<PAGE> 1
LOGO
TCSI CORPORATION
1080 MARINA VILLAGE PARKWAY
ALAMEDA, CALIFORNIA 94501
------------------------
INFORMATION STATEMENT
TO THE SHAREHOLDERS OF TCSI CORPORATION:
NOTICE IS HEREBY GIVEN that the Board of Directors has unanimously approved
the following:
1. The amendment of the Company's 1991 Stock Incentive Plan (the "1991
Plan") to increase to 750,000 the maximum number of shares subject to
options which may be awarded to any participant in a fiscal year;
2. The grant of a stock option to Dr. Ram A. Banin under the 1991 Plan to
acquire 500,000 shares of Common Stock at an exercise price equal to
$5.8876 per share.
In order for such actions to become effective, the actions must be approved
by holders of a majority of the Company's outstanding Common Stock. The purpose
of this Information Statement is to solicit such approval by written consent.
Only shareholders of record at the close of business on July 16, 1997 are
entitled to notice of the proposed action and to provide or withhold their
written consent to such action. The actions will be effective on or about
September 15, 1997 if approved by holders of a majority of the Company's Common
Stock through their written consent prior to such date.
By Order of the Board of Directors,
LOGO
Christine M. Davis
Assistant Secretary
August 15, 1997
PLEASE COMPLETE, SIGN AND RETURN THE ACCOMPANYING WRITTEN CONSENT OF
SHAREHOLDERS BY AUGUST 31, 1997.
THE FORM OF CONSENT TO BE COMPLETED DOES NOT CONSTITUTE A PROXY. WE ARE NOT
ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
<PAGE> 2
INFORMATION STATEMENT
OF
TCSI CORPORATION
1080 MARINA VILLAGE PARKWAY
ALAMEDA, CALIFORNIA 94501
This Information Statement is being furnished to shareholders of TCSI
Corporation (the "Company") in connection with a proposal by the Company's Board
of Directors to (i) amend the Company's 1991 Stock Incentive Plan (the "1991
Plan") to increase to 750,000 shares the maximum number of shares subject to
options which may be awarded to any participant in a fiscal year (the
"Amendment") and (ii) approve the grant to Dr. Ram Banin of a stock option to
purchase 500,000 shares of the Company's Common Stock at an exercise price of
$5.8876 per share (the "Option Grant"). No proxy is being solicited by the Board
of Directors in connection with this Information Statement.
This Information Statement is being mailed on or about August 5, 1997 to
holders of record of the Company's Common Stock at the close of business on July
16, 1997. Shareholders of record on such date are entitled to notice of and to
consent to the proposed Amendment and the Option Grant. On that date, 21,530,525
shares of Common Stock were outstanding and entitled to consent. No shares of
Preferred Stock were outstanding on such date. Before the Amendment and the
Option Grant may become effective, the written consent of holders of a majority
of the outstanding shares of the Company's Common Stock must be received. Each
share of Common Stock has the equivalent of one vote for purpose of providing
consent. Holders of more than the minimum number of shares required to approve
the Amendment and the Option grant have indicated their intent to support each
of the proposals. Nevertheless, recipients of this Information Statement are
being asked to complete and return the enclosed consent. Any consent which the
Company has received from shareholders may be revoked in writing at any time by
such shareholder, provided such written revocation is received by the Secretary
of the Company prior to the close of business on August 31, 1997.
PROPOSAL 1: TO AMEND THE 1991 STOCK INCENTIVE PLAN
General. The Company's 1991 Plan was adopted by the Board of Directors and
the shareholders in May 1991. The purpose of the Stock Plan is to attract and
retain key employees and consultants and to promote the success of the Company.
The Stock Plan provides for the issuance of incentive stock options pursuant to
Section 422 of the Code ("ISOs"), nonstatutory stock options ("NSOs") and
restricted stock awards to key employees and consultants of the Company,
including employees who serve as officers or directors of the Company. The total
number of shares of Common Stock authorized for issuance under the Stock Plan is
currently 7,500,000 shares, subject to certain adjustments upon stock dividend,
stock splits, recapitalization, and similar events.
In June 1997, the Board of Directors approved an amendment to the 1991 Plan
to set the maximum number of shares as to which stock options may be awarded to
any participant in any fiscal year at 750,000. This Amendment will enable the
Board greater flexibility in granting performance-based compensation to
executive management in the form of stock options and other stock incentives.
The Amendment is included in its entirety.
ANNUAL AWARD LIMIT AND OTHER AMENDMENTS RELATING TO SECTION 162(M)
Section 162(m) of the Code limits the Federal income tax deduction
available to a public company for compensation paid to any of its Chief
Executive Officer and four other highest paid executive officers to $1 million
per year. However, Section 162(m) provides for an exception from this limitation
for certain "performance-based" compensation if various requirements are
satisfied. The proposed amendments of the Stock Plan is designed to satisfy this
exception for stock options issued thereunder.
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SUMMARY OF MATERIAL PROVISIONS OF THE AMENDED 1991 STOCK INCENTIVE PLAN
The following summary is necessarily incomplete and selective and is
qualified in its entirety by reference to the full text of the Stock Plan.
Administration. The Stock Plan has been administered by the Compensation
Committee, which is currently composed of John C. Bolger and William A. Hasler.
Upon approval of the proposed amendments to the Stock Plan, the Stock Plan will
be administered by an administrative committee (the "Committee"), which must be
composed of not less than two directors of the Company who are "disinterested
persons" within the meaning of Rule 16b-3 promulgated under Section 16(b) of the
Securities Exchange Act of 1934 and who are "outside directors" within the
meaning of Section 162(m) of the Code, and accordingly are ineligible to
participate under the Plan. The Board of Directors has elected Messrs. Bolger
and Hasler to serve on the Committee to administer the amended Stock Plan. The
Committee has the sole discretion, subject to certain limitations, to interpret
the Stock Plan, to select participants, to determine the type, size, terms, and
conditions of awards under the Stock Plan, to authorize the grant of such
awards, and to adopt, amend, and rescind rules relating to the Stock Plan.
Eligibility. All officers, employees, and consultants to the Company and
any future subsidiaries are eligible for participation under the Stock Plan;
however, only employees are eligible for ISOs.
Types of Awards. The Stock Plan permits the Committee to grant awards
consisting of stock options or restricted stock.
Stock Options. A stock option is a right granted by the Committee to the
participant to purchase a specified number of shares of Common Stock from the
Company at a price determined by the Committee at the date of grant. Options are
evidenced by stock option agreements between the Company and the participant.
The Committee also determines the duration of the option, which may in no event
exceed ten years from the date of grant. The Stock Plan provides that the stock
options may either be ISOs or NSOs.
The exercise price for each ISO granted under the Stock Plan may not be
less than the fair market value of the Common Stock on the date of the grant,
unless the optionee owns greater than 10% of the total combined voting power of
all classes of capital stock of the Company, in which case the exercise price
may not be less than 110% of the fair market value of the Common Stock on the
date of the grant. The exercise price for each NSO may be any price determined
by the Committee. The exercise price of ISOs and NSOs may be paid to the Company
in cash or, at the discretion of the Committee, by delivery of Common Stock
already owned by the optionee or other awards (valued at their fair market value
at the time of exercise.) The Committee has authority to determine the eligible
participants to whom options are granted, the number of shares granted under
each option, the purchase price, the option period and the vesting schedule.
Options are exercisable in such amounts, at such intervals and upon such terms
as the Committee shall provide in the option, subject to certain limitations
specified in the Stock Plan. The Committee may accelerate the exercisability of
any option at any time.
An option will expire not later than three months after termination of
employment or engagement of the participant for reasons other than death,
disability, or retirement. ISOs will terminate not later than three months after
termination by reason of retirement and not later than twelve months after
termination by reason of disability. The Committee may establish a period longer
than three months in the event of termination as a result of death, disability,
or retirement for NSOs or as a result of death for ISOs.
Restricted Stock. The Committee is authorized under the Stock Plan as
amended to issue shares of Common Stock to eligible employees and consultants
selected by the Committee. The participant must pay such consideration, if any,
specified by the Committee for the underlying shares, and must satisfy any
restrictions imposed in connection with such award, such as the requirement of
continued employment by the Company for such period as the Committee may
prescribe. In the event the conditions specified by the Committee in a
particular award are not satisfied, the shares are forfeited to the Company.
During the period of restriction, a participant will be entitled to beneficial
ownership of the restricted stock, including the right to receive dividends and
to vote the shares, but will not be entitled to possession of certificates
representing the restricted stock or to sell, assign, pledge, or otherwise
dispose of the restricted stock.
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Additional Information. The Stock Plan also permits the Company to make
loans to participants in connection with the exercise of an award under the
Stock Plan. No such loan may exceed the aggregate purchase price payable
pursuant to the Stock Plan award with respect to which the loan is made plus the
amount of the reasonably estimated income taxes payable by the participant with
respect to the exercise of the award. All such loans must be full recourse in
nature and secured by Common Stock of the Company acquired upon such exercise.
Notwithstanding the vesting schedule established for each option or
restricted stock award, the Stock Plan provides that upon occurrence of certain
events that result in a change of control of the Company (as determined by the
Board of Directors prior to such change in control) unvested options will become
exercisable immediately and all restrictions on restricted stock awards will
lapse. No option or restricted stock award granted under the Stock Plan is
assignable or transferable other than by will or by the laws of descent and
distribution. Unless earlier terminated, the Stock Plan terminates on May 19,
2001.
Amendments. The Stock Plan provides that it may be amended or terminated by
the Board of Directors upon the recommendation of the Committee at any time,
provided that shareholder approval must be obtained for any amendment that
increases the number of shares with respect to which awards may be granted under
the Stock Plan, amends the provisions concerning ISOs in any manner which would
disqualify such ISOs under applicable tax provisions, modifies the class of
eligible participants or materially increases the benefits accruing to
participants under the Stock Plan. No amendment will, without the consent of the
participant, impair any outstanding award previously granted to such
participant.
Tax Consequences. The following is a brief summary of the principal federal
income tax consequences of awards under the Stock Plan. The Stock Plan as
amended has been designed to meet the requirements in Section 162(m) of the
Code. This summary is not intended to be exhaustive and does not describe state,
local, or foreign tax consequences.
ISOs. An employee who is granted an ISO will not recognize taxable income
either on the date of grant or on the date of its timely exercise. However, the
excess of the fair market value of the shares of the Company's Common Stock on
the date of exercise over the exercise price is an item includible in the tax
base upon which the alternate minimum tax may be imposed. A participant may be
required to pay an alternative minimum tax even though the participant receives
no cash upon exercise of the ISO with which to pay such tax.
Upon disposition of the Common Stock acquired upon exercise of an ISO,
long-term capital gain or loss would be recognized in an amount equal to the
difference between the sales price and the option exercise price, provided the
participant has not disposed of the Common Stock within two years of the date of
grant and within one year from the date of exercise. If the participant does not
satisfy these holding periods, the disposition of the option shares is a
"disqualifying disposition" and the participant will recognize income in the
year of the disqualifying disposition equal to the excess of the amount received
for the shares over the exercise price. Of that income, the portion equal to the
excess of the fair market value of the shares at the time the ISO was exercised
over the exercise price will be treated as compensation to the participant,
taxable as ordinary income, and the balance (if any) will be long-term or
short-term capital gain depending on whether the shares were sold more than one
year after the ISO was exercised. If the participant sells the shares in a
disqualifying disposition at a price that is below the exercise price, the loss
will be a short-term capital loss if the participant has held the shares for one
year or less and otherwise will be a long-term capital loss. Special rules apply
to participants who are officers or directors of the Company and who are subject
to the provisions of Section 16(b) of the Securities Exchange Act of 1934.
Under current IRS rulings, special rules apply for determining a
participant's tax basis in and holding period for Common Stock acquired upon the
exercise of an ISO if the participant pays the exercise price of the shares in
whole or in part with previously-owned shares of the Company's Common Stock.
Under these rules, the participant does not recognize any income or loss from
delivery of shares of Common Stock (other than shares previously acquired
through the exercise of an ISO and not held for the statutory holding periods)
in payment of the exercise price. The participant's tax basis in and holding
period for the newly-acquired shares of Common Stock will be determined as
follows under proposed Treasury regulations: as to a number of
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<PAGE> 5
newly-acquired shares equal to the number of previously-owned shares delivered,
the participant's basis in and holding period (for capital gains purposes, but
not for disqualifying disposition purposes) for the previously-owned shares will
carry over to the newly-acquired shares on a share-for-share basis; as to each
remaining newly-acquired share, the participant's basis will be zero (or, if
part of the exercise price is paid in cash, the amount of such cash dividend by
the number of remaining newly-acquired shares) and the participant's holding
period will begin on the date such share is transferred to the employee.
If a participant pays the exercise price of an ISO in whole or in part with
previously-owned shares that were acquired upon the exercise of an ISO and have
not been held for the statutory holding periods, the participant will recognize
compensation income (but not capital gains) under the rules applicable to
disqualifying dispositions.
The Company is not entitled to any deduction with respect to the grant or
exercise of an ISO or the subsequent disposition of the shares acquired upon
exercise of an ISO if the participant does not have any disqualifying
dispositions. If the participant has compensation taxable as ordinary income as
a result of a disqualifying disposition, the Company will be entitled to a
deduction of an equivalent amount in the year in which the disqualifying
disposition occurs.
NSOs. A participant who is granted a NSO recognizes no income upon the
grant of the NSO. At the time of exercise, however, the participant recognizes
compensation income equal to the difference between the option exercise price
and the fair market value of the Common Stock on the date of exercise. This
income is subject to income and employment tax withholding. The Company is
entitled to an income tax deduction corresponding to the compensation income
recognized by the participant, unless the compensation is treated as a capital
expenditure of inventory cost. If the participant is subject to the restrictions
of Section 16(b) of the Securities Exchange Act of 1934, the time of recognition
of compensation and the amount thereof, and the availability of a tax deduction
to the Company, will be determined when such restrictions cease to apply.
Upon a subsequent sale of the Common Stock acquired upon exercise of a NSO,
the participant will recognize capital gains or losses equal to the difference
between the sales proceeds and the tax basis of the shares sold. The
participant's capital gain will be long-term or short-term, depending upon
whether the stock sold was held more than one year. The Company will not receive
a deduction for any gain recognized by the participant.
If the participant pays the exercise price for a NSO entirely in cash, the
participant's tax basis in the Common Stock received equals the stock's fair
market value on the exercise date and the participant's holding period begins on
the day after the exercise date. If, however, the participant pays the exercise
price of a NSO in whole or in part with previously-owned shares of Common Stock,
then the participant's tax basis in and holding period for the newly-acquired
shares will be determined as follows: as to a number of newly-acquired shares
equal to the number of previously-owned shares delivered, the participant's
basis in and holding period for the previously-owned shares will carry over to
the newly-acquired shares on a share-for-share basis thereby deferring any gain
inherent in the previously-owned shares. As to each remaining newly-acquired
share, the participant's basis will equal the share's value on the exercise date
and the participant's holding period will begin on the day after the exercise
date. The participant's compensation income, which is taxable as ordinary income
upon such exercise, and the Company's deduction will not be affected by whether
the exercise price is paid in cash or in shares of Common Stock.
Restricted Stock. A participant granted restricted stock will in most cases
be subject to tax at ordinary income rates on the fair market value of the
restricted stock at the time the restrictions lapse or the shares otherwise
become vested. However, a participant who makes an election under Section 83(b)
of the Code within 30 days of the date of grant will have ordinary income as of
such date equal to the fair market value of the shares of restricted stock
determined without regard to the restrictions. If the shares subject to such
election are forfeited, the participant will not be entitled to a deduction,
refund, or loss for tax purposes, except to the extent of any cash or property
paid for the stock. In the case of a sale of shares after the expiration of the
restriction period, the holding period to determine whether the participant has
long-term or short-term capital gains or losses begins upon such expiration and
the tax basis for such shares will be equal to the fair market value thereof on
such date. If the participant elects to be taxed as of the date of grant,
however, the holding
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<PAGE> 6
period commences on such date and the tax basis will be equal to the fair market
value of the shares on the date of grant determined without regard to the
restrictions. The Company will in most instances be entitled to a deduction
equal to the amount treated as compensation to the participant.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS APPROVE
PROPOSAL 1
PROPOSAL 2: TO APPROVE THE GRANT OF A STOCK OPTION TO DR. RAM A BANIN
UNDER THE 1991 PLAN TO PURCHASE 500,000 SHARES OF COMMON STOCK
AT AN EXERCISE PRICE OF $5.8876 PER SHARE.
In connection with the promotion of Dr. Banin to serve as the Company's
Chief Executive Officer, the Company and Dr. Banin entered into an amendment of
Dr. Banin's Employment Agreement on June 11, 1997 (the "Employment Agreement").
See "Arrangements with Executive Officer - Employment Agreement with Dr. Banin."
The terms of such amended agreement provide, among other things, for the grant
to Dr. Banin of an option to purchase 500,000 shares of Common Stock at an
exercise price of $5.8876 per share (the "Option Grant" ), which was the average
fair market value of the Company's Common Stock for the five days prior to the
date of the Option Grant.
The Employment Agreement provides that the effectiveness of the Option
Grant is conditioned upon the shareholder approval of the Option Grant in order
for certain gains realized upon exercise of the Option Grant to constitute
"performance-based compensation" under Section 162(m) of the Code. Section
162(m) limits the amount of compensation paid to executive officers that may be
deducted for federal tax purposes in any year to $1.0 million, unless the
compensation qualifies as "performance-based compensation." In 1996, the Company
amended the 1991 Plan pursuant to Section 162(m) to provide that the maximum
number of shares of Common Stock subject to options that may be granted to any
one participant under the 1991 Plan in any fiscal year was 300,000 shares (as
adjusted for the Company's three-for-two stock split in May 1996). Because the
Option Grant exceeded such maximum number of shares, the Company would not be
permitted to deduct as compensation gains attributable to exercise of the shares
subject to the Option Grant which, when added to Dr. Banin's other compensation,
exceed $1.0 million. If the Option Grant is approved, all such gains would be
deductible by the Company as compensation.
DESCRIPTION OF OPTION GRANT
The Employment Agreement provides for the grant to Dr. Banin of an option
to purchase 500,000 shares of Common Stock. The Option is a nonstatutory stock
option for purposes of the Code. The date of grant of the Option is June 11,
1997 and the exercise price of the Option is $5.8876 per share, which was the
average fair market value of the Company's Common Stock for the five days prior
to the date of grant. Under the terms of the Employment Agreement, the Option
vests ratably in annual installments over the four-year term of his employment
with the Company on the first day of the year and will expire on the sixth
anniversary of the date of the grant, unless the Option terminates earlier in
accordance with the provisions of the 1991 Plan. If Dr. Banin's employment with
the Company terminates for any reason (other than death or disability), he will
forfeit the unvested portion of the Option, and the vested portion will remain
exercisable for 90 days following the termination of employment. If Dr. Banin's
employment is terminated without "cause" or if Dr. Banin should resign for "good
reason" (as such terms are defined in the Employment Agreement) after a change
in control of the Company, he will also vest in an additional portion of the
Option as set forth in the Employment Agreement. A summary of the Employment
Agreement is attached to this Information Statement as Arrangements with
Executive Officers -- Employment Agreement with Dr. Banin.
The terms of the 1991 Plan and the tax consequences of option grants under
the 1991 Plan (including the Option) are discussed above. See Proposal No. 1.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE
SHAREHOLDERS APPROVE PROPOSAL 2
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REQUIREMENT FOR SHAREHOLDER APPROVAL
A majority of the shares of Common Stock issued and outstanding as of the
Record Date is required to approve the proposals as described above. At the time
that the Board of Directors approved the proposals, certain members of the Board
of Directors, a major shareholder, and certain officers of the Company, as
shareholders, indicated their intention to consent to the proposals. Such
persons held more than a majority of the shares of the Company's Common Stock
outstanding as of the Record Date. Accordingly, unless any such persons revoke
their consents, the proposals will be approved by the Company's shareholders.
Notwithstanding receipt of shareholder approval of the proposals, the proposals
will not be effective prior to August 31, 1997.
SECURITY OWNERSHIP OF DIRECTORS, OFFICERS, AND PRINCIPAL SHAREHOLDERS
The following table sets forth information as of January 15, 1997,
concerning ownership of Common Stock by each director, the Named Executive
Officers, as defined below, all directors and Named Executive Officers as a
group, and the only persons known by the Company to own 5% or more of the
outstanding shares of its Common Stock. Unless otherwise noted, the listed
persons have sole voting and dispositive powers with respect to the shares held
in their names, subject to community property laws if applicable.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP
-------------------------
NAME AMOUNT PERCENT
----------------------------------------------------- ---------- --------
<S> <C> <C>
BENEFICIAL OWNERS AND MANAGEMENT
Amerindo Investment Advisors 6,721,200 31.61%
One Embarcadero Center, Suite 2300
San Francisco, California 94111-3162
Roger A. Strauch(1)(2) 1,718,000 8.0
Daniel H. Miller(1) 1,120,319 5.3
Harvey E. Wagner 629,638 3.0
Ram A. Banin, Ph.D.(1) 183,750 *
David G. Messerschmitt, Ph.D.(1)(2) 177,604 *
Paul A. Farmer(1) 101,250 *
Harish S. Rao, Ph.D.(1) 71,625 *
Hatch Graham(1) 28,125 *
John C. Bolger(1) 27,000 *
William A. Hasler(1) 20,500 *
All directors and named executive officers as a group
(eleven persons)(1)(2) 10,799,011 50.12%
</TABLE>
- ---------------
* Less than 1%
(1) Includes options under the Company's stock option plans which are
exercisable on July 16, 1997 or within 60 days thereafter.
(2) Includes shares held in a family trust/family foundation in which the
director controls or shares investment and voting power.
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<PAGE> 8
COMPENSATION COMMITTEE REPORT
The report of the Compensation Committee (the "Committee") shall not be
deemed incorporated by reference by any general statement into any filing under
the Securities Act of 1933 or under the Securities Exchange Act of 1934 and
shall not be otherwise deemed filed under such Acts.
The Company's compensation program is reevaluated annually. The program,
designed to encourage teamwork and cooperation and to motivate key personnel,
establishes a base salary for each executive with annual cash incentives to be
paid based on attainment of defined performance goals. The overall structure of
the plan is the same for corporate staff, functional leaders, and other key
personnel in that specific targets are set for each individual. The target bonus
(up to 50% of salary) is paid to an individual achieving expected performance.
Higher percentages may be paid for extraordinary performance.
The annual targets are set by the Committee based on recommendations from
members of executive management at the end of the previous year and include
between two and five specific performance measures focused in the individual's
area of responsibility. The performance of executive officers is measured based
on overall Company performance, including earnings per share. All compensation
awarded is at the discretion of the Board of Directors.
The Committee recognizes that stock options are considered a standard
component of competitive compensation packages throughout the industry. As part
of the Company's longer term incentive compensation program, generally all
employees, including executive officers, are eligible for awards under the
Company's 1991 Stock Incentive Plan, which permits the grant of stock options or
restricted stock. As the options provide value to the owner only when the price
of the Company's stock increases above the grant price of the options, senior
management attains the perspective of a shareholder with regard to the Company's
financial position. Stock option grants are based on a median competitive grant
level dependent only on a threshold level of corporate performance. Stock
options are generally granted on an annual basis and generally vest over four to
six years from the date of the grant. The Committee has the authority to grant
additional options at year end (within ranges established at the beginning of
the year) for individuals believed to have exhibited extraordinary performance
during the year. A total of 65,000 options were awarded to executive officers
during the 1997 fiscal year to date.
Senior management also participates in company-wide employee benefit plans,
including the Company's Profit Sharing/401(k) Plan. Benefits under these plans
are not dependent upon individual performance.
The Committee believes that executive compensation should not only be
within competitive norms, but also be highly related to individual and corporate
performance. The 1997 base salaries for Dr. Banin, the President and Chief
Executive Officer, and all other executive officers were established at a
meeting of the Board of Directors held on May 7, 1997 and were based upon the
Company's 1996 performance and based upon a report prepared by an outside
compensation consultant. Dr. Banin, formerly the Company's President and Chief
Operating Officer, was confirmed as President, Chief Executive Officer and a
Director of the Company on June 11, 1997. He replaced Mr. Strauch, who resigned
on June 30, 1997. On June 11, 1997, Dr. Banin was awarded an additional 500,000
shares subject to shareholder approval in this Information Statement. The 1996
base salary for Mr. Strauch was increased from $245,000 in 1995 to $250,000 for
his leadership effort and commitment to the Company. Effective January 1, 1997,
Mr. Strauch's base salary was decreased to $230,000 based upon the 1996
operating results of the Company. Further, Mr. Strauch received no bonus based
upon 1996 corporate results. In early 1996, Mr. Strauch was granted options to
30,000 shares based upon the Company's 1995 performance. Mr. Strauch was not
granted any stock options relating to the Company's 1996 performance.
COMPENSATION COMMITTEE
John C. Bolger, Chairman
William A. Hasler
May 30, 1997
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COMPARISON CUMULATIVE TOTAL RETURN AMONG TCSI CORPORATION,
NASDAQ MARKET INDEX, AND PEER GROUP INDEX
The Comparison Stock Performance Graph below shall not be deemed
incorporated by reference by any general statement incorporating by reference
this Information Statement into any filing under the Securities Act of 1933 or
under the Securities Exchange Act of 1934, except to the extent the Company
specifically incorporates this information by reference, and shall not otherwise
be deemed filed under such Acts. The following graph assumes $100 invested on
July 18, 1991 and all dividends are reinvested. The peer group consists of
companies in the Computer Integrated Design Industry.
<TABLE>
<CAPTION>
Measurement Period Nasdaq Market
(Fiscal Year Covered) TCSI Corporation Peer Group Index
<S> <C> <C> <C>
1991 100 100 100
1992 40.00 109.54 100.98
1993 95.00 121.95 121.13
1994 136.67 116.66 127.17
1995 246.67 188.13 164.96
1996 124.94 199.68 204.98
</TABLE>
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EXECUTIVE COMPENSATION
The following table sets forth the compensation of the Company's executive
officers whose cash compensation exceeded $100,000, for the years ended December
31, 1996, 1995, and 1994 (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
ANNUAL COMPENSATION --------------------
------------------------------------------ NUMBER OF SECURITIES
NAME AND OTHER ANNUAL UNDERLYING OPTIONS/ ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) COMPENSATION($) SARS(#)(2)(3) COMPENSATION($)(4)
- -------------------------------- ----- --------- ----------- --------------- -------------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Roger A. Strauch 1996 250,000 -- 24,738(15) 30,000 4,750
Chairman of the Board 1995 245,000 150,000 -- 90,000 4,620
and Chief Executive Officer(5) 1994 215,000 135,000 -- 150,000 4,620
Ram A. Banin, Ph.D. 1996 230,000 -- 20,696(15) 75,000 4,750
President and Chief 1995 210,000 200,000 -- 60,000 4,620
Operating Officer(6) 1994 180,000 104,809(8) -- 45,000 4,620
Paul A. Farmer, 1996 180,000 -- 8,091(15) 45,000 3,919
Chief Financial Officer, 1995 165,000 125,000 -- 60,000 4,620
Secretary, and Treasurer(7) 1994 140,000 70,000 110,914(9) -- 4,620
Hatch Graham, 1996 180,000(11) -- 2,163(15) -- 3,643
Senior Vice President(10) 1995 36,923 135,000(12) 50,000(12) 112,500(12) --
Harish S. Rao, Ph.D. 1996 205,000(14) -- 10,904(15) 55,500 3,853
Senior Vice President, 1995 171,875 175,000 -- 45,000 4,620
Engineering and 1994 140,000 77,471 -- 27,000 4,620
Operations(13)
</TABLE>
- ---------------
(1) Includes bonuses accrued in 1995 and 1994 paid in 1996 and 1995,
respectively.
(2) Reflects options only. No SARs have been issued.
(3) Options have been adjusted for the three-for-two split in May of 1996.
(4) These amounts represent the amounts accrued for the Company's contributions
to the Company's Profit Sharing/401(k) Plan for 1996, 1995, and 1994,
respectively, and allocated to the named executive officers.
(5) Mr. Strauch resigned from the Board of Directors and as Chief Executive
Officer of the Company effective June 30, 1997 (see "Compensation Committee
Report").
(6) Dr. Banin was appointed as Chief Executive Officer and elected to serve on
TCSI's Board of Directors effective July 1, 1997 (see "Compensation
Committee Report").
(7) Mr. Paul Farmer resigned as Chief Financial Officer of the Company
effective July 21, 1997. The Company is conducting a search to fill this
position.
(8) Includes $1,500 paid to Dr. Banin for special incentive program.
(9) Represents relocation costs paid in 1994 by the Company on behalf of Mr.
Farmer. In 1994, no other executive officer received compensation other
than the salary and bonus described herein, including incidental personal
benefits, in excess of the lesser of $50,000 or 10% of such officer's cash
compensation.
(10) Mr. Graham resigned from the executive management team subsequent to the
licensing of the Personal Communications Group's wireless technology to
Atmel Corporation late in 1996. Mr. Graham will continue to remain an
employee of the Company until October 31, 1997.
(11) Does not include $45,000 paid to Mr. Graham as part of his separation
agreement dated January 1997. Mr. Graham will remain an employee of the
Company until October 31, 1997 and will receive full salary until that
date.
(12) These amounts include a sign-on bonus of $100,000, 1995 bonus of $35,000,
relocation allowance of $50,000, and 112,500 options in accordance with Mr.
Graham's employment agreement.
(13) Dr. Rao resigned from the executive management team in October 1996 and
from the Company in January 1997. Dr. Rao became an executive officer in
August 1995.
(14) Does not include approximately $95,000 paid to Dr. Rao as part of his
separation from the Company in 1997.
(15) Represents cash paid in lieu of accrued vacation.
9
<PAGE> 11
OPTION/SAR GRANTS IN FISCAL YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT
------------------------------------------------------ ASSUMED ANNUAL RATES
NUMBER OF % OF TOTAL OF
SECURITIES OPTIONS/SARS STOCK PRICE OPTION
UNDERLYING GRANTED TO EXERCISE OR TERM(1)
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION ---------------------
NAME GRANTED FISCAL YEAR ($/SH) DATE 5% 10%
- -------------------------- ------------ ------------ ----------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Roger A. Strauch 30,000 2.7% 11.17 1/1/02 $113,932 $258,474
Ram A. Banin, Ph.D. 75,000 6.7 11.17 1/1/02 284,831 646,184
Paul A. Farmer 45,000 4.0 11.17 1/1/02 170,899 387,711
Harish S. Rao, Ph.D. 55,500 5.0 11.17 1/1/02 210,775 478,176
</TABLE>
- ---------------
(1) Amounts reflect rates of appreciation set forth in the Securities and
Exchange Commission's executive compensation disclosure rules, which are
more flexible than the rules under Financial Accounting Standards Board
Statement 123 used in financial reporting. Actual gains, if any, on stock
option exercises depend on future performance of the Company's common shares
and overall stock market conditions. No assurance can be given that the
amounts reflected in these columns will be achieved.
AGGREGATED OPTION/SAR EXERCISES IN FISCAL YEAR ENDED
DECEMBER 31, 1996 AND OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
SHARES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE-
ACQUIRED ON OPTIONS/SARS AT MONEY OPTIONS/SARS AT
EXERCISE VALUE DECEMBER 31, 1996(#) DECEMBER 31, 1996 ($)
NAME (#) REALIZED ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(1)
- ---------------------------- ----------- ------------ ------------------------- ----------------------------
<S> <C> <C> <C> <C>
Roger A. Strauch -- -- 152,500/147,500 157,500/45,000
Ram A. Banin, Ph.D. 45,000 741,500 135,000/135,000 420,003/33,750
Paul A. Farmer 15,000 293,063 75,000/90,000 171,000/0
Harish S. Rao, Ph.D. 35,200 514,847 46,500/98,250 181,604/17,730
Hatch Graham -- -- 28,125/84,375 0/0
</TABLE>
- ---------------
(1) The market closing price at December 31, 1996 was $6.25.
TEN-YEAR OPTION/SAR REPRICINGS
<TABLE>
<CAPTION>
LENGTH OF
ORIGINAL OPTION
TERM
MARKET PRICE REMAINING AT
NUMBER OF OF STOCK AT EXERCISE PRICE DATE OF
OPTIONS/SARS TIME OF AT TIME OF NEW REPRICING OR
REPRICED OR REPRICING OR REPRICING OR EXERCISE AMENDMENT
NAME DATE AMENDED (#) AMENDMENT AMENDMENT PRICE (YRS)
-------------------- ------- ------------ ------------ -------------- ------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Ram A. Banin, Ph.D. 1/4/93 90,000 $ 2.33 $ 3.47 $ 2.33 4.4
Ram A. Banin, Ph.D. 1/28/97 75,000 6.625 11.1667 6.625 6.0
Roger A. Strauch 1/28/97 30,000 6.625 11.1667 6.625 6.0
Paul A. Farmer 1/28/97 45,000 6.625 11.1667 6.625 6.0
</TABLE>
The foregoing table includes the January 1997 repricing of options to
purchase 75,000, 30,000, and 45,000 shares for Dr. Banin, Mr. Strauch, and Mr.
Farmer, respectively. On January 13, 1997, the Board of Directors approved an
exchange of outstanding stock options for new options with an exercise price
equal to the fair market value of the Company's Common Stock on January 28,
1997. This exchange offer was open to all employees of the Company. The new
options were issued January 28, 1997 with a 6 year life. Executive options vest
at 25 percent per year for 4 years; non-executive options vest 50 percent the
first year, then 25 percent each year thereafter until fully vested.
10
<PAGE> 12
EMPLOYMENT CONTRACTS AND TERMINATIONS
Mr. Graham resigned from the executive management team subsequent to the
licensing of the Personal Communications Group's wireless technology to Atmel
Corporation late in 1996. Mr. Graham will continue to serve as an employee of
the Company until October 31, 1997.
Mr. Strauch resigned from the Board of Directors and as Chief Executive
Officer of the Company effective June 30, 1997.
Mr. Paul Farmer resigned as Chief Financial Officer of the Company
effective July 21, 1997. The Company is conducting a search to fill this
position.
ARRANGEMENTS WITH EXECUTIVE OFFICER -- EMPLOYMENT AGREEMENT WITH DR. BANIN
On June 11, 1997, the Company confirmed Dr. Banin's appointment as Chief
Executive Officer and a Director of the Company and amended the employment
agreement between Dr. Banin and the Company dated May 11, 1992 (the
"Agreement"). As amended, the Agreement continues in effect. Under the amended
Agreement, Dr. Banin will be paid an annual base salary of $230,000. In
addition, on June 11, Dr. Banin was granted an option (the "Option") to purchase
500,000 shares of Common Stock at an exercise price of $5.8876 per share, which
was the average fair market value of the Common Stock for the five days prior to
the date of grant. The terms of the Option are described in the section of this
Information Statement entitled "PROPOSAL TWO: TO APPROVE THE GRANT OF A STOCK
OPTION TO DR. RAM A. BANIN UNDER THE 1991 PLAN TO PURCHASE 500,000 SHARES OF
COMMON STOCK AT AN EXERCISE PRICE OF $5.8876 PER SHARE."
Upon a change of control of the Company, all of Dr. Banin's options
(including the Option) will become fully vested and exercisable. Under the
amended Agreement, a "change of control" of the Company generally means a merger
transaction or sale of stock as a result of which the shareholders of the
Company prior to such transaction do not own a majority of the outstanding
shares of the Company's voting stock, or a sale of all or substantially all of
the assets of the Company.
Dr. Banin's employment with the Company may be terminated by either party
at any time, with or without cause, subject to the terms of the amended
Agreement. If Dr. Banin's employment is terminated for "cause," he will receive
no further compensation and benefits. The amended Agreement generally defines
"cause" as willful and continued failure to perform his duties and willful
misconduct that is materially injurious to the Company. If Dr. Banin's
employment is terminated without cause or Dr. Banin terminates his employment
after the occurrence of a certain event, the Company shall continue his salary
and target bonus, benefits, stock option grants and vesting for a period of one
year. The events following which a resignation by Dr. Banin would be treated as
a termination without cause generally include a change of control of the
Company, a failure of the Company to comply with any of the terms of the amended
Agreement, a change in place of employment beyond the San Francisco Bay Area, or
a material reduction in Dr. Banin's base salary, bonus, benefits or
responsibilities.
11
<PAGE> 13
3060-IS-97
<PAGE> 14
FRONT OF CARD
- -------------
TCSI CORPORATION
(a Nevada corporation)
ACTION BY WRITTEN CONSENT
OF THE SHAREHOLDERS
IN LIEU OF A MEETING THIS WRITTEN CONSENT IS SOLICITED ON
BEHALF OF THE BOARD OF DIRECTORS
In accordance with Section 78.320 of Nevada General Corporation Law and
the Bylaws of TCSI Corporation, a Nevada corporation (the "Corporation"), the
undersigned, take the following action by Written Consent in lieu of a meeting,
as set forth on the reverse side.
Continued and to be signed on reverse side
<PAGE> 15
BACK OF CARD
1. RESOLVED: That the Company's 1991 Stock Incentive Plan (the "1991 Plan")
to increase to 750,000 the maximum number of shares subject to options
which may be awarded to any participant in a fiscal year.
[ ] Consent Granted [ ] Consent Withheld
2. RESOLVED FURTHER: That the grant of a stock options to Dr. Ram A. Banin
under the 1991 Plan to acquire 500,000 shares of Common Stock at an
exercise price equal to $5.8876 per share is hereby approved.
[ ] Consent Granted [ ] Consent Withheld
3. RESOLVED FURTHER: That the officers of this Corporation are hereby
authorized and directed to take all actions necessary and desirable in
order to implement the foregoing resolutions and to take all such further
actions and execute all such further documents as may be necessary to carry
out the intent of the foregoing resolution.
[ ] Consent Granted [ ] Consent Withheld
This is an action by written consent. This is not a proxy. The shares
represented by this written consent will be voted in accordance with the
specification made herein. If you wish to authorize the resolutions, mark the
box labeled "Consent Granted." If you will not authorize the resolution, mark
the box labeled "Consent Withheld." Please mark, sign, date and return this
written consent promptly using the enclosed envelope.
This Action by Written Consent of the Shareholders may be signed in one
or more counterparts, all of which together shall constitute one instrument.
This instrument, when duly executed by a majority of the shareholders of the
Corporation, shall be filed in the minute book of the Corporation.
- --------------------------- ---------------------------
Signature Date Signature Date
