<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>
PEOPLESOFT, 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
PEOPLESOFT, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 26, 1998
TO THE STOCKHOLDERS OF PEOPLESOFT, INC.:
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Stockholders of
PeopleSoft, Inc., a Delaware corporation (the "Company"), will be held at 10:00
a.m., local time, on Tuesday, May 26, 1998, at the Carr America Visitor's Center
located at 4400 Rosewood Drive, Pleasanton, California 94588, for the following
purposes:
1. To elect three (3) Class II directors to serve two-year terms.
2. To approve an amendment of the Company's Restated Certificate of
Incorporation to increase the authorized number of shares of
Common Stock of the Company to 700,000,000.
3. To approve amendments to the 1989 Stock Option Plan, including an
increase of 5,000,000 shares available, as set forth in the
accompanying proxy statement.
4. To approve amendments to the 1992 Employee Stock Purchase Plan,
including an increase of 700,000 shares available, as set forth
in the accompanying proxy statement.
5. To ratify the appointment of Ernst & Young LLP as independent
auditors of the Company for the year ending December 31, 1998.
6. To transact such other business as may properly come before the
meeting or any postponements or adjournments thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on March 31, 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 Annual 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,
David A. Duffield, President and
Chief Executive Officer
Pleasanton, California
April 15, 1998
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IMPORTANT: WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE REQUESTED TO
COMPLETE AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED.
- --------------------------------------------------------------------------------
<PAGE> 3
MAPS TO
CARR AMERICA VISITOR'S CENTER IN PLEASANTON
AND LOCATION OF STOCKHOLDER MEETING ROOM
1
<PAGE> 4
PEOPLESOFT, 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
PeopleSoft, Inc. (the "Company") for use at the Annual Meeting of Stockholders
to be held on Tuesday, May 26, 1998 at 10:00 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 Carr America Visitor's Center located at 4400 Rosewood
Drive, Pleasanton, California 94588. The Company's telephone number is (925)
225-3000. 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 the election of the nominees for directors set forth
herein, for the increase in authorized shares of Common Stock, for the
amendments to the 1989 Stock Option Plan, for the amendments to the 1992
Employee Stock Purchase Plan, for the ratification of the appointment of Ernst &
Young as independent auditors as set forth herein, and at the discretion of the
proxy holders upon such other business as may properly come before the meeting
or any adjournment or postponement thereof.
These proxy solicitation materials and the Annual Report to Stockholders
for the year ended December 31, 1997, including financial statements, were first
mailed on or about April 17, 1998, to all stockholders entitled to vote at the
Annual Meeting.
RECORD DATE AND VOTING SECURITIES
Stockholders of record at the close of business on March 31, 1998
("Record Date") are entitled to notice of and to vote at the Annual Meeting. At
the Record Date, 226,654,724 shares of the Company's Common Stock, $.01 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 a written notice of revocation bearing a later date than the proxy with
the Secretary of the Company at or before the taking of the vote at the Annual
Meeting, (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 PeopleSoft, Inc. at 4440 Rosewood Drive,
Pleasanton, California 94588, Attention: Secretary of the Company, or
hand-delivered to the Secretary of the Company at or before the taking of the
vote at the Annual Meeting.
VOTING AND SOLICITATION
Each stockholder is entitled to one vote for each share of Common Stock
owned on all matters presented at the Annual Meeting. Stockholders do not have
the right to cumulate votes in the election of directors.
The Company will retain Corporate Investor Communications, Inc. ("CIC")
to assist in its solicitation of proxies from brokers, nominees, institutions
and individuals. The Company will pay CIC's solicitation fee of $11,000 plus
reasonable out-of-pocket expenses. Arrangements will also be made with
custodians, nominees and fiduciaries for forwarding of proxy solicitation
materials to beneficial owners of shares held as of the Record Date 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
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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 "ABSTAINED" on a matter are treated as being present at the
Annual 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 1988 Delaware case, Berlin v. Emerald Partners, the Delaware
Supreme Court held that, while broker non-votes should be counted for purpose of
determining the presence or absence of a quorum for the transaction of business,
broker non-votes should not be counted for purposes 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 mid-May 1999 and to mail Proxy Statements relating to such
meeting in mid-April 1999. The date by which stockholder proposals must be
received by the Company so that they may be considered for inclusion in the
Proxy Statement and form of proxy for its 1999 Annual Meeting of Stockholders is
December 11, 1998. Such stockholder proposals should be submitted to PeopleSoft,
Inc. at 4440 Rosewood Drive, Pleasanton, California 94588, Attention: Secretary
of the Company.
CERTAIN TRANSACTIONS WITH MANAGEMENT
The Company and a limited liability company ("LLC") entered into
agreements in 1995 and 1997, whereby the LLC will provide up to $9.6 million to
fund the development of a suite of student information and administration system
applications ("SIS Software") with the Company assuming exclusive responsibility
for the distribution of the SIS Software. Substantially all of the LLC's funds
were provided equally by the Company's founder and principal stockholder and the
Student Loan Marketing Association ("Sallie Mae"), an independent strategic
business partner. The Company has no contractual obligation to provide funds to
the LLC and does not have a right to acquire any of the LLC's equity interests.
The Company will pay the LLC a royalty based on fees received from the licensing
of the SIS Software until the later of five years from the commercial release of
the SIS Software or $17 million in cumulative royalties have been paid to the
LLC. The royalty rate was determined based on negotiations between the Company
and Sallie Mae. All ownership rights and interests in the SIS Software will
transfer to the Company, upon the later of five years from the commercial
release of the SIS Software or when $17 million in cumulative royalties have
been paid to the LLC. The SIS Software became generally available for sale in
December 1997, and the Company recorded $3.3 million in cumulative royalty
expense in the year ended December 31, 1997. The LLC reimbursed the Company $2.0
million, $2.4 million and $3.2 million in 1995, 1996 and 1997, respectively, for
development funding advanced by the Company during the year and, in 1998, the
Company anticipates using the remaining $2.0 million to fund the development of
two new related software products. In addition, the Company was reimbursed
$98,000 in 1995 and $65,700 in 1996 (none in 1997) for interest on such
advances.
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<PAGE> 6
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of March 20, 1998 (except as noted
below) 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
director of the Company, (iii) each executive officer named in the Summary
Compensation Table, and (iv) all directors and executive officers as a group.
Except as otherwise noted below, the Company knows of no agreements among its
stockholders which relate to voting or investment power of its Common Stock.
<TABLE>
<CAPTION>
Shares of Common Stock Beneficially Owned (l)
Directors, Named Executive Officers and Five ---------------------------------------------
Percent Stockholders Number Percentage Ownership
- -------------------------------------------- ------ --------------------
<S> <C> <C>
OFFICERS
- --------
David A. Duffield (2) ......................................52,516,643 23.2%
4440 Rosewood Drive, Pleasanton, CA 94588
Aneel Bhusri (3) ........................................... 177,395 *
Ronald E.F. Codd (3) ....................................... 669,159 *
Albert W. Duffield (3) ..................................... 2,152,831 *
Margaret L. Taylor (3) ..................................... 1,447,574 *
DIRECTORS
- ---------
George J. Still, Jr. (3) ................................... 299,130 *
Edgar F. Codd (3) .......................................... 260,000 *
Cyril J. Yansouni (3) ...................................... 4,000 *
A. George "Skip" Battle (3) ................................ 45,466 *
All directors and executive officers as a group (4) ........60,587,813 26.8
5% SHAREHOLDERS AT 12/31/97 (5)
Putnam Investments, Inc. (6) ...............................13,712,347 6.1
One Post Office Square, Boston, MA 02109
</TABLE>
- ----------
* Less than 1%
(1) Applicable percentage of ownership is based on 226,330,688 shares of Common
Stock outstanding as of March 20, 1998 together with applicable options for
such stockholder. Beneficial ownership is determined in accordance with the
rules of the Securities and Exchange Commission, and includes voting and
investment power with respect to shares. Shares subject to options currently
exercisable or exercisable within 60 days after March 20, 1998 are deemed
outstanding for computing the percentage ownership of the person holding
such options, but are not deemed outstanding for computing the percentage
ownership of any other person.
(2) Includes 640,000 shares and 800,000 shares subject to stock options held by
David A. Duffield and Mr. Duffield's wife, respectively, that are
exercisable within 60 days of March 20, 1998 and 44,464,835 shares held by
trusts, foundations or accounts of which David A. Duffield is trustee or
director.
(3) Includes the following numbers of shares issuable upon exercise of options
that are exercisable on or within 60 days of March 20, 1998: Aneel Bhusri:
104,400; Albert W. Duffield: 2,064,000; Margaret L. Taylor: 887,806; Ronald
E.F. Codd: 498,552; George J. Still, Jr.: 192,000; Dr. Edgar F. Codd:
112,000; Cyril J. Yansouni: 4,000; and A. George "Skip" Battle: 42,400.
(4) Includes 5,440,638 shares subject to stock options held by directors and
officers (12 persons) that are exercisable within 60 days of March 20, 1998.
(5) Shares beneficially owned are determined solely from information reported on
a Schedule 13G as of December 31, 1997.
(6) Putnam Investment Management, Inc. (PMI) has shared dispositive power with
respect to 9,861,939 shares. The Putnam Advisory Company (PAC) has shared
voting power and shared dispositive power with respect to 2,615,708 and
3,850,408 shares, respectively. Putnam Investments, Inc., as parent to PMI
and PAC, has shared voting power and shared dispositive power with respect
to 2,615,708 and 13,712,347 shares, respectively.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act and regulations of the Securities and
Exchange Commission (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 period from January 1, 1997
to December 31, 1997, all of the Section 16(a) filing requirements applicable to
its executive officers, directors and 10% stockholders were complied with,
except with respect to the May 1997 and October 1997 Form 4 reports for Mr.
Aneel Bhusri and Mr. Albert Duffield, which were filed late or amended.
4
<PAGE> 7
PROPOSAL NO. 1
ELECTION OF DIRECTORS
NOMINEES
The Company's Board of Directors currently consists of six persons
serving staggered two-year terms. Three Class II directors will be elected at
the Annual Meeting for a term of two years. Three Class I directors (Mr. David
A. Duffield, Dr. Edgar F. Codd and Mr. George J. Still, Jr.) were elected at
last year's annual meeting for a term of two years.
Unless otherwise instructed, the proxy holders will vote the proxies
received by them for the three nominees named below, all of whom are presently
directors of the Company. In the event that any such nominee 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 directors, 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 of any nominee who will be unable or will decline to serve as a
director. Each director elected at this Annual Meeting will serve a term of two
years or until such director's successor has been duly elected and qualified.
VOTE REQUIRED
The three nominees receiving the highest number of affirmative votes of
the shares entitled to be voted shall be elected to the Board of Directors as
Class II Directors. An abstention will have the same effect as a vote withheld
for the election of directors, and pursuant to Delaware law, a broker non-vote
will not be treated as voting in person or by proxy on the proposal. The names
of the nominees and related information as of March 14, 1998 are set forth
below.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES LISTED BELOW.
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE POSITION(S) WITH THE COMPANY SINCE
- --------------- --- ---------------------------- -----
<S> <C> <C>
NOMINEES FOR CLASS II DIRECTOR
Albert W. Duffield 55 Director and Senior Vice President of 1991
Worldwide Operations
Cyril J. Yansouni(l)(2) 55 Director 1992
A. George "Skip" Battle(1)(2) 54 Director 1995
DIRECTORS WHOSE TERMS CONTINUE
David A. Duffield(3) 57 Chairman of the Board of Directors, 1987
President and Chief Executive Officer
Edgar F. Codd 74 Director 1992
George J. Still, Jr.(1)(2)(3) 39 Director 1991
</TABLE>
- ----------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
(3) Member of the Nominating Committee
NOMINEES FOR CLASS II DIRECTOR
Mr. Albert Duffield joined the Company in June 1990 as Vice President of
Sales, and was appointed Vice President of Operations in September 1991, Vice
President of Sales and Marketing in February 1993, Senior Vice President of
Sales and Marketing in November 1993, and Senior Vice President of Worldwide
Operations in January 1994. He was elected to the Board of Directors in April
1991. Prior to joining the Company, Mr. Duffield served as Chief Operating
Officer of Data Design Associates, a division of Integral Systems, Inc., from
June 1989 through June 1990. Prior to the acquisition of Data Design Associates
by Integral Systems, Inc. in September 1989, he served as its Senior Vice
President of Sales and Marketing from October 1981 through June 1989. From 1970
to 1981, Mr.
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<PAGE> 8
Duffield worked at IBM in various sales, sales management and staff management
positions. He holds a B.Sc. in Hotel/Business Administration from Cornell
University and an M.B.A. from Rutgers University. Albert Duffield and David
Duffield are brothers.
Mr. Cyril Yansouni became a director of the Company in October 1992.
Since March 1991, he has served as Chief Executive Officer and Chairman of
Read-Rite Corporation, a supplier of thin film magnetic recording heads. From
January 1989 to February 1991, he served in various senior management capacities
at Unisys, a manufacturer of computer systems, most recently as an Executive
Vice President. Mr. Yansouni was President of Convergent Technologies, a
manufacturer of computer systems, from October 1986 until its acquisition by
Unisys in December 1988. From June 1967 to October 1986, Mr. Yansouni served in
a variety of technical and management positions at Hewlett-Packard Company,
including Vice President and General Manager of the PC Group. He holds an
M.S.E.E. from Stanford University and a B.Sc. in electrical and mechanical
engineering from the Catholic University of Louvain, Belgium. Mr. Yansouni is
also a director of ActivCard, Informix Software, Inc. and Raychem Corporation.
A. George "Skip" Battle became a director of the Company in December
1995. Mr. Battle served from 1968 until his retirement in June 1995 in various
roles of increasing responsibility with Andersen Consulting. At the time of his
retirement, Mr. Battle was Managing Partner of Market Development. He was also a
member of Andersen Consulting's Executive Committee, Global Management Council
and Partner Income Committee. Prior to his position as Managing Partner of
Market Development, he served as Managing Partner of North American Planning and
Operations. Mr. Battle holds a B.A. in Economics with highest distinction from
Dartmouth College and an M.B.A. from the Stanford Business School where he held
McCarthy and University Fellowships. Mr. Battle is a director of Barra, Inc. and
Fair Isaac Company, and he is also currently a Senior Fellow at the Aspen
Institute.
DIRECTORS WHOSE TERMS CONTINUE
Mr. David Duffield is a founder of the Company and has served as
Chairman of the Board, Chief Executive Officer and President since the Company's
incorporation in August 1987. Prior to that time, he was a founder and Chairman
of the Board of Integral, a vendor of human resource and financial applications
software, from April 1972 through April 1987. During a portion of that time, Mr.
Duffield also served as Integral's Chief Executive Officer. Mr. Duffield is also
the co-founder of Information Associates (now a subsidiary of Systems and
Computer Technology), where he was employed between 1968 and 1972. From 1964 to
1968, Mr. Duffield worked at IBM, a computer systems manufacturer, as a
marketing representative and systems engineer. He holds a B.Sc. in Electrical
Engineering and an M.B.A. from Cornell University.
Dr. Edgar Codd became a director of the Company in June 1992. Dr. Codd
is presently an independent consultant. From 1985 to 1993, he was a principal at
Codd and Date Consulting, and at Codd and Date, Inc., both of which are
relational database consulting firms. Dr. Codd received his M.A. in Mathematics
from Oxford University and his M.S. and Ph.D. in Communication Sciences from the
University of Michigan. Prior to 1985, Dr. Codd was employed by IBM where he
developed the theoretical foundation for relational database management. In
1994, he became a fellow of the Association for Computing Machinery (ACM).
Mr. George Still became a director of the Company in April 1991. He has
been a partner of Norwest Venture Capital, a venture capital investment fund,
since 1989. From July 1984 to October 1989, he was a general partner with The
Centennial Funds, a venture capital investment fund. Mr. Still holds a B.Sc. in
Business Administration from Pennsylvania State University and an M.B.A. from
Dartmouth College. Mr. Still is on the board of directors of 3DFX and numerous
private companies.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of four regular
meetings and no special meetings during 1997. No directors attended fewer than
75% of the total number of meetings of the
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<PAGE> 9
Board of Directors or committees of the Board of Directors held in 1997. The
Board of Directors has an Audit Committee, Compensation Committee and Nominating
Committee.
The Audit Committee, which currently consists of Messrs. Battle,
Yansouni and Still, held a total of five regular meetings and one special
meeting during 1997. The Audit 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 currently consists of
Messrs. Battle and Yansouni as voting members and Mr. Still as a non-voting
member, held two meetings in 1997. The Compensation Committeee reviews and
approves the Company's executive compensation policies and plans. The Nominating
Committee was established in May 1997 and consists of Messrs. David Duffield and
Still. The Nominating Committee was established to evaluate future board members
and held two meetings during 1997.
BOARD COMPENSATION
Directors do not receive any cash compensation for their services as
members of the Board of Directors, however, non-employee directors are entitled
to receive a $500 travel allowance for each meeting they attend. Non-employee
directors are automatically granted annual options to purchase 4,000 shares of
the Company's Common Stock pursuant to the terms of the Company's 1992
Directors' Stock Option Plan (the "Directors' Plan"). Pursuant to the Directors'
Plan and prior to adjustment for the Company's two-for-one stock split in
December, 1997, Messrs. Battle, Codd, Still and Yansouni were each granted an
option to purchase 4,000 shares of Common Stock at an exercise price of $47.94
per share in January 1997. Officers are appointed by and serve at the discretion
of the Board of Directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Neither Messrs. Battle nor Yansouni (the voting members of the Company's
Compensation Committee), is an executive officer of any entity for which any
executive officer of the Company serves as a director or a member of the
compensation committee.
PROPOSAL NO. 2
AMENDMENT OF RESTATED CERTIFICATE OF INCORPORATION
The Company's Restated Certificate of Incorporation (the "Certificate"),
as currently in effect, provides that the Company is authorized to issue
320,000,000 shares of Common Stock, par value $.01 per share, and 2,000,000
shares of Preferred Stock, par value $.0l per share. On March 17, 1998, the
Board of Directors authorized an amendment to the Certificate to increase the
authorized number of shares of Common Stock to 700,000,000 shares.
Under the proposed amendment, the first paragraph of Article III of the
Certificate would be amended to read as follows:
This Corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock". The total
number of shares which the corporation is authorized to issue is Seven
Hundred Two Million (702,000,000) shares. Seven Hundred Million
(700,000,000) shares shall be Common Stock and Two Million (2,000,000)
shares shall be Preferred Stock, each with a par value of One Cent ($.01).
As of March 20, 1998, 226,330,688 shares of Common Stock were issued and
outstanding. In addition, as of March 20, 1998, 53,872,102 shares were reserved
for future grant or for future issuance upon exercise of outstanding options
under the Company's Amended and Restated 1989 Stock Option Plan (the "1989 Stock
Option Plan"), 772,974 shares were reserved for issuance under the Company's Red
Pepper Stock Option Plan (the "Red Pepper Plan"), 1,125,520 shares were reserved
for future issuance under the Company's 1992 Employee Stock Purchase Plan (the
"1992 Purchase Plan"), 2,330,000 shares were reserved for future issuance under
the Company's 1992 Directors' Stock Option Plan (the "Directors' Option Plan")
and warrants to purchase 6,400,000 shares of Common Stock were outstanding.
7
<PAGE> 10
PURPOSE AND EFFECT OF AMENDMENT
The principal purpose of the proposed amendment to the Certificate is to
authorize additional shares of Common Stock which will be available in the event
that the Board of Directors determines that it is necessary or appropriate to
effect future stock dividends or stock splits, to raise additional capital
through the sale of securities, to acquire another company or its business or
assets through the issuance of securities, or to establish a strategic
relationship with a corporate partner through the exchange of securities. In
determining the appropriate level of authorized shares of Common Stock, the
Board of Directors considered, among other factors, i) that as of March 20,
1998, 290,831,284 shares of Common Stock were issued or reserved for issuance,
thereby effectively encumbering substantially all of the 320,000,000 shares
presently authorized, ii) that in 1994, 1995, 1996 and 1997, the Company
effected two-for-one stock splits, iii) that were the Company to effect another
two-for-one stock split in the future, a minimum of 600,000,000 authorized
shares would be required, iv) that such splits facilitate absolute increases in
the employee stock option pool, which in turn, provides for broader employee
participation in the stock option program while simultaneously reducing (on a
percentage basis) the potential dilutive effect of aggregate grants to existing
shareholders, and v) that in the Board's opinion, at least 10% to 15% of the
Company's equity securities should be available as a contingency for any of the
aforementioned potential strategic transactions. If the proposed amendment is
adopted, 380,000,000 additional shares of Common Stock will be available for
issuance by the Board of Directors without any further stockholder approval,
although certain issuances of shares may require stockholder approval in
accordance with the requirements of the NASDAQ National Market or the Delaware
General Corporations Law. The holders of Common Stock have no preemptive rights
to purchase any stock of the Company. The additional shares might be issued at
such times and under such circumstances as to have a dilutive effect on earnings
per share and on the equity ownership of the present common stockholders.
The flexibility of the Board of Directors to issue additional shares of
stock could enhance the Board's ability to negotiate on behalf of the
stockholders in a takeover situation. Although it is not the purpose of the
proposed amendment, the authorized but unissued shares of Common Stock (as well
as the authorized but unissued shares of Preferred Stock) also could be used by
the Board of Directors to discourage, delay or make more difficult a change in
the control of the Company. For example, such shares could be privately placed
with purchasers who might align themselves with the board in opposing a hostile
takeover bid. The issuance of additional shares might serve to dilute the stock
ownership of persons seeking to obtain control and thereby increase the cost of
acquiring a given percentage of the outstanding stock. The Company has
previously adopted certain measures that may have the effect of helping to
resist an unsolicited takeover attempt, including provisions in the 1989 Stock
Option Plan providing for the acceleration of exercisability of outstanding
options in the event of a sale of assets or merger if such options are not
assumed or substituted by the successor corporation, a dividend distributed to
the holders of the Company's Common Stock consisting of rights to purchase the
Company's Series A Participating Preferred Stock upon the terms and conditions
set forth in the Amended Stockholder Rights Plan approved by the Board of
Directors, provisions of the Certificate authorizing the Board to issue up to
2,000,000 shares of Preferred Stock with terms, provisions and rights fixed by
the Board, and provisions in the Certificate providing for the Board of
Directors to be classified into two classes serving staggered two year terms.
The Board of Directors is not aware of any pending or proposed effort to acquire
control of the Company.
VOTE REQUIRED
The approval of the amendment to the Certificate requires the
affirmative vote of a majority of the outstanding shares of Common Stock of the
Company. An abstention or non-vote is not an affirmative vote and, therefore,
will have the same effect as a vote against the proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENT TO THE
COMPANY'S RESTATED CERTIFICATE OF INCORPORATION TO AUTHORIZE AN ADDITIONAL
380,000,000 SHARES OF COMMON STOCK.
8
<PAGE> 11
PROPOSAL NO. 3
AMENDMENT TO THE 1989 STOCK OPTION PLAN
The Company's Amended and Restated 1989 Stock Option Plan (the "Option
Plan") was approved by the Board of Directors and by the stockholders in
September 1989. Since then, the Board and the Company's stockholders have
approved numerous amendments to the Option Plan, including increases in the
number of shares of Common Stock issuable under the Option Plan. The Option Plan
provides for the granting to employees of incentive stock options within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended
("Code"), and for the granting of non-statutory options to employees and
consultants. See Exhibit A for a summary of the Option Plan and the federal
income tax consequences of incentive stock options and nonstatutory stock
options.
As of March 20, 1998, options to purchase 91,908,574 shares of Common
Stock had been granted under the Option Plan, 5,772,765 had been canceled, and
13,464,191 shares remain available for future option grants. A total of
45,727,898 options under the Option Plan had been exercised. The aggregate
market value of the unexercised options for shares of Common Stock under the
Option Plan was approximately $2.0 billion on a closing price of $49.50 per
share on the NASDAQ National Market on March 20, 1998.
PROPOSAL
Shareholder approval is hereby being sought to increase the term of the
Option Plan from September 1999 to March 17, 2008. Shareholder approval is also
hereby being sought for amendments approved by the Board of Directors in 1998
increasing the number of shares of Common Stock reserved for issuance under the
Option Plan i) in 1998 by 5,000,000 shares of Common Stock, and ii) in each
subsequent year during the term of the Option Plan by a number of shares of
Common Stock equal to the lesser of i) 20,000,000 shares of Common Stock (with
such number adjusted appropriately for any stock split or similar transaction)
or ii) 5% of the number of shares of Common Stock issued and outstanding on the
last day of the immediately preceding fiscal year.
The total number of shares of Common Stock reserved for issuance under
the Option Plan is 99,600,000. If the proposed amendments are approved, the
total number of shares of Common Stock reserved for issuance under the Option
Plan will be 104,600,000. In addition, that number will increase automatically
on the first day of each subsequent fiscal year during the term of the Option
Plan by an amount equal to 5% of the Company's Common Stock issued and
outstanding on the last day of the immediately preceding fiscal year ("Annual
Option Plan Replenishment"). In other words, the number of shares available for
grant under the Option Plan at the beginning of each fiscal year will equal 5%
of the Company's Common Stock then issued and outstanding plus any carryover
balance of shares reserved for issuance under the Option Plan. If the proposed
amendments are approved, 18,464,191 shares of Common Stock will be immediately
available for issuance as incentive stock options. In addition, in future years
each Annual Option Plan Replenishment will be available for issuance as
incentive stock options.
The Board believes that the proposed amendments are in the best
interests of the Company for several reasons. First, the increase will provide
an adequate reserve of shares for issuance under the Plan which is an integral
part of the Company's overall compensation program. Competition for qualified
employees in the information technology market is extremely intense and, due to
the rapid growth of many successful companies in this sector, such competition
is increasing. The proposed increase is essential for the Company to compete
successfully against other companies in attracting and retaining employees,
thereby facilitating the future potential growth of the Company. In addition,
the Option Plan is an important contributor to the alignment of employee and
stockholder interests. Second, the Board of Directors believes that it is
appropriate to have a reasonable contingency pool of options available for grant
pursuant to acquisitions that the Company may make from time to time. The
ability to make such grants could enhance the Company's ability to structure
attractive offers to potential acquisition targets. Finally, under current
accounting rules, if the number of options granted exceeds the number of shares
reserved for issuance (even for a brief period of time), the Company may be
required to record compensation expense on such excess options until the date
shareholders approve an associated increase
9
<PAGE> 12
in the reserve. Consequently, the Board believes a pool sufficient in size to
avoid a potential charge for non-cash compensation expense and an associated
reduction in net income is highly desirable.
Including the recent increase and assuming that the Company continues
its recent practice of granting options each year which aggregate approximately
5% of the Company's outstanding securities, the Board of Directors believes the
reserve pool would be sufficient for future option grants during the term of the
Option Plan. In determining the appropriate level of annual stock option grants,
the Board of Directors considered, among other factors, the Company's historical
and anticipated growth rate, current conditions concerning availability of
personnel in the geographic markets in which the Company operates, historical
and current equity practices of the software and technology industries and
select market leaders within such industries, and the Company's own internal
philosophy concerning employee compensation and Company ownership. This
philosophy revolves around a focus on total compensation (including base salary,
incentive pay and stock options), which in the opinion of the Board, must reach
certain very competitive levels to attract and retain individuals of high
caliber. Furthermore, the Board believes that by placing relatively greater
emphasis on stock options and incentive pay, and relatively lower emphasis on
base salaries, the interests of the shareholders are best served. Finally, the
Company's stock option granting practices emphasize a relatively broad
distribution of stock options, which based on historical experience, encourages
high levels of individual performance across the Company. Should actual option
grants exceed anticipated levels or the Company conclude an acquisition which
requires use of the reserve pool, the reserve pool will not be sufficient and
the Company may need to seek shareholder approval for another increase in the
reserve pool.
AMENDED PLAN BENEFITS
The following table sets forth information with respect to stock option
grants under the Option Plan and the 1992 Directors Stock Option Plan for the
year ended December 31, 1997 to (i) the Named Executive Officers, (ii) all
current executive officers as a group and (iii) all other employees as a group:
<TABLE>
<CAPTION>
Name of Individual Number of Shares Aggregate
or Identity Subject to Options Exercise
Group and Position Granted (#) (1) Price ($) (1)
------------------ --------------- -------------
<S> <C> <C>
David A. Duffield(2) .............................. -- $ --
Aneel Bhusri(2) ................................... 40,000 27.25
60,000 19.875
Ronald E.F. Codd(3) ............................... -- --
Albert W. Duffield ................................ 60,000 27.25
Margaret L. Taylor ................................ 60,000 27.25
All current executive officers as a group
(8 total)...................................... 344,000 19.875-31.44
All current directors who are not executive
officers as a group (4 total) ................. 34,000 23.969
All other employees as a group .................... 10,530,350 21.69
</TABLE>
(1) All options have been adjusted to reflect the Company's two-for-one stock
split in December 1997. The amounts in Notes 2 and 3 below are presented on
a pre-split basis.
(2) In January 1997, David A. Duffield and Aneel Bhusri were granted options to
purchase 30,000 shares and 20,000 shares, respectively. Subsequently, the
Compensation Committee determined that Mr. Bhusri's total stock option
position relative to other management team members should be adjusted, and,
in April 1997, Mr. Bhusri was granted an additional option to purchase
30,000 shares. Rather than take this additional grant out of the remaining
pool of shares reserved for stock option grants to employees in 1997, Mr.
Duffield and the Company agreed to rescind his January 1997 stock option
grant effective August 1, 1997. Mr. Duffield did not receive any
compensation or other benefit from the Company in connection with the
rescission.
(3) Effective August 1, 1997, Mr. Codd requested that the Company rescind and
allocate his January 1997 stock option grant of 20,000 shares to a senior
financial executive who was hired in October 1997.
10
<PAGE> 13
VOTE REQUIRED
The affirmative vote of a majority of the Votes Cast will be required to
approve the amendments of the 1989 Stock Option Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENTS TO THE
OPTION PLAN.
PROPOSAL NO. 4
AMENDMENT TO THE 1992 EMPLOYEE STOCK PURCHASE PLAN
The 1992 Employee Stock Purchase Plan (the "Purchase Plan") was adopted
by the Board of Directors in September 1992 and by the stockholders in October
1992. Since then, the Board and the Company's stockholders have approved
numerous amendments to the Purchase Plan, including increases in the number of
shares of Common Stock issuable under the Purchase Plan. The Purchase Plan,
which is intended to qualify under Section 423 of the Code, permits eligible
employees to purchase Common Stock through payroll deductions at a price equal
to 85% of the fair market value of the Common Stock at the beginning or at the
end of each offering period, whichever is lower. Qualified employees are
eligible to participate at the beginning of the first day of an offering period
after their first full calendar month of full time employment. See Exhibit B for
a summary and federal tax consequences of the Purchase Plan. As of March 20,
1998, a total of 4,874,480 shares of Common Stock had been purchased under the
Purchase Plan.
PROPOSAL
Shareholder approval is hereby being sought for amendments approved by
the Board of Directors in 1998 increasing the number of shares reserved for
issuance under the Purchase Plan i) in 1998 by 700,000 shares of Common Stock,
and ii) in each subsequent year during the term of the Purchase Plan by 1.5% of
the shares of Common Stock issued and outstanding on the last day of the
immediately preceding fiscal year.
The total number of shares of Common Stock reserved for issuance under
the Purchase Plan is 6,000,000. If the proposed amendments are approved, the
total number of shares of Common Stock reserved for issuance under the Purchase
Plan will be 6,700,000. In addition, that number will increase automatically on
the first day of each subsequent fiscal year during the term of the Purchase
Plan by a number of shares of Common Stock equal to the lesser of i) 5,000,000
shares of Common Stock (with such number adjusted appropriately for any stock
split or similar transaction) or ii) an amount equal to (x) 1.5% of the number
of shares of Company's Common Stock issued and outstanding on the last day of
the immediately preceding fiscal year less (y) the number of shares available
for future issuance under the Purchase Plan on the last day of the immediately
preceding fiscal year ("Annual Purchase Plan Replenishment"). In other words,
the number of shares available for issuance under the Purchase Plan at the
beginning of each fiscal year will equal 1.5% of the Company's Common Stock then
issued and outstanding. If the proposed amendments are approved, 1,825,520 will
be immediately available for issuance under the Purchase Plan. In addition, in
future years each Annual Purchase Plan Replenishment will be available for
issuance under the Purchase Plan.
The Board believes that the proposed amendments are in the best
interest of the Company. Since its inception, the Purchase Plan has become an
important and, with an average participation rate in excess of 95% of all
eligible employees, an extremely popular employee benefit. The Board of
Directors believes that broad stock ownership by the Company's employees is
beneficial to all stockholders and that the increase will provide an adequate
reserve of shares for issuance under the Purchase plan which is necessary to
enable the Company to compete successfully with other companies to attract and
retain employees. In addition, given the SEC's position that if the number of
shares issued or to be issued during a period exceeds the number of shares
reserved for issuance, the Company may be required to record compensation
expense on such excess shares until the date shareholders approve an associated
increase in the reserve. Consequently, the Board believes a pool sufficient in
size to avoid a potential charge for non-cash compensation expense and an
associated reduction in net income is highly desirable.
11
<PAGE> 14
VOTE REQUIRED
The affirmative vote of a majority of the Votes Cast will be required to
approve the amendments of the 1992 Employee Stock Purchase Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENTS TO THE
PURCHASE PLAN.
PROPOSAL NO. 5
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young LLP, independent
auditors, to audit the consolidated financial statements of the Company for the
fiscal year ending December 31, 1998, and recommends that the 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.
Ernst & Young LLP has audited the Company's financial statements since
1989. 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.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT AUDITORS.
EXECUTIVE COMPENSATION
All securities underlying options and related per share information has
been adjusted to reflect two-for-one splits of the Company's Common Stock in
1995, 1996 and 1997.
SUMMARY COMPENSATION TABLE
The following table sets forth the annual and long-term compensation
earned in each of the last three years by the Company's Chief Executive Officer
and each of the other four most highly compensated executive officers (the
"Named Executive Officers"):
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
------------------------------- ----------------------
Name and Other Annual Sec. Underlying
Principal Position Year Salary Bonus (1) Compensation (2) Options (#)
------------------ ---- ------ --------- ---------------- -----------
<S> <C> <C> <C> <C> <C>
David A. Duffield 1997 $242,000 $228,079 $ 12,015 --
President and Chief 1996 220,000 125,796 4,482 120,000
Executive Officer 1995 200,000 126,800 7,650 240,000
Aneel Bhusri 1997 137,500 127,246 3,220 100,000
Senior Vice President of 1996 125,000 112,511 3,095 80,000
Product Strategy, Business
Development and Marketing
Ronald E. F. Codd 1997 181,500 150,672 6,312 --
Senior Vice President of 1996 165,000 114,789 5,470 80,000
Finance & Administration 1995 150,000 93,600 3,030 160,000
Albert W. Duffield 1997 211,750 198,441 2,311 60,000
Senior Vice President of 1996 192,500 122,220 5,750 100,000
Worldwide Operations 1995 175,000 110,950 5,340 200,000
Kenneth R. Morris 1995 165,000 71,170 360 320,000
Senior Vice President and
Chief Technology Officer
Margaret L. Taylor 1997 211,750 201,700 9,566 60,000
Senior Vice President of 1996 192,500 122,364 7,845 100,000
Corporate Operations 1995 175,000 110,950 5,340 200,000
</TABLE>
(1) Payments of bonuses are made pursuant to the Company's Executive Bonus Plan.
(2) Includes Company funded health benefit credits of $720 in 1997, 1996 and
1995, and Company matching contributions to a non-qualified deferred
compensation plan.
12
<PAGE> 15
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END VALUES
The following table sets forth, for each of the Named Executive
Officers, certain information concerning the exercise of stock options during
1997, including the year-end value of unexercised options:
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-the-Money Options
Acquired Value Options at Fiscal Year-End (#) at Fiscal Year-End (1)($)
Name on Exercise (#) Realized (l)($) Exercisable/Unexercisable Exercisable/Unexercisable
- ----------------- --------------- --------------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
David A. Duffield -- $ -- 456,000/464,000 $16,324,050/$15,695,450
Aneel Bhusri 72,800 1,877,472 42,400/327,200 1,405,449/9,170,224
Ronald E. F. Codd 203,100 4,007,775 460,900/288,000 17,586,633/9,793,000
Albert W. Duffield 220,000 4,349,583 1,544,000/1,156,000 59,018,585/41,699,752
Margaret L. Taylor 100,000 2,354,167 691,200/727,200 25,873,234/24,920,651
</TABLE>
(1) Calculated by determining the difference between the closing price of the
Company's Common Stock as reported on the NASDAQ National Market on the date
of exercise or at December 31, 1997 ($39.00), as applicable, and the
exercise price of such options.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth each grant of stock options made during
the year ended December 31, 1997 to each of the Named Executive Officers:
<TABLE>
<CAPTION>
Individual Grants
----------------------------------- Potential Realizable
% of Total Value at Assumed
Number of Options Annual Rate of Stock
Securities Granted to Price Appreciation for
Underlying Employees Exercise Option Term(4)
Options in Fiscal Price Expiration ----------------------
Name Granted(1)(#) Year(2) ($/share)(3) Date 5%($) 10%($)
---- ------------- -------- ---------- ---- ----- ------
<S> <C> <C> <C> <C> <C> <C>
David A. Duffield(5) -- --% $ -- n/a $ -- $ --
Aneel Bhusri(5) 40,000 .37% 27.25 1/31/07 685,495 1,737,179
60,000 .55% 19.875 4/1/07 749,957 1,900,538
Ronald E. F. Codd(5) -- --% -- n/a -- --
Albert W. Duffield 60,000 .55% 27.25 1/31/07 1,028,243 2,605,769
Margaret L. Taylor 60,000 .55% 27.25 1/31/07 1,028,243 2,605,769
</TABLE>
(1) These options vest in five equal annual installments commencing one year
from the date of grant.
(2) An aggregate of 10,870,350 options to purchase shares of the Company's
Common Stock were granted to employees in 1997.
(3) The exercise price and the 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. All of the options have an
exercise price equal to 100% of the fair market value of the Company's
Common Stock on the date of grant.
(4) This column shows the hypothetical gains or "option spreads" of the options
granted based on assumed annual compound stock price appreciation rates of
5% and 10% over the full ten-year term of the option. The 5% and 10% assumed
rates of appreciation are mandated by the rules of the Securities and
Exchange Commission and do not represent the Company's estimated or
projected future prices of the Company's Common Stock.
(5) See Notes 2 and 3 of "Proposal No. 3 - Amended Plan Benefits."
13
<PAGE> 16
REPORT OF THE COMPENSATION COMMITTEE
The following is the Report of the Compensation Committee of the
Company, describing the compensation policies and rationale applicable to the
Company's executive officers with respect to the compensation paid to such
executive officers for the year ended December 31, 1997. The information
contained in the report shall not be deemed to be "soliciting material" or to be
"filed" with the Securities and Exchange Commission 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.
The Compensation Committee (the "Committee") of the Board of Directors
of the Company is charged with the responsibility of reviewing all aspects
of the Company's executive compensation programs and administering the
Company's Stock Option Plan. In 1997, the voting members of the Committee
were Messrs. Battle and Yansouni, both of whom are non-employee Directors of
the Company. Mr. Still is a non-voting member of the Committee and is a
non-employee Director of the Company.
The Company's executive compensation programs are designed to attract
and retain executives who will contribute to the Company's long-term
success, to reward executives for achieving the Company's financial goals,
and to link executive compensation and stockholder interests through
equity-based plans. The Committee believes that strong financial
performance, on a sustained basis, is the most certain avenue through which
the Company can positively affect long-term stockholder return. Furthermore,
the Company believes that, in order to attract and retain the most qualified
executives in the industry, its compensation policies must be competitive
with other companies in the software industry, particularly those of smaller
or similar size and those located within the greater San Francisco Bay Area.
Beginning in 1994, the Code limited the federal income tax deductibility
of compensation paid to the Company's chief executive officer and to each of
the four most highly compensated executive officers. For this purpose,
compensation can include, in addition to cash compensation, the difference
between the exercise price of stock options and the value of the underlying
stock on the date of exercise. The Company may deduct compensation with
respect to any of these individuals only to the extent that during any
fiscal year such compensation does not exceed $1 million or meets certain
other conditions (such as shareholder approval). Considering the Company's
current compensation plans and policy, the Company and Compensation
Committee believe that, for the neat future, there is little risk that the
Company will lose any significant tax deduction relating to executive
compensation. If the deductibility of executive compensation becomes a
significant issue, the Company's compensation plans and policy will be
modified to maximize the deduction of compensation if the Company and the
Compensation Committee determine that such action is in the best interests
of the Company.
The Company's executive compensation programs consist of base salary,
annual cash incentive compensation, long-term incentive compensation in the
form of stock options, and various benefits, including medical and savings
plans generally available to all employees of the Company. In addition, the
Company's executives are eligible to participate in a non-qualified deferred
compensation plan whereby participants may elect to defer part or all of
their base and incentive cash compensation, which in turn is invested in
whole-life insurance policies owned by the Company or in a broad range of
investment alternatives similar to those available to all employees under
the Company's qualified 401(k) Plan. Under the non-qualified plan, the
Company provides matching contributions, subject to a maximum amount of
$9,500 in 1997 (the same amount as provided under the 401(k) Plan), based on
a participant's years of service and actual contributions. Matching
contributions vest ratably after two through five years of service, and any
unvested matching contributions are forfeited upon termination of
employment. Although the executives are eligible to participate under the
Company's qualified 401(k) Plan, they are not eligible for a matching
Company contribution under that plan.
14
<PAGE> 17
Compensation is reviewed and adjusted annually based principally on an
evaluation of individual contributions to corporate goals, comparable market
salary data, growth in the Company's size and complexity, internal
compensation equity considerations, increases or decreases in an executive's
span of responsibilities, and the Company's performance. The Company
presently targets executive base compensation at roughly the 25th percentile
of comparable market salary data. Based on this review, Mr. David A.
Duffield's base pay was increased by 10% in 1996 and 1997, respectively, and
the base pay of the other named executive officers was increased by an
aggregate of 10% in 1996 and 1997, respectively.
The Company's annual management incentive bonus plan was initially
established in 1991 and covers the Chief Executive Officer and the other
senior executive officers. In 1997, such executives could earn up to a
maximum of 100% of their base salary in additional incentive compensation.
This level was arrived at based on a target level of incentive compensation
which is 25% above the industry average based on market survey data. The
Board feels that the relatively lower level of targeted base salary (noted
above) and relatively higher level of incentive compensation most
effectively aligns the interests of management with that of the
shareholders. Subject to the Company attaining a minimum target level of
operating profitability, up to 90% of a person's base salary could be earned
pursuant to an objective formula based component and up to 20% could be
awarded under a subjective component, subject to a maximum total limit of
100% of a person's base salary. If the Company's operating profit margin was
below a minimum target level, no incentive compensation could be earned. The
formula based component was based on a combination of the Company's
operating profit margin and certain other financial measures. In setting
these operating profit targets, the Company considered its historical
performance and underlying business model, and external as well as internal
expectations related to 1997 operating profits. Within the minimum and
maximum operating profit targets, incentive compensation was computed based
on a weighted combination of financial factors, including the Company's
contracting activity, total revenues, capital expenditures, accounts
receivable days sales outstanding (DSO), earnings per share (EPS) and
organization expense budget management. The financial factors were derived
from one or a combination of 1997 budget data, historical performance, or
median expectations of a group of brokerage firm analysts who publish
earnings forecasts for the Company and otherwise actively follow the
Company. Subjective bonuses were determined by the Company's CEO, Mr. David
A. Duffield, except for his subjective bonus which was determined by the
Committee. The Committee believes that the 1997 plan reflects the Company's
philosophy that no incentive compensation payments are merited for periods
during which the Company generally fails to meet analyst's expectations, and
that the maximum level of performance should be based on an aggressive
internal budget prepared by the Company which establishes challenging
operational goals for the Company.
Grants of stock options may be awarded to individual executives based on
their actual and potential contributions to the achievement of the Company's
long-term goals. The magnitude of such grants was based on merit and an
evaluation of market survey data on executive stock option granting
practices. The Company's regular practice has been to set the target level
of stock option awards to executives at the 70th percentile of the industry
average for stock option awards. In addition, 1997 stock option grants to
executives include adjustments to i) increase Mr. Bhusri's equity position
which was deemed significantly below other management team members, and ii)
defer and allocate Mr. Codd's option grant, at his request, to a new senior
financial executive who was hired later in 1997. Before giving effect to the
Company's two-for-one stock splits in December 1997 and November 1996, the
total stock options granted to executives in 1997 and 1996 were 150,000 and
170,000, respectively.
In 1997 Mr. David A. Duffield earned a base salary of $242,000 and cash
incentives of $228,079. Cash incentives for 1997 approximated 94% of his
base salary and were based on attaining the goals described above. In
January 1997, Mr. Duffield received 30,000 options (with an exercise price
of 110% of market value of the common stock on the date of grant). This
grant was primarily based on the performance of the Company and Mr.
Duffield's significant
15
<PAGE> 18
contribution to that performance in terms of both leadership and strategic
vision. To avoid having the adjustment to Mr. Bhusri's equity position
noted above adversely impact the remaining pool of shares reserved for
stock option grants to employees in 1997, Mr. Duffield and the Company
agreed to rescind his January 1997 stock option grant effective August 1,
1997. Mr. Duffield did not receive any compensation or other benefit from
the Company in connection with the rescission
Compensation Committee
A. George "Skip" Battle
Cyril J. Yansouni
George J. Still
COMPANY PERFORMANCE
The following graph compares the cumulative total return on a percentage
basis to stockholders on the Company's Common Stock since November 18, 1992 (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
National Market (U.S. Companies) Index ("Nasdaq - Total"), and (ii) the Nasdaq
Computer and Data Processing Services Group Index ("Nasdaq - Software"). The
information contained in the Performance Graph shall not be deemed to be
"soliciting material" or to be "filed" with the Securities and Exchange
Commission, 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.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG PEOPLESOFT, INC.,
NASDAQ - SOFTWARE, AND NASDAQ - TOTAL
<TABLE>
<CAPTION>
11/18/92 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
<S> <C> <C> <C> <C> <C> <C> <C>
PeopleSoft, Inc. 100.000 166.176 183.824 444.118 1011.785 2255.882 3670.588
Nasdaq-Software 100.000 98.970 104.744 127.159 193.656 239.158 293.711
Nasdaq-Total 100.000 103.681 119.019 116.339 164.525 202.379 248.202
</TABLE>
Time intervals are not to scale.
OTHER MATTERS
The Company knows of no other matters to be addressed at the Annual
Meeting. If any other matters are properly addressed at the Annual Meeting, it
is the intention of the persons named in the accompanying proxy to vote the
shares represented in the manner as the Board of Directors may recommend.
THE BOARD OF DIRECTORS
BY: DAVID A. DUFFIELD, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
Dated: April 15, 1998
16
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EXHIBIT A
SUMMARY OF 1989 STOCK OPTION PLAN
Purpose. The purpose of the Option Plan is to attract and retain the
best available personnel for positions of substantial responsibility, to provide
additional incentive to employees and consultants of the Company and to promote
the success of the Company's business.
Administration. The Option Plan is to be administered by the Board of
Directors or by a committee or committees designated by the Board of Directors
to administer the Option Plan (the "Administrator"). The Board of Directors may
establish different committees to handle different administrative duties under
the Option Plan. The Administrator, with respect to directors and Section 16
officers, must be constituted in such a manner as to permit the Option Plan and
transactions thereunder to comply with Rule 16b-3 as it applies to a plan
intended to quality thereunder as a discretionary grant or award plan. The
Option Plan is currently being administered by the Compensation Committee and
the Board of Directors (acting on the recommendation of the Compensation
Committee).
Eligibility. The Option Plan provides that incentive stock options may
be granted thereunder to employees (including officers or employee directors) of
the Company. The Option Plan provides for nonstatutory options to be granted to
employees (including officers or employee directors) and consultants of the
Company. As defined under the Option Plan, the term "Employee" excludes any
"Contingent Worker" even if such contingent worker is reclassified as a
common-law employee of the Company. The Administrator selects the employees and
consultants and determines the number of shares to be subject to each option.
Terms and Conditions of Options. The terms and conditions of options
granted under the Option Plan are determined by the Administrator. Each option
is evidenced by a stock option agreement between the Company and the employee or
consultant granted such option, and is subject to the following additional terms
and conditions:
(a) Exercise of the Option. Any option granted under the Option Plan
shall be exercisable according to the terms of the Option Plan and at such times
and under such conditions as determined by the Administrator and set forth in
the option agreement. An option is exercised by (i) giving written notice of
exercise to the company from the person entitled to exercise the option, and
(ii) tendering full payment to the Company of the purchase price. The exercise
price of the shares purchased upon exercise of any option may be paid in cash,
check, promissory note, exchange of shares of Common Stock or such form of
consideration as the Administrator determines is acceptable to the extent
permissible by applicable law and which may vary for each option. With respect
to any incentive stock option, the form of consideration to be paid upon
exercise of such option must be determined at the time of the grant.
(b) Exercise Price. The exercise price of an option is determined by the
Administrator. The exercise price of an incentive stock option may not be less
than 100% of the fair market value of the Common Stock and the exercise price of
a nonstatutory stock option may not be less than 85% of the fair market value of
the Common Stock on the grant date. Notwithstanding the foregoing, in the case
of any stock option granted to a holder of 10% or more of the Company's
outstanding securities, the exercise price must not be less than 110% of the
fair market value at the time of grant. For the purposes of the Option Plan,
fair market value is defined as the reported closing sales price of a share of
Common Stock on the NASDAQ National Market on the last market trading day prior
to the date of determination.
(c) Termination of Employment. If the optionee's employment with the
Company terminates for any reason other than upon death or disability, options
under the Option Plan may be exercised, but only within such period of time as
determined by the Administrator and may be exercised only to the extent the
option was exercisable at the termination date. In the case of an incentive
stock option, the Administrator shall determine such period of time (in no event
to exceed ninety (90) days from the date of termination) when the option is
granted.
(d) Death or Disability of Optionee. If the optionee's employment with
the Company, its subsidiaries or its affiliated companies, should terminate as a
result of the optionee's death or disability,
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options may be exercised at any time within twelve (12) months (or such shorter
period of time determined by the Administrator) after such termination, but only
to the extent that the optionee was entitled to exercise the option as of one
year from the date of death or disability.
(e) Termination of Options. Incentive and non-qualified stock options
granted under the Option Plan expire ten years from the date of grant, unless a
shorter term is provided in the notice of grant. However, any incentive stock
option granted to a holder of 10% or more of the Company's outstanding
securities will expire no more than five years from the date of grant. No option
may be exercised after its expiration.
(f) Non-Transferability of Options and Stock Purchase Rights. An option
or stock purchase right is non-transferable by the optionee or purchaser other
than by will or the laws of descent or distribution. During the lifetime of the
optionee or purchaser, an option is exercisable only by such optionee or
purchaser.
(g) Rule 16b-3. Options granted under the Option Plan to persons subject
to Section 16 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), must comply with Rule 16b-3 and shall contain such additional conditions
or restrictions as may be required thereunder as of the time of grant to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
plan transactions.
(h) Other Provisions. The option agreement may contain such other terms,
provisions and conditions not inconsistent with the Option Plan as may be
determined by the Administrator.
Stock Purchase Rights. The Option Plan permits the Company to grant
stock purchase rights to purchase Common Stock of the Company ("Stock Purchase
Rights") either alone, in addition to, or in tandem with other awards under the
Option Plan and/or cash awards made outside the Option Plan. Upon the granting
of a Stock Purchase Right under the Option Plan, the offeree shall be advised in
writing of the terms, conditions, and restrictions related to the offer,
including the number of shares of Common Stock that the offeree shall be
entitled to purchase, the price to be paid (which in no case shall be less than
85% of fair market value) and the time within which the offeree must accept such
offer (which shall in no event exceed 30 days from the date upon which the
Administrators made the determination to grant the Stock Purchase Right), the
offer shall be acceptable by execution of a stock purchase agreement between the
Company and the offeree.
(a) Repurchase Option. Unless the Administrator of the Option Plan
determines otherwise, the stock purchase agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's employment or consulting relationship with the Company for any
reason (including death or disability). The purchase price for shares
repurchased pursuant to the restricted stock purchase agreement shall be the
original price paid by the purchaser of the fair market value as of the date of
bonus in the case of a stock bonus and may be paid by cancellation of any
indebtedness of the purchaser to the Company. The repurchase option shall lapse
at such rate as the Administrator may determine.
(b) Other Provisions. The stock purchase agreement shall contain such
other terms, provisions and conditions not inconsistent with the Option Plan as
may be determined by the Administrator, and such provisions need not be the same
with respect to each purchaser.
(c) Rights as a Stockholder. Upon exercise of a Stock Purchase Right,
the purchaser shall have rights equivalent to those of a stockholder of the
Company. As of the date of this proxy statement, no Stock Purchase Rights have
been granted under the Option Plan.
Adjustments Upon Changes in Capitalization. In the event of any increase
or decrease in the number of issued shares of Common Stock resulting from a
stock split, reverse stock split or stock dividend, combination or
reclassification of Common Stock or any other increase or decrease in the number
of issued shares of Common Stock effected without receipt of consideration, 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 Option Plan but as to which no options have yet been granted
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or which have been returned to the Option 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.
In the event of the proposed dissolution or liquidation of the Company,
each option outstanding under the Option Plan will terminate immediately prior
to the consummation of such proposed action. The Board of Directors 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 of Directors and give each optionee
the right to exercise his or her option as to all or any part of the shares
relating thereto, including shares as to which the option would not otherwise be
exercisable.
Merger of the Company. In the event of a merger of the Company with or
into another corporation or the sale of substantially all of the assets of the
Company, each outstanding option will be assumed or an equivalent option or
right will be substituted by the successor corporation or by a parent or
subsidiary of such successor corporation. In the event that the successor
corporation does not agree to assume the option or to substitute an equivalent
option or right, the Administrator shall, in lieu of such assumption or
substitution, provide for the optionee to have the right to exercise the option
as to all of or a portion of the optioned stock, including shares as to which
the option would not otherwise be exercisable. If the Administrator makes an
option fully exercisable in lieu of assumption or substitution in the event of a
merger or sale of assets, the Administrator shall notify the optionee that (i)
the option will be fully exercisable for a period of 15 days from the date of
such notice, and (ii) the option will terminate upon the expiration of such
period.
Interpretation, Amendment and Termination of the Plan. The Administrator
has the authority to interpret and construe the provisions of the Option Plan
and to conclusively resolve any issues arising thereunder. The Board of
Directors at any time may amend, alter, suspend or terminate the Option Plan;
provided, however, that no such amendment, alteration, suspension or termination
shall impair the rights of any optionee unless mutually agreed otherwise between
the optionee and the Administrator. In addition, to the extent stockholder
approval is required and desirable to comply with Rule 16b-3 or Section 422 of
the Internal Revenue Code of 1986, as amended (or any successor rule or statute
or other applicable law, rule or regulation, including requirements of any
exchange or quotation system on which the Company's Common Stock is listed or
quoted), such stockholder approval, if required, will be obtained in such a
manner and to such a degree as is required by the applicable law, rule or
regulation.
TAX INFORMATION
Options granted under the Option Plan may be either "incentive stock
options," as defined in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), or nonstatutory stock options.
Incentive Stock Options. An optionee who is granted an incentive stock
option will not recognize taxable income either at the time the option is
granted or upon its exercise, although the exercise may subject the optionee to
the alternative minimum tax. Upon the sale or exchange of the shares more than
two years after grant of the option and one year after exercising the option,
any gain or loss will be treated as long term capital gain or loss. If these
holding periods are not satisfied, the optionee will recognize ordinary income
at the date of sale or exchange equal to the difference between the exercise
price and the lower of (i) the fair market value of the shares at the date of
the option exercise, or (ii) the sale price of the shares. Different rules may
apply in the case of optionees who are subject to Section 16 of the Securities
Exchange Act of 1934, as amended ("Section 16 Insiders").
The Company will be entitled to a deduction in the same amount as the
ordinary income recognized by the optionee. Any gain or loss recognized on such
a premature disposition of the shares in excess of the amount treated as
ordinary income will be characterized as long-term or short-term capital gain or
loss, depending on the holding period.
Nonstatutory Stock Options. All other options which do not qualify as
incentive stock options are referred to as nonstatutory stock options. An
optionee will not recognize any taxable income at the time he or she is granted
a nonstatutory stock option. However, upon its exercise, the optionee will
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recognize taxable income generally measured as the excess of the then fair
market value of the shares purchased over the purchase price. Any taxable income
recognized in connection with an option exercise by an optionee who is also an
employee of the Company will be subject to tax withholding by the Company. Upon
resale of such shares by the optionee, any difference between the sales price
and the optionee's purchase price, to the extent not recognized as taxable
income as described above, will be treated as long-term or short-term capital
gain or loss, depending on the holding period. Different rules may apply in the
case of optionees who are Section 16 Insiders.
The Company will be entitled to a tax deduction in the same amount as
the ordinary income recognized by the Optionee with respect to shares acquired
upon exercise of a nonstatutory stock option.
Stock Purchase Rights. Stock Purchase Rights will generally be taxed in
the same manner as Nonstatutory Stock Options. However, restricted stock is
generally purchased upon exercise of a Stock Purchase Right. At the time of
purchase, restricted stock is subject to a "substantial risk of forfeiture"
within the meaning of Section 83 of the Code. As a result, the purchaser will
not recognize ordinary income at the time of purchase. Instead, the purchaser
will recognize ordinary income on the dates when the stock ceases to be subject
to substantial risk of forfeiture. The stock will generally cease to be subject
to a substantial risk of forfeiture when it is no longer subject to the
Company's right to repurchase the stock upon the purchaser's termination of
employment with the Company (i.e. as it "vests"). At such times, the purchaser
will recognize the ordinary income measured as the difference between the
purchase price and the fair market value of the stock on the date the stock is
no longer subject to a substantial risk of forfeiture. However, a purchaser may
accelerate to the date of purchase his or her recognition of ordinary income, if
any, and the beginning of any capital gain holding period by timely filing an
election pursuant to Section 83(b) of the Code. In such event, the ordinary
income recognized, if any, would be equal to the difference between the purchase
price and the fair market value of the stock on the date of purchase, and the
capital gain holding period would commence on the purchase date. The ordinary
income recognized by a purchaser who is an employee will be treated as wages and
will be subject to tax withholding by the Company out of the current
compensation of the purchaser. If such compensation is insufficient to pay the
withholding tax, the purchaser will be required to make direct payment to the
Company for the tax liability. Different rules may apply in the case of
purchasers who are Section 16 Insiders.
Generally, the Company will be entitled to a tax deduction in the amount
and at the time the purchaser recognizes ordinary income.
The foregoing does not purport to be a complete summary of the effect of
federal income taxation upon holders of options or upon the Company. It also
does not reflect provisions of the income tax laws of any municipality, state or
foreign country in which an optionee may reside.
EXHIBIT B
SUMMARY OF EMPLOYEE STOCK PURCHASE PLAN
Purpose. The purpose of the Employee Stock Purchase Plan ("Purchase
Plan") is to provide employees of the Company with an opportunity to purchase
Common Stock of the Company through accumulated payroll deductions.
Administration. The Purchase Plan shall be administered by the Board of
Directors or a committee appointed by the Board. All questions of interpretation
of the Purchase Plan are determined by the Board of Directors or its committee,
whose decisions are final and binding upon all participants. The Purchase Plan
shall be administered in compliance with Rule 16b-3 of the Securities Exchange
Act of 1934, as amended (the "Exchange Act").
Eligibility. Any person who is employed by the Company for at least 20
hours per week and more than five months in a calendar year shall be eligible to
participate in the Purchase Plan, provided that the employee had been employed
for at least one month on the first day of an offering period and subject to
certain limitations imposed by Section 423(b) of the Code. As defined under the
Purchase Plan,
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the term "Employee" excludes any "Contingent Worker." Contingent Workers include
any person who is not an employee pursuant to Code Section 3121(d) or Revenue
Ruling 87-41.
Participation. Eligible employees become participants in the Purchase
Plan by delivering to the Company a subscription agreement authorizing payroll
deductions prior to the applicable offering date, unless a later time for filing
the subscription agreement has been set by the Board of Directors for all
eligible employees with respect to a given offering period.
Offering Periods. The Purchase Plan is implemented by consecutive
six-month offering periods commencing on or about January 1 and July 1 of each
year or on such date as the Board shall determine. The first offering period
commenced on January 1, 1993. The Board of Directors may change the duration of
the offering periods without stockholder approval upon fifteen days prior
notice.
Payroll Deductions. The purchase price for the shares is accumulated by
payroll deductions during the offering period. The deductions may not be less
than 1% nor more than 10% of a participant's eligible aggregate compensation
during the offering period. Eligible aggregate compensation is defined to
include all regular straight time gross earnings and sales commissions,
including payments for overtime, shift premiums, bonuses and other compensation
earned during a given offering period. A participant may discontinue his or her
participation in the Purchase Plan at any time during the offering period and
may decrease or increase the rate of payroll deductions one time during any
calendar year. Payroll deductions shall commence on the first payroll following
the first day of the offering period, and shall end on the last day of the
offering period (the "exercise date") unless sooner terminated as provided in
the Purchase Plan.
Grant and Exercise of Option. The maximum number of shares placed under
option to a participant in an offering is that number determined by dividing the
amount of the participant's total payroll deductions to be accumulated prior to
an exercise date (not to exceed $12,500) by the lower of 85% of the fair market
value of the Common Stock at the beginning of the offering period or 85% of the
fair market value of the Common Stock on the exercise date. The fair market
value of Common Stock on a given date shall be the closing sale price of the
Common Stock for such date as reported by the NASDAQ National Market System or,
if such price is not reported, the means of the bid and asked prices per share
of the Common Stock as reported by NASDAQ or, if listed on a stock exchange, the
closing price on such exchange as of such date or, if not traded on such date,
on the immediately preceding trading date as reported in the Wall Street
Journal. Unless a participant withdraws from the Purchase Plan, such
participant's option for the purchase of shares will be exercised automatically
on each exercise date for the maximum number of whole shares at the applicable
rate.
Notwithstanding the foregoing, no employee will be permitted to
subscribe for shares under the Purchase Plan if, immediately after the grant of
an option, the employee would own 5% or more of the voting power or value of all
classes of stock of the Company or of any of its subsidiaries (including stock
which may be purchased under the Purchase Plan or pursuant to any other
options), nor shall any employee be granted an option which would permit the
employee to buy pursuant to the Purchase Plan more than $25,000 worth of stock
(determined at the fair market value of the shares at the time the option is
granted) in any calendar year.
Withdrawal; Termination of Employment. A participant's interest in a
given offering may be terminated in whole, but not in part, at any time by
signing and delivering to the Company a notice of withdrawal from the Purchase
Plan. Any withdrawal by the participant of accumulated payroll deductions for a
given offering automatically terminates the participant's interest in that
offering. The failure to remain in the continuous employ of the Company for at
least 20 hours per week during an offering period will be deemed to be a
withdrawal from that offering.
Transferability. Neither accumulated payroll deductions nor any rights
with regard to the exercise of an option to receive shares under the Purchase
Plan may be assigned, transferred, pledged or otherwise disposed of in any way
(other than by will, the laws of descent and distribution or as provided in the
Purchase Plan) by the participant. Any such attempt at assignment, transfer,
pledge or other
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disposition shall be without effect, except that the Company may treat such act
as an election to withdraw from the Purchase Plan.
Adjustments Upon Changes in Capitalization. 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 Purchase Plan and in the purchase price per share.
In the event of the proposed dissolution or liquidation of the Company,
the offering will terminate immediately prior to the consummation of such
proposed action, unless otherwise provided by the Board. 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, each option under the
Purchase Plan shall be assumed or an equivalent option shall be substituted by
such successor corporation, unless the Board decides to accelerate vesting of
such options. If the Board accelerates vesting of such options, participants
shall have ten (10) days to withdraw from the offering period or such options
will be exercised automatically.
Amendment or Termination. The Board of Directors may at any time
terminate or amend the Purchase Plan, except that termination shall not affect
options previously granted and no amendment may make any change in any option
previously granted which adversely affects the rights of any participant. In
addition, the Company shall obtain stockholder approval in such a manner and to
such a degree as required to comply with Rule 16b-3 under the Exchange Act or
under Section 423 of the Code (or any successor rule or provision or any other
applicable law or regulation).
TAX INFORMATION
The Purchase Plan, and the right of participants to make purchases
thereunder is intended to qualify under the provisions of Sections 421 and 423
of the Code. Under these provisions, no income will be taxable to a participant
at the time of grant of the option or purchase of the shares. Upon disposition
of the shares, the participant will generally be subject to tax and the amount
of the tax will depend upon the length of time the shares have been held by the
participant. If the shares have been held by the participant for more than two
years after the date of option grant, the lessor of (a) the excess of the fair
market value of the shares at the time of such disposition over the option price
or (b) the excess of the fair market value of the shares at the time the option
was granted over the option price (which option price will be computed as of the
grant date) will be treated as long-term capital gain. If the shares are
disposed of earlier than two years after the date of grant, the excess of the
fair market value of the shares on the exercise date over the option price will
be treated as ordinary income, and any further gain or loss on such disposition
will be capital gain or loss and will be long term if held for more than one
year. Under current law, capital gain is fully included in gross income, but is
taxed at a rate which may be different than that for ordinary income. Capital
losses are allowed in full against capital gains plus $3,000 of other income.
Different rules may apply with respect to optionees subject to Section
16(b) of the Exchange Act. The Company is not entitled to a deduction for
amounts taxed as ordinary income or capital gain to a participant except to the
extent of ordinary income reported by participants upon dissolution of shares
within two years from date of grant.
The foregoing does not purport to be a complete summary of the effect of
federal income taxation upon the participant and the Company with respect to the
purchase of shares under the Purchase Plan and reference should be made to the
applicable provisions of the Code. In addition, this summary does not reflect
provisions of the income tax laws of any municipality, state or foreign country
in which a participant may reside.
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1159-PS-98
<PAGE> 26
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
PEOPLESOFT, INC.
1998 ANNUAL MEETING OF STOCKHOLDERS
The undersigned stockholder of PeopleSoft, Inc. a Delaware corporation (the
"Company"), hereby acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement, each dated April 15, 1998, and hereby appoints
Ronald E. F. Codd and David A. Duffield, 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 PeopleSoft, Inc. to be held on May 26, 1998 at 10:00
a.m. local time, at the Carr America Visitor's Center at 4400 Rosewood Drive,
Pleasanton, California, and at any adjournment(s) thereof, and to vote all
shares of Common Stock which the undersigned would be entitled to vote if then
and there personally present, on the matters set forth below.
This Proxy will be voted as directed, or, if no contrary direction is
indicated, will be voted FOR the election of the nominees for directors, FOR the
amendment to the Company's Restated Certificate of Incorporation to increase the
authorized number of shares of Common Stock, FOR the amendments to the 1989
Stock Option Plan, FOR the amendments to the 1992 Employee Stock Purchase Plan,
FOR the ratification of the appointment of Ernst & Young LLP as independent
auditors, and as said proxies deem advisable on such matters as may properly
come before the meeting.
CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE (SEE REVERSE SIDE)
<PAGE> 27
X Please mark votes as in this example.
1. To elect three (3) Class II directors of the Company each to serve for
a two-year term.
Class II Nominees: Albert W. Duffield, Cyril J. Yansouni, and
A. George "Skip" Battle
___ FOR ALL NOMINEES
___ WITHHELD FROM ALL NOMINEES
-------------------------------
___ For all nominees except as noted above
2. To ratify and approve the amendments to the Company's Restated Certificate
of Incorporation to increase the authorized number of shares of Common Stock
of the Company to 700,000,000.
___ FOR
___ AGAINST
___ ABSTAIN
3. To ratify and approve the amendments to the 1989 Stock Option Plan ("Option
Plan") including extending the term of the Option Plan and increasing the
number of shares issuable under the Option Plan.
___ FOR
___ AGAINST
___ ABSTAIN
4. To ratify and approve the amendments to the 1992 Employee Stock Purchase
Plan ("Purchase Plan") including increasing the number of shares issuable
under the Purchase Plan.
___ FOR
___ AGAINST
___ ABSTAIN
5. To ratify the appointment of Ernst & Young LLP as independent auditors of
the Company for the fiscal year ending December 31, 1998.
___ FOR
___ AGAINST
___ ABSTAIN
6. To transact such other business as may properly come before the meeting or
any postponement or adjournments thereof.
Mark here for address change note at left __.
Signature: _________________ Date: ____________
Signature: _________________ Date: ____________
