substituted by the successor corporation or a parent or subsidiary thereof (the
"Successor Corporation"). If the Successor Corporation does not assume an
outstanding Option or substitute an equivalent option then, the Optionee shall
have the right to exercise the Option as to some or all of the Optioned Stock,
including Shares as to which the Option would not otherwise be exercisable. If
an Option becomes exercisable in lieu of assumption or substitution in the event
of a merger or sale of assets, the Board shall notify the Optionee that the
Option shall be exercisable for a period of fifteen (15) days from the date of
such notice, and the Option will terminate upon the expiration of such period.
For the purposes of this Section 11(c), an Option shall be considered
assumed if, following the merger or sale of assets, the Option confers the right
to purchase or receive, for each Share of Optioned Stock subject to the Option
immediately prior to the merger or sale of assets, the consideration (whether
stock, cash, or other securities or property) received in the merger or sale of
assets by holders of Common Stock for each Share held on the effective date of
the transaction (and if holders were offered a choice of consideration, the type
of consideration chosen by the holders of a majority of the outstanding Shares).
If such consideration received in the merger or sale of assets is not solely
common stock of the successor corporation or its Parent, the Administrator may,
with the consent of the successor corporation, provide for the consideration to
be received upon the exercise of the Option, for each Share of Optioned Stock
subject to the Option, to be solely common stock of the successor corporation or
its Parent equal in fair market value to the per share consideration received by
holders of Common Stock in the merger or sale of assets.
(d) Certain Business Combinations. In the event it is determined by
the Company's independent public accountants that the acceleration of vesting of
outstanding Options upon a merger pursuant to this Section would preclude
accounting for such merger as a pooling of interests, and the Board desires to
approve such merger 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.
12. Time of Granting Options. The date of grant of an Option shall, for
all purposes, be the date determined in accordance with Section 4(b) hereof.
Notice of the determination shall be given to each Outside Director to whom an
Option is so granted within a reasonable time after the date of such grant.
13. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may amend or terminate the
Plan from time to time in such respects as the Board may deem advisable;
provided that, to the extent necessary and desirable to comply with any
applicable law or regulation, the Company shall obtain approval of the
stockholders of the Company to Plan amendments to the extent and in the manner
required by such law or regulation.
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<PAGE> 28
(b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan that would impair the rights of any Optionee shall not
affect Options already granted to such Optionee and such Options shall remain in
full force and effect as if this Plan had not been amended or terminated, unless
mutually agreed otherwise between the Optionee and the Board, which agree ment
must be in writing and signed by the Optionee and the Company.
14. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, state securities laws, and the requirements of any stock exchange
upon which the Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares, if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
Inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained.
15. Reservation of Shares. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
16. Option Agreement. Options shall be evidenced by written option
agreements in such form as the Board shall approve.
17. Stockholder Approval.
(a) Continuance of the Plan shall be subject to approval by the
stockholders of the Company at or prior to the first annual meeting of
stockholders held subsequent to the granting of an Option hereunder. If such
stockholder approval is obtained at a duly held stockholders' meeting, it may be
obtained by the affirmative vote of the holders of a majority of the outstanding
shares of the Company present or represented and entitled to vote thereon. If
such stockholder approval is obtained by written consent, it may be obtained by
the written consent of the holders of a majority of the outstanding shares of
the Company.
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<PAGE> 29
(b) Any required approval of the stockholders of the Company shall be
solicited substantially in accordance with Section 14(a) of the Exchange Act and
the rules and regulations promulgated thereunder.
18. Information to Optionees. The Company shall provide to each
\Optionee, during the period for which such Optionee has one or more Options
outstanding, copies of all annual reports to stock holders, proxy statements and
other information provided to all stockholders of the Company.
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<PAGE> 30
DETACH HERE
- --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
AUSPEX SYSTEMS, INC.
2300 CENTRAL EXPRESSWAY, SANTA CLARA, CALIFORNIA 95050
1998 ANNUAL MEETING OF STOCKHOLDERS
NOVEMBER 19, 1998
The undersigned stockholder of Auspex Systems, Inc., a Delaware corporation (the
"Company"), hereby acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement, each dated October 16, 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 Annual Meeting
of Stockholders of the Company to be held on November 19, 1998 at 9:00 a.m.
local time, at the Company's headquarters located at 2300 Central Expressway,
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 on the reverse side.
- ----------- -----------
SEE REVERSE SEE REVERSE
SIDE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
- ----------- -----------
<PAGE> 31
DETACH HERE
- --------------------------------------------------------------------------------
Please mark
[X] votes as in
this example.
This proxy, when properly executed, will be voted as directed below, or, if no
contrary direction is indicated, will be voted FOR the election of two (2)
Class I directors, FOR proposals 2 and 3, and as said proxies deem advisable on
such other matters as may properly come before the meeting.
1. To elect two (2) Class I directors of the Company to serve for a two-year
term.
Nominees: W. Frank King and Bruce N. Moore
FOR WITHHELD
[ ] [ ] MARK HERE
IF YOU PLAN [ ]
TO ATTEND
THE MEETING
MARK HERE
FOR ADDRESS [ ]
CHANGE AND
- --------------------------------------------------------- NOTE BELOW
To withhold authority to vote for any individual nominee,
write that nominee's name on the space provided above.
FOR AGAINST ABSTAIN
2. To approve amendments to the Company's 1993 [ ] [ ] [ ]
Directors' Stock Option Plan to (i) increase
the number of shares of Common Stock reserved
for issuance thereunder by 150,000 to a total
of 325,000 and (ii) increase the number of
shares of Common Stock subject to the initial
and annual option grants automatically awarded
to the Company's directors thereunder from
16,000 and 4,000 to 25,000 and 8,000,
respectively.
FOR AGAINST ABSTAIN
3. To ratify the appointment of Arthur Anderson [ ] [ ] [ ]
LLP as the independent auditors of the Company
for the year ending June 30, 1999.
4. To transact such other business as may properly
come before the meeting or any postponements or
adjournments thereof.
TO ENSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, PLEASE MARK, SIGN AND DATE
THIS PROXY AND RETURN IT AS PROMPTLY AS POSSIBLE.
(This proxy should be marked, dated and 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, as 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:
--------------------------------------- -------------------------
