<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
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 addition materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
RETIX
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
RETIX
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/X/ No fee required
/ / 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 transactions applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
-----------------------------------------------------------------------
(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:
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- ------------------------
* Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE>
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 15, 1997
---------------------
TO THE SHAREHOLDERS OF RETIX:
Notice is hereby given that the Annual Meeting of Shareholders of Retix (the
"Company"), a California corporation, will be held at the Marina Beach Marriott
Hotel located at 4100 Admiralty Way, Marina del Rey, California 90292, on
Tuesday, April 15, 1997, at 8:30 a.m., local time, for the following purposes:
1. To elect the following Class I directors of the Company each to serve
for a two-year term: Jeffrey M. Drazan, M.Y. (Joe) Stephan, and Gilbert
P. Williamson.
2. To ratify the appointment of Deloitte & Touche LLP as the independent
auditors for the Company for the fiscal year ending December 27, 1997.
3. To transact such other business as may properly come before the meeting
or any postponement or adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only shareholders of record at the close of business on February 19, 1997
will be entitled to notice of and to vote at the Annual Meeting or any
postponement or adjournment thereof.
All shareholders are cordially invited to attend the Annual Meeting in
person. However, to assure your representation at the meeting, you are urged to
mark, sign, date and return the enclosed proxy card as promptly as possible in
the postage-prepaid envelope enclosed for that purpose. If you decide to attend
the meeting you may vote in person even if you returned a proxy card.
BY ORDER OF THE BOARD OF DIRECTORS
[/S/ CRAIG W. JOHNSON]
CRAIG W. JOHNSON,
SECRETARY
Marina del Rey, California
February 26, 1997
YOUR VOTE IS IMPORTANT
IN ORDER TO ASSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE REQUESTED TO
COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE AND RETURN IT
IN THE ENVELOPE PROVIDED.
<PAGE>
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PROXY STATEMENT FOR 1997 ANNUAL MEETING OF SHAREHOLDERS
---------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed Proxy is solicited on behalf of the Board of Directors of Retix
(the "Company"), a California corporation, for use at the Annual Meeting of
Shareholders to be held Tuesday, April 15, 1997 at 8:30 a.m., local time, or at
any postponement or adjournment thereof, for the purposes set forth in this
Proxy Statement and in the accompanying Notice of Annual Meeting of
Shareholders. The Annual Meeting will be held at the Marina Beach Marriott Hotel
located at 4100 Admiralty Way, Marina del Rey, California 90292. The Company's
principal executive offices are located at 4640 Admiralty Way, 6th Floor, Marina
del Rey, California 90292-6695. The Company's principal telephone number at that
location is (310) 828-3400.
These proxy solicitation materials were mailed on or about February 26, 1997
to all shareholders entitled to vote at the meeting.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Company (Attention:
Pamela J. Bergman, Inspector of Elections) a written notice of revocation or a
duly executed proxy bearing a later date or by attending the meeting and voting
in person.
VOTING AND SOLICITATION
Votes cast by proxy or in person at the Annual Meeting will be tabulated by
the Inspector of Elections with the assistance of the Company's transfer agent.
The Inspector of Elections will also determine whether or not a quorum is
present. Each share of Common Stock is entitled to one vote, and the Company's
Articles of Incorporation provide that there is no cumulative voting for the
election of directors.
Except in certain specific circumstances, the affirmative vote of a majority
of shares REPRESENTED and VOTING at a duly held meeting at which a quorum is
present (which shares voting affirmatively also constitute a majority of the
required quorum) is required under California law for approval of proposals
presented to shareholders. In general, California law also provides that a
quorum consists of a majority of the shares ENTITLED TO VOTE, represented either
in person or by proxy. The Inspector of Elections will treat abstentions as
shares that are present and ENTITLED TO VOTE for purposes of determining the
presence of a quorum but as not VOTING for purposes of determining the approval
of any matter submitted to the shareholders for a vote. Any proxy which is
returned using the form of proxy enclosed and which is not marked as to a
particular item will be voted for the election of directors, for ratification of
the appointment of the designated independent auditors and as the proxy holders
deem advisable on other matters that may come before the meeting, as the case
may be with respect to the item not marked. If a broker indicates on the
enclosed proxy or its substitute that it does not have discretionary authority
as to certain shares to vote on a particular matter ("broker non-votes"), those
shares will not be considered as VOTING with respect to that matter. While there
is no definitive specific statutory or case law authority in California
concerning the proper treatment of abstentions and broker non-votes, the Company
believes that the tabulation procedures to be followed by the Inspector of
Elections are consistent with the general statutory requirements in California
concerning voting of shares and determination of a quorum.
1
<PAGE>
The cost of soliciting proxies will be borne by the Company. The Company
will reimburse brokerage firms and other persons representing beneficial owners
of shares for their expenses in forwarding solicitation material to such
beneficial owners. Proxies may be solicited by certain of the Company's
directors, officers and regular employees, without additional compensation,
personally or by telephone, facsimile or telegram.
RECORD DATE AND SHARE OWNERSHIP
Only shareholders of record at the close of business on February 19, 1997
are entitled to notice of and to vote at the meeting. As of February 19, 1997,
22,601,836 shares of the Company's Common Stock were issued and outstanding.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
NOMINEES
The Company's Bylaws currently provide for five directors, and the Company's
Articles of Incorporation provide for the classification of the Board of
Directors into two classes serving staggered terms. The Company's Board of
Directors currently consists of five persons, including three Class I directors
and two Class II directors. Each Class I and Class II director is elected for
two year terms, with Class I directors elected in odd-numbered years (e.g.,
1997) and the Class II directors elected in even-numbered years (e.g., 1998).
Accordingly, at the Annual Meeting, three Class I directors will be elected.
The Board of Directors has nominated the three persons named below to serve
as Class I directors until the next Annual Meeting at which Class I directors
are elected and until their successors are elected and qualified. Unless
otherwise instructed, the proxy holders will vote the proxies received by them
for the Company's three nominees named below, all of whom are presently
directors of the Company. In the event that any nominee of the Company is unable
or declines to serve as a director at the time of the Annual Meeting, the
proxies will be voted for any nominee who shall be designated by the present
Board of Directors to fill the vacancy. In the event that additional persons are
nominated for election as directors, the proxy holders intend to vote all
proxies received by them in such a manner as will assure the election of as many
of the nominees listed below as possible, and, in such event, the specific
nominees for whom the proxy holders will vote will be determined by the proxy
holders. Assuming a quorum is present and no additional nominations are made,
the three nominees for director receiving the greatest number of votes cast at
the Annual Meeting will be elected.
The names of the nominees for Class I director, and certain information
about them as of February 19, 1997, are set forth below:
<TABLE>
<CAPTION>
NAME OF DIRECTOR AGE PRINCIPAL OCCUPATION DIRECTOR SINCE
- ------------------------ --- -------------------------------------------------------- ---------------
<S> <C> <C> <C>
Jeffrey M. Drazan 38 General Partner, Sierra Ventures, a venture 1996
capital firm
Joe Stephan 52 President and Chief Executive Officer of Retix 1996
Gilbert P. Williamson 59 Retired Chairman of the Board of Directors and Chief 1993
Executive Officer of NCR Corporation
</TABLE>
Except as set forth below, each of the nominees has been engaged in his
principal occupation set forth above during the past five years. There is no
family relationship between any director or executive officer of the Company.
Mr. Drazan has been a member of the Board of Directors of the Company since
his appointment in January 1996. Mr. Drazan has been a general partner of Sierra
Ventures, a venture capital firm, since 1985. Mr. Drazan currently serves as a
director of FaxSav, a discount international fax service, and Digital Generation
Systems, a multimedia network distribution company. Mr. Drazan holds a B.S.E. in
Engineering from Princeton University and an M.B.A. from New York University.
2
<PAGE>
Mr. Stephan has served as President and Chief Executive Officer of the
Company since September 1995 and as a director of the Company since January
1996. From July 1995 to September 1995, prior to his appointment as President
and Chief Executive Officer of the Company, Mr. Stephan served as a consultant
to the Company. Prior to joining the Company, Mr. Stephan served in several
executive positions during his 25 years at NCR Corporation, a supplier of
computers and other electronic equipment ("NCR") (subsequently AT&T Global
Information Solutions), including Senior Vice President, International from 1993
to 1995, Vice President, Europe Group from 1992 to 1993, Vice President,
Corporate Marketing and Strategy Planning from 1991 to 1992 and Vice President,
Latin America/Middle East/Africa from 1986 to 1991.
Mr. Williamson has served as a director of the Company since December 1993.
From September 1991 to May 1993 he served as Chairman of the Board of Directors
and Chief Executive Officer of NCR. He served as President of NCR from January
1988 until September 1991. Mr. Williamson is also a director of The Santa Cruz
Operation, Inc., a supplier of computer software, Roberds, a home electronics
and furniture retailer and Citizens Federal Bancorp, an Ohio-based bank.
CLASS II DIRECTORS
The names of the Company's Class II directors, and certain information about
them as of February 19, 1997, are set forth below:
<TABLE>
<CAPTION>
NAME OF DIRECTOR AGE PRINCIPAL OCCUPATION DIRECTOR SINCE
- -------------------- --- ------------------------------------------------------------ ---------------
<S> <C> <C> <C>
Neil Hynes 61 Retired President and Chief Executive Officer of
Plantronics, Inc. 1993
Craig W. Johnson 50 Director, Venture Law Group, A Professional Corporation,
counsel to the Company 1993
</TABLE>
Except as set forth below, each of the Class II directors has been engaged
in his principal occupation set forth above during the past five years.
Mr. Hynes has served as a director of the Company since December 1993. From
December 1980 to April 1992 he served as President and Chief Executive Officer
of Plantronics, Inc., a supplier of telecommunications products.
Mr. Johnson has been Secretary of the Company since July 1992, and a
director since February 1993. Since January 1995, he has been a Director of
Venture Law Group, A Professional Corporation, outside general counsel to the
Company, and from February 1993 until January 1995 he was a partner of Venture
Law Group (a predecessor entity). Prior to February 1993, and for more than five
years prior to the date of mailing of these proxy solicitation materials, he was
a member of Wilson, Sonsini, Goodrich & Rosati, Professional Corporation,
outside general counsel to the Company prior to February 1993. Mr. Johnson is
also a director of Collagen Corporation, a biomaterials company, and Fractal
Design Corporation, a developer of graphics and multimedia design software.
3
<PAGE>
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of ten meetings during
the fiscal year ended December 28, 1996. The Board of Directors has an Audit
Committee and a Compensation Committee. It does not have a nominating committee
or a committee performing the functions of a nominating committee.
The Audit Committee of the Board of Directors presently consists of Messrs.
Johnson and Williamson. The Audit Committee held five formal meetings during the
last fiscal year. The Audit Committee recommends engagement of the Company's
independent auditors, and is primarily responsible for approving the services
performed by the Company's independent accountants and for reviewing and
evaluating the Company's accounting principles and its system of internal
accounting controls.
The Compensation Committee of the Board of Directors presently consists of
Messrs. Hynes, Johnson and Williamson and held six formal meetings during the
last fiscal year. The Compensation Committee makes recommendations to the Board
of Directors regarding the Company's executive compensation policy.
No incumbent director attended fewer than 75% of the aggregate number of
meetings of the Board of Directors and meetings of the committees of the Board
on which he serves.
COMPENSATION OF DIRECTORS
Non-employee members of the Board of Directors are eligible to receive a
retainer of $1,750 per quarter and $1,000 per meeting of the Board of Directors
attended, and may be reimbursed for costs of attending Board and Committee
meetings. In addition, non-employee members of the Board of Directors receive
options to purchase shares of the Company's Common Stock pursuant to its 1996
Directors' Stock Option Plan (the "1996 Directors' Option Plan").
The 1996 Directors' Option Plan provides for the grant of nonstatutory
options to non-employee directors of the Company at an exercise price not less
than the fair market value of the Company's Common Stock on the date of grant.
Each non-employee director is automatically granted an option to purchase 40,000
shares of Common Stock (the "Initial Option") on the date on which the earlier
of the following occurs: (1) the effective date of the 1996 Directors' Option
Plan if such person was a non-employee director on such date, or (2) the date on
which such person first becomes a director, whether through election by the
shareholders of the Company or appointment by the Board of Directors to fill a
vacancy. Thereafter, on January 1 of each year commencing January 1, 1997, each
non-employee director is automatically granted an option to purchase 10,000
shares of Common Stock (the "Annual Option") if, on such date, he or she shall
have served on the Company's Board for at least six months. Options granted
under the 1996 Directors' Option Plan have a term of ten years. The Initial
Options become exercisable cumulatively to the extent of 25% of the shares
subject to the option on each of the first four anniversaries of the date of
grant. In addition, both the Initial and Annual Options become exercisable in
full upon dissolution or liquidation of the Company, sale of all or
substantially all of the Company's assets, merger or consolidation in which the
Company is not the surviving corporation, or other capital reorganization in
which more than fifty percent (50%) of the shares of the Company entitled to
vote are exchanged.
Except for automatic option grants under the 1996 Directors' Option Plan,
non-employee directors will not be eligible to receive any additional option
grants or stock issuances for Retix shares under the 1996 Directors' Option
Plan. The 1996 Directors' Option Plan provides for neither a maximum nor a
minimum number of shares subject to options that may be granted to any one
non-employee director, but does provide for the number of shares which may be
included in any grant and the method of making a grant.
In addition, Messrs. Drazan, Hynes, Johnson, Stephan and Williamson (the
"Subsidiary Directors") are also members of the respective Boards of certain of
the Company's subsidiaries (Vertel Corporation,
4
<PAGE>
Internetworking Solutions and Wireless Solutions (collectively, the
"Subsidiaries")), except for Messrs. Hynes and Johnson who are not directors of
Vertel. In such capacity, the non-employee Subsidiary Directors are entitled to
be reimbursed for costs of attending Subsidiary Board and Committee meetings. In
addition, the non-employee Subsidiary Directors receive options to purchase
shares of the Subsidiaries' Common Stock pursuant to Vertel's 1996 Directors'
Stock Option Plan (the "Vertel Plan"), Internetworking Solutions' 1996
Directors' Stock Option Plan (the "Internetworking Plan"), and Wireless
Solutions' 1996 Directors' Stock Option Plan (the "Wireless Plan").
The Vertel Plan, the Internetworking Plan and the Wireless Plan
(collectively, the "Subsidiary Plan(s)") provide for the grant of nonstatutory
options to all non-employee directors of the Subsidiaries (including the
Subsidiary Directors) at an exercise price of not less than the fair market
value of each respective Subsidiary's Common Stock on the date of grant. Under
the terms of the Subsidiary Plans, each non-employee director of the
Subsidiaries who also serves as a director of the Company is automatically
granted an initial option (the "Initial Subsidiary Option") to purchase 10,000
shares of Vertel's Common Stock in the case of the Vertel Plan, 20,000 shares of
Internetworking Solutions' Common Stock in the case of the Internetworking Plan,
and 20,000 shares of Wireless Solutions' Common Stock in the case of the
Wireless Plan, in each case on the date on which the earlier of the following
occurs: (1) the effective date of the respective Subsidiary Plan, if such person
was a non-employee director of the Subsidiary on such date, or (2) the date on
which such person first becomes a director, whether through election by the
shareholders of the Subsidiary or appointment by the Subsidiary's Board of
Directors to fill a vacancy. In addition, under the current provisions of the
Subsidiary Plans, each non-employee director who joins the Board of Directors of
any Subsidiary and does not also serve as a director of Retix shall be
automatically granted options to purchase 20,000 shares of Vertel's Common Stock
in the case of the Vertel Plan, 40,000 shares of Internetworking Solutions'
Common Stock in the case of the Internetworking Plan, and 40,000 shares of
Wireless Solutions' Common Stock in the case of the Wireless Plan on the date on
which such person first becomes a director of any Subsidiary, whether through
election by the shareholders of the Subsidiary or appointment by the
Subsidiary's Board of Directors to fill a vacancy. Thereafter, on January 1 of
each year, each non-employee director of the Subsidiaries is automatically
granted an option ("Subsequent Subsidiary Option") to purchase 2,500 shares
(5,000 shares for each non-employee Subsidiary Director who does not also serve
as a director of Retix) of Vertel Common Stock in the case of the Vertel Plan,
5,000 shares (10,000 shares for each non-employee Subsidiary Director who does
not also serve as a director of Retix) of Internetworking Solutions' Common
Stock in the case of the Internetworking Plan, and 5,000 shares (10,000 shares
for each non-employee Subsidiary Director who does not also serve as a director
of Retix) of Wireless Solutions' Common Stock in the case of the Wireless Plan,
if on such date, he or she shall have served on the respective Subsidiary's
Board for at least six months. Options granted under the Subsidiary Plans have a
term of ten years. The Initial Subsidiary Options become exercisable
cumulatively to the extent of 25% of the shares subject to the option on each of
the first four anniversaries of the date of grant. The Subsequent Subsidiary
Options become exercisable in full on the fourth anniversary of the date of
grant. In addition, both the Initial and Subsequent Subsidiary Options become
exercisable in full upon any dissolution or liquidation of the Subsidiary, sale
of all or substantially all of the Subsidiary's assets, merger or consolidation
in which the Subsidiary is not the surviving corporation, or other capital
reorganization in which more than fifty percent (50%) of the shares of the
Subsidiary entitled to vote are exchanged.
Currently, Ralph Ungermann, founder and Chief Executive Officer of First
Virtual Corporation, an ATM networking company, is the only non-employee
Subsidiary Director who does not also serve as a director of Retix. Mr.
Ungermann has served as a director of Vertel Corporation since March 1996 and,
as such, received Initial Subsidiary Options to purchase 20,000 shares of
Vertel's Common Stock pursuant to the Vertel Plan. In addition, Mr. Johnson, who
is not a director but acts as the Secretary of Vertel, has received options to
purchase 1,000 shares of Vertel's common stock pursuant to Vertel's 1996 Stock
Option Plan. Venture Law Group, A Professional Corporation, a law firm of which
Mr. Johnson is a director and shareholder, acts as legal counsel to Vertel and,
in such role, received options to purchase 8,000 shares of
5
<PAGE>
Vertel Common Stock pursuant to Vertel's 1996 Stock Option Plan. The options
granted to Mr. Johnson and Venture Law Group were non-statutory options which
vest cumulatively to the extent of 25% of the shares subject to the option on
each of the first four anniversaries of the date of grant.
Except for automatic option grants under the Subsidiary Plans, the
Subsidiary Directors will not be eligible to receive any additional option
grants or stock issuances for Subsidiary shares under the Subsidiary Plans. The
Subsidiary Plans provide for neither a maximum nor a minimum number of shares
subject to options that may be granted to any Subsidiary Director, but do
provide for the number of shares which may be included in any grant and the
method of making a grant.
Directors who are employees of the Company do not receive any additional
compensation for their services as directors.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS VOTING FOR ALL OF THE NOMINEES LISTED
ABOVE.
PROPOSAL NO. 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected Deloitte & Touche LLP, independent
auditors, to audit the financial statements of the Company for the fiscal year
ending December 27, 1997 and recommends that the shareholders vote for
ratification of such appointment. In the event of a negative vote on such
ratification, the Board of Directors will reconsider its selection. Deloitte &
Touche LLP has audited the financial statements of the Company since 1987.
Representatives of Deloitte & Touche LLP are expected to be present at the
meeting and will have the opportunity to make a statement if they desire to do
so. They are also expected to be available to respond to appropriate questions.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS VOTING IN FAVOR OF THE RATIFICATION OF THE
APPOINTMENT OF DELOITTE & TOUCHE LLP AS INDEPENDENT AUDITORS FOR THE COMPANY.
6
<PAGE>
COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of the Company's
Common Stock as of February 19, 1997 as to (i) each person who is known by the
Company to own beneficially more than five percent of the Company's Common
Stock, (ii) each of the Company's directors, (iii) each of the executive
officers named in the Summary Compensation Table beginning on page 11, and (iv)
all directors and executive officers as a group.
<TABLE>
<CAPTION>
5% SHAREHOLDERS, DIRECTORS, NAMED SHARES BENEFICIALLY OWNED (1)
EXECUTIVE OFFICERS, AND DIRECTORS AND ------------------------------
EXECUTIVE OFFICERS AS A GROUP NUMBER(2) PERCENT OF TOTAL
- --------------------------------------------------------------------- ----------- -----------------
<S> <C> <C>
Sierra Ventures V, L.P. (3).......................................... 4,000,000 16.3%
3000 Sand Hill Road
Menlo Park, CA 94025
Ashok Dhawan (4)..................................................... 15,000 *
Jeffrey M. Drazan (5)................................................ 10,000 *
Randolph G. Fardal (6)............................................... 52,725 *
Neil Hynes........................................................... 25,000 *
Craig W. Johnson (7)................................................. 30,000 *
Philip Mantle........................................................ 426,000 1.9%
Joe Stephan.......................................................... 1,058,824 4.7%
Steven M. Waszak..................................................... 235,371 1.0%
Gilbert P. Williamson................................................ 33,000 *
All directors and executive officers as a group (9 persons) (8)...... 1,885,920 8.3%
</TABLE>
- ------------------------------
* Less than 1%.
(1) Except as indicated in the footnotes to this table and pursuant to
applicable community property laws, the persons named in the table have sole
voting and investment power with respect to all shares of Common Stock.
(2) Includes with respect to each named person the following shares subject to
stock options exercisable within 60 days of February 19, 1997: Mr. Fardal --
28,603; Mr. Hynes -- 25,000; Mr. Johnson -- 30,000; Mr. Williamson --
25,000; and Mr. Drazan -- 10,000.
(3) Total includes 2,000,000 shares of the Company's Common Stock issuable upon
exercise of a warrant issued to Sierra Ventures V, L.P. ("Sierra") on
January 30, 1996 (the "Sierra Warrant").
(4) Mr. Dhawan resigned as an officer of the Company in March 1996.
(5) Total excludes 2,000,000 shares of Common Stock held by Sierra and 2,000,000
shares of Common Stock issuable upon exercise of the Sierra Warrant. Mr.
Drazan is a general partner of Sierra and disclaims beneficial ownership of
such shares except to the extent of his monetary interest therein.
(6) Mr. Fardal became an officer of Internetworking Solutions, a subsidiary of
the Company, in May 1996.
(7) Shares held by Mr. Johnson are beneficially owned by various investment
partnerships of which Mr. Johnson and certain other employees of Venture Law
Group, A Professional Corporation, legal counsel to the Company, are
partners. Mr. Johnson disclaims beneficial ownership of such shares except
to the extent of his monetary interest therein aggregating 6,000 shares.
(8) Total excludes 2,000,000 shares of Common Stock held by Sierra and 2,000,000
shares of Common Stock issuable issuable upon exercise of the Sierra
Warrant. Mr. Drazan is a general partner of Sierra and disclaims beneficial
ownership of such shares except to the extent of his monetary interest
therein. Total includes Messrs. Dhawan and Fardal; see footnotes 4 and 6
above.
7
<PAGE>
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE COMPANY'S
PREVIOUS FILINGS UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, THAT MIGHT INCORPORATE FUTURE FILINGS,
INCLUDING THIS PROXY STATEMENT, IN WHOLE OR IN PART, THE FOLLOWING REPORT AND
THE PERFORMANCE GRAPH ON PAGE 10 SHALL NOT BE INCORPORATED BY REFERENCE INTO ANY
SUCH FILINGS.
REPORT OF THE COMPENSATION COMMITTEE
EXECUTIVE COMPENSATION PRINCIPLES
This Committee report documents the components of the Company's executive
officer compensation programs and describes the bases on which fiscal 1996
compensation determinations were made by the Compensation Committee with respect
to the executive officers of the Company, including the executive officers who
are named in the compensation tables (the "Named Executives").
The Compensation Committee of the Board of Directors is composed of three
non-employee directors. As members of the Compensation Committee, it is our
responsibility to set and administer the policies which govern compensation and
stock ownership programs, and to set compensation levels of the chief executive
and other executive officers.
The following objectives have been adopted by the Compensation Committee as
guidelines for compensation decisions: (i) provide a competitive compensation
package that enables the Company to attract and retain key executives, (ii)
integrate all pay programs with the Company's annual and long-term business
strategy and objectives, and focus executive actions on the fulfillment of those
objectives, and (iii) provide variable compensation opportunities that are
directly linked with the performance of the Company and that align executive
remuneration with the interests of shareholders.
The Company's executive compensation program consists of base salary, annual
incentive compensation and long-term equity incentives in the form of stock
options. Executives are also eligible for benefits generally available to all
employees of the Company, including medical plans, a 401(k) savings plan and the
Company's 1991 Employee Stock Purchase Plan.
Base salary levels for the Company's executive officers are competitively
set relative to companies of comparable size, geographic scope and complexity to
Retix. In determining salaries the Compensation Committee also considers
individual experience, performance and specific issues particular to the
Company.
Annual incentive compensation is provided to executive officers through a
bonus program which rewards achievement of desired levels of corporate and
business unit performance. At the beginning of each fiscal year, the Board of
Directors determines threshold and target goals for Company and business unit
performance. The corporate performance rating is based on achievement by the
Company of revenue and operating profit goals. Bonuses for business unit
performance are based on achievement of defined revenue levels and operating
profitability of the business unit. The Board of Directors determines the amount
of incentive compensation to be paid to the respective executive officers for
achievement by the Company and the business units of performance goals based
upon the recommendations of the Compensation Committee. In addition, the Board
of Directors determines the amount of annual incentive compensation to be paid
under commission agreements to executive officers who directly manage the
Company's sales organization for achieving specified sales levels based upon the
recommendations of the Compensation Committee.
The Board of Directors approved a total of $193,500 in cash bonuses to the
Company's executive officers in 1996 (including $75,000 for Mr. Stephan, Retix's
President and Chief Executive Officer, as described on the following page). The
bonuses were paid as a result of significant improvements in the Company's
break-even point after successful execution of its restructuring strategy, in
addition to completion of the Company's reorganization into three separate
business units.
Longer term incentive compensation consists of grants of stock options under
the Company's stock option plans. Additionally, grants of stock options under
subsidiary business unit stock option plans provide specific incentive by
business unit. The Compensation Committee strongly believes that by
8
<PAGE>
providing those persons who have substantial responsibility for the day-to-day
management and growth of the Company with an opportunity to increase their
ownership of the Company's stock, the best interests of shareholders and
executives will be closely aligned. Therefore, executives are eligible to
receive stock options from time to time, giving them the right to purchase
shares of Common Stock of the Company at a specified price in the future. The
number of stock options granted to executive officers is based on both
individual performance and competitive practices.
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Stephan was appointed to the position of Chief Executive Officer of the
Company in September 1995. In his position as Chief Executive Officer, Mr.
Stephan's base salary for fiscal 1996 was $200,000. During 1996, Mr. Stephan was
granted options to purchase 250,000 shares of Common Stock. In January 1996, the
Board of Directors amended stock options held by Mr. Stephan and certain other
officers to permit the exercise of unexercised options then outstanding in
exchange for such officers' promissory notes. The shares issued upon such early
exercise are subject to repurchase by the Company at cost in accordance with the
vesting schedule contained in the applicable stock option agreement. The
Compensation Committee believes that the interest of shareholders and management
are further aligned by management also assuming investment risk as shareholders
of the Company. See "Compensation of Executive Officers -- Summary Compensation
Table."
In determining the compensation package of the Chief Executive Officer, the
Compensation Committee considered the Company's 1996 reorganization activities,
Mr. Stephan's leadership role required with respect to such activities, the
magnitude of the activities to reverse the Company's declining financial trend
and improve its financial position and the factors listed above which are
considered for each executive officer. The Compensation Committee believes that
Mr. Stephan's 1996 compensation package includes the necessary base compensation
level required to attract and retain a qualified CEO, particularly during the
period of transition for the Company. Mr. Stephan does not participate in the
Compensation Committee's determination of his salary, incentive compensation or
option grants.
COMPENSATION COMMITTEE
Neil Hynes
Craig W. Johnson
Gilbert P. Williamson
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
There are currently no employee directors serving on the Compensation
Committee. The following non-employee directors serve on the Compensation
Committee: Neil Hynes, Craig W. Johnson and Gilbert P. Williamson.
Mr. Johnson has been Secretary of the Company since July 1992, a director of
the Company since February 1993, Secretary of Vertel since February 1996 and a
director and Secretary of Internetworking Solutions and Wireless Solutions since
May 1996. Since January 1995, he has been a Director of Venture Law Group, A
Professional Corporation, outside general counsel to the Company, and from
February 1993 until January 1995 he was a partner of Venture Law Group (a
predecessor entity). Prior to February 1993, and for more than five years prior
to the date of mailing of these proxy solicitation materials, he was a member of
Wilson, Sonsini, Goodrich & Rosati, Professional Corporation, outside general
counsel to the Company prior to February 1993. Mr. Johnson is also a director of
Collagen Corporation, a biomaterials company, and Fractal Design Corporation, a
developer of graphics and multimedia design software.
See "Proposal No. 1 -- Election of Directors -- Compensation of Directors"
for a discussion of certain information with respect to all outside directors,
including directors serving on the Compensation Committee.
9
<PAGE>
PERFORMANCE GRAPH
The following graph compares, for the period that the Company's Common Stock
has been registered under Section 12 of the Securities Exchange Act of 1934
(which commenced December 10, 1991), the cumulative total shareholder return for
the Company, the CRSP Total Return Index for the Nasdaq Stock Market (U.S.
companies) (the "Nasdaq Composite Index"), and a group consisting of publicly
traded U.S. companies in the Company's industry (the "Industry Group"). The
Industry Group consists of 14 companies compiled from within the Investor's
Business Daily "Computer-Local Networks Group," as follows: 3Com Corporation,
Artisoft, Bay Networks, Cabletron Systems Inc., Cheyenne Software Inc., Cisco
Systems Inc., Computer Network Technologies, Crosscom Corporation, Novell,
Optical Data Systems, Proteon Inc., Standard Microsystems, Storage Technologies
and Xircom Inc.
Measurement points are the last trading days of the Company's fiscal years
ended December 28, 1991, January 2, 1993, January 1, 1994, December 31, 1994,
December 30, 1995 and December 28, 1996. The graph assumes that $100 was
invested on December 28, 1991 in the Common Stock of Retix, the Nasdaq Composite
Index and the Industry Group, and further assumes reinvestment of dividends. The
investment returns of each issuer within the Industry Group have been weighted
according to the respective issuer's stock market capitalization at the
beginning of each of the periods presented. The stock price performance on the
following graph is not necessarily indicative of future stock price performance.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
RETIX NASDAQ COMPOSITE INDUSTRY GROUP
<S> <C> <C> <C>
12/28/1991 100.00 100.00 100.00
1/2/1993 145.83 107.62 124.01
1/1/1994 82.29 118.46 144.88
12/31/1994 33.34 120.03 149.63
12/30/1995 17.71 165.13 244.05
12/28/1996 56.25 198.24 309.41
</TABLE>
10
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table shows the compensation received by the Company's Chief
Executive Officer and the four other most highly compensated executive officers
of the Company for fiscal year 1996 (including two persons who resigned their
positions as executive officers during 1996) (the "Named Executives"), and the
compensation received by each such individual for the Company's two prior fiscal
years.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------------ AWARDS
OTHER ANNUAL OPTIONS/SARS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS(2)(3) COMPENSATION(4) (SHARES)(5)(6) COMPENSATION(7)
- --------------------------------- --------- ---------- ----------- ----------------- -------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Joe Stephan (8) 1996 $ 200,000 $ 75,000 -- 250,000 $ 1,818
President and 1995 165,845 -- $ 1,675 775,000 --
Chief Executive Officer 1994 -- -- -- -- --
Ashok Dhawan (9) 1996 131,521 -- -- -- --
Vice President, 1995 152,711 -- -- 50,000 11,708
Development 1994 138,664 15,000 -- 125,000 5,322
Randolph G. Fardal (10) 1996 70,000 -- -- -- 516
Vice President, 1995 139,904 -- -- 30,000 4,250
Marketing 1994 115,980 15,000 -- 51,500 --
Philip Mantle (11) 1996 157,120 58,500 -- 100,000 --
Senior Vice President, 1995 26,292 -- -- 300,000 --
Sales & Marketing 1994 -- -- -- -- --
Steven Waszak 1996 150,000 30,000 -- 50,000 380
Vice President, Finance & 1995 149,961 -- -- 100,000 4,911
Administration and 1994 135,154 17,750 -- 47,500 446
Chief Financial Officer
</TABLE>
- ------------------------------
(1) Includes amounts deferred under the Company's 401(k) plan.
(2) Includes bonuses earned in the indicated fiscal year and paid in the
subsequent fiscal year. Excludes bonuses paid in the indicated fiscal year
but earned in the preceding fiscal year.
(3) Executive officers are entitled to discretionary bonuses based on individual
and corporate performance. These bonuses are determined by the Board of
Directors based on the recommendation of the Compensation Committee. See
"Report of the Compensation Committee."
(4) Includes amounts paid for relocation expenses for the benefit of the Named
Executive.
(5) All options have 10-year terms and become exercisable cumulatively at the
rate of 25% one year after the vesting commencement date and 1/48 of the
shares subject to the option in equal monthly installments thereafter. All
unvested options are subject to earlier termination in the event of the
termination of participant's relationship with the Company. All options were
granted at market value on the date of grant. In the event that certain
change in control events were to occur, the options would be assumed or
equivalent options substituted by a successor corporation, unless the Board
of Directors determined that the options should become immediately
exercisable. The exercise price may be paid, subject to certain conditions,
by delivery of already owned shares or with the proceeds from the sale of
the option shares.
(6) In January and March 1996, the Board of Directors amended certain stock
options held by Messrs. Stephan, Mantle, and Waszak and certain other
employees and consultants to permit the exercise of unexercised options then
outstanding in exchange for such officers' promissory notes, including with
respect to options to purchase 1,025,000 shares of the Company's Common
Stock granted to Mr. Stephan, 400,000 shares of the Company's Common Stock
granted to Mr. Mantle and 203,750 shares of the Company's Common Stock
granted to Mr. Waszak. The shares issued upon such early exercise are
subject to repurchase by the Company at cost in accordance with the same
vesting schedule contained in the applicable stock option agreement. See
"Report of the Compensation Committee."
(7) Consists of the dollar value of premiums paid on term or split-dollar life
insurance policies for the benefit of the Named Executive.
(8) Mr. Stephan began his employment with the Company as a consultant in July
1995 and was appointed President and Chief Executive Officer in September
1995. Mr. Stephan's annual salary compensation for 1995 includes $44,479 in
wages earned as Chief Executive Officer and $121,366 in fees as a consultant
to the Company from July 1995 to September 1995. The consulting expenses
include both services and reimbursed expenses for travel and other
activities undertaken on the Company's behalf.
(9) Mr. Dhawan resigned as an officer of the Company in March 1996.
(10) Mr. Fardal became an officer of Internetworking Solutions, a subsidiary of
the Company, in May 1996. The compensation reflected above represents Mr.
Fardal's compensation received directly from the Company for the portion of
the year he was an officer of the Company.
(11) Mr. Mantle began his employment with the Company in November 1995.
11
<PAGE>
STOCK OPTION GRANTS IN FISCAL YEAR 1996
The following table sets forth information for the Named Executives with
respect to grants of options to purchase Common Stock of the Company made in the
fiscal year ended December 28, 1996 and the value of such options held by the
executive officers on December 28, 1996.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE
AT ASSUMED ANNUAL
INDIVIDUAL GRANTS RATES
---------------------------------------------------------------- OF STOCK PRICE
OPTIONS APPRECIATION
GRANTED % OF TOTAL OPTIONS EXERCISE OR FOR OPTION TERM (3)
(SHARES) GRANTED TO EMPLOYEES BASE PRICE EXPIRATION ---------------------
NAME (1) IN FISCAL YEAR (2) (PER SHARE) DATE 5% 10%
- ----------------------------- ----------- --------------------- ------------- ------------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Joe Stephan.................. 250,000 40.0 $ 3.98 3/18/06 -- --
Ashok Dhawan (4)............. -- -- -- -- -- --
Randolph G. Fardal (5)....... -- -- -- -- -- --
Philip Mantle................ 100,000 16.0 $ 3.98 3/18/06 -- --
Steven Waszak................ 50,000 8.0 $ 3.98 3/18/06 -- --
</TABLE>
- ------------------------------
(1) Options were granted on March 18, 1996. In January and March 1996, the Board
of Directors amended certain stock options held by Messrs. Stephan, Mantle,
and Waszak, including the above referenced options. See "Compensation of
Executive Officers--Summary Compensation Table" and "Transactions with
Management and Others."
(2) The Company granted options to employees for an aggregate of 625,500 shares
of Common Stock during the 1996 fiscal year.
(3) Gains are reported net of the option exercise price but before taxes
associated with exercise. These amounts represent certain assumed rates of
appreciation only. Actual gains, if any, on stock option exercises are
dependent on future performance of the Company's Common Stock, as well as
the optionee's continued employment through the vesting period.
(4) Mr. Dhawan resigned as an officer of the Company in March 1996.
(5) Mr. Fardal became an officer of Internetworking Solutions, a subsidiary of
the Company, in May 1996.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1996
AND YEAR-END OPTION VALUES
The following table sets forth information for the Named Executives with
respect to exercises in fiscal year 1996 of options to purchase Common Stock of
the Company.
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
NUMBER OF IN-THE-MONEY
UNEXERCISED OPTIONS AT
OPTIONS AT12/28/96 12/28/96
SHARES VALUE ------------------ ------------------
ACQUIRED REALIZED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (1) UNEXERCISABLE UNEXERCISABLE (2)
- ----------------------------------------------- ----------- ----------- ------------------ ------------------
<S> <C> <C> <C> <C>
Joe Stephan.................................... 1,025,000 $ -- -- / -- -- / --
Ashok Dhawan (3)............................... 85,034 $ 259,268 -- / -- -- / --
Randolph G. Fardal (4)......................... -- -- 28,603 / -- $ 69,515 / --
Philip Mantle.................................. 400,000 -- -- / -- -- / --
Steven Waszak.................................. 203,750 $ -- -- / -- -- / --
</TABLE>
- ------------------------------
(1) Value realized is calculated based on the closing price of the Company's
Common Stock as reported on the Nasdaq National Market on the date of
exercise minus the exercise price of the option, and does not necessarily
indicate that the optionee sold such stock.
(2) Based on the closing price of the Company's Common Stock as reported on the
Nasdaq National Market on December 27, 1996 ($7.125) minus the exercise
price of the options.
(3) Mr. Dhawan resigned as an officer of the Company in March 1996.
(4) Mr. Fardal became an officer of Internetworking Solutions, a subsidiary of
the Company, in May 1996.
12
<PAGE>
TRANSACTIONS WITH MANAGEMENT AND OTHERS
In January and March 1996, the Board of Directors amended stock options held
by certain officers to permit the exercise of unexercised options then
outstanding in exchange for such officers' promissory notes. The shares issued
upon such early exercise are subject to repurchase by the Company at cost in
accordance with the vesting schedule contained in the applicable stock option
agreement. Payment in the form of promissory notes in the transactions was
approved in each case by a majority of the disinterested directors of the
Company. See "Compensation of Executive Officers -- Summary Compensation Table."
<TABLE>
<CAPTION>
TOTAL
SHARES AGGREGATE
PURCHASER PURCHASED PRICE
- ------------------------------------------------------------------- ----------- ---------------
<S> <C> <C>
Joe Stephan........................................................ 1,025,000 $ 2,695,625
Philip Mantle...................................................... 400,000 $ 1,040,000
Steven Waszak...................................................... 203,750 $ 648,750
</TABLE>
Non-employee members of the Company's Board of Directors are eligible to
receive cash compensation and options to purchase shares of Common Stock in
connection with their service on the Board. See "Proposal No. 1 -- Election of
Directors -- Compensation of Directors."
The Company has entered into indemnification agreements with each of its
directors and officers, which may require the Company, among other things, to
indemnify them against certain liabilities that may arise by reason of their
status or service as directors or officers, to advance their expenses incurred
as a result of any proceeding against them as to which they could be
indemnified, and to obtain directors' and officers' liability insurance if
available on reasonable terms.
SECTION 16(A)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors, and persons who own more than ten percent
of a registered class of the Company's equity securities, to file certain
reports of ownership with the SEC and with the National Association of
Securities Dealers. Such officers, directors and shareholders are also required
by SEC rules to furnish the Company with copies of all Section 16(a) forms that
they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons, the Company believes
that for the fiscal year ended December 28, 1996 all Section 16(a) filing
requirements applicable to its officers, directors and ten percent shareholders
were met.
SHAREHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Proposals of shareholders of the Company which are intended to be presented
by such shareholders at the Company's 1998 Annual Meeting must be received by
the Company no later than October 29, 1997 in order that they may be included in
the proxy statement and form of proxy relating to that meeting.
OTHER MATTERS
The Board of Directors knows of no other matters to be submitted to the
meeting. If any other matters properly come before the meeting or any
postponement(s) or adjournment(s) thereof, it is the intention of the persons
named in the enclosed form of Proxy to vote the shares they represent as the
Board of Directors may recommend.
BY ORDER OF THE BOARD OF DIRECTORS
[/S/ CRAIG W. JOHNSON]
CRAIG W. JOHNSON
SECRETARY
Dated: February 26, 1997
13
<PAGE>
PROXY THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS PROXY
OF RETIX
1997 ANNUAL MEETING OF SHAREHOLDERS
The undersigned shareholder of Retix, a California corporation, hereby
acknowledges receipt of the Notice of Annual Meeting of Shareholders and
Proxy Statement, each dated February 26, 1997, and hereby appoints M.Y. (Joe)
Stephan and Steven Waszak or either of them, proxies and attorneys-in-fact,
with full power to each of substitution, on behalf and in the name of the
undersigned to represent the undersigned at the 1997 Annual Meeting of
Shareholders of Retix to be held on April 15, 1997 at 8:30 a.m., local time,
at the Marina Beach Marriott Hotel, 4100 Admiralty Way, Marina del Rey,
California 90292, and at any postponement or adjournment thereof, and to vote
all shares of Common Stock which the undersigned would be entitled to vote if
then and there personally present, on the matters set forth below:
SEE REVERSE SIDE
- -------------------------------------------------------------------------------
FOLD AND DETACH HERE
Please mark X
your votes as
indicated in
this example
For all nominees Withhold authority to
listed to the right vote for all nominees
(except as indicated) listed to the right
1. Election of / / / / Nominees: Class I:
Directors Jeffrey M. Drazan
M.Y. (Joe) Stephan
Gilbert P. Williamson
If you wish to withhold authority to vote for any individual nominee, strike a
line through that nominee's name in the list to the right.
2. Proposal to approve the appointment of FOR AGAINST ABSTAIN
Deloitte & Touche LLP as the independent / / / / / /
auditors of the Company for the fiscal year
ending December 27, 1997.
and, in their discretion, upon such other matter
or matters that may properly come before the meeting
and any postponement(s) or adjournment(s) thereof.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY
DIRECTION IS INDICATED, WILL BE VOTED FOR THE ELECTION OF
DIRECTORS, FOR THE RATIFICATION OF THE APPOINTMENT OF
DELOITTE & TOUCHE LLP AS INDEPENDENT AUDITORS, AND AS SAID
PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY COME
BEFORE THE MEETING.
Signature(s) ____________________________________ Dated _____________, 1997
NOTE: (This Proxy should be marked, dated, signed by
the shareholder(s) exactly as his or her name appears
hereon, and returned promptly in the enclosed envelope.
Persons signing in a fiduciary capacity should so indicate.
If shares are held by joint tenants or as community property,
both should sign.)
- -------------------------------------------------------------------------------
FOLD AND DETACH HERE
