<PAGE> 1
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:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to [Section] 240.14a-11(c) or [Section]
240.14a-12
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
CAYENNE SOFTWARE, INC.
----------------------
(Name of Registrant as Specified In Its Charter)
CAYENNE SOFTWARE, INC.
----------------------
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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
CAYENNE SOFTWARE, INC.
8 NEW ENGLAND EXECUTIVE PARK
BURLINGTON, MA 01803
OCTOBER 22, 1996
Dear Stockholder:
You are cordially invited to attend the 1996 Special Meeting in Lieu of
Annual Meeting of Stockholders of Cayenne Software, Inc. The meeting will be
held at the offices of Foley, Hoag & Eliot, 16th Floor, One Post Office Square,
Boston, Massachusetts on Wednesday, November 20, 1996, beginning at 9:00 a.m.,
local time.
Matters to be considered and acted on at the meeting include the election
of the Class B Directors to the Board of Directors and approval of the Amended
1996 Incentive and Nonqualified Stock Option Plan. Detailed information
concerning these matters is set forth in the attached Notice of Special Meeting
in Lieu of Annual Meeting of Stockholders and Proxy Statement.
Your vote is important. I encourage you to execute and return your proxy
promptly whether you plan to attend the meeting or not so that we may have as
many shares as possible represented at the meeting. Returning your completed
proxy will not prevent you from voting in person at the meeting prior to the
proxy's exercise if you wish to do so.
Thank you for your cooperation, continued support and interest in Cayenne
Software, Inc.
Sincerely,
/S/ PETER J. BONI
-----------------------------
PETER J. BONI
President and Chief Executive
Officer
<PAGE> 3
CAYENNE SOFTWARE, INC.
8 NEW ENGLAND EXECUTIVE PARK
BURLINGTON, MA 01803
NOTICE OF SPECIAL MEETING IN LIEU
OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 20, 1996
Notice is hereby given that the Special Meeting in Lieu of Annual Meeting
of Stockholders (the "Annual Meeting") of Cayenne Software, Inc. (the "Company")
will be held on Wednesday, November 20, 1996, at 9:00 a.m., local time, at the
offices of Foley, Hoag & Eliot, 16th Floor, One Post Office Square, Boston,
Massachusetts for the following purposes:
1. To elect two members of the Board of Directors, to serve as the
Class B Directors of the Company;
2. To approve the Amended 1996 Incentive and Nonqualified Stock Option
Plan; and
3. To transact such other business as may be related to the foregoing
purposes or as may otherwise properly come before the meeting or any
adjournments thereof.
The Board of Directors has fixed the close of business on October 1, 1996,
as the record date for the determination of stockholders entitled to notice of
and to vote at the Annual Meeting.
A list of the stockholders entitled to vote at the Annual Meeting will be
made available during regular business hours at the offices of the Company at 8
New England Executive Park, 4th Floor, Burlington, Massachusetts 01803, for
inspection by any stockholder for any purpose germane to the meeting.
By Order of the Board of Directors,
/s/ JOHN D. PATTERSON, JR.
-----------------------------
JOHN D. PATTERSON, JR.
Clerk
Burlington, Massachusetts
Dated: October 22, 1996
IMPORTANT: WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE
COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE
ENVELOPE PROVIDED. IF YOU ATTEND THE ANNUAL MEETING, YOU MAY VOTE IN PERSON IF
YOU SO WISH AT ANY TIME BEFORE THE PROXY IS EXERCISED EVEN IF YOU HAVE
PREVIOUSLY SENT IN YOUR PROXY.
<PAGE> 4
CAYENNE SOFTWARE, INC.
PROXY STATEMENT
FOR
SPECIAL MEETING IN LIEU OF
ANNUAL MEETING OF STOCKHOLDERS
NOVEMBER 20, 1996
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Cayenne Software, Inc. (the "Company") to
be used at the Special Meeting in Lieu of Annual Meeting of Stockholders
("Annual Meeting") of the Company to be held on Wednesday, November 20, 1996 and
any adjournment thereof. At the Annual Meeting, the stockholders will be asked
to consider and vote upon the following specific matters:
1. To elect two members of the Board of Directors, to serve as the
Class B Directors of the Company; and
2. To act upon a proposal to adopt the Amended 1996 Incentive and
Nonqualified Stock Option Plan.
Any stockholder furnishing a proxy has the power to revoke it by furnishing
written notice to the Company, by granting a proxy bearing a later date, or by
giving oral notice at the Annual Meeting before the proxy is exercised. The
shares represented by each properly signed and returned proxy will be voted in
accordance with the instructions of the signer. If the signer does not specify
otherwise, the proxy will be voted in favor of the recommendations of the Board
of Directors.
The close of business on October 1, 1996, has been fixed as the record date
for the determination of the stockholders entitled to notice of and to vote at
the Annual Meeting or any adjournment thereof. The presence, in person or by
proxy, of at least a majority in interest of all the capital stock issued,
outstanding and entitled to vote is necessary to constitute a quorum for
transaction of business at the Annual Meeting. The Company has one class of
voting securities, Common Stock. The holders of Common Stock are entitled to one
vote for each share held on each matter submitted to vote. The votes necessary
to elect Directors and to approve each of the items on the agenda are stated in
the related sections of the Proxy Statement. Votes withheld from any nominee for
election as a Director, abstentions and broker non-votes will be counted as
present or represented at the Annual Meeting for purposes of determining the
presence or absence of a quorum. For the items on the agenda, (i) votes withheld
for any nominee for election as Director will be included in the number of
shares present or represented and voting on Proposal 1, (ii) abstentions will be
included in the number of shares present or represented and voting on each
matter, and (iii) broker non-votes will not be included in the number of shares
present or represented and voting on each matter. A 'non-vote' occurs when a
nominee holding shares for a beneficial owner votes on one proposal, but does
not vote on another proposal because, in respect of such other proposal, the
nominee does not have discretionary voting power and has not received
instructions from the beneficial owner. The Company's transfer agent, State
Street Bank and Trust Company, will tabulate the votes. The vote on each matter
submitted to stockholders is tabulated separately. On the record date, the
Company had 17,631,445 shares of Common Stock outstanding.
The principal executive offices of the Company are located at 8 New England
Executive Park, Burlington, Massachusetts 01803. This Proxy Statement and the
accompanying Notice and Proxy are first being mailed to stockholders on or about
October 22, 1996 in connection with the solicitation of proxies for the Annual
Meeting.
<PAGE> 5
PROPOSAL 1 -- ELECTION OF DIRECTORS
The number of Directors constituting the full Board of Directors of the
Company has been fixed at seven. After the Annual Meeting, six seats will be
filled. One seat will remain vacant and may be filled by the Board at any time.
The Board of Directors is divided into three classes. Directors are elected to
serve for three-year terms and until their respective successors are duly
elected and qualified, with the term of one of the three classes expiring each
year at the Company's annual meeting or special meeting in lieu thereof.
John J. Alexander and Allyn C. Woodward, Jr. are the Company's Class A
Directors. Mr. Alexander was re-elected as a Class A Director at the Company's
1994 Annual Meeting held on November 16, 1994, and Mr. Woodward was elected by
the Board of Directors to serve as a Class A Director on April 25, 1995. Peter
J. Boni and R. John Fletcher are the Company's Class B Directors. On November 3,
1994, Mr. Fletcher was elected by the Board of Directors to succeed a departing
Director. Charles W. Bachman and William H. D. Goddard are the Company's Class C
Directors. Mr. Bachman was elected as a Class C Director at the Company's 1995
Special Meeting in Lieu of Annual Meeting held on November 15, 1995. On July 18,
1996, William H. D. Goddard was elected by the Board of Directors to serve as a
Class C Director.
The terms of the Company's Class B Directors, R. John Fletcher and Peter J.
Boni, expire at the Annual Meeting. The terms of the Company's two current Class
A Directors, John J. Alexander and Allyn C. Woodward, Jr. expire at the
Company's 1997 annual meeting of stockholders or special meeting in lieu
thereof, and until their successors are duly elected and qualified. The terms of
the Company's Class C Directors, Charles W. Bachman and William H. D. Goddard
expire at the Company's 1998 annual meeting of stockholders or special meeting
in lieu thereof, and until their respective successors are duly elected and
qualified.
Unless authority is withheld, proxies in the accompanying form will be
voted FOR the election of Mr. Boni and Mr. Fletcher as Class B Directors, to
hold office until the expiration of their respective terms and until their
respective successors are duly elected and qualified. In the event the nominees
are unable or decline to serve as Directors at the time of the Annual Meeting
(which is not now expected), proxies will be voted for such other nominees as
are then designated by the Board of Directors.
If a quorum is present at the Annual Meeting, the affirmative vote of a
plurality of the shares of Common Stock present or represented at the Annual
Meeting and entitled to vote is necessary to elect each Director.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF MR.
BONI AND MR. FLETCHER AS THE CLASS B DIRECTORS OF THE COMPANY.
2
<PAGE> 6
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information concerning each Director
of the Company continuing in office, each nominee for election as Director and
each executive officer of the Company:
NAME AGE POSITION
---- --- --------
Charles W. Bachman(1)........ 71 Chairman of the Board of Directors
Peter J. Boni................ 50 President, Chief Executive Officer and
Director
Joan E. Cohen................ 50 Vice President, Marketing and Business
Development
Eugene J. DiDonato........... 39 Vice President, General Counsel
Ronald H. Imbriale........... 49 Senior Vice President, Worldwide Field
Operations
Frederick H. Phillips........ 47 Vice President, Finance and
Administration, Chief Financial Officer
and Treasurer
Vincent Stango............... 41 Vice President, North American Field
Operations
William F. Winslow........... 57 Vice President, Human Resources
Massood Zarrabian............ 47 Senior Vice President, Product Operations
John J. Alexander(3)......... 61 Director
R. John Fletcher(1)(2)(3).... 50 Director
William H. D. Goddard........ 54 Director
Allyn C. Woodward, Jr.(2).... 55 Director
- ---------------
(1) Member of the Nominating Committee.
(2) Member of the Audit Committee.
(3) Member of the Compensation Committee.
The business experience during at least the last five years of each of the
Directors and the executive officers of the Company is as follows:
CHARLES W. BACHMAN has been the Chairman of the Board of Directors of the
Company since 1988. From 1983, when he founded the Company, through April 1988,
he was President, Chief Executive Officer and a Director of the Company. Before
founding the Company, he was employed by Cullinet Software, Inc. from 1981 to
1983, by Honeywell from 1970 to 1981, by General Electric Company from 1960 to
1970, and by The Dow Chemical Company from 1950 to 1960.
PETER J. BONI has been the President and Chief Executive Officer and a
Director of the Company since August 4, 1993. From 1990 to March 1993, he served
as President of the Software & Information Services Group of Paramount
Communications, a conglomerate with interests in information services,
publishing and entertainment. From 1989 to 1990, he served as President and
Chief Operating Officer of On-Line Software International, Inc., a software,
consulting and educational services firm. From 1987 until 1989, he served as a
Turnaround Consultant and the President Pro-Tem of several companies while a
principal of Potential Dynamics, a consulting company specializing in the
turnaround, repositioning and restructuring of troubled firms. Mr. Boni is now a
Director subject to election.
3
<PAGE> 7
JOAN E. COHEN has been Vice President, Marketing and Business Development
since joining the Company in May 1995. From April 1990 to January 1995, she was
Director, Strategic Partners and Programs, of Progress Software Corporation.
EUGENE J. DIDONATO has been Vice President and General Counsel since
November 1993. For the period from November 1995 through July 1996, he was also
Chief Financial Officer and Treasurer. He joined the Company in August 1993 as
General Counsel. From 1986 to 1993, he was a corporate-securities attorney at
Foley, Hoag & Eliot, a law firm in Boston, Massachusetts. From 1984 to 1986, he
was a corporate-securities attorney at Wertheimer and Fredman, P.C., a law firm
in New York, New York.
RONALD H. IMBRIALE has been Senior Vice President, Worldwide Field
Operations since July 1996. From September 1995 to July 1996, he was Chief
Operating Officer of Cadre Technologies Inc. ("Cadre"), a software company which
was acquired by the Company in July 1996. From June 1991 to August 1995, Mr.
Imbriale was Vice President of Sales for Cadre.
FREDERICK H. PHILLIPS has been Vice President, Finance and Administration,
Chief Financial Officer and Treasurer since July 1996. From February 1996 to May
1996, Mr. Phillips operated his own financial management consulting business,
and from July 1995 to January 1996 he was a principal of Siegal & Dunn Inc., a
financial management consulting business. From June 1991 to February 1995, Mr.
Phillips was Assistant Treasurer, Treasury and Financial Management of Lotus
Development Corporation.
VINCENT STANGO has been Vice President, North American Field Operations
since July 1996. From May 1994 to July 1996, he was Cadre's Director of Sales --
North America and from January 1988 to April 1994, he was Cadre's Director of
Sales -- Eastern Region.
WILLIAM F. WINSLOW has been Vice President, Human Resources since July
1996. From March 1992 to July 1996, he was Vice President, Human Resources of
Cadre. From June 1991 to March 1992, Mr. Winslow operated his own human
resources consulting business, W. Winslow & Associates.
MASSOOD ZARRABIAN has been Senior Vice President, Product Operations since
July 1996. From July 1995 to July 1996, he was Vice President, Product
Operations. From February 1994 to June 1995, he was Vice President, Development.
From 1992 to 1994, he was Vice President Core Technology and Product Development
of the Software Business Unit of Computervision Corp., a software company. From
1989 to 1992, he was that company's Vice President of Product Marketing for
CAD/CAM products, from 1985 to 1989, he was its Vice President of Mechanical
Product Development, and from 1983 to 1985 he was its Vice President of the
Technology Division.
JOHN J. ALEXANDER has been a Director of the Company since December 1993.
Since October 1993, he has been President of Business Technology Consulting,
Inc., a consulting company which provides venture capital to start-up companies,
consults in marketing and strategy and provides expertise in reengineering
business processes. From January 1987 to October 1993, he was Senior Vice
President and Chief Information Officer with UNUM, a life insurance company.
R. JOHN FLETCHER has been a Director of the Company since November 1994.
Since June 1990, he has been Chief Executive Officer of Fletcher Spaght, Inc., a
strategic marketing consulting firm. Mr. Fletcher is also a director of
AutoImmune, Inc. Mr. Fletcher is now a Director subject to election.
WILLIAM H. D. GODDARD has been a Director of the Company since July 1996.
From 1982 to 1989, he served as a Director, Chairman, and Chief Executive
Officer of Cadre and rejoined the Board of Directors of Cadre in 1992. He is
President and Treasurer of the Warwick Land Company, a company engaged in
investment in and management and development of real and intellectual property,
and a Partner of Brown & Ives, an office management partnership, holding these
positions since 1974 and 1970, respectively.
4
<PAGE> 8
ALLYN C. WOODWARD, JR. has been a Director of the Company since April 1995.
Since June 1995, he has been president of Adams, Harkness & Hill, Inc., an
investment banking firm. From June 1990 to March 1995, he was Chief Operating
Officer of Silicon Valley Bank. Mr. Woodward is also a director of Viewlogic
Systems, Inc.
There are no family relationships among the executive officers and
directors of the Company.
THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
During the 1996 fiscal year, the Board of Directors of the Company held 10
meetings and the Audit Committee, the Compensation Committee, the Nominating
Committee and the Stock Option Committee, which are the only standing committees
of the Board of Directors, met four, four, one and three times, respectively.
The Stock Option Committee also acted twice by unanimous written consent. No
Director attended fewer than seventy-five (75%) of the meetings of the Board of
Directors and committees of the Board of which he or she was a member.
Based solely upon a review of the forms and written representations
received by the Company pursuant to Section 16(a) of the Securities Exchange Act
of 1934 (the "Exchange Act"), the Company believes that during the 1996 fiscal
year, the Directors and executive officers complied with all applicable Section
16 filing requirements; except that the Company cannot confirm such belief with
respect to Gerald Christopher, a former executive officer, since it neither
received a copy of Form 5 from such individual for fiscal 1996 nor a written
representation that no such Form 5 was required to be filed.
THE AUDIT COMMITTEE, which currently consists of Allyn C. Woodward and R.
John Fletcher, confers with the Company's independent public accountants
concerning the scope of their examinations of the Company's financial
statements, the Company's accounting policies and internal controls and the
results of their audit examination, and recommends the selection of the
Company's independent public accountants to the Board. The Committee's duties do
not include accounting or auditing functions, which are the responsibility of
the Company's officers and its independent public accountants.
THE COMPENSATION COMMITTEE, which currently consists of R. John Fletcher
and John J. Alexander, reviews and makes recommendations to the Board with
respect to compensation policy, executive salaries, profit sharing, and
employment contracts and administers the Company's employee stock option and
stock purchase plans. See "Proposal 2 -- Approval of the Amended 1996 Incentive
and Nonqualified Stock Option Plan."
THE STOCK OPTION COMMITTEE, formerly administered the Company's employee
stock option and stock purchase plans. In September 1996, the functions of the
Stock Option Committee were transferred to the Compensation Committee.
THE NOMINATING COMMITTEE, which currently consists of Charles W. Bachman
and R. John Fletcher, nominates candidates for election as Directors at the
annual meeting of stockholders or special meeting in lieu thereof. Any
stockholder who wishes to recommend an individual for consideration by the
committee should deliver written notice to the clerk of the Company. A
stockholder's notice must be delivered to, or mailed and received at, the
principal executive offices of the Company not less than sixty days nor more
than (120) days prior to the date of the scheduled annual or special meeting in
lieu thereof. Such stockholder's notice must set forth (a) as to each person
whom the stockholder proposes to nominate for election or re-election as a
Director and as to the stockholder giving the notice (i) the name, age, business
address and residence address of such person, (ii) the principal occupation or
employment of such person, (iii) the class and number of shares of the Company's
capital stock which are beneficially owned by such person on the date of such
stockholder notice and (iv) any other information relating to such person that
is required to be disclosed in
5
<PAGE> 9
solicitations of proxies with respect to nominees for election as Directors,
pursuant to the rules of the Securities and Exchange Commission promulgated
under Section 14(a) of the Exchange Act; and (b) as to the stockholder giving
the notice (i) the name and addresses as they appear on the Company's books, of
such stockholder to be supporting such nominees and (ii) the class and number of
shares of the Company's capital stock which are beneficially owned by such
stockholder on the date of such stockholder notice and by any other stockholders
known by such stockholder to be supporting such nominees on the date of such
stockholder notice. The Nominating Committee may reject any nomination by a
stockholder that is not timely made in accordance with these procedures or does
not satisfy these requirements in any material respect.
REMUNERATION OF EXECUTIVE OFFICERS AND DIRECTORS
DIRECTORS' COMPENSATION
In July 1996, the Company adopted a plan to compensate its outside
Directors by means of $10,000 per year retainer, $1,000 per Board meeting
attended and reimbursement for expenses incurred in attending Board and
Committee meetings. In addition, under such plan each outside Board member will
be granted an initial stock option grant of 20,000 shares upon election to the
Board (other than by contract or in connection with corporate transactions) and
an annual grant of 10,000 shares. Also, each outside Director that is the member
of a Committee will receive an annual stock issuance equal to the number of
shares of Common Stock obtained by dividing the number of meetings attended
times $500 by the fair market value of one share of the Company's Common Stock
on the date of issuance. Messrs. Alexander, Fletcher and Woodward were each
granted options to purchase 20,000 shares of the Company's Common Stock on
December 17, 1993, November 3, 1994 and April 25, 1995, respectively, as
compensation for their service as Directors. On July 18, 1996, Messrs.
Alexander, Fletcher, Goddard and Woodward were each granted options to purchase
10,000 shares of the Company's Common Stock. Such options vest and become
exercisable one year from the date of grant. Directors who are employees of the
Company are not paid any separate fees for serving as Directors.
6
<PAGE> 10
EXECUTIVE COMPENSATION
<TABLE>
The following table presents information concerning the annual and
long-term compensation for services in all capacities to the Company for the
fiscal years ended June 30, 1996, 1995 and 1994, of those persons who were the
Chief Executive Officer and the other four most highly compensated executive
officers of the Company at June 30, 1996 (the "Named Officers"):
<CAPTION>
ANNUAL COMPENSATION LONG-TERM ALL
FISCAL -------------------- COMPENSATION AWARDS OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) NUMBER OF OPTIONS(2) COMPENSATION
- --------------------------- ------ -------- --------- --------------------- -------------
<S> <C> <C> <C> <C> <C>
Peter J. Boni (3).................... 1996 $250,000 -- 100,000 --
President and Chief Executive 1995 225,000 $112,500 110,000 --
Officer 1994 204,375 112,500 544,946 --
Massood Zarrabian (4)................ 1996 $200,000 -- 50,000 --
Sr. Vice President, Product 1995 175,000 $ 20,590 30,000 --
Operations 1994 70,265 12,501 80,000 --
Curt F. Bloom (5).................... 1996 $178,692 -- 50,000 --
Vice President, Field Operations 1995 126,825 $ 25,150 65,000 --
1994 135,397 37,947 13,000 --
Eugene J. DiDonato (6)............... 1996 $130,000 -- 25,000 --
Vice President, General Counsel 1995 115,000 $ 7,200 15,000 --
1994 72,311 20,700 20,000 --
Charles W. Bachman................... 1996 $125,000 -- 25,000 --
Chairman of the Board of 1995 133,000 -- -- --
Directors 1994 190,000 $ 34,200 -- --
- ---------------
<FN>
(1) See "Report of the Compensation Committee of the Board of Directors on
Executive Compensation -- Bonus Arrangements."
(2) See "Report of the Compensation Committee of the Board of Directors on
Executive Compensation -- Option Plans."
(3) Mr. Boni was elected as President and Chief Executive Officer effective
August 4, 1993.
(4) Mr. Zarrabian was elected Vice President, Development in February 1994. He
was elected Vice President, Product Operations effective July 1, 1995 and
Senior Vice President, Product Operations effective July 18, 1996.
(5) Mr. Bloom was elected Vice President, International Operations in January
1994. He was elected to Vice President, Field Operations effective July 1,
1995. Mr. Bloom resigned from office as of May 31, 1996.
(6) Mr. DiDonato was elected Vice President, General Counsel in November 1993.
</TABLE>
7
<PAGE> 11
OPTION GRANTS
<TABLE>
The following table presents information concerning grants of stock options
to the Named Officers during the fiscal year ended June 30, 1996:
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
PERCENTAGE ANNUAL RATES
OF TOTAL OF STOCK PRICE
OPTIONS APPRECIATION
GRANTED TO EXERCISE OR FOR OPTION TERM
OPTIONS EMPLOYEES BASE PRICE EXPIRATION --------------------
NAME GRANTED(1)(2) IN FISCAL 1996 (PER SHARE) DATE 5% 10%
---- ------------ --------------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Peter J. Boni........... 100,000 13% $6.25 9/13/05 $393,059 $996,089
Massood Zarrabian(3).... 50,000 7% $6.25 9/13/05 $196,530 $498,045
Curt F. Bloom(3)........ 50,000 7% $6.25 9/13/05 $196,530 $498,045
Eugene J. DiDonato(3)... 25,000 3% $6.25 9/13/05 $ 98,265 $249,022
Charles W. Bachman(3)... 25,000 3% $6.25 9/13/05 $ 98,265 $249,022
- ---------------
<FN>
(1) All of these options were granted with an exercise price equal to the market
price on the date of grant for the Company's Common Stock on the NASDAQ
National Market System.
(2) All of these options were granted on September 13, 1995 and are exercisable
on September 30, 1996 as follows: (i) one-half of the shares based upon the
Company's achievement of certain levels of Company profitability and (ii)
one-half based on certain levels of increases in the fair market value of
the Company's Common Stock price over the fair market value on the date of
agreement. Any shares that are not vested on September 30, 1996 vest on the
fourth anniversary of the date of grant. As of September 30, 1996, no
shares were vested.
(3) A portion or all of these options would become immediately exercisable upon
the occurrence of a "change of control" as defined in the employment
agreements between the Company and certain of the Named Officers. See
"Remuneration of Executive Officers and Directors -- Employment and
Severance Compensation Agreements."
</TABLE>
During fiscal 1996, the Company granted options to purchase a total of
275,000 shares of Common Stock at a weighted exercise price of $6.25 per share
to its current executive officers, as a group, and options to purchase a total
of 466,500 shares of Common Stock at a weighted exercise price of $6.50 per
share to its employees, including current officers who are not executive
officers, as a group.
8
<PAGE> 12
OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
<TABLE>
The following table presents information for Named Officers with respect to
options exercised during the fiscal year ended June 30, 1996 and outstanding
options to purchase the Company's Common Stock held by them at June 30, 1996:
<CAPTION>
NUMBER
OF NUMBER OF VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ACQUIRED HELD AT JUNE 30, 1996 (1) HELD AT JUNE 30, 1996(2)
ON VALUE -------------------------- --------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Peter J. Boni................ -0- -0- 431,960 322,986 $1,624,345 $863,571
Massood Zarrabian............ -0- -0- 62,472 97,528 $ 219,225 $208,275
Curt F. Bloom................ 10,000 89,295 16,260 97,340 $ 24,987 $138,685
Eugene J. DiDonato........... -0- -0- 9,600 41,400 $ 26,898 $ 53,797
Charles W. Bachman........... 40,000 327,000 109,593 28,200 $ 362,235 $ 29,059
- ---------------
<FN>
(1) "In-the-money options" are options outstanding at the end of the fiscal year
for which the fair market value at June 30, 1996 of $7.125 exceeded the
exercise price of the options.
(2) See "Remuneration of Executive Officers and Directors -- Employment and
Severance Compensation Agreements" regarding acceleration of vesting of
certain options upon the occurrence of certain events.
</TABLE>
EMPLOYEE STOCK OPTION PLANS
Executive officers of the Company currently hold stock options granted
under four plans: the Amended and Restated 1986 Incentive and Non Qualified
Stock Option Plan (the "1986 Plan"), the 1996 Incentive and Non Qualified Stock
Option Plan, the Cadre 1988 Incentive and Non-Statutory Stock Option Plan, and
the Cadre 1989 Non-Statutory Stock Option Plan (collectively, the "Option
Plans"). For the future, the Company expects to grant additional options only
under the 1996 Plan. The 1996 Plan is being submitted for approval by the
stockholders at this meeting. See "Proposal 2 -- Approval of the Amended 1996
Incentive and Non Qualified Stock Option Plan".
KEY MAN AND DISABILITY INSURANCE
The Company maintained a "key man" life insurance policy covering Charles
W. Bachman expiring in October 1994 in the amount of $2 million. The Company has
not renewed such policy. The Company also maintains long-term care policies for
Charles W. Bachman and Constance H. Bachman.
EMPLOYMENT AND SEVERANCE COMPENSATION AGREEMENTS
The Company entered into a three year employment contract with Peter J.
Boni as of August 4, 1993 as the Company's President and Chief Executive
Officer. That contract was extended for an additional three years pursuant to an
agreement dated as of April 30, 1996. Under the terms of his agreement, Mr. Boni
receives an annual base salary of at least $225,000, an automobile allowance,
and reimbursement for the reasonable costs of housing for the first six months
of his employment and relocation costs. He was entitled to participate in the
Company's bonus plan for fiscal 1996 at a rate equal to ten percent (10%) of net
income before taxes achieved by the Company, and received no bonus for fiscal
1996 thereunder. For all subsequent fiscal years, Mr. Boni will receive a bonus
of at least fifty percent (50%) of his base salary if he meets all his financial
and management objectives established by the Compensation Committee. He also
received options under the 1986 Plan to acquire 544,946 shares of the Company's
Common Stock at an exercise price of
9
<PAGE> 13
$3.25 per share. Twenty-eight percent (28%) of those options vested on the first
anniversary of his employment and the remainder vest at the rate of two percent
(2%) per month thereafter, except that the options will vest immediately upon
consummation of certain transactions involving a change in control of the
Company. In February 1994, the Compensation Committee approved an amendment to
Mr. Boni's options to provide that in the event of the termination of his
employment without cause, because of retirement for reasons of age or disability
or because of death, Mr. Boni may exercise the nonqualified portion of such
options vested through the date of termination of his employment at any time
prior to the option termination date. Under the terms of Mr. Boni's contract, if
his employment is terminated due to a change in control of the Company or
without cause, he is entitled to termination payments equal to his base salary,
automobile allowance and fringe benefits for twelve months after termination and
a pro rata portion of his incentive compensation for the fiscal year in which
such termination occurs. Under the terms of the contract, Mr. Boni is prohibited
from engaging in certain activities competitive with those of the Company for a
period of one year after termination of his employment unless he is terminated
without cause or due to a change in control in which case such prohibition shall
only continue while the Company is paying his base salary, automobile allowance
and fringe benefits.
Effective January 1994, the Company entered into an employment contract
with Charles W. Bachman for an initial term of eighteen months. The contract
term is automatically renewed for successive eighteen month periods unless
either party gives the other party at least twelve months notice prior to the
expiration of the initial or any renewal term. The contract provides for payment
of base salary of $95,000 from January 1, 1994 through June 30, 1994; $76,000
from July 1, 1994 through December 31, 1994; $57,000 from January 1, 1995
through June 30, 1995; and $114,000 per annum thereafter, with increases to be
determined by the Board, fringe benefits and participation in the Company's
bonus pool plan. Under the terms of Mr. Bachman's contract, he was required to
work full-time through June 30, 1994, the equivalent of four days per week
through December 31, 1994, and the equivalent of three days per week thereafter.
The Company and Mr. Bachman have agreed to amend his contract to provide that
commencing October 1, 1996, Mr. Bachman will be required to work 36 days per
year (approximately three days per month) at a per annum rate of $32,500 plus
expenses. Additional days will be paid at a rate of $1,000 per day plus
expenses.
Under the terms of the contract, as amended, for the period from October 1,
1996 through December 31, 1996, Mr. Bachman will receive the payments calculated
at a rate of $114,000 per annum minus any payments received under the amended
contract. Under the terms of the contract, Mr. Bachman is prohibited from
engaging in certain activities competitive with those of the Company for a
period of two years after termination of his employment unless he is terminated
without cause in which case such prohibition shall only continue while the
Company is paying his base salary and fringe benefits.
The Company entered into agreements with Ronald H. Imbriale, Vincent
Stango, William F. Winslow and Massood Zarrabian providing them with 52, 26, 26
and 52 weeks of payment of base salary, respectively, in the event of the
termination of their employment by the Company without cause. The payments to
Messrs. Stango and Winslow expire upon obtaining other employment and the
payments to Mr. Zarrabian are subject to offset by any employment compensation
he receives during the severance period. Mr. Imbriale's payments expire upon
obtaining other employment after the first 26 weeks of payments. The agreement
with Mr. Zarrabian also provide for acceleration of vesting of his options
granted at the time of his employment during such 52 week periods.
The Company has adopted certain Employment Agreements with Messrs. DiDonato
and Zarrabian that commence on the effective date of any "change in control" (as
defined) in the ownership or management of the Company and end on a date
eighteen months thereafter, plus three additional months for each whole or
partial year employed by the Company (the "Expiration Date") unless employment
is sooner terminated as described below. The agreements shall not extend for a
period of more than three years from the
10
<PAGE> 14
change in control date. The agreements provide for, among other things,
severance payments payable to each executive officer in an amount equal to such
officer's annual base salary and fringe benefits from the date of termination
until the Expiration Date plus any targeted bonus for the first year after such
termination. Such payments are triggered by (i) the termination of employment by
the Company without cause or (ii) upon termination by the employee for "good
reason" (as defined). In addition, if an executive officer's employment is
terminated for any reason after the Expiration Date, the foregoing severance
payments will be paid for a period of twelve months after termination. The
Agreements also provide that the Company shall make disability payments to an
executive officer equal to such executive officer's base salary (subject to
adjustments) from the date of termination of employment due to disability until
the Expiration Date. Under the Agreements, any shares subject to options under
the Option Plans granted to an executive officer shall immediately vest on a
change in control to the extent such shares would have vested prior to the
Expiration Date.
11
<PAGE> 15
STOCK PRICE PERFORMANCE
The following chart assumes $100 invested in shares of the Company's Common
Stock beginning November 26, 1991 (the date of the Company's initial public
offering) at the initial offering price of $15.00 per share and ending June 30,
1995, compared with $100 invested in The NASDAQ Stock Market-US Index and in The
NASDAQ Computer and Data Processing Index:
<TABLE>
COMPARISON OF 55 MONTH CUMULATIVE TOTAL RETURN*
AMONG CAYENNE SOFTWARE, INC., THE NASDAQ STOCK MARKET-US INDEX
AND THE NASDAQ COMPUTER & DATA PROCESSING INDEX
<CAPTION>
MEASUREMENT PERIOD CAYENNE NASDAQ STOCK NASDAQ COMPUTER &
(FISCAL YEAR COVERED) SOFTWARE, INC. MARKET-US DATA PROCESSING
--------------------- -------------- ------------ -----------------
<S> <C> <C> <C>
11/26/91 100 100 100
6/92 77 108 102
6/93 19 136 130
6/94 13 138 130
6/95 53 183 213
6/96 48 236 282
</TABLE>
* INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING JUNE 30.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION
Policies on compensation of the Company's executive officers are subject to
the approval of the Compensation Committee of the Board. The members of the
Compensation Committee are R. John Fletcher and John J. Alexander. Each member
of the Compensation Committee is a non-employee Director. Decisions about awards
to executive officers under the Company's Option Plans and Stock Purchase Plan
are made by the Compensation Committee (the 1986 Plan was administered by the
Stock Option Committee from June 1994 through August 1996 and prior to June 1994
and after August 1996 by the Compensation Committee).
Set forth below is a report submitted by the Board of Director's
Compensation Committee. This report addresses the Company's compensation
policies for fiscal 1996, as such policies affected (i) Peter J. Boni as
12
<PAGE> 16
Chief Executive Officer, and (ii) Messrs. Bachman, Bloom, DiDonato and
Zarrabian, who were the four executive officers other than Mr. Boni who, at June
30, 1996, were the Company's next most highly paid executives (collectively,
such five executives are referred to in this report as the "Senior Executives"),
and (iii) the Company's executive officers which include the Senior Executives.
Compensation Policies Toward Executive Officers
The Compensation Committee's executive compensation policies are designed
to provide competitive compensation based on the achievement of the Company's
strategic and operational goals, reward for above-average corporate performance,
and recognition of individual initiative and achievements. In general, the
Company strives for fair but not excessive compensation of its executive
officers in order to assist the Company in attracting and retaining highly
qualified executives.
Executive officers' overall compensation levels are intended to be
consistent with other companies in the Company's industry, to reflect the
Company's performance and to attract and retain highly qualified executives.
Also, the Senior Executives' bonus plans typically include operating performance
targets, below which either no bonus or a significantly reduced bonus is paid or
above which an increased bonus is paid, and management objectives to be met
before all or any part of a bonus is paid. Compensation to Senior Executives
under the Option Plan is intended to reward exceptional competence, to attract
and retain such Senior Executives and furnish an additional incentive to
increase performance, generally. Executive officers have also been provided with
severance agreements with varying terms. See "Remuneration of Executive Officers
and Directors -- Employment and Severance Compensation Agreements".
Executive officers and officers and employees other than the Senior
Executives may also participate in the Company's Option Plan provided they meet
certain eligibility requirements, but typically receive a larger percentage of
their compensation in the form of base salary than do Senior Executives.
The Compensation Committee (formerly the Stock Option Committee) believes
that stock ownership by management and stock-based performance compensation
arrangements are beneficial as ways to align management's interests and
incentives with shareholders' interests toward the enhancement of shareholder
value. The Compensation Committee further believes that stock option programs
with future exercise dates and/or accelerated vesting provisions upon the
occurrence of certain specified events are an effective means to retain key
executives. As a result, the Compensation Committee has used stock-based
elements in the Company's compensation packages for its executive officers.
Relationship of Company Performance to Executive Compensation
Compensation paid the Company's executive officers in fiscal 1996, as
reflected in the Tables included in this Proxy Statement regarding the Senior
Executives, primarily consisted of base salary and performance bonus. In
addition, as reflected in the above Tables, the Stock Option Committee (now the
Compensation Committee) awarded stock options to the Senior Executives during
fiscal 1996 under the Company's 1986 Plan.
Measures of performance which are taken into account in determining the
Company's executive compensation may include: (1) the Company's revenue and
operating income, (2) target versus actual operating performance, generally in
terms of revenue, operating income, contribution margin or expense reduction,
(3) the market value of the Company's Common Stock, (4) the success of any
special projects or goals, or (5) subjective considerations of performance
including individual initiative and effort, managerial ability and undertaking
and completing special projects or goals.
13
<PAGE> 17
Bonus Arrangements
The Company's bonuses to its executive officers are based on both objective
and subjective performance criteria. Objective criteria include realization of
individual strategic goals, and the attainment of certain levels of operating
performance by the Company as compared to targeted figures. As noted above, the
performance bonuses for executive officers are typically tied to achievement of
certain minimum performance thresholds, with no bonus, or a reduced bonus, being
paid in the event that minimum targets are not achieved or an increased bonus
paid if targets are exceeded. Target operating objectives utilized for purposes
of determining bonuses (including revenue and/or operating income and/or
contribution margin and/or expense reduction quotas) are based on business plans
developed by the Chief Executive Officer with input derived from individual
executive officers, subject to review by the Compensation Committee and, if it
so chooses, by the Company's full Board of Directors. Performance under the
objective criteria for fiscal 1996 was determined after the end of fiscal 1995,
after discussions among the members of the Compensation Committee.
Subjective performance criteria encompass evaluation of each executive
officer's initiative and contribution to overall corporate performance, expense
reduction, the officer's managerial ability, and the officer's performance and
effort on special projects or strategic objectives that the officer may have
undertaken.
Executive officers' target 1996 bonus amounts were established early in the
fiscal year following a review of compensation to ascertain the compensation
levels which were necessary, or desirable, to maintain the Company's
compensation structure on a competitive basis with others in the industry, and
to provide appropriate incentives for achieving desired Company performance. For
fiscal 1996, bonuses for executive officers were based on objective criteria.
Option Plans
The other major incentive component of the Executive Officers' fiscal 1996
compensation was under the Company's 1986 Plan. The Company's Option Plans are
intended to promote the Company's interests by encouraging ownership of its
Common Stock by participants in order to help the Company attract and retain
qualified individuals and to motivate them to improve their performance.
The 1996 Plan is administered by the Compensation Committee (the 1986 Plan
was administered by the Stock Option Committee from June 1994 through August
1996 and prior to June 1994 and after August 1996 by the Compensation
Committee). The Compensation Committee meets at least four times each fiscal
year, and at other times if it chooses or at the request of the Chief Executive
Officer, to determine the type, amount, and dates of option grants to eligible
participants. The Compensation Committee determines specific grants subject to
the annual limitations permitted under Section 422A of the Internal Revenue Code
(pertaining to Incentive Stock Options).
Participation in the 1996 Plan may be in the form of (a) Incentive Stock
Options as defined in Section 422A of the Internal Revenue Code, (b) options not
qualifying under Section 422A of the Internal Revenue Code as Incentive Stock
Options (i.e., Nonqualified Options), or (c) any combination thereof. Incentive
Stock Options can be granted only to persons who are employees (including
officers) of the Company when the options are granted. The Option Plan does not
impose any limitation on the number of shares of Common Stock with respect to
which options may be granted to any individual under the Option Plan.
During fiscal 1996, the Stock Option Committee (now the Compensation
Committee) made the following grants of options to purchase Common Stock to the
Senior Executives: 100,000 to Mr. Boni, 25,000 to Mr. Bachman, 50,000 to Mr.
Bloom, 25,000 to Mr. DiDonato and 50,000 to Mr. Zarrabian. During fiscal 1996,
options to purchase 275,000 shares of Common Stock were granted to all current
executive officers, as a group, including the shares to Messrs. Boni, Bachman,
Bloom, DiDonato and Zarrabian. The options which were granted in fiscal 1996
were Incentive Stock Options to the extent allowable under the I.R.S. $100,000
14
<PAGE> 18
annual limitation, and Non-Qualified Stock Options for any remainder, where
applicable, and were all granted with an exercise price equivalent to fair
market value as of the date of grant. Generally, the options granted to
executive officers in fiscal 1996 become exercisable at the rate of twenty eight
percent (28%) on the first anniversary date of grant and two percent (2%) per
month thereafter, subject to acceleration of vesting in the event of a change in
control or, under certain circumstances, a termination of employment or
achievement by the Company of certain performance goals. The Compensation
Committee believes that the staggered exercisability of option grants, together
with the lapsing of options following termination of employment, help motivate
optionees to remain with the Company over the long-term, one of the primary
objectives of the Option Plans. The Compensation Committee also believes that
the acceleration of vesting of options for executives if they are terminated
without cause or if there is a change in control of the Company helps attract
and retain them.
The Compensation Committee also believes that option grants to Company
executives will motivate optionees to generate potential gains by working to
increase the Common Stock's price over the long term. (See the Table elsewhere
in this Proxy Statement for potential future values of Senior Executive options,
assuming various rates of growth in the Company's stock price.) While the value
realizable from exercisable options is dependent upon the extent to which the
Company's performance is reflected in the market price of the Company's Common
Stock, whether such value will be realized in any specific year is primarily
determined by each individual executive's decision with respect to the
disposition of the shares underlying the options. Accordingly, the Stock Option
Committee (now the Compensation Committee) determined that the fiscal 1996
option grants and other Company incentives were appropriate, notwithstanding
gains realized by certain Company executives as a result of their individual
decisions to exercise during fiscal 1996 stock options granted in previous years
(see the Table included above in this Proxy Statement, indicating amounts
realized by the Senior Executives from option exercises in fiscal 1996 and the
value inherent in unexercised options as of the Company's fiscal year-end).
Other Compensation Plans
The Company has adopted certain broad-based employee benefit plans in which
the Senior Executives are permitted to participate on substantially the same
terms as non-executive employees who meet applicable eligibility criteria,
subject to any legal limitations on the amounts that may be contributed or the
benefits that may be payable under these Company plans. Most significant among
these, is the Company's 401(k) plan.
Chief Executive Compensation for Fiscal 1996, and Relationship to Company
Performance
Current regulations of the Securities and Exchange Commission ("SEC")
require the Compensation Committee to discuss the Committee's basis for the
compensation reported for the Company's Chief Executive Officer, Mr. Boni, in
fiscal 1996.
The Compensation Committee's general approach in setting the Chief
Executive Officer's compensation is to seek to be competitive with other
companies in the Company's industry, and to tie a large percentage of the Chief
Executive Officer's total compensation package to Company performance and to
achievement of individual goals. While this results in some variation in the
level of compensation, the Compensation Committee believes that such an
arrangement motivates the Company's Chief Executive Officer toward Company
performance goals, while acknowledging the importance of having some certainty
in the level of compensation through its non-performance based elements. In
addition, the Chief Executive Officer's compensation is set to retain a highly
qualified individual in that position especially in light of the Company's
losses in fiscal 1996 and 1995.
15
<PAGE> 19
Mr. Boni's base salary for fiscal year 1996 was $250,000 with a bonus
potential calculated at a rate equal to ten percent (10%) of net income before
taxes achieved by the Company. Mr. Boni received no bonus in fiscal 1996. During
fiscal 1996, Mr. Boni also received options to purchase 100,000 shares of Common
Stock. The Compensation Committee believes that such compensation helped retain
Mr. Boni as President and Chief Executive Officer. Mr. Boni continued to guide
the Company in its transition into the client/server marketplace and the
development and launch of new products, devoted substantial time and effort to
seeking strategic and other relationships on behalf of the Company, and oversaw
the acquisition of Cadre Technologies Inc.
SUBMITTED BY THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS.
John J. Alexander
R. John Fletcher
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No person serving on the Compensation Committee at any time during fiscal
1996 is or has been an officer or employee of the Company or had any
relationship required to be disclosed under item 404 of Regulation S-K
promulgated by the Securities and Exchange Commission.
PROPOSAL 2 -- APPROVAL OF THE AMENDED 1996 INCENTIVE AND NONQUALIFIED STOCK
OPTION PLAN
To replace the Company's Amended and Restated 1986 Incentive and
Nonqualified Option Plan, under which no further incentive options could be
granted, the Board of Directors has adopted the 1996 Incentive and Nonqualified
Option Plan (as amended, "the 1996 Plan"). In October 1996, the Board expects to
amend the Plan to conform it more closely to the requirements and the powers of
current tax law. Under the Internal Revenue Code (the "Code"), stockholder
approval is necessary for stock options relating to the shares issuable under
the 1996 Plan to qualify as incentive stock options under Section 422 of the
Code. Approval will require the affirmative vote of a majority of the shares of
Common Stock present or represented at the meeting and voting on the Proposal.
Stockholder rejection of the 1996 Plan would mean any options granted under the
1996 Plan would not be eligible for incentive treatment under the Code. The Plan
would remain in effect and all options would remain valid as Nonqualified
Options.
The Company intends to file, as soon as practicable after stockholder
approval of the 1996 Plan, a Registration Statement under the Securities Act of
1933 covering the shares of Common Stock issuable under the 1996 Plan.
The full text of the 1996 Plan as adopted and expected to be amended by the
Board of Directors is printed as Appendix A, beginning on page A-1. The
following is a summary of some of its provisions:
The 1996 Plan authorizes the grant of (i) options to purchase Common Stock
intended to qualify as incentive stock options ("Incentive Options"), as defined
in Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"),
and (ii) options that do not so qualify ("Nonqualified Options").
Up to 2,000,000 shares of Common Stock (subject to adjustment upon certain
changes in the capitalization of the Company) may be issued pursuant to options
granted under the 1996 Plan.
The 1996 Plan will be administered by the Compensation Committee of the
Board of Directors, the members of which are not officers or employees of the
Company (the "Committee"). The Committee will select the individuals to whom
options are granted and will determine the option exercise price and other terms
of each award, subject to the provisions of the 1996 Plan. Incentive Options may
be granted under the
16
<PAGE> 20
1996 Plan to employees, including officers and Directors who are also employees.
As of September 1, 1996, approximately 375 employees were eligible to
participate in the 1996 Plan. Nonqualified Options may be granted under the 1996
Plan to employees, officers, individuals providing services to the Company and
Directors, whether or not they are employees of the Company.
No options may extend for more than ten years from the date of grant (five
years in the case of an optionee who owns stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company
or any parent or subsidiary ("greater-than-ten-percent-stockholders")). The
exercise price of Incentive Options granted under the 1996 Plan must be at least
equal to the fair market value of the Common Stock on the date of grant (110% of
fair market value in the case of a greater-than-ten-percent-stockholder). The
aggregate fair market value (determined at the time of grant) of shares issuable
pursuant to Incentive Options which first become exercisable by an employee or
officer in any calendar year may not exceed $100,000.
Options are non-transferable except by will or by the laws of descent or
distribution and are exercisable, during the optionee's lifetime, only by the
optionee. Incentive Options generally may not be exercised after (i) termination
of the optionee's employment by optionee voluntarily or by the Company for
cause, (ii) ninety days after termination of the optionee's employment by the
Company without cause, including optionee's retirement in accordance with the
Company's policy and (iii) one year following the optionee's termination of
employment with the Company by reason of death or disability. The terms and
conditions of Nonqualified Options will be determined by the Committee in
connection with each grant, if any.
Payment of the exercise price of the shares subject to the option may be
made with (i) cash or check for an amount equal to the option price for such
shares, (ii) with the consent of the Committee, shares of Common Stock having a
fair market value equal to the option price of such shares, (iii) with the
consent of the Committee, a personal recourse note issued by the optionee to the
Company in a principal amount equal to such aggregate exercise price, (iv) with
the consent of the Committee, delivery of such documentation as the Committee
and the broker, if applicable, will require to effect an exercise of the option
and delivery to the Company of the sale or loan proceeds required to pay the
option price, (v) with the consent of the Committee, such other consideration
which is acceptable to the Committee and has a fair market value equal to the
option price of such shares, or (vi) with the consent of the Committee, a
combination of the foregoing.
NEW PLAN BENEFITS
Except as set forth below, the Company is unable to determine the dollar
value and number of options which will be received by or allocated to (i) any of
the executive officers, (ii) the current executive officers, as a group, (iii)
the current Directors who are not executive officers, as a group, (iv) each
nominee for election as a Director and (v) the employees who are not executive
officers, as a group, as a result of the proposed Plan because, options may be
granted by the Committee on a discretionary basis.
17
<PAGE> 21
<TABLE>
The following table sets forth information concerning the benefits that
will be received by or allocated to the persons specified for fiscal 1997,
assuming that Proposal 2, the proposal to approve the 1996 Plan, is adopted.
Approval of the Plan will constitute approval of the option grants shown in the
following table for purposes of Section 16 of the Securities Exchange Act of
1934:
<CAPTION>
NUMBER OF
DOLLAR SECURITIES UNDERLYING
NAME AND POSITION VALUE($) OPTIONS GRANTED
----------------- ------- ---------------------
<S> <C> <C>
Peter J. Boni, President and Chief Executive Officer...... -0-(1) 250,000
Massood Zarrabian, Senior Vice President.................. -0-(1) 125,000
Eugene J. DiDonato, Vice President........................ -0-(1) 30,000
Charles W. Bachman, Chairman of the Board................. -0-(1) 10,000
Executive Officers (as a group)........................... -0-(1) 815,000
Directors who are not executive officers (as a group)..... -0-(1) 40,000
All employees who are not executive officers (as a
group).................................................. 3,844(1) 252,074
- ---------------
<FN>
(1) The dollar value of the options granted assuming a fair market value at
October 1, 1996 of $4.56 per share. Each such option was granted at an
exercise price equal to the fair market value of the Common Stock on the
date of option grant. Options granted to executive officers and Directors
who are not executive officers are "out of the money" since their exercise
prices exceeded the fair market values at October 1, 1996.
</TABLE>
FEDERAL INCOME TAX INFORMATION WITH RESPECT TO THE 1996 PLAN.
The grantee of a Nonqualified Option recognizes no income for federal
income tax purposes on the grant thereof. On the exercise of a Nonqualified
Option, the difference between the fair market value of the underlying shares of
Common Stock on the exercise date and the option exercise price is treated as
compensation to the holder of the option taxable as ordinary income in the year
of exercise, and such fair market value becomes the basis for the underlying
shares which will be used in computing any capital gain or loss upon disposition
of such shares. Subject to certain limitations, the Company may deduct for the
year of exercise an amount equal to the amount recognized by the option holder
as ordinary income upon exercise of a Nonqualified Option.
The grantee of an Incentive Option recognizes no income for federal income
tax purposes on the grant thereof. Except as provided below with respect to the
alternative minimum tax, there is no tax upon exercise of an Incentive Option.
If no disposition of shares acquired upon exercise of the Incentive Option is
made by the option holder within two years from the date of the grant of the
Incentive Option or within one year after exercise of the Incentive Option, any
gain realized by the option holder on the subsequent sale of such shares is
treated as a long-term capital gain for federal income tax purposes. If the
shares are sold prior to the expiration of such periods, the difference between
the lesser of the value of the shares at the date of exercise or at the date of
sale and the exercise price of the Incentive Option is treated as compensation
to the employee taxable as ordinary income and the excess gain, if any, is
treated as capital gain (which will be long-term capital gain if the shares are
held for more than one year).
The excess of the fair market value of the underlying shares over the
option price at the time of exercise of an Incentive Option will constitute an
item of tax preference for purposes of the alternative minimum tax. Taxpayers
who incur the alternative minimum tax are allowed a credit which may be carried
forward indefinitely to be used as a credit against the regular tax liability in
a later year; however, the minimum tax credit can not reduce the regular tax
below the alternative minimum tax for that carryover year.
18
<PAGE> 22
In connection with the sale of the shares covered by Incentive Options, the
Company is allowed a deduction for tax purposes only to the extent, and at the
time, the option holder receives ordinary income (for example, by reason of the
sale of shares by the holder of an Incentive Option within two years of the date
of the granting of the Incentive Option or one year after the exercise of the
Incentive Option), subject to certain limitations on the deductibility of
compensation paid to executives.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THIS PROPOSAL TO
APPROVE THE 1996 PLAN.
PRINCIPAL HOLDERS OF VOTING SECURITIES
The Company has one issued and outstanding class of voting securities,
Common Stock. The holders of Common Stock are entitled to one vote for each
share held on each matter submitted to vote.
<TABLE>
The following table sets forth the number of shares of the Company's Common
Stock beneficially owned by all persons known by the Company to be the
beneficial owners of more than 5% of the Company's Common Stock, by each of the
Company's current Directors and nominees for Director, by each of the Company's
executive officers and by all officers and Directors of the Company, as a group,
as of October 1, 1996:
<CAPTION>
DIRECTORS, OFFICERS AND 5% STOCKHOLDERS SHARES BENEFICIALLY OWNED
- --------------------------------------- -------------------------
NUMBER(1) PERCENT (2)
--------- -----------
<S> <C> <C>
Associated Capital, L.P.(3)..................................... 2,168,900 12.3%
477 Madison Avenue, 14th Floor
New York, NY 10022
Tudor Investment Corporation (4)................................ 1,018,400 5.8%
One Liberty Plaza, 51st Floor
New York, NY 10006
Wellington Management Company, LLP(5)........................... 1,000,000 5.7%
75 State Street
Boston, MA 02109
Peter J. Boni................................................... 497,455(6) 2.7%
Cayenne Software, Inc.
8 New England Executive Park
Burlington, MA 01803
Charles W. Bachman.............................................. 154,210(7) *
Cayenne Software, Inc.
8 New England Executive Park
Burlington, MA 01803
William H. D. Goddard........................................... 141,102(6) *
Ramallah Capital Corporation
5 Brown St.
Providence, RI 02906
Massood Zarrabian............................................... 71,912(6) *
Cayenne Software, Inc.
8 New England Executive Park
Burlington, MA 01803
Ronald H. Imbriale.............................................. 60,525(6) *
Cayenne Software, Inc.
8 New England Executive Park
Burlington, MA 01803
</TABLE>
19
<PAGE> 23
<TABLE>
<CAPTION>
DIRECTORS, OFFICERS AND 5% STOCKHOLDERS SHARES BENEFICIALLY OWNED
- --------------------------------------- -------------------------
NUMBER(1) PERCENT(2)
--------- -----------
<S> <C> <C>
John J. Alexander............................................... 14,800(6) *
Business Technology Consulting, Inc.
75 Market Street
Portland, ME 04101
Allyn C. Woodward, Jr. ......................................... 12,900(6) *
Adams, Harkness & Hill, Inc.
60 State Street
Boston, MA 02109
R. John Fletcher................................................ 12,842(6) *
Fletcher Spaght, Inc.
222 Berkeley Street
Boston, MA 02116
Eugene J. DiDonato.............................................. 13,100(6) *
Cayenne Software, Inc.
8 New England Executive Park
Burlington, MA 01803
William F. Winslow.............................................. 8,183(6) *
Cayenne Software, Inc.
8 New England Executive Park
Burlington, MA 01803
Joan E. Cohen................................................... 8,000(6) *
Cayenne Software, Inc.
8 New England Executive Park
Burlington, MA 01803
Vincent Stango.................................................. 6,658(6) *
Cayenne Software, Inc.
8 New England Executive Park
Burlington, MA 01803
Frederick H. Phillips........................................... 0 *
Cayenne Software, Inc.
8 New England Executive Park
Burlington, MA 01803
All officers and Directors as a group (13 persons).............. 1,001,687(8) 5.4%
- ---------------
<FN>
* Less than 1.0%.
(1) The persons named in the table have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them
subject to community property laws where applicable and the information
contained in the footnotes to this table. Amounts shown also include all
shares subject to stock options and warrants to purchase Common Stock
exercisable within 60 days of October 1, 1996.
(2) The number of shares deemed outstanding as of October 1, 1996 was 18,422,531
shares, which includes 791,086 shares subject to stock options exercisable
within sixty days of October 1, 1996.
</TABLE>
20
<PAGE> 24
(3) Based upon information provided by Associated Capital, L.P. for it and A.
Cap, Inc., Jay Zises, Selig Zises and Nancy J. Frankel-Zises. Represents
shares beneficially owned by various entities and persons.
(4) Based upon a Schedule 13D dated June 26, 1996 provided by Tudor Investment
Corporation ("TIC") Paul Tudor Jones II, Raptor Global Fund Ltd., Raptor
Global Fund L.P., Tudor Arbitrage Partners L.P., Tudor BVI Futures Ltd. and
Tudor Global Trading LLC.. Represents shares beneficially owned by various
entities and persons. Such Schedule indicates that TIC and Paul Tudor Jones
II, Chairman and Chief Executive Officer of TIC have shared voting and
dispositive power with respect to 971,708 and 1,018,400 shares,
respectively; the Raptor Global Fund Ltd. has shared voting and dispositive
power over 336,764 shares; the Raptor Global Fund L.P. has shared voting
and dispositive power over 176,544 shares; Tudor Arbitrage Partners has
shared voting and dispositive power over 46,692 shares; Tudor BVI Futures
Ltd. has shared voting and dispositive power over 458,400; and Tudor Global
Trading LLC. holds shared voting and dispositive power over 46,692 shares.
(5) Based upon information as of October 10, 1996 provided by Wellington
Management Company, LLP ("WMC") in its capacity as an investment advisor
registered under the Investment Advisors Act of 1990. In its capacity as
investment advisor, WMC may be deemed to have beneficial ownership of the
shares that are owned by its investment advisors' clients.
(6) Represents shares issuable upon exercise of stock options exercisable
within sixty days of October 1, 1996. For Messrs Alexander, Fletcher,
Goddard, Imbriale, Stango and Woodward, the number of shares includes
2,400, 10,400, 8,955, 43,541, 5,947 and 8,400 shares, respectively,
issuable upon exercise of stock options within sixty days of October 1,
1996. For Mr. Goddard, the number of shares includes 1,236 held by him as
custodian for Charlotte Ives Goddard under the Rhode Island UTMA, as to
which he disclaims any beneficial ownership.
(7) Includes 8,760 shares held by Mr. Bachman's wife and 112,793 shares
issuable upon exercise of stock options. Excludes shares held by four
of Mr. Bachman's children; Mr. Bachman disclaims beneficial ownership of
those shares.
(8) Includes 791,086 shares issuable upon exercise of stock options within
sixty days of October 1, 1996, 1,236 held by Mr. Goddard as custodian
for Charlotte Ives Goddard and 8,760 shares held by Charles W. Bachman's
wife. Excludes shares held by Mr. Bachman's four children.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
MARKETING
The Company and IBM were parties to Marketing Agreements for Cooperative
Software Supplier Programs ("CSSP") giving IBM the non-exclusive right to market
and solicit orders for the Company's products in the United States, Puerto Rico
and Canada. The percentage varied over the terms of the CSSP Agreements. The
CSSP Agreement with respect to the United States and Puerto Rico was terminated
as of October 31, 1992 and with respect to Canada expired on June 30, 1993. The
CSSP Agreements were terminated pursuant to the terms of the Settlement
Agreement.
A subsidiary of IBM, IBM World Trade Corporation, was the exclusive
distributor of the Company's products in sixteen countries in the Far East,
including Australia and Japan. IBM was also the exclusive distributor of the
Company's products in Austria. This arrangement terminated on June 30, 1993. IBM
continues as a non-exclusive sales agent in certain Asia/Pacific countries and
Switzerland.
21
<PAGE> 25
OTHER TRANSACTIONS
For a description of the Employment Agreements between the Company and
Charles W. Bachman and Peter J. Boni and other severance and employment
agreements with executive officers, see "Remuneration of Officers and Directors
- -- Employment and Severance Compensation Agreements."
FUTURE TRANSACTIONS
All future transactions, including loans, between the Company and officers,
Directors, principal stockholders and their affiliates will be on terms no less
favorable to the Company than could reasonably have been obtained in
arm's-length transactions with independent third parties, and such transactions
will be subject to approval by a majority of the disinterested outside Directors
of the Company.
SELECTION OF AUDITORS
The Board of Directors has selected the firm of Coopers & Lybrand, L.L.P.,
independent certified public accountants, to serve as the Company's independent
auditors for the fiscal year ended June 30, 1996. Coopers & Lybrand L.L.P. has
audited the Company's financial statements since its 1986 fiscal year. The
Company has been advised that a representative of Coopers & Lybrand L.L.P. will
be present at the Annual Meeting. This representative will have the opportunity
to make a statement if he or she wishes and will be available to respond to
appropriate questions presented at the Annual Meeting.
EXPENSES OF SOLICITATION
The cost of solicitation of proxies will be borne by the Company. In
addition to soliciting stockholders by mail through its regular employees, the
Company may request banks, brokers and other custodians, nominees and
fiduciaries to solicit their customers who have stock of the Company registered
in the names of nominees and, if so, will reimburse such banks, brokers and
other custodians, nominees and fiduciaries for their reasonable out-of-pocket
costs in forwarding proxy materials to the beneficial owners of shares held of
record by them. Employees of the Company may solicit stockholders in person or
by mail, telephone or facsimile following the original solicitation.
FUTURE STOCKHOLDER PROPOSALS
In order to be included in the Proxy materials for the 1997 Annual Meeting
of Stockholders of the Company, stockholder proposals must be received at the
Company's principal executive offices no later than June 24, 1997.
In addition, under the by-laws of the Company, any stockholder intending to
present at the 1997 Annual Meeting any proposal (other than a proposal by, or at
the direction of, the Board of Directors of the Company) must give written
notice to the Company not less than 60 and not more than 120 days prior to the
scheduled annual meeting describing in detail the proposal to be brought before
the meeting, the name and address as they appear on the Company's books of the
stockholder or stockholders giving such notice and known to be supporting the
proposal and the class and number of shares of the Company's capital stock which
are beneficially owned by such stockholders known to be supporting such proposal
on the date of such notice.
OTHER MATTERS
As of this date, the Board of Directors knows of no business which may
properly come before the Annual Meeting other than that stated in the Notice of
Annual Meeting of Stockholders accompanying this Proxy
22
<PAGE> 26
Statement. Should any other business arise, proxies given in the accompanying
form will be voted in accordance with the discretion of the person or persons
voting them.
ANNUAL REPORT TO STOCKHOLDERS
This Proxy Statement is accompanied by a copy of the Company's Annual
Report for the year ended June 30, 1996, which contains detailed financial
information concerning the Company. This Annual Report is being distributed for
informational purposes only and shall not be deemed to be made a part of this
Proxy Statement.
Burlington, MA
October 22, 1996
23
<PAGE> 27
APPENDIX A
CAYENNE SOFTWARE, INC.
AMENDED 1996 INCENTIVE AND NONQUALIFIED STOCK OPTION PLAN
SECTION 1. PURPOSE OF THE PLAN.
This Amended 1996 Incentive and Nonqualified Stock Option Plan (the "Plan")
of Cayenne Software, Inc., a Massachusetts corporation (the "Company"), is
designed to provide additional incentive to present and future executives, key
employees and consultants of the Company, which shall include its subsidiaries
as defined in Section 424 of the Internal Revenue Code of 1986, as amended (the
"Code"). The Company intends that this purpose will be effected by the granting
of incentive stock options ("Incentive Stock Options") as defined in Section 422
of the Code and nonqualified stock options ("Nonqualified Options") under the
Plan which afford such executives, key employees and consultants an opportunity
to acquire or increase their proprietary interest in the Company through the
acquisition of shares of its Common Stock, $.01 par value (the "Common Stock").
By encouraging stock ownership by such executives, salaried employees and
consultants, the Company seeks to attract and retain on a continuing basis the
services of persons of exceptional competence and seeks to furnish an added
incentive for them to increase their efforts on behalf of the Company.
SECTION 2. ADMINISTRATION.
The Plan shall be administered by the Board of Directors (the "Board") or a
committee of the Board (the "Committee") consisting of at least two directors.
All questions of interpretation and application of the Plan, of Incentive Stock
Options and Nonqualified Options granted hereunder (collectively, the "Options",
and individually, an "Option"), and of the value of shares of Common Stock
subject to an Option, shall be subject to the determination of the Committee,
which determination shall be final and binding; provided, however, that the
Committee shall not modify, extend or renew any Incentive Stock Option.
SECTION 3. OPTION SHARES.
The stock subject to the Options and other provisions of the Plan shall be
shares of the Company's Common Stock. The total amount of the Common Stock with
respect to which Options may be granted shall not exceed in the aggregate
2,000,000 shares; provided, however, that the class and aggregate number of
shares which may be subject to Options granted hereunder shall be subject to
adjustment in accordance with the provisions of Section 16 hereof. Such shares
may be treasury shares or authorized but unissued shares.
In the event that any outstanding Option for any reason shall expire or
terminate prior to exercise, the shares of Common Stock allocable to the
unexercised portion of such Option may again be subject to an Option under the
Plan.
SECTION 4. AUTHORITY TO GRANT OPTIONS.
The Committee may grant Options from time to time to such eligible
employees and consultants of the Company as it shall determine. Subject to any
applicable limitations set forth in the Plan or established from time to time by
the Committee, the number of shares of Common Stock to be covered by any Option
shall be as determined by the Committee.
SECTION 5. LIMITATION ON AMOUNT OF OPTIONS WHICH MAY BE GRANTED.
The aggregate fair market value (determined at the time the Option is
granted) of the Common Stock with respect to which Incentive Stock Options are
exercisable for the first time by any optionee during any
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<PAGE> 28
calendar year (under the Plan and any other plans of the Company or any parent
or subsidiary for the issuance of Incentive Stock Options) shall not exceed
$100,000 (or such greater amount as may from time to time be permitted with
respect to incentive stock options by the Code or any other applicable law or
regulation).
SECTION 6. ELIGIBILITY.
Incentive Stock Options may be granted only to officers and other employees
of the Company or its subsidiaries, including members of the Board who are also
employees of the Company or its subsidiaries. Nonqualified Options may be
granted to officers or other employees of the Company or its subsidiaries, to
members of the Board (regardless of whether they are also employees) and to
consultants and other individuals providing services to the Company or its
subsidiaries.
No Incentive Stock Option shall be granted to an individual who, at the
time said Option is granted, owns (including ownership attributed pursuant to
Section 424 of the Code) more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or any subsidiary or parent
(a "greater-than-ten-percent-stockholder"); notwithstanding the above, a
greater-than-ten-percent-stockholder may be granted an Incentive Stock Option
provided that the purchase price per share shall not be less than one hundred
and ten percent (110%) of the fair market value of the stock at the time such
Option is granted, and further provided that no such Option shall be exercisable
to any extent after the expiration of five (5) years from the date it is
granted.
Except as otherwise provided, for all purposes of the Plan the term
"subsidiary" shall mean any corporation of which 50% or more of its outstanding
voting stock is at the time owned by the Company or by one or more subsidiaries
or by the Company and one or more subsidiaries.
SECTION 7. OPTION PRICE.
The price at which shares may be purchased pursuant to Options shall be
specified by the Committee at the time the Option is granted; provided, however,
that the option price of any Incentive Stock Option shall not be less than one
hundred percent (100%) (one hundred and ten percent (110%) in the case of a
greater-than-ten-percent-stockholder) of the fair market value of the shares of
Common Stock on the date such Option is granted. For the purpose of the Plan,
the fair market value of the Common Stock shall be the closing price per share
on the date of grant of the Option as reported by a nationally recognized stock
exchange, or, if the Common Stock is not listed on such an exchange, as reported
by the National Association of Securities Dealers Automated Quotation System,
Inc. ("NASDAQ"), or, if the Common Stock is not quoted on NASDAQ, the fair
market value as determined by the Committee.
SECTION 8. DURATION OF OPTIONS.
The Committee in its discretion may provide that an Option shall be
exercisable during any specified period of time from the date such Option is
granted; provided, however, that no Incentive Stock Option shall be exercisable
after the expiration of ten (10) years (five years in the case of a
greater-than-ten-percent-stockholder) from the date that such Option is granted.
SECTION 9. AMOUNT EXERCISABLE; VESTING OF SHARES PURCHASED; REPURCHASE OF
UNVESTED SHARES; RESTRICTION ON TRANSFER OF CERTAIN SHARES.
Each Option may be exercised, so long as it is valid and outstanding, from
time to time in part or as a whole, subject to any limitations with respect to
the number of shares for which the Option may be exercised at a particular time
and to such other conditions as the Committee in its discretion may specify upon
granting the Option.
A-2
<PAGE> 29
The Committee may in its discretion provide upon the grant of any Option
hereunder that the Company shall have an option to repurchase, upon such terms
and conditions as determined by the Committee, all or any number of shares
purchased upon exercise of such Option. The repurchase price per share payable
by the Company shall be such amount or be determined by such formula as is fixed
by the Committee at the time the Option for the shares subject to repurchase is
granted. In the event the Committee shall grant Options subject to the Company's
repurchase option, such Option shall carry a legend satisfactory to counsel for
the Company referring to the Company's repurchase option.
The shares of stock issuable upon exercise of an Option by any executive
officer, director or beneficial owner of more than ten percent (10%) of the
Common Stock of the Company may not be sold or transferred (except that such
shares may be issued upon exercise of such Option) by such officer, director or
beneficial owner for a period of six (6) months following the grant of such
Option.
SECTION 10. EXERCISE OF OPTIONS.
Subject to the provisions of Section 13 hereof, Options shall be exercised
by the delivery of written notice to the Company setting forth the number of
shares with respect to which the Option is to be exercised, and specifying the
address to which the certificates for such shares are to be mailed, together
with (a) cash, certified check, bank draft or postal or express money order
payable to the order of the Company for an amount equal to the option price of
such shares; or (b) with the consent of the Company, shares of Common Stock of
the Company having a fair market value equal to the option price of such shares;
or (c) with the consent of the Committee, a personal recourse note issued by the
optionee to the Company in a principal amount equal to such aggregate exercise
price and with such other terms, including interest rate and maturity, as the
Committee may determine in its discretion; provided that the interest rate borne
by such a note shall not be less than the lowest applicable federal rate, as
defined in Section 1274(d) of the Code; or (d) with the consent of the
Committee, such other consideration that is acceptable to the Committee and that
has a fair market value, as determined by the Committee, equal to such aggregate
exercise price, including any broker-directed cashless exercise/resale procedure
adopted by the Committee; or (e) with the consent of the Company, a combination
of any of the foregoing. For the purpose of the preceding sentence, the fair
market value of the shares of Common Stock so delivered to the Company shall be
determined in accordance with procedures adopted by the Committee. As promptly
as practicable after receipt of such written notification and payment, the
Company shall deliver to the optionee certificates for the number of shares with
respect to which such Option has been so exercised, issued in the optionee's
name; provided, however, that such delivery shall be deemed effected for all
purposes when a stock transfer agent of the Company shall have deposited such
certificates in the Unites States mail, addressed to the optionee, at the
address specified pursuant to this Section 10.
SECTION 11. TRANSFERABILITY OF OPTIONS.
Options shall not be transferable by the optionee otherwise than by will or
under the laws of descent and distribution, and shall be exercisable, during his
or her lifetime, only by that person.
SECTION 12. TERMINATION OF EMPLOYMENT OR SERVICES OR DEATH OF OPTIONEE.
Except as may be otherwise expressly provided herein, Options may be not
exercised after the earlier of:
(i) the date of expiration thereof; or
(ii) the date of termination of the optionee's employment with or
services to the Company by it for cause (as determined by the
Company), or voluntarily by the optionee; or
A-3
<PAGE> 30
(iii) ninety (90) days after termination of the optionee's employment
with or services to the Company by it without cause.
12.1 TEMPORARY LEAVE. Whether authorized temporary leave of absence, or
absence on military or government service, shall constitute termination of the
employment or consultant relationship between the Company and the optionee shall
be determined by the Committee at the time thereof.
12.2 DEATH OR DISABILITY. In the event the optionee as an employee shall
be retired in good standing from the employ of the Company for reasons of
disability under the then established rules of the Company or in the event of
the death of the holder of an Option while an employee or consultant of the
Company and before the date of expiration of such Option, such Option may be
exercised until the earlier of such date of expiration or one (1) year following
the date of such retirement for reason of disability or such death, to the
extent the optionee was entitled to exercise such Option immediately before his
death. After the death of the optionee, his executors, administrators or any
person or persons to whom his Option may be transferred by will or by the laws
of descent and distribution, shall have the right to exercise the Option.
12.3 RETIREMENT. If, before the date of expiration of the Option, the
optionee as an employee shall be retired in good standing from the employ of the
Company for reasons of age under the then established rules of the Company, the
Option may be exercised until the earlier of such date of expiration or ninety
(90) days after the date of such retirement, to the extent to which the optionee
was entitled to exercise such Option immediately prior to such retirement.
12.4 EMPLOYMENT RELATIONSHIP; CONSULTANT RELATIONSHIP. An employment
relationship between the Company and the optionee shall be deemed to exist
during any period in which the optionee is employed by the Company. A consultant
relationship between the Company and the optionee shall be deemed to exist
during any period in which the optionee renders services as a consultant or
otherwise on an independent contractor basis to the Company.
SECTION 13. REQUIREMENTS OF LAW.
The Company shall not be required to sell or issue any shares under any
Option if the issuance of such shares shall constitute a violation by the
optionee or by the Company of any provision of any law, regulation or order of
any governmental authority. Without limiting the generality of the foregoing,
upon exercise of any Option, the Company shall not be required to issue such
shares unless the Committee has received evidence satisfactory to it to the
effect that the holder of such Option will not transfer such shares except
pursuant to a registration statement in effect under the Securities Act of 1933,
as now in effect or hereafter amended (the "Act"), and under the applicable
securities laws of any State, unless the Company has received an opinion of
counsel satisfactory to the Company, in form and substance satisfactory to the
Company, to the effect that such registration is not required. Any determination
in this connection by the Committee shall be final, binding and conclusive. In
the event the shares issuable on exercise of an Option are not registered under
the Act, the Company may imprint the following legend or any other legend which
counsel for the Company considers necessary or advisable to comply with the Act
or other applicable laws:
The shares of stock represented by this certificate have not been
registered under the Securities Act of 1933 or under the securities
laws of any State and may not be sold or transferred except upon such
registration or upon receipt by the Corporation of an opinion of
counsel satisfactory to the Corporation, in form and substance
satisfactory to the Corporation, that registration is not required for
such sale or transfer.
The Company may, but shall in no event be obligated to, register any
securities covered hereby pursuant to the Act; and in the event any shares are
so registered the Company may remove any legend on certificates
A-4
<PAGE> 31
representing such shares. The Company shall not be obligated to take any other
affirmative action in order to cause the exercise of an Option or the issuance
of shares pursuant thereto to comply with any other law, regulation or order of
any governmental authority.
SECTION 14. NO RIGHTS AS STOCKHOLDER.
No optionee shall have rights as a stockholder with respect to shares
covered by his Option until the date of issuance of a stock certificate for such
shares; and, except as otherwise provided in Section 16 hereof, no adjustment
for dividends, or otherwise, shall be made if the record date therefor is prior
to the date of issuance of such certificate.
SECTION 15. EMPLOYMENT OBLIGATION.
The granting of any Option shall not impose upon the Company any obligation
to employ or continue to employ, or to retain the services of or to continue to
retain the services of, any optionee; and the right of the Company to terminate
the employment or services of any officer, other employee or consultant shall
not be diminished or affected by reason of the fact that an Option has been
granted to him.
SECTION 16. CHANGES IN THE COMPANY'S CAPITAL STRUCTURE.
The existence of outstanding Options shall not affect in any way the right
or power of the Company or its stockholders to make or authorize, without
limitations, any or all adjustments, recapitalizations, reorganizations or other
changes in the Company's capital structure or its business, or any merger or
consolidation of the Company, or any issue of Common Stock, or any issue of
bonds, debentures, preferred or prior preference stock ahead of or affecting the
Common Stock or the rights thereof, or the dissolution or liquidation of the
Company, or any sale or transfer of all or any part of its assets or business,
or any other corporate act or proceeding, whether of a similar character or
otherwise.
If the Company shall effect a subdivision or consolidation or shares or
other capital readjustment, the payment of a stock dividend, or other increase
or reduction of the number of shares of the Common Stock outstanding, without
receiving compensation therefor in money, services or property, then (i) the
number, class, and per share price of shares of stock subject to outstanding
Options hereunder shall be appropriately adjusted in such a manner as to entitle
an optionee to receive upon exercise of an Option, for the same aggregate cash
consideration, the same total number and class of shares as he would have
received as a result of the event requiring the adjustment had he exercised his
Option in full immediately prior to such event; and (ii) the number and class of
shares with respect to which Options may be granted under the Plan shall be
adjusted by substituting for the total number of shares of Common Stock then
reserved that number and class of shares of stock that would have been received
by the owner of an equal number of outstanding shares of Common Stock as the
result of the event requiring the adjustment.
After a merger of one or more corporations into the Company, or after a
consolidation of the Company and one or more corporations in which (i) the
Company shall be the surviving corporation, and (ii) the stockholders of the
Company immediately prior to such merger or consolidation own after such merger
or consolidation shares representing at least fifty percent (50%) of the voting
power of the Company, each holder of an outstanding Option shall, at no
additional cost, be entitled upon exercise of such Option to receive (subject to
any required action by stockholders) in lieu of the number of shares as to which
such Option shall then be so exercisable, the number and class of shares of
stock or other securities to which such holder would have been entitled pursuant
to the terms of the agreement of merger or consolidation if, immediately prior
to such merger or consolidation, such holder had been the holder of record of a
number of shares of Common Stock equal to the number of shares as to which such
Option shall be so exercised.
If the Company is merged into or consolidated with another corporation
under circumstances where the Company is not the surviving corporation, or if
there is a merger or consolidation where the Company is the
A-5
<PAGE> 32
surviving corporation but the stockholders of the Company immediately prior to
such merger or consolidation do not own after such merger or consolidation
shares representing fifty percent (50%) of the voting power of the Company, or
if the Company is liquidated, or sells or otherwise disposes of substantially
all its assets to another corporation while unexercised Options remain
outstanding under the Plan, (i) subject to the provisions of clause (iii) below,
after the effective date of such merger, consolidation, liquidation, sale or
disposition, as the case may be, each holder of an outstanding Option shall be
entitled, upon exercise of such Option, to receive, in lieu of shares of Common
Stock, shares of such stock or other securities, cash or property as the holders
of shares of Common Stock received pursuant to the terms of the merger,
consolidation, liquidation, sale or disposition; (ii) the Committee may
accelerate the time for exercise of all unexercised and unexpired Options to and
after a date prior to the effective date of such merger, consolidation,
liquidation, sale or disposition, as the case may be, specified by the
Committee; or (iii) all outstanding Options may be cancelled by the Committee as
of the effective date of any such merger, consolidation, liquidation, sale or
disposition provided that (x) notice of such cancellation shall be given to each
holder of an Option and (y) each holder of an Option shall have the right to
exercise such Option to the extent that the same is then exercisable or, if the
Committee shall have accelerated the time for exercise of all unexercised and
unexpired Options, in full during the 30-day period preceding the effective date
of such merger, consolidation, liquidation, sale or disposition.
Except as hereinbefore expressly provided, the issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, for cash or property, or for labor or services either upon direct
sale or upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, shall not affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock then
subject to outstanding Options.
SECTION 17. AMENDMENT OR TERMINATION OF PLAN.
The Committee may modify, revise or terminate this Plan at any time and
from time to time, except that the class of executives, employees and
consultants eligible to receive Options and the aggregate number of shares
issuable pursuant to this Plan shall not be changed or increased, other than by
operation of Section 16 hereof, without the consent of the stockholders of the
Company; provided, however, that no amendment shall modify (within the meaning
of Section 424(h) of the Code) any Incentive Stock Option outstanding on the
date of such amendment.
SECTION 18. WRITTEN AGREEMENT.
Each Option granted hereunder shall be embodied in a written option
agreement which shall be subject to the terms and conditions prescribed above
and shall be signed by the President, any Vice President or the Treasurer of the
Company for and in the name and on behalf of the Company. Such an option
agreement shall contain such other provisions as the Committee in its discretion
shall deem advisable.
SECTION 19. EFFECTIVE DATE AND DURATION OF PLAN.
The Plan shall become effective upon its adoption by the Board of
Directors, and shall be submitted to the stockholders of the Company at the next
Annual Meeting or Special Meeting in Lieu of Annual Meeting following the
adoption of the Plan by the Board of Directors. Options may not be granted under
the Plan more than (10) years after said effective date. The Plan shall
terminate (i) when the total amount of the Common Stock with respect to which
Options may be granted shall have been issued upon the exercise of Options or
(ii) by action of the Committee pursuant to Section 17 hereof, whichever shall
first occur.
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CAYENNE SOFTWARE, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF CAYENNE SOFTWARE,
INC. A STOCKHOLDER WISHING TO VOTE IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE
BOARD OF DIRECTORS NEED ONLY SIGN AND DATE THIS PROXY AND RETURN IT IN THE
ENCLOSED ENVELOPE.
PROXY FOR SPECIAL MEETING IN LIEU OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 20, 1996
The undersigned stockholder of Cayenne Software, Inc., revoking all prior
proxies, hereby appoints Peter J. Boni and Frederick H. Phillips, or either of
them acting singly, proxies, with full power of substitution, to vote all shares
of Common Stock of Cayenne Software, Inc. which the undersigned is entitled to
vote at the Special Meeting In Lieu of Annual Meeting of Stockholders to be held
at the law offices of Foley, Hoag & Eliot, 16th Floor, One Post Office Square,
Boston, Massachusetts on Wednesday, November 20, 1996 at 9:00 A.M., local time,
and at any adjournments thereof, upon matters set forth in the Notice of Special
Meeting In Lieu of Annual Meeting and Proxy Statement dated October 22, 1996, a
copy of which has been received by the undersigned, and in their discretion upon
any business that may properly come before the meeting or any adjournments
thereof. Attendance of the undersigned at the meeting or any adjourned session
thereof will not be deemed to revoke this proxy unless the undersigned shall
affirmatively indicate the intention of the undersigned to vote the shares
represented hereby in person prior to the exercise of this proxy.
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PLEASE VOTE AND SIGN ON OTHER SIDE AND RETURN PROMPTLY IN ENCLOSED ENVELOPE.
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Please sign this proxy card exactly as your name(s) appear on your stock
certificate. Joint owners should each sign personally. Trustees and other
fiduciaries should indicate the capacity in which they sign, and where more than
one name appears, a majority must sign. If a corporation or partnership, this
signature should be that of an authorized officer or other person who should
state his or her title.
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HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
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/X/ PLEASE MARK VOTES
AS IN THIS EXAMPLE
With- For All
For hold Except
1. Election of Class B Directors / / / / / /
Peter J. Boni, R. John Fletcher
INSTRUCTIONS: To withhold authority to vote for either nominee, mark the "For
All Except" box and strike a line through that nominee's name.
RECORD DATE SHARES:
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REGISTRATION
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For Against Abstain
2. To Approve the Amended 1996 Incentive / / / / / /
and Non-qualified Stock Option Plan.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO
DIRECTION IS GIVEN WITH RESPECT TO ONE OR MORE OF THE PROPOSALS SET FORTH ON
THE REVERSE SIDE OF THIS CARD, WILL BE VOTED FOR SUCH PROPOSAL OR PROPOSALS.
Mark box at right if comments or address change have / /
been noted on the reverse side of this card.
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Please be sure to sign and date this Proxy. Date
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---------Shareholder sign here----------------Co-owner sign here----------
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DETACH CARD DETACH CARD
