<PAGE> 1
LOGO
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 15, 1997
------------------------
TO THE SHAREHOLDERS OF ISOCOR:
Notice is hereby given that the 1997 Annual Meeting of Shareholders of
ISOCOR (the "Company"), a California corporation, will be held at the Miramar
Sheraton Hotel, 101 Wilshire Boulevard, Santa Monica, California 90401 on
Thursday, May 15, 1997 at 9:00 a.m. local time, for the following purposes:
1. To elect the following directors, each to serve for a one year
term: Jean-Michel Barbier, Janine M. Bushman, Andrew De Mari, Alexandra
Giurgiu and G. Bradford Jones.
2. To authorize amendments to the Company's 1992 Stock Option Plan to
increase the number of shares of Common Stock reserved for issuance
thereunder by 300,000 shares to an aggregate of 2,600,000 shares.
3. To ratify the appointment of Coopers & Lybrand L.L.P. as the
independent auditors for the Company for the fiscal year ending December
31, 1997.
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only shareholders of record at the close of business on April 1, 1997 will
be entitled to notice of and to vote at the Annual Meeting or any adjournment
thereof.
All shareholders are cordially invited to attend the Annual Meeting in
person. However, to assure your representation at the meeting, you are urged to
mark, sign, date and return the enclosed proxy card as promptly as possible in
the postage-prepaid envelope enclosed for that purpose. If you decide to attend
the meeting you may vote in person even if you have returned a proxy card.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Elias J. Blawie
ELIAS J. BLAWIE
Secretary
Santa Monica, California
April 15, 1997
YOUR VOTE IS IMPORTANT
IN ORDER TO ASSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE REQUESTED TO
COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE AND RETURN IT
IN THE ENVELOPE PROVIDED.
<PAGE> 2
LOGO
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PROXY STATEMENT FOR 1997 ANNUAL MEETING OF SHAREHOLDERS
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INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed Proxy is solicited on behalf of the Board of Directors of
ISOCOR (the "Company"), a California corporation, for use at the Annual Meeting
of Shareholders to be held May 15, 1997 at 9:00 a.m., local time, or at any
adjournment or postponement thereof, for the purposes set forth in this Proxy
Statement and in the accompanying Notice of Annual Meeting of Shareholders. The
Annual Meeting will be held at the Miramar Sheraton Hotel, 101 Wilshire
Boulevard, Santa Monica, California 90401.
These proxy solicitation materials were mailed on or about April 15, 1997
to all shareholders entitled to vote at the meeting.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Company (Attention:
Janine M. Bushman, Inspector of Elections) a written notice of revocation or a
duly executed proxy bearing a later date or by attending the meeting and voting
in person.
VOTING AND SOLICITATION
Every shareholder voting for the election of directors may cumulate such
shareholder's votes and give one candidate a number of votes equal to the number
of directors to be elected multiplied by the number of shares held by such
shareholder, or distribute the shareholder's votes on the same principle among
as many candidates as the shareholder thinks fit, provided that votes cannot be
cast for more than five candidates. However, no shareholder shall be entitled to
cumulate votes for a candidate unless such candidate's name has been placed in
nomination prior to the voting and the shareholder, or any other shareholder,
has given notice at the meeting prior to the voting of the intention to cumulate
the shareholder's votes. On all other matters, each share has one vote.
Votes cast by proxy or in person at the Annual Meeting will be tabulated by
the Inspector of Elections with the assistance of the Company's transfer agent.
The Inspector of Elections will also determine whether or not a quorum is
present. Except in certain specific circumstances, the affirmative vote of a
majority of shares represented and voting at a duly held meeting at which a
quorum is present is required under California law for approval of proposals
presented to shareholders. In general, California law also provides that a
quorum consists of a majority of the shares entitled to vote, represented either
in person or by proxy. The Inspector of Elections will treat abstentions as
shares that are present and entitled to vote for purposes of determining the
presence of a quorum but as not voting for purposes of determining the approval
of any matter submitted to the shareholders for a vote. Any proxy which is
returned using the form of proxy enclosed and which is not marked as to a
particular item will be voted for the election of the persons nominated by
management as directors, for approval of the amendments to the Company's 1992
Stock Option Plan, for ratification of the appointment of the designated
independent auditors and as the proxy holders deem advisable on other matters
that may come before the meeting, as the case may be with respect to the item
not marked. If a broker indicates on the enclosed proxy or its substitute that
it does not have discretionary authority as to certain shares to vote on a
<PAGE> 3
particular matter ("broker non-votes"), those shares will not be considered as
voting with respect to that matter. While there is no definitive specific
statutory or case law authority in California concerning the proper treatment of
abstentions and broker non-votes, the Company believes that the tabulation
procedures to be followed by the Inspector of Elections are consistent with the
general statutory requirements in California concerning voting of shares and
determination of a quorum.
The cost of soliciting proxies will be borne by the Company. In addition,
the Company will reimburse brokerage firms and other persons representing
beneficial owners of shares for their expenses in forwarding solicitation
materials to such beneficial owners. Proxies may be solicited by certain of the
Company's directors, officers and regular employees, without additional
compensation, personally or by electronic mail, telephone or telegram.
RECORD DATE AND SHARE OWNERSHIP
Only shareholders of record at the close of business on April 1, 1997 are
entitled to notice of and to vote at the meeting. As of April 1, 1997, 9,362,472
shares of the Company's Common Stock were issued and outstanding.
PROPOSAL NO. 1:
ELECTION OF DIRECTORS
NOMINEES
A board of five directors is to be elected at the meeting. Unless otherwise
instructed, the proxy holders will vote the proxies received by them for
management's five nominees named below, all of whom are currently directors of
the Company.
In the event that any nominee of the Company is unable or declines to serve
as a director at the time of the Annual Meeting, the proxies will be voted for
any 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 in accordance with cumulative voting 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. It is expected
that all nominees will be able and willing to serve as directors. The term of
office of each person elected as a director will continue until the next Annual
Meeting of Shareholders, until such director's successor has been elected and
qualified or until such director resigns as a director of the Company. The names
of the nominees, and certain information about them as of December 31, 1996, are
set forth below:
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION SINCE
- ------------------------------- --- ----------------------------------------------------- --------
<S> <C> <C> <C>
Jean-Michel Barbier............ 51 Directeur General, Thomson-CSF Ventures, a venture 1993
capital investment firm
Janine M. Bushman.............. 42 Vice President, Finance and Administration and Chief 1995
Financial Officer of the Company
Andrew De Mari................. 57 President and Chief Executive Officer of the Company 1991
Alexandra Giurgiu.............. 38 Partner, 4C Ventures, a venture capital investment 1993
firm
G. Bradford Jones.............. 41 General partner, Brentwood Venture Capital, a venture 1991
capital investment firm
</TABLE>
Except as set forth below, each of the nominees has been engaged in his or
her principal occupation described above during the past five years. There is no
family relationship between any of the directors or executive officers of the
Company.
2
<PAGE> 4
Jean-Michel Barbier is Directeur General of Thomson-CSF Ventures, a
corporate venture capital investor, with which he has been associated since
1987. He was elected to the Board of Directors of the Company in November 1993.
He also serves on the Board of Directors of the following companies: Geris
Consultants, Optim, Info Radio Interactive Services, Financial Architecture
Research and Resources, Thomnet, Aonix, Virtual IO, Inc., Virtual Prototypes,
Inc. Era A.S. and certain other private companies.
Janine M. Bushman joined the Company in April 1993. She became the Vice
President, Operations of the Company in October 1994, was elected to the Board
of Directors in July 1995 and was elected Vice President, Finance and
Administration and Chief Financial Officer in November 1995. For almost six
years prior to joining the Company, Ms. Bushman was Controller and Corporate
Secretary for Interactive Systems Corporation, a developer and supplier of UNIX
operating systems software. Ms. Bushman holds an M.B.A. from Loyola Marymount
University and a B.S. in Accounting from the California State University at
Northridge.
Andrew De Mari is a founder of the Company and has served as the Company's
President and Chief Executive Officer and a member of the Board of Directors
since its founding in 1991. Dr. De Mari was previously a founder and the
Chairman and Chief Executive Officer of Retix from its inception in 1985 to
November 1990. Retix develops, manufactures, markets and supports networking
software and system products. Prior to 1985, he was Senior Vice President of
Research and Development and Engineering at Compucorp, a manufacturer of office
automation products. Dr. De Mari holds M.S.E.E. and Ph.D. degrees in Electrical
Engineering from the California Institute of Technology and Dott. Ing.
Electrical Engineering from the Politecnico di Torino, Italy.
Alexandra Giurgiu is President of Olivetti Management of America, Inc., an
investment subsidiary of Ing. C. Olivetti & C., S.p.A., a manufacturer of
information processing systems, which position she has held since 1991. Ms.
Giurgiu has also been a Managing Director and Executive Officer of 4C Ventures,
L.P., a venture capital partnership, since 1994. From 1984 to 1985, she was
Director of International Operations for Lifeboat Associates, a software
distribution and publishing company. She became a member of the Company's Board
of Directors in May 1993. Additionally, she currently serves on the Board of
Directors of Wireless Access and Alacrity Systems.
G. Bradford Jones is a general partner in the venture capital firm of
Brentwood Venture Capital, which he joined in 1981. He became a member of the
Company's Board of Directors in July 1991. Mr. Jones also serves on the Board of
Directors of Aastrom Biosciences, Interpore International, Onyx Acceptance
Corporation, Plasma & Materials Technologies Inc. and several privately held
companies.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of six meetings during
the fiscal year ended December 31, 1996. The Board of Directors has an Audit
Committee and a Compensation Committee. There is no committee performing the
functions of a nominating committee.
The Audit Committee of the Board of Directors reviews the results and scope
of the audit and other services provided by the Company's independent auditors,
approves fee arrangements with auditors and reports the results of its review to
the full Board of Directors and to management. This Committee, which consists of
directors Barbier and Giurgiu, consulted regularly among themselves but held no
formal meetings during fiscal 1996.
The Compensation Committee of the Board of Directors makes recommendations
regarding salaries and incentive compensation for employees of the Company,
makes recommendations with respect to purchase and option arrangements for
individuals subject to Section 16 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and makes recommendations regarding other
compensation matters to the full Board of Directors. This Committee, which
consists of directors Barbier and Jones, consulted regularly among themselves
but held no formal meetings during fiscal 1996.
No incumbent director attended fewer than 75 percent of the aggregate
number of meetings of the Board of Directors and of the committees, if any, upon
which such director served during fiscal 1996.
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<PAGE> 5
COMPENSATION OF DIRECTORS
All directors are reimbursed for out-of-pocket travel expenses associated
with their attendance at Board meetings. Nonemployee directors of the Company
are automatically granted options to purchase shares of the Company's Common
Stock pursuant to the terms of the Company's 1996 Directors' Stock Option Plan
(the "Directors' Plan"). The Directors' Plan provides that each person who is or
becomes a nonemployee director of the Company and who has not previously been
granted an option under the 1992 Stock Option Plan shall be granted a
nonstatutory stock option to purchase 10,000 shares of the Common Stock of the
Company (the "First Option") on the date on which the optionee first becomes a
nonemployee director of the Company (or January 18, 1996 with respect to
directors who were nonemployee directors as of the date of adoption of the
Directors' Plan). Such First Options are only granted to directors who meet the
foregoing requirements who have not received an option under the 1992 Stock
Option Plan; if a director who would otherwise be eligible to receive a First
Option has previously received an option under the 1992 Stock Option Plan, then
such director receives a modified First Option to purchase 5,000 shares of the
Common Stock of the Company. Thereafter, on the first calendar day of the
Company's fiscal year commencing in 1997, each nonemployee director shall be
granted an additional option to purchase 2,500 shares of Common Stock if, on
such date, he or she shall have served on the Company's Board of Directors for
at least three months.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL OF THE NOMINEES LISTED
ABOVE.
PROPOSAL NO. 2:
AMENDMENT OF THE 1992 STOCK OPTION PLAN
At the Annual Meeting, shareholders are being asked to approve amendments
to the 1992 Stock Option Plan (the "1992 Option Plan") that would increase the
shares reserved for issuance thereunder by 300,000 shares of Common Stock to an
aggregate of 2,600,000 shares.
GENERAL
The Company's 1992 Option Plan provides for the grant of options to
employees and consultants of the Company. The aggregate number of shares
reserved for issuance under the 1992 Option Plan includes options previously
granted and exercised under the 1992 Option Plan. The increase in shares
reserved for issuance under the 1992 Option Plan has been necessitated by the
growth in the number of employees and the grant of additional stock options to
current employees as previously granted options vest and become exercisable. The
Company does not believe that the shares remaining available for future grant
pursuant to the 1992 Option Plan are sufficient to attract new employees or
retain existing employees. The increase will provide sufficient additional stock
to continue the Company's policy of equity ownership by employees and
consultants as an incentive to contribute to the Company's success. The 1992
Option Plan was adopted by the Board of Directors in July 1992 and approved by
the shareholders in September 1992. A total of 2,300,000 shares of Common Stock
has been reserved for issuance under the 1992 Option Plan. Subject to
shareholder approval, this amount would be increased to an aggregate of
2,600,000 shares.
Options granted under the 1992 Option Plan may be either "incentive stock
options" within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code"), or nonstatutory stock options at the discretion of the
Board of Directors and as reflected in the terms of the written option
agreement. The 1992 Option Plan is not a qualified deferred compensation plan
under Section 401(a) of the Code, and is not subject to the provisions of the
Employee Retirement Income Security Act of 1974, as amended.
As of December 31, 1996, 172,084 shares had been issued upon exercise of
options granted under the 1992 Option Plan, options for 1,975,088 shares were
outstanding under the 1992 Option Plan and 152,828 shares remained available for
future grants. Shares not purchased under an option prior to its expiration will
be available for future option grants under the 1992 Option Plan. As of December
31, 1996, the fair market value
4
<PAGE> 6
of shares subject to outstanding options was $11,109,870, based upon the closing
price of the Common Stock as reported on the Nasdaq National Market on such
date.
PURPOSE
The purposes of the 1992 Option Plan are 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 1992 Option Plan may be administered by the Board of Directors or by a
committee of the Board of Directors. The 1992 Option Plan is currently being
administered by the Board of Directors. The Board of Directors has the exclusive
authority to grant stock options and otherwise administer the 1992 Option Plan
with respect to the Company's directors and officers eligible to participate in
the 1992 Option Plan. Members of the Board of Directors receive no additional
compensation for their services in connection with the administration of the
1992 Option Plan. All questions of interpretation of the 1992 Option Plan are
determined by the Board of Directors or its committee and its decisions are
final and binding upon all participants.
ELIGIBILITY
The 1992 Option Plan provides that either incentive stock options or
nonstatutory options may be granted to employees (including officers and
directors who are also employees) of the Company or any of its subsidiaries. In
addition, the 1992 Option Plan provides that nonstatutory options may be granted
to consultants (not including directors who are not compensated for their
services or are paid only a director's fee by the Company) of the Company or any
of its subsidiaries. The Board of Directors or its committee selects the
optionees and determines the number of shares to be subject to each option. In
making such determination, there are taken into account the duties and
responsibilities of the optionee, the value of the optionee's services, the
optionee's present and potential contribution to the success of the Company, and
other relevant factors.
The 1992 Option Plan provides that the maximum number of shares of Common
Stock which may be granted under options to any one employee during any fiscal
year shall be 750,000, subject to adjustment as provided in the 1992 Option
Plan. There is also a limit on the aggregate market value of shares subject to
all incentive stock options that may be granted to an optionee during any
calendar year.
TERMS OF OPTIONS
Each option is evidenced by a stock option agreement between the Company
and the optionee. Each option is subject to the following additional terms and
conditions:
(a) Exercise of the Option. The Board of Directors or its committee
determines when options may be exercised. An option is exercised by giving
written notice of exercise to the Company specifying the number of full
shares of Common Stock to be purchased and by tendering of payment of the
purchase price. The purchase price of the shares purchased upon exercise of
an option shall be paid in consideration of such form as is determined by
the Board of Directors or its committee and specified in the option
agreement, and such form of consideration may vary for each option.
(b) Exercise Price. The exercise price under the 1992 Option Plan is
determined by the Board of Directors or its committee and may not be less
than 100% and 85% of the fair market value of the Common Stock on the date
the option is granted for incentive stock options and nonstatutory stock
options, respectively. The fair market value per share is equal to the
closing price on the Nasdaq National Market on the date of grant. In the
case of an option granted to an optionee who owns more than 10% of the
voting power of all classes of stock of the Company, its parent or
subsidiaries, the exercise price must not be less than 110% of the fair
market value on the date of the grant.
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<PAGE> 7
(c) Termination of Employment. If the optionee's employment or
consulting relationship terminates for any reason other than disability or
death, options under the 1992 Option Plan may be exercised not later than
forty-five days (or such other period of time not exceeding three months in
the case of an incentive stock option or six months in the case of a
nonstatutory stock option as is determined by the Board of Directors or its
committee) after such termination and may be exercised only to the extent
the option was exercisable on the date of termination. In no event may an
option be exercised by any person after the expiration of its term.
(d) Disability. If an optionee is unable to continue his or her
employment or consulting relationship with the Company as a result of his
or her total and permanent disability, options may be exercised within
twelve months (or such other period of time not exceeding twelve months as
is determined by the Board of Directors or its committee) of termination
and may be exercised only to the extent the option was exercisable on the
date of termination, but in no event may the option be exercised after its
termination date.
(e) Death. Under the 1992 Option Plan, if an optionee should die
while employed or retained by the Company, and such optionee has been
continuously employed or retained by the Company since the date of grant of
the option, the option may be exercised within six months after the date of
death (or such other period of time, not exceeding six months, as is
determined by the Board of Directors or its committee) by the optionee's
estate or by a person who acquired the right to exercise the option by
bequest or inheritance to the extent the optionee would have been entitled
to exercise the option had the optionee continued living and remained
employed or retained by the Company for three months after the date of
death, but in no event may the option be exercised after its termination
date.
If an optionee should die within thirty days (or such other period of
time not exceeding three months as is determined by the Board of Directors
or its committee) after the optionee has ceased to be continuously employed
or retained by the Company, the option may be exercised within six months
after the date of death by the optionee's estate or by a person who
acquired the right to exercise the option by bequest or inheritance to the
extent that the optionee was entitled to exercise the option at the date of
termination, but in no event may the option be exercised after its
termination date.
(f) Termination of Options. The 1992 Option Plan provides that
options granted under the 1992 Option Plan have the term provided in the
option agreement. In general, these agreements currently provide for a term
of ten years. Incentive stock options granted to an optionee who,
immediately before the grant of such option, owned more than 10% of the
total combined voting power of all classes of stock of the Company, its
parents or subsidiaries, may not in any case have a term of more than five
years. No option may be exercised by any person after its expiration.
(g) Option Not Transferable. An option is nontransferable by the
optionee other than by will or the laws of descent and distribution, and is
exercisable only by the optionee during his or her lifetime and in the
event of the optionee's death by a person who acquires the right to
exercise the option by bequest or inheritance or by reason of the death.
(h) Other Provisions. The option agreement may contain such other
terms, provisions and conditions not inconsistent with the 1992 Option Plan
as may be determined by the Board of Directors or its committee.
AMENDMENT AND TERMINATION
The Board of Directors may amend the 1992 Option Plan at any time or from
time to time or may terminate it without approval of the shareholders; provided,
however, that shareholder approval is required for any amendment to the 1992
Option Plan that increases the number of shares that may be issued under the
1992 Option Plan, modifies the standards of eligibility, modifies the limitation
on grants to employees described in the 1992 Option Plan or results in other
changes which would require shareholder approval to qualify options granted
under the 1992 Option Plan as performance-based compensation under Section
162(m) of the Code, or so long as the Company has a class of equity securities
registered under Section 12 of
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<PAGE> 8
the Exchange Act, materially increases the benefits to participants that may
accrue under the 1992 Option Plan. However, no action by the Board of Directors
or shareholders may alter or impair any option previously granted under the 1992
Option Plan. The 1992 Option Plan shall terminate in September 2002, provided
that any options then outstanding under the 1992 Option Plan shall remain
outstanding until they expire by their terms.
FEDERAL INCOME TAX ASPECTS OF THE 1992 OPTION PLAN
Options granted under the 1992 Option Plan may be either "incentive stock
options," as defined in Section 422 of the Code, or nonstatutory options.
If an option granted under the 1992 Option Plan is an incentive stock
option, under U.S. tax laws the optionee will recognize no income upon grant of
the incentive stock option and incur no tax liability due to the exercise unless
the optionee is subject to the alternative minimum tax. The Company will not be
allowed a deduction for federal income tax purposes as a result of the exercise
of an incentive stock option regardless of the applicability of the alternative
minimum tax. Upon the sale or exchange of the shares at least two years after
grant of the option and one year after receipt of the shares by the optionee,
any gain will be treated as long-term capital gain under U.S. tax laws. If these
holding periods are not satisfied, the optionee will recognize ordinary income
under U.S. tax laws equal to the difference between the exercise price and the
lower of the fair market value of the stock at the date of the option exercise
or the sale price of the stock. A different rule for measuring ordinary income
upon such a premature disposition may apply if the optionee is also an officer,
director, or 10% shareholder of the Company. The Company will be entitled to a
deduction in the same amount as the ordinary income recognized by the optionee.
Any gain recognized on such a premature disposition of the shares in excess of
the amount treated as ordinary income will be characterized under U.S. tax laws
as long-term capital gain if the sale occurs more than one year after exercise
of the option or as shortterm capital gain if the sale is made earlier. For
years beginning after 1990, the federal tax rate on long-term capital gains is
capped at 28%. Capital losses are allowed under U.S. tax laws in full against
capital gains plus $3,000 of other income.
All other options which do not qualify as incentive stock options are
referred to as nonstatutory options. An optionee will not recognize any taxable
income under U.S. tax laws at the time he or she is granted a nonstatutory
option. However, upon its exercise, under U.S. tax laws the optionee will
recognize ordinary income for tax purposes measured by the excess of the then
fair market value of the shares over the exercise price. In certain
circumstances, where the shares are subject to a substantial risk of forfeiture
when acquired or where the optionee is an officer, director or 10% shareholder
of the Company, the date of taxation under U.S. tax laws may be deferred unless
the optionee files an election with the Internal Revenue Service under Section
83(b) of the Code. The income recognized by an optionee who is also an employee
of the Company will be subject to tax withholding by the Company by payment in
cash or out of the current earnings paid to the optionee. Upon resale of such
shares by the optionee, any difference between the sales price and the exercise
price, to the extent not recognized as ordinary income as provided above, will
be treated under U.S. tax laws as capital gain or loss, and will qualify for
long-term capital gain or loss treatment if the shares have been held for more
than one year. For years beginning after 1990, the tax rate on long-term capital
gains under U.S. tax laws is capped at 28%. Capital losses are allowed under
U.S. tax laws in full against capital gains plus $3,000 of other income.
REQUIRED VOTE
The affirmative vote of the holders of a majority of the Common Stock
present or represented and voting at the Annual Meeting is required to approve
the amendments to the 1992 Option Plan.
THE BOARD OF DIRECTORS RECOMMENDS VOTING FOR THE AMENDMENTS TO THE 1992
STOCK OPTION PLAN.
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<PAGE> 9
PROPOSAL NO. 3:
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed Coopers & Lybrand L.L.P., independent
auditors, to audit the consolidated financial statements of the Company for the
fiscal year ending December 31, 1997, and recommends that shareholders vote for
ratification of such appointment. In the event of a negative vote on such
ratification, the Board of Directors will reconsider its selection.
Coopers & Lybrand L.L.P. has audited the Company's financial statements
annually since its inception. Representatives of Coopers & Lybrand L.L.P. are
expected to be present at the meeting, with the opportunity to make a statement
if they desire to do so, and to respond to appropriate questions.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF COOPERS & LYBRAND L.L.P. AS INDEPENDENT AUDITORS FOR THE COMPANY.
8
<PAGE> 10
COMMON STOCK OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of the Company's
Common Stock as of April 1, 1997 as to (i) each person who is known by the
Company to beneficially own more than five percent of the Company's Common
Stock, (ii) each of the Company's directors, (iii) each of the executive
officers named in the Summary Compensation Table beginning on page 11, and (iv)
all directors and executive officers as a group.
<TABLE>
<CAPTION>
PERCENT
5% SHAREHOLDERS, DIRECTORS, NAMED OFFICERS AND NUMBER OF SHARES BENEFICIALLY
EXECUTIVE OFFICERS AND DIRECTORS AS A GROUP BENEFICIALLY OWNED OWNED
- ----------------------------------------------------------------- ------------------ ------------
<S> <C> <C>
Brentwood Associates............................................. 607,618 6.1%
11150 Santa Monica Boulevard, Suite 1200 Los Angeles, CA 90025
CFJPE............................................................ 568,964 5.7
12, rue Chauchat 75009 Paris, France
ISO-Investors.................................................... 548,571 5.5
450 N. Roxbury Drive, Suite 600 Beverly Hills, CA 90210
Thomson-CSF Ventures............................................. 897,084 8.7
173 Boulevard Haussmann 75415 Paris, France
Bjorn Ahlen (1).................................................. 77,333 0.8
Jean-Michel Barbier (2).......................................... 899,584 8.8
Janine M. Bushman (1)............................................ 34,248 *
Andrew De Mari (1)(3)............................................ 302,000 3.1
Paul Gigg (1).................................................... 43,958 *
Alexandra Giurgiu (4)............................................ 425,118 4.3
G. Bradford Jones (5)............................................ 610,118 6.1
Patrick S. Moore (1)............................................. 10,667 *
Betty Niimi...................................................... -- *
All executive officers and directors as a group (12 persons)
(1)(2)(3)(4)(5)................................................ 2,569,591 21.5
--------- ----
</TABLE>
- ---------------
* Less than 1%.
(1) Includes shares subject to options issued pursuant to the Company's 1992
Stock Option Plan which are exercisable on or before May 30, 1997 (60 days
from the date of this table). Such shares include: Bjorn Ahlen: 3,333;
Janine M. Bushman: 34,248; Andrew De Mari: 10,000; Paul Gigg 13,100; Patrick
Moore 10,667; other executive officers, 67,414.
(2) Includes 897,084 shares held by Thomson-CSF Ventures. Mr. Barbier, a
director of the Company, is Directeur General of Thomson-CSF Ventures.
Because of his position with Thomson-CSF Ventures, Mr. Barbier may be deemed
to be a beneficial owner of such shares, but disclaims beneficial ownership
of such shares.
(3) Excludes 6,471 shares owned by Antonella De Mari, 471 shares owned by Luigi
De Mari, 6,471 shares owned by Alessandra De Mari and 6,471 shares owned by
Susanna De Mari, all of whom are members of Dr. De Mari's immediate family.
Dr. De Mari disclaims beneficial ownership of such shares.
(4) Includes 422,618 shares held by 4CV Management Company, Inc. Ms. Giurgiu, a
director of the Company, is a Partner of 4CV Management Company, Inc.
Because of her position with 4CV Management Company, Inc., Ms. Giurgiu may
be deemed to be a beneficial owner of such shares, but disclaims beneficial
ownership of such shares except to the extent of her individual interest
therein.
(5) Includes 607,618 shares held by Brentwood Associates. Mr. Jones, a director
of the Company is a general partner of Brentwood Associates, a limited
partnership. Because of his position with Brentwood Associates, Mr. Jones
may be deemed to be a beneficial owner of such shares, but disclaims
beneficial ownership of such shares except to the extent of his individual
interest in the partnership.
9
<PAGE> 11
COMPENSATION OF EXECUTIVE OFFICERS
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, that might incorporate future filings,
including this Proxy Statement in whole or in part, the following report and the
Performance Graph on page 13 shall not be incorporated by reference into any
such filings.
REPORT OF THE COMPENSATION COMMITTEE
COMPENSATION POLICIES
The Board of Directors establishes and periodically reviews the
compensation of the Chief Executive Officer and the management employees who
report to the Chief Executive Officer. Compensation for executives is based
generally on the concept that compensation must be competitive with that of
other quality companies in order to help motivate and retain the talent,
leadership skills and experience needed to help successfully guide the Company
and must provide a strong incentive for key personnel to achieve the Company's
financial, product development and market expansion goals.
It is the Company's policy that executive compensation include base salary,
stock options and, for certain employees, commissions. The Company's salary
levels are determined by comparisons with companies with similar characteristics
in the software industry. Salary increases are determined based on the
individual performance of the executive, the performance of the Company, any
change in the responsibilities of the executive and comparisons to industry
compensation data.
The Company relies upon incentive stock options as an important element of
the compensation packages of executive employees. By using incentive stock
options, the Company has been able to keep salaries and bonuses at relatively
modest levels. All employee stock options are granted pursuant to one of the
Company's incentive stock option plans. The Company makes stock option grants
periodically at no less than 100% of the market price of the Company's Common
Stock on the day prior to the date of the grant.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The compensation of Andrew De Mari, President and Chief Executive Officer,
consists of base salary and incentive stock options. The Board of Directors
periodically reviews Dr. De Mari's salary and revises his compensation based on
the Board's overall evaluation of his performance toward the achievement of the
Company's financial, strategic and other goals, with consideration given to his
length of service and to competitive chief executive officer compensation
information.
Dr. De Mari's compensation is structured to provide a long-term focus on
the Company's operating performance through his holdings of Common Stock of the
Company and the grant of incentive stock options. Therefore, as a complement to
shares of Common Stock already held by Dr. De Mari, in January 1996, Dr. De Mari
was granted an option to purchase 50,000 shares of Common Stock at an exercise
price of $6.75 per share, with vesting over a four year period.
COMPENSATION COMMITTEE
Jean-Michel Barbier
G. Bradford Jones
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee of the Company's Board of
Directors are currently Jean-Michel Barbier and G. Bradford Jones. Neither Mr.
Barbier nor Mr. Jones has at any time been an officer or employee of the
Company.
10
<PAGE> 12
EMPLOYMENT AGREEMENTS WITH MANAGEMENT
The Board of Directors elects the Company's officers and such officers
serve at the discretion of the Board of Directors of the Company. Consistent
with other employees of the Company's Irish operation, the Company has entered
into an employment agreement with C. Raomal Perera, the Company's Senior Vice
President, Engineering and the General Manager of the Company's Irish
operations. Such agreement contains customary provisions including the rate of
compensation, benefits, vacation and a car allowance consistent with the terms
offered to other ISOCOR managers in Ireland. In addition, his contract provides
for the payment of certain management fees related to his position as General
Manager of ISOCOR B.V. Mr. Perera is an "at-will" employee of the Company.
SUMMARY COMPENSATION TABLE
The following table shows the compensation received by the Company's Chief
Executive Officer and the four other most highly compensated executive officers
of the Company on an annualized basis, whose total annual salary and bonus
exceeded $100,000 for 1996 (the "Named Executive Officers"), and the
compensation received by each such individual for the fiscal years ended
December 31, 1994, 1995 and 1996.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION ------------
------------------------------------------ SECURITIES
BONUS AND OTHER ANNUAL UNDERLYING ALL OTHER
SALARY(1) COMMISSION(1) COMPENSATION OPTIONS COMPENSATION(2)
--------- ------------- ------------ ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Andrew De Mari............ 1996 $165,000 $ -- $ -- 50,000 $ --
President & CEO 1995 $150,000 $ -- $ -- 10,000 $ --
1994 $132,000 $ -- $ -- -- $ --
Bjorn Ahlen............... 1996 $ 95,000 $47,056 $ -- 10,000
Senior Vice President, 1995 $ 80,000 $90,839 $ -- -- $ --
International Sales and 1994 $ 80,000 $48,906 -- 4,000
Marketing
Betty M. Niimi............ 1996 $ 91,539 $27,471 $ -- 40,000 $ --
Senior Vice President,
Product Development and
Services
Patrick S. Moore.......... 1996 $114,026 $58,687 $ -- 40,000 $ --
Vice President, North
American Sales
Paul Gigg................. 1996 $ 79,698 $76,913 $ -- 25,000 $ 7,949
Vice President, European 1995 $ 80,467 $57,752 $ -- -- $ --
Marketing and Sales 1994 $ 78,065 $35,116 $ -- -- $ --
</TABLE>
- ---------------
(1) Includes amounts earned during such fiscal year, but payable during the
subsequent fiscal year.
(2) Reflects reimbursement for car-related expenses.
11
<PAGE> 13
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------------------------------------
% OF POTENTIAL REALIZABLE
TOTAL VALUE AT ASSUMED
OPTIONS ANNUAL
GRANTED RATES OF STOCK PRICE
TO APPRECIATION
OPTIONS EMPLOYEES EXERCISE OR FOR OPTION TERM($)(2)
GRANTED IN FISCAL BASE PRICE EXPIRATION ---------------------
NAME (SHARES)(1) YEAR (PER SHARE) DATE 5% 10%
- ------------------------ ----------- --------- ----------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Andrew De Mari.......... 50,000 4.3% $6.75 8/14/05 $212,252 $537,888
Bjorn Ahlen............. 10,000 0.9 6.75 8/14/05 42,450 107,578
Betty M. Niimi.......... 40,000 3.4 6.75 8/14/05 169,802 430,310
Patrick S. Moore........ 32,000 2.7 6.75 8/14/05 135,841 344,248
8,000 0.7 8.00 1/18/06 40,249 102,000
Paul Gigg............... 25,000 2.1 6.75 8/14/05 106,126 268,944
</TABLE>
- ---------------
(1) For a description of the general terms of the options, see "Proposal No. 2:
Amendment of the 1992 Stock Option Plan."
(2) Potential realizable values are reported net of the option exercise price
but before taxes associated with exercise. These amounts represent certain
assumed rates of appreciation only. Actual realized gains, if any, on stock
option exercises are dependent on future performance of the Company's Common
Stock, as well as the optionee's continued employment through the vesting
period.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUE TABLE
The following table provides certain summary information concerning shares
of Common Stock acquired upon exercise of stock options and represented by
outstanding stock options for each of the Named Executive Officers as of
December 31, 1996.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END (1)
ACQUIRED VALUE ----------------------------- -----------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Andrew De Mari..... -- -- 10,000 50,000 $56,250 $ 281,250
Bjorn Ahlen........ -- -- 2,916 11,084 $16,403 $ 62,347
Betty M. Niimi..... -- -- -- 40,000 -- $ 225,000
Patrick S. Moore... -- -- -- 40,000 -- $ 225,000
Paul Gigg.......... 30,458(2) $231,565 10,808 35,334 $60,795 $ 198,754
</TABLE>
- ---------------
(1) Determined based on the closing price of the Company's Common Stock as
reported on the Nasdaq National Market on December 31, 1996 ($5.625 per
share).
(2) Determined based on the estimated fair market value of the Common Stock of
the Company of $8.00 per share at March 11, 1996, the date of exercise. Does
not indicate that such shares were sold by optionee.
12
<PAGE> 14
PERFORMANCE GRAPH
The following graph compares, for the period of time that the Company's
Common Stock has been registered under Section 12 of the Securities Exchange Act
of 1934, as amended, the cumulative total shareholder return for the Company
with the cumulative total return of the Nasdaq Stock Market US Index and the
Hambrecht & Quist Computer Software Index. The stock price performance on the
following graph is not necessarily indicative of future stock price performance.
COMPARISON OF TOTAL RETURN*
<TABLE>
<CAPTION>
MEASUREMENT PERIOD H&Q SOFTWARE
(FISCAL YEAR COVERED) ISOCOR NASDAQ COMPOSITE INDEX
<S> <C> <C> <C>
3/14/96 100 100 100
12/31/96 63 119 111
</TABLE>
- ---------------
* Assumes $100 invested on March 14, 1996, the date of the Company's initial
public offering of Common Stock and further assumes reinvestment of dividends
for purposes of the Nasdaq Stock Market US Index and the Hambrecht & Quist
Computer Software Index.
CERTAIN TRANSACTIONS
On March 14, 1996, pursuant to a Series C Preferred Stock Purchase
Agreement dated November 19, 1993, as amended, the Company issued and sold
39,942 shares of its Common Stock to Thomson-CSF Ventures ("Thomson") at a price
of $7.20 per share concurrently with the consummation of the Company's initial
public offering. Thomson is a principal shareholder of the Company. In addition,
Jean-Michel Barbier, a director of the Company, is Directeur General of Thomson.
The Company is a party to an international reseller agreement with Syseca,
an affiliate of Thomson. Pursuant to such agreement, the Company provides
products to Syseca for resale on terms not substantially different from terms
with other international resellers. Pursuant to orders under such agreement, the
Company has included $292,000 in revenues for the year ended December 31, 1996.
Included in accounts receivable as of December 31, 1996 was $74,000 relating to
Syseca. The Company believes that this transaction was made on terms no less
favorable to the Company than could have been obtained from unaffiliated third
parties.
13
<PAGE> 15
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING REQUIREMENTS
Under the securities laws of the United States, the Company's directors,
its executive officers and any persons holding more than ten percent of the
Company's Common Stock are required to report their initial ownership of the
Company's Common Stock and any subsequent changes in that ownership to the
Securities and Exchange Commission ("SEC"). Specific filing deadlines of these
reports have been established and the Company is required to disclose in this
Proxy Statement any failure to file by these dates during 1996. During 1996, all
of these filing requirements were satisfied, except that Ms. Bushman, the
Company's Vice President, Finance and Administration and Chief Financial Officer
and a Director, failed to timely file such a report in connection with the
acquisition of certain shares of the Company by an immediate family member. Ms.
Bushman subsequently made such filing. In making this statement, the Company has
relied solely on written representations of its directors and executive officers
and any ten percent holders and copies of the reports that they filed with the
SEC.
SHAREHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Proposals of shareholders of the Company that are intended to be presented
by such shareholders at the Company's 1998 Annual Meeting must be received by
the Company no later than December 16, 1997 in order that they may be included
in the proxy statement and form of proxy relating to that meeting.
OTHER MATTERS
The Board of Directors knows of no other matters to be submitted to the
meeting. If any other matters properly come before the meeting, it is the
intention of the persons named in the enclosed form of Proxy to vote the shares
they represent as the Board of Directors may recommend.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Elias J. Blawie
ELIAS J. BLAWIE
Secretary
Dated: April 15, 1997
14
<PAGE> 16
ISOCOR
1992 STOCK OPTION PLAN
AS AMENDED OCTOBER, 1996
1. Purposes of the Plan. The purposes of this Stock Option Plan are 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 its Subsidiaries and to promote the success of the Company's
business. Options granted under the Plan may be incentive stock options (as
defined under Section 422 of the Code) or non-statutory stock options, as
determined by the Administrator at the time of grant of an option and subject to
the applicable provisions of Section 422 of the Code, as amended, and the
regulations promulgated thereunder.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of its Committees
appointed pursuant to paragraph (a) of Section 4 of the Plan.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as
amended.
(d) "Committee" means the Committee appointed by the Board of
Directors in accordance with paragraph (a) of Section 4 of the Plan.
(e) "Common Stock" means the Common Stock of the Company.
(f) "Company" means ISOCOR, a California corporation.
(g) "Consultant" means any person, including an advisor, who
is engaged by the Company or any Parent or Subsidiary to render consulting
services and is compensated for such services, and any director of the Company
whether compensated for such services or not, provided that if and in the event
the Company registers any class of any equity security pursuant to the Exchange
Act, the term Consultant shall thereafter not include directors who are not
compensated for their services or are paid only a director's fee by the Company.
(h) "Continuous Status as an Employee" means the absence of
any interruption or termination of the employment relationship by the Company or
any Subsidiary. Continuous Status as an Employee shall not be considered
interrupted in the case of: (i) sick leave; (ii) military leave; (iii) any other
leave of absence approved by the Board, provided that such leave is for a period
of not more than ninety (90) days, unless reemployment upon the expiration of
such leave is guaranteed by contract or statute, or unless provided otherwise
pursuant to Company policy adopted from time to time; or (iv) in the case of
transfers between locations of the Company or between the Company, its
Subsidiaries or its successor.
<PAGE> 17
(i) "Employee" means any person, including officers and
directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a director's fee by the Company shall not be sufficient to
constitute "employment" by the Company.
(j) "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
(k) "Fair Market Value" means, as of any date, the value of
Common Stock determined as follows:
(i) If the Common Stock is listed on any established
stock exchange or a national market system including without limitation the
National Market of the National Association of Securities Dealers, Inc.
Automated Quotation ("Nasdaq") System, its Fair Market Value shall be the
closing sales price for such stock (or the closing bid, if no sales were
reported, as quoted on such system or exchange, or the exchange with the
greatest volume of trading in Common Stock) for the last market trading day
prior to the time of determination, as reported in The Wall Street Journal or
such other source as the Administrator deems reliable;
(ii) If the Common Stock is quoted on the Nasdaq
System (but not on the National Market thereof) or regularly quoted by a
recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean between the high bid and low asked prices for the
Common Stock for the last market trading day prior to the time of determination,
as reported in The Wall Street Journal or such other source as the Administrator
deems reliable; or
(iii) In the absence of an established market for the
Common Stock, the Fair Market Value thereof shall be determined in good faith by
the Administrator.
(l) "Incentive Stock Option" means an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code.
(m) "Named Executive" means (any individual who, on the last
day of the Company's fiscal year, is the chief executive officer of the Company
(or is acting in such capacity) or among the four highest compensated officers
of the Company (other than the chief executive officer). Such officer status
shall be determined pursuant to the executive compensation disclosure rules
under the Exchange Act.
(n) "Nonstatutory Stock Option" means an Option not intended
to qualify as an Incentive Stock Option.
(o) "Option" means a stock option granted pursuant to the
Plan.
(p) "Optioned Stock" means the Common Stock subject to an
Option.
(q) "Optionee" means an Employee or Consultant who receives an
Option.
<PAGE> 18
(r) "Parent" means a "parent corporation", whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(s) "Plan" means this 1992 Stock Option Plan.
(t) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 13 of the Plan.
(u) "Subsidiary" means a "subsidiary corporation", whether now
or hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 13
of the Plan, the maximum aggregate number of shares that may be optioned and
sold under the Plan is 2,300,000 shares of Common Stock. The shares may be
authorized, but unissued, or reacquired Common Stock.
If an Option should expire or become unexercisable for any
reason without having been exercised in full, the unpurchased Shares that were
subject thereto shall, unless the Plan shall have been terminated, become
available for future grant under the Plan.
4. Administration of the Plan.
(a) Composition of Administrator.
(i) Multiple Administrative Bodies. If permitted by
Rule 16b-3, and by the legal requirements relating to the administration of
incentive stock option plans, if any, of applicable securities laws and the Code
(collectively, the "Applicable Laws"), the Plan may (but need not) be
administered by different administrative bodies with respect to directors,
officers who are not directors and Employees who are neither directors nor
officers.
(ii) Administration with respect to Directors and
Officers. With respect to grants of Options to Employees or Consultants who are
also officers or directors of the Company, the Plan shall be administered by (A)
the Board, if the Board may administer the Plan in compliance with Rule 16b-3 as
it applies to a plan intended to qualify thereunder as a discretionary plan and
Section 162(m) of the Code as it applies so as to qualify grants of Options to
Named Executives as performance-based compensation, or (B) a Committee
designated by the Board to administer the Plan, which Committee shall be
constituted in such a manner as to permit the Plan to comply with Rule 16b-3 as
it applies to a plan intended to qualify thereunder as a discretionary plan, to
qualify grants of Options to Named Executives as performance-based compensation
under Section 162(m) of the Code and otherwise so as to satisfy the Applicable
Laws.
<PAGE> 19
(iii) Administration with respect to Other Persons.
With respect to grants of Options to Employees or Consultants who are neither
directors nor officers of the Company, the Plan shall be administered by (A) the
Board or (B) a Committee designated by the Board, which Committee shall be
constituted in such a manner as to satisfy the Applicable Laws.
(iv) General. If a Committee has been appointed
pursuant to subsection (ii) or (iii) of this Section 4(a), such Committee shall
continue to serve in its designated capacity until otherwise directed by the
Board. From time to time the Board may increase the size of any Committee and
appoint additional members thereof, remove members (with or without cause) and
appoint new members in substitution therefor, fill vacancies (however caused)
and remove all members of a Committee and thereafter directly administer the
Plan, all to the extent permitted by the Applicable Laws and, in the case of a
Committee appointed under subsection (ii), to the extent permitted by Rule 16b-3
as it applies to a plan intended to qualify thereunder as a discretionary plan,
and to the extent required under Section 162(m) of the Code to qualify grants of
Options to Named Executives as performance-based compensation.
(b) Powers of the Administrator. Subject to the provisions of
the Plan and in the case of a Committee, the specific duties delegated by the
Board to such Committee, the Administrator shall have the authority, in its
discretion:
(i) to determine the Fair Market Value of the Common
Stock, in accordance with Section 2(k) of the Plan;
(ii) to select the Consultants and Employees to whom
Options may from time to time be granted hereunder;
(iii) to determine whether and to what extent Options
are granted hereunder;
(iv) to determine the number of shares of Common
Stock to be covered by each such award granted hereunder;
(v) to approve forms of agreement for use under the
Plan;
(vi) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any award granted
hereunder (including, but not limited to, the share price and
any restriction or limitation);
(vii) to determine whether and under what
circumstances an Option may be settled in cash under Section
10(f) instead of Common Stock;
(viii) to reduce the exercise price of any Option to
the then current Fair Market Value if the Fair Market Value of
the Common Stock covered by such Option shall have declined
since the date the Option was granted.
<PAGE> 20
(c) Effect of Administrator's Decision. All decisions,
determinations and interpretations of the Administrator shall be final
and binding on all Optionees and any other holders of any Options.
5. Eligibility.
(a) Nonstatutory Stock Options may be granted to Employees and
Consultants. Incentive Stock Options may be granted only to Employees. An
Employee or Consultant who has been granted an Option may, if he or she is
otherwise eligible, be granted an additional Option or Options.
(b) Each Option shall be designated in the written option
agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.
However, notwithstanding such designations, to the extent that the aggregate
Fair Market Value of the Shares with respect to which Options designated as
Incentive Stock Options are exercisable for the first time by any Optionee
during any calendar year (under all plans of the Company or any Parent or
Subsidiary) exceeds $100,000, such excess Options shall be treated as
Nonstatutory Stock Options.
(c) For purposes of Section 5(b), Incentive Stock Options
shall be taken into account in the order in which they were granted, and the
Fair Market Value of the Shares shall be determined as of the time the Option
with respect to such Shares is granted.
(d) The Plan shall not confer upon any Optionee any right with
respect to continuation of employment or consulting relationship with the
Company, nor shall it interfere in any way with an Optionee's right or the
Company's right to terminate his or her employment or consulting relationship at
any time, with or without cause.
6. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company as described in Section 19 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 15 of the Plan.
7. Term of Option. The term of each Option shall be the term stated in
the Option Agreement; provided, however, that the term shall be no more than ten
(10) years from the date of grant thereof or such shorter term as may be
provided in the Option Agreement. However, in the case of an Option granted to
an Optionee who, at the time the Option is granted, owns stock representing more
than ten percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary, the term of the Option shall be five (5)
years from the date of grant thereof or such shorter term as may be provided in
the Option Agreement.
8. Limitation on Grants to Employees. Subject to adjustment as provided
in Section 13 of this Plan, the maximum number of shares which may be subject to
Options granted to any one employee under this Plan for any fiscal year of the
Company shall be 750,000.
<PAGE> 21
9. Option Exercise Price and Consideration.
(a) Exercise Price. The per share exercise price for the
Shares to be issued pursuant to exercise of an Option shall be such price as is
determined by the Board, but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time
of the grant of such Incentive Stock Option, owns stock representing more than
ten percent (10%) of the voting power of all classes of stock of the Company or
any Parent or Subsidiary, the per Share exercise price shall be no less than
110% of the Fair Market Value per Share on the date of grant.
(B) granted to any other Employee, the per
Share exercise price shall be no less than 100% of the Fair Market Value per
Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option
(A) granted to a person who, at the time of
the grant of such Option, owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of the grant.
(B) granted to a person, who, at the time of
grant of such Option is a Named Executive of the Company, the per share exercise
price shall be no less than 100% of the Fair Market Value on the date of grant.
(C) granted to any person other than those
persons described in subsections (ii) (A) and (B) above, the per Share exercise
price shall be no less than 85% of the Fair Market Value per Share on the date
of grant.
(b) Permissible Consideration. The consideration to be paid
for the Shares to be issued upon exercise of an Option, including the method of
payment, shall be determined by the Administrator (and, in the case of an
Incentive Stock Option, shall be determined at the time of grant) and may
consist entirely of (1) cash, (2) check, (3) promissory note, (4) other Shares
that (x) in the case of Shares acquired upon exercise of an Option, have been
owned by the Optionee for more than six months on the date of surrender, and (y)
have a Fair Market Value on the date of surrender equal to the aggregate
exercise price of the Shares as to which such Option shall be exercised, (5)
authorization from the Company to retain from the total number of Shares as to
which the Option is exercised that number of Shares having a Fair Market Value
on the date of exercise equal to the exercise price for the total number of
Shares as to which the Option is exercised, (6) delivery of a properly executed
exercise notice together with such other documentation as the Administrator and
the broker, if applicable, shall require to effect an exercise of the Option and
delivery to the Company of the sale or loan proceeds required to pay the
exercise price, (7) delivery of a subscription agreement for the Shares that
irrevocably
<PAGE> 22
obligates the option holder to take and pay for the Shares not more than twelve
months after the date of delivery of the subscription agreement, (8) any
combination of the foregoing methods of payment, or (9) such other consideration
and method of payment for the issuance of Shares to the extent permitted under
Applicable Laws. In making its determination as to the type of consideration to
accept, the Board shall consider if acceptance of such consideration may be
reasonably expected to benefit the Company.
10. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any
Option granted hereunder shall be exercisable at such times and under such
conditions as determined by the Board, including performance criteria with
respect to the Company and/or the Optionee, and as shall be permissible under
the terms of the Plan.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice
of such exercise has been given to the Company in accordance with the terms of
the Option by the person entitled to exercise the Option and the Company has
received full payment for the Shares with respect to which the Option is
exercised. Full payment may, as authorized by the Board, consist of any
consideration and method of payment allowable under Section 9(b) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause to
be issued) such stock certificate promptly upon exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 13 of the Plan.
Exercise of an Option in any manner shall result in a decrease
in the number of Shares which thereafter may be available, both for purposes of
the Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Employment. In the event of termination of
an Optionee's consulting relationship or Continuous Status as an Employee with
the Company, such Optionee may, but only within three (3) months (or such other
period of time as is determined by the Board, with such determination in the
case of an Incentive Stock Option being made at the time of grant of the Option
and not exceeding three (3) months) after the date of such termination (but in
no event later than the expiration date of the term of such Option as set forth
in the Option Agreement), exercise his or her Option to the extent that Optionee
was entitled to exercise it at the date of such termination. To the extent that
Optionee was not entitled to ,exercise the Option at the date of such
termination, or if Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate.
<PAGE> 23
(c) Disability of Optionee. Notwithstanding the provisions of
Section 10(b) above, in the event of termination of an Optionee's consulting
relationship or Continuous Status as an Employee as a result of his or her total
and permanent disability (within the meaning of Section 22(e)(3) of the Code),
Optionee may, but only within twelve (12) months from the date of such
termination (but in no event later than the expiration date of the term of such
Option as set forth in the Option Agreement), exercise the Option to the extent
otherwise entitled to exercise it at the date of such termination. To the extent
that Optionee was not entitled to exercise the Option at the date of
termination, or if Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate.
(d) Death of Optionee. In the event of the death of an
Optionee, the Option may be exercised, at any time within twelve (12) months
following the date of death (but in no event later than the expiration date of
the term of such Option as set forth in the Option Agreement), by the Optionee's
estate or by a person who acquired the right to exercise the Option by bequest
or inheritance, but only to the extent the Optionee was entitled to exercise the
Option at the date of death. To the extent that the Optionee was not entitled to
exercise the Option at the date of termination, or if Optionee does not exercise
such Option to the extent so entitled within the time specified herein, the
Option shall terminate.
(e) Rule 16b-3. Options granted to persons subject to Section
16(b) of the Exchange Act must comply with Rule 16b-3 and shall contain such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.
(f) Buyout Provisions. The Administrator may at any time offer
to buy out for a payment in cash or Shares, an Option previously granted, based
on such terms and conditions as the Administrator shall establish and
communicate to the Optionee at the time that such offer is made.
11. Non-Transferability of Options. The Option may not be sold,
pledged, assigned, hypothecated, transferred, or disposed of in any manner other
than by will or by the laws of descent or distribution and may be exercised,
during the lifetime of the Optionee, only by the Optionee.
12. Stock Withholding to Satisfy Withholding Tax Obligation. At the
discretion of the Administrator. Optionees may satisfy withholding obligations
as provided in this paragraph. When an Optionee incurs tax liability in
connection with an Option, which tax liability is subject to tax withholding
under applicable tax laws, and the Optionee is obligated to pay the Company an
amount required to be withheld under applicable tax laws, the Optionee may
satisfy the withholding tax obligation by electing to have the Company withhold
from the Shares to be issued upon exercise of the Option that number of Shares
having a Fair Market Value equal to the amount required to be withheld. The Fair
Market Value of the Shares to be withheld shall be determined on the date that
the amount of tax to be withheld is to be determined (the "Tax Date").
<PAGE> 24
All elections by an Optionee to have Shares withheld for this purpose
shall be made in writing in a form acceptable to the Administrator and shall be
subject to the following restrictions:
(a) the election must be made on or prior to the applicable
Tax Date;
(b) once made, the election shall be irrevocable as to the
particular Shares of the Option as to which the election is made;
(c) all elections shall be subject to the consent or
disapproval of the Administrator;
(d) if the Optionee is subject to Section 16 of the Exchange
Act, the election must comply with the applicable provisions of Rule 16b-3 and
shall be subject to such additional conditions or restrictions as may be
required thereunder to qualify for the maximum exemption from Section 16 of the
Exchange Act with respect to Plan transactions.
In the event the election to have Shares withheld is made by an
Optionee and the Tax Date is deferred under Section 83 of the Code because no
election is filed under Section 83(b) of the Code, the Optionee shall receive
the full number of Shares with respect to which the Option or Stock Purchase
Right is exercised but, such Optionee shall be unconditionally obligated to
tender back to the Company the proper number of Shares on the Tax Date.
13. Adjustments Upon Changes in Capitalization; Corporate Transactions.
(a) Changes in Capitalization. Subject to any required action
by the shareholders of the Company, the number of shares of Common Stock covered
by each outstanding Option, and the number of shares of Common Stock that have
been authorized for issuance under the Plan but as to which no Options have yet
been granted or that have been returned to the Plan upon cancellation or
expiration of an Option, the maximum number of shares of Common Stock for which
Options may be granted to any employee under Section 8 of the Plan and the price
per share of Common Stock covered by each such outstanding Option, shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any other
increase or decrease in the number of issued shares of Common Stock effected
without receipt of consideration by the Company; provided, however, that
conversion of any convertible securities of the Company shall not be deemed to
have been "effected without receipt of consideration." Such adjustment shall be
made by the Board, whose determination in that respect shall be final, binding
and conclusive. Except as expressly provided herein, no issuance by the Company
of shares of stock of any class, or securities convertible into shares of stock
of any class, shall affect, and no adjustment by reason
<PAGE> 25
thereof shall be made with respect to, the number or price of shares of Common
Stock subject to an Option.
(b) Corporate Transactions. In the event of the proposed
dissolution or liquidation of the Company, the Board shall notify the Optionee
at least fifteen (15) days prior to such proposed action. To the extent it has
not been previously exercised, the Option will terminate immediately prior to
the consummation of such proposed action. 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, the Option may be assumed or an equivalent
option may be substituted by such successor corporation or a parent or
subsidiary of such successor corporation. If the successor corporation does not
agree to assume the Option or substitute an equivalent option, the Board shall
notify the Optionee at least fifteen (15) days prior to the consummation of the
transaction. To the extent it has not been previously exercised, the Option will
terminate immediately prior to the consummation of such transaction.
14. Time of Granting Options. The date of grant of an Option shall, for
all purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Board. Notice
of the determination shall be given to each Employee or Consultant to whom an
Option is so granted within a reasonable time after the date of such grant.
15. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may amend or
terminate the Plan from time to time in such respects as the Board may deem
advisable; provided that, the following revisions or amendments shall require
approval of the shareholders of the Company in the manner described in Section
19 of the Plan:
(i) any increase in the number of Shares subject to
the Plan, other than an adjustment under Section 13 of the
Plan;
(ii) any change in the designation of the class of
persons eligible to be granted Options;
(iii) any change in the limitation on grants to
employees as described in Section 8 of the Plan or other
changes which would require shareholder approval to qualify
options granted hereunder as performance-based compensation
under Section 162(m) of the Code; or
(iv) any revision or amendment requiring shareholder
approval in order to preserve the qualification of the Plan
under Rule 16b-3.
(b) Shareholder Approval. If any amendment requiring
shareholder approval under Section 16(a) of the Plan is made subsequent to the
first registration of any class of equity
<PAGE> 26
securities by the Company under Section 12 of the Exchange Act, such shareholder
approval shall be solicited as described in Section 19 of the Plan.
(c) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Board, which agreement must be in writing and signed by the Optionee and the
Company.
16. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the Shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may
require the person exercising such Option to represent and warrant at the time
of any such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
17. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
The inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the Company's
counsel to be necessary to the lawful issuance and sale of any Shares hereunder,
shall relieve the Company of any liability in respect of the failure to issue or
sell such Shares as to which such requisite authority shall not have been
obtained.
18. Agreements. Options shall be evidenced by written agreements in
such form as the Board shall approve from time to time.
19. Shareholder Approval.
(a) Continuance of the Plan shall be subject to approval by
the shareholders of the Company within twelve (12) months before or after the
date the Plan is adopted. Such shareholder approval shall be obtained in the
degree and manner required under applicable state and federal law and the rules
of any stock exchange upon which the Shares are listed.
(b) In the event that the Company registers any class of
equity securities pursuant to Section 12 of the Exchange Act, any required
approval of the shareholders of the
<PAGE> 27
Company obtained after such registration shall be solicited substantially in
accordance with Section 14(a) of the Exchange Act and the rules and regulations
promulgated thereunder.
(c) If any required approval by the shareholders of the Plan
itself or of any amendment thereto is solicited at any time otherwise than in
the manner described in Section 19(b) hereof, then the Company shall, at or
prior to the first annual meeting of shareholders held subsequent to the later
of (1) the first registration of any class of equity securities of the Company
under Section 12 of the Exchange Act or (2) the granting of an Option hereunder
to an officer or director after such registration, do the following:
(i) furnish in writing to the holders entitled to
vote for the Plan substantially the same information that would be required (if
proxies to be voted with respect to approval or disapproval of the Plan or
amendment were then being solicited) by the rules and regulations in effect
under Section 14(a) of the Exchange Act at the time such information is
furnished; and
(ii) file with, or mail for filing to, the Securities
and Exchange Commission four copies of the written information referred to in
subsection (i) hereof not later than the date on which such information is first
sent or given to shareholders.
20. Information to Optionees. The Company shall provide to each
Optionee and individual who acquired shares pursuant to the exercise of an
option, during the period for which such Optionee has one or more Options
outstanding, copies of all annual reports and other information that are
provided to all shareholders of the Company.
<PAGE> 28
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF ISOCOR
1997 ANNUAL MEETING OF SHAREHOLDERS
The undersigned shareholder of ISOCOR, a California corporation, hereby
acknowledges receipt of the Notice of Annual Meeting of Shareholders and Proxy
Statement, each dated April 15, 1997, and hereby appoints Andrew De Mari and
Janine M. Bushman 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 1997 Annual Meeting of Shareholders of ISOCOR
to be held on May 15, 1997 at 9:00 a.m., local time, at the Miramar Sheraton
Hotel, 101 Wilshire Boulevard, Santa Monica, California 90401 and at any
adjournment or postponement thereof, and to vote all shares of Common Stock
which the undersigned would be entitled to vote if then and there personally
present, on the matters set forth on the reverse side and, in their discretion,
upon such other matter or matters that may properly come before the meeting and
any adjournment(s) thereof.
------------
SEE
REVERSE
SIDE
------------
(To be Signed on Reverse Side)
<PAGE> 29
Please date, sign and mail your proxy card back as soon as possible!
Annual Meeting of Shareholders
ISOCOR
May 15, 1997
[ X ] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE
FOR ALL WITHHOLD
NOMINEES AUTHORITY TO
LISTED TO VOTE FOR
THE RIGHT ALL NOMINEES
(EXCEPT AS LISTED TO
INDICATED) THE RIGHT
1. Election of [ ] [ ] Nominees: Jean-Michel Barbier,
Directors Janine M. Bushman,
Andrew De Mari,
Alexandra Giurgiu,
G. Bradford Jones
If you wish to withhold authority to vote for any individual nominee, strike a
line through that nominee's name in the list to the right.
FOR AGAINST ABSTAIN
2. Proposal to approve an amendment to the [ ] [ ] [ ]
Company's 1992 Stock Option Plan to increase
the number of shares of Common Stock reserved
for issuance thereunder by 300,000 shares to
an aggregate of 2,600,000 shares.
3. Proposal to ratify the appointment of Coopers [ ] [ ] [ ]
& Lybrand L.L.P. as the independent auditors
of the Company for the year ending December
31, 1997
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS INDICATED,
WILL BE VOTED AS FOLLOWS: (1) FOR THE ELECTION OF THE PERSONS NOMINATED BY
MANAGEMENT AS DIRECTORS; (2) FOR APPROVAL OF THE AMENDMENT TO THE COMPANY'S 1992
STOCK OPTION PLAN; (3) FOR RATIFICATION OF THE APPOINTMENT OF COOPERS & LYBRAND
L.L.P. AS INDEPENDENT AUDITORS, AND AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER
MATTERS AS MAY COME BEFORE THE MEETING.
SIGNATURE ____________________ SIGNATURE _____________________ DATED ___________
NOTE: This Proxy should be marked, dated, signed by the shareholder(s) exactly
as his or her name appears hereon, and returned in the enclosed envelope.
Persons signing in a fiduciary capacity should so indicate. If shares are
held by joint tenants or as community property, both should sign.
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