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
___ Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
_X_ Definitive Proxy Statement
___ Definitive Additional Materials
___ Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
Walker Interactive Systems, Inc.
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box)
_X_ No fee required.
___ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
Title of each class of securities to which transaction applies:
___________________________________________________________________________
Aggregate number of securities to which transaction applies:
___________________________________________________________________________
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):
___________________________________________________________________________
Proposed maximum aggregate value of transaction:
___________________________________________________________________________
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.
Amount Previously Paid:
___________________________________________________________________________
Form, Schedule or Registration Statement No.:
___________________________________________________________________________
Filing Party:
___________________________________________________________________________
Date Filed:
___________________________________________________________________________
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Walker Interactive Systems, Inc.
303 Second Street, Three North
San Francisco, California 94107
April 17, 1998
Dear Stockholder:
On behalf of Walker Interactive Systems, Inc. (the "Company"), I cordially
invite you to attend the Annual Meeting of Stockholders, which will begin at
2:00 p.m. local time on Thursday, May 21, 1998, at the Company's headquarters
located at 303 Second Street, San Francisco, California. At the meeting,
stockholders will be asked to (i) elect one individual to the Company's Board of
Directors to serve a three-year term expiring on the date of the Company's 2001
annual meeting of stockholders, (ii) approve an amendment to the Company's 1992
Employee Stock Purchase Plan to increase the aggregate number of shares
available for issuance thereunder, (iii) approve an amendment to the Company's
1994 Equity Incentive Plan to increase the aggregate number of shares available
for issuance thereunder, and (iv) ratify the selection of Deloitte & Touche LLP
as the Company's independent auditors for the next fiscal year. The accompanying
Notice and Proxy Statement describe these proposals. We urge you to read this
information carefully.
The directors and officers of the Company hope that as many stockholders as
possible will be present at the meeting. Because the vote of each stockholder is
important, we ask that you sign and return the enclosed proxy card in the
envelope provided, whether or not you now plan to attend the meeting. This will
not limit your right to change your vote at the meeting or to attend the
meeting.
We appreciate your cooperation and interest in the Company. To assist us in
preparation for the meeting, please return your proxy card at your earliest
convenience.
Sincerely yours,
/s/ Leonard Y. Liu
LEONARD Y. LIU
Chairman of the Board
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Walker Interactive Systems, Inc.
303 Second Street, Three North
San Francisco, California 94107
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On Thursday, May 21, 1998
TO THE STOCKHOLDERS OF WALKER INTERACTIVE SYSTEMS, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Walker
Interactive Systems, Inc., a Delaware corporation (the "Company"), will be held
on Thursday, May 21, 1998 at 2:00 p.m. local time at the Company's headquarters,
303 Second Street, San Francisco, California for the following purposes:
1. To elect one director to hold office until the 2001 annual
meeting of stockholders.
2. To approve the Company's 1992 Employee Stock Purchase Plan, as
amended, to increase the aggregate number of shares of Common
Stock authorized for issuance under such plan from 650,000 shares
to 950,000, an increase of 300,000 shares.
3. To approve the Company's 1994 Equity Incentive Plan, as amended,
to increase the aggregate number of shares of Common Stock
authorized for issuance under such plan from 1,200,000 shares to
2,400,000, an increase of 1,200,000 shares.
4. To ratify the selection of Deloitte & Touche LLP as independent
auditors of the Company for its fiscal year ending December 31,
1998.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on March 31, 1998 as
the record date for the determination of stockholders entitled to notice of and
to vote at this Annual Meeting and at any adjournment or postponement thereof.
By Order of the Board of Directors,
/s/ Bruce C. Pollock
BRUCE C. POLLOCK
Senior Vice President,
Chief Financial Officer
and Assistant Secretary
San Francisco, California
April 17, 1998
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ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR
REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE PREPAID IF
MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE. EVEN IF YOU HAVE
GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING. PLEASE
NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER
NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE RECORD
HOLDER A PROXY ISSUED IN YOUR NAME.
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Walker Interactive Systems, Inc.
303 Second Street, Three North
San Francisco, California 94107
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
Walker Interactive Systems, Inc., a Delaware corporation (the "Company"), for
use at the Annual Meeting of Stockholders (the "Annual Meeting"), to be held on
Thursday, May 21, 1998, at 2:00 p.m. local time or at any adjournment or
postponement thereof, for the purposes set forth herein and in the accompanying
Notice of Annual Meeting of Stockholders. The Annual Meeting will be held at the
Company's headquarters located at 303 Second Street, San Francisco, California.
The Company intends to mail this proxy statement and accompanying proxy card on
or about April 17, 1998, to all stockholders entitled to vote at the Annual
Meeting.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies, including
preparation, assembly, printing and mailing of this proxy statement, the proxy
and any additional information furnished to stockholders. Copies of solicitation
materials will be furnished to banks, brokerage houses, fiduciaries and
custodians holding in their names shares of Common Stock beneficially owned by
others to forward to such beneficial owners. The Company may reimburse persons
representing beneficial owners of Common Stock for their costs of forwarding
solicitation materials to such beneficial owners. Original solicitation of
proxies by mail may be supplemented by telephone, telegram or personal
solicitation by directors, officers or other regular employees of the Company.
No additional compensation will be paid to directors, officers or other regular
employees for such services.
VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of Common Stock at the close of business on March
31, 1998 will be entitled to notice of and to vote at the Annual Meeting. At the
close of business on March 31, 1998, the Company had outstanding and entitled to
vote 14,000,190 shares of Common Stock. Each holder of record of Common Stock on
such date will be entitled to one vote for each share held on all matters to be
voted upon at the Annual Meeting.
All votes will be tabulated by the inspector of election appointed for the
meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions will be counted towards the
tabulation of votes cast on proposals presented to the stockholders and will
have the same effect as negative votes. Broker non-votes are counted towards a
quorum, but are not counted for any purpose in determining whether a matter has
been approved.
REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
Secretary of the Company at the Company's principal executive office, 303 Second
Street, Three North, San Francisco, California 94107, a written notice of
revocation or a duly executed proxy bearing a later date, or it may be revoked
by attending the meeting and voting in person. Attendance at the meeting will
not, by itself, revoke a proxy.
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STOCKHOLDER PROPOSALS
Proposals of stockholders that are intended to be presented at the
Company's 1999 annual meeting of stockholders must be received by the Company
not later than December 18, 1998 in order to be included in the proxy statement
and proxy relating to that annual meeting. Stockholders are also advised to
review the Company's Bylaws, which contain additional requirements with respect
to advance notice of stockholder proposals and director nominations.
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Restated Certificate of Incorporation and Bylaws provide that
the Board of Directors shall be divided into three classes with each class
having a three-year term. Vacancies on the Board may be filled only by persons
elected by a majority of the remaining directors. A director elected by the
Board to fill a vacancy (including a vacancy created by an increase in the Board
of Directors) shall serve for the remainder of the full term of the class of
directors in which the vacancy occurred and until such director's successor is
elected and qualified.
The Board of Directors is presently composed of six members. There is one
director being nominated for election as a Class III Director. The nominee for
election to this class is currently a director of the Company. If elected at the
Annual Meeting, the nominee would serve until the 2001 annual meeting and until
his successor is elected and has qualified, or until such director's earlier
death, resignation or removal.
Directors are elected by a plurality of the votes present in person or
represented by proxy and entitled to vote at the meeting. Shares represented by
executed proxies will be voted, if authority to do so is not withheld, for the
election of the nominee named below. In the event that the nominee should be
unavailable for election as a result of an unexpected occurrence, such shares
will be voted for the election of such substitute nominee as management may
propose. The person nominated for election has agreed to serve if elected, and
management has no reason to believe that the nominee will be unable to serve.
Mr. David C. Hodgson served as a Class III Director from February 1989
until his resignation in August 1997.
Set forth below is biographical information for the each person nominated
and the person whose term of office as a director will continue after the Annual
Meeting.
NOMINEE FOR ELECTION FOR A THREE-YEAR TERM EXPIRING AT THE 2001 ANNUAL MEETING
Class III Director
Mr. Richard C. Alberding, age 67, has served as a director of the Company
since October 1991. Mr. Alberding was employed by Hewlett-Packard Co., a
computer company, from 1958 until his retirement in June 1991, serving in
various positions, most recently as Executive Vice President with responsibility
for Hewlett-Packard's Marketing and International operations. Mr. Alberding is
currently a director of Kennametal, Inc., Sybase, Inc., Digital Microwave Corp.,
Paging Network, Inc., Digital Link, Inc., Quickturn Design Systems, Inc., Storm
Technology, Inc. and JLK Direct Distribution, Inc.
MANAGEMENT RECOMMENDS
A VOTE IN FAVOR OF THE NAMED NOMINEE.
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DIRECTORS CONTINUING IN OFFICE UNTIL THE 1999 ANNUAL MEETING
Class I Directors
Mr. Leonard Y. Liu, age 56, has served as the Chairman, President and Chief
Executive Officer of the Company since June 1995. Prior to joining the Company,
Mr. Liu served as Chief Operating Officer of Cadence Design Systems, Inc.
("Cadence"), an electronic automated design software company, from January 1993
to March 1995, and has been a director of Cadence since June 1989. Mr. Liu was
Chairman and Chief Executive Officer of Acer America Corporation and President
of Acer, Inc., a personal computer company, from 1989 until March 1992. From
1969 to April 1989, Mr. Liu held various technical and general management
positions in IBM Corporation, a computer company.
Mr. David C. Wetmore, age 49, has served as a director of the Company since
May 1993. Since November 1995, Mr. Wetmore has served as Managing Director of
Updata Capital, Inc., an investment banking organization serving the technology
industry. From January 1995 through April 1995, Mr. Wetmore was Executive Vice
President, Europe and Agents, of Legent Corporation ("Legent"), a developer and
distributor of productivity enhancement system software. From August 1992 to
December 1994, Mr. Wetmore served as Legent's Executive Vice President and Chief
Operating Officer. From August 1988 to August 1992, Mr. Wetmore was employed by
Goal Systems International, Inc., a software products company, in various
positions, most recently as Chairman of the Board, President and Chief Executive
Officer. Mr. Wetmore is currently a director of Grange Mutual Insurance
Companies, Continental Circuits Corp., Career Builder, Inc., Pivotpoint, Inc.
and Nationwide Investing Foundation, Plc., a registered investment company.
Mr. William A. Hasler, age 56, has served as a director of the Company
since February 1996. Since August 1991, Mr. Hasler has been the Dean and
Department Chair of the Walter A. Haas School of Business at the University of
California, Berkeley. From July 1972 to August 1991, Mr. Hasler was employed by
KPMG Peat Marwick in various positions, most recently as Vice Chairman
responsible for the worldwide management consulting practice. Mr. Hasler is
currently a director of The Gap, Inc., Tenera Corporation, TCSI Corporation,
Aphton Corporation and Asia Pacific Wire & Cable Corporation Limited.
DIRECTORS CONTINUING IN OFFICE UNTIL THE 2000 ANNUAL MEETING
Class II Directors
Ms. Tania Amochaev, age 48, has served as a director of the Company since
May 1994. Ms. Amochaev joined QuickResponse Services, Inc., a provider of supply
chain management solutions to the retail industry, as President in May 1992 and
was appointed Chief Executive Officer in May 1993. In February 1997, Ms.
Amochaev resigned from that position and was named Chairman of the Executive
Committee of QuickResponse Services, Inc. Ms. Amochaev was Chief Executive
Officer of Natural Language, Inc., a client/server database tool software
company, from May 1988 to March 1992. From 1984 to 1987, Ms. Amochaev was
President and Chief Executive Officer of Comserv Corporation, a manufacturing
applications software company acquired in 1987 by Management Science America.
Ms. Amochaev is currently a director of Governmental Technology Services, Inc.,
Symantec Corporation and QRS Corporation.
Mr. John M. Lillie, age 61, has served as a director of the Company since
July 1996. In May 1996, Mr. Lillie was appointed Chairman of the Board of The
Epic Team, Inc., a manufacturer of bicycles and bicycle accessories. From 1991
to 1995, Mr. Lillie served as Chairman of the Board and Chief Executive Officer
of APL, Ltd. after having served as its President and Chief Operating Officer
from 1990 to 1991. Mr. Lillie is currently a director of The Gap, Inc.,
Consolidated Freightways and Circle International, Inc.
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BOARD COMMITTEES AND MEETINGS
During the fiscal year ended December 31, 1997, the Board of Directors held
six meetings. The Board has an Audit Committee, a Compensation Committee and a
Non-Officer Stock Option Committee.
The Audit Committee meets with the Company's independent auditors at least
annually to review the results of the annual audit and discuss the financial
statements, recommends to the Board the independent auditors to be retained, and
receives and considers the independent auditors' comments as to controls,
adequacy of staff and management performance and procedures in connection with
audit and financial controls. The Audit Committee met four times during the
fiscal year ended December 31, 1997. It is currently composed of three
non-employee directors, Ms. Amochaev and Messrs. Lillie and Wetmore. Prior to
May 14, 1997, the Audit Committee was composed of Ms. Amochaev and Messrs.
Hodgson and Wetmore. From May 14, 1997 through August 7, 1997, the committee was
composed of Ms. Amochaev and Messrs. Hodgson, Wetmore and Lillie.
The Compensation Committee makes recommendations concerning salaries and
incentive compensation and otherwise determines compensation levels and performs
such other functions regarding compensation as the Board may delegate. The
Compensation Committee, which is currently composed of three non-employee
directors, Messrs. Alberding, Hasler and Lillie, met two times during the fiscal
year ended December 31, 1997.
The Non-Officer Stock Option Committee is authorized to make stock option
grants under the Company's 1994 Equity Incentive Plan and 1995 Non-Statutory
Stock Option Plan for Non-Officers to employees who are not officers. The
Non-Officer Stock Option Committee, which is composed of one director, Mr. Liu,
acted fifteen times during the fiscal year ended December 31, 1997.
During the fiscal year ended December 31, 1997, each incumbent Board
member, except for Ms. Amochaev, attended at least 75% of the aggregate of the
meetings of the Board and of the committees on which he or she served which were
held during the period for which he or she was a director or committee member.
PROPOSAL 2
APPROVAL OF 1992 EMPLOYEE STOCK PURCHASE PLAN, AS AMENDED
In January 1992, the Company's Board of Directors (the "Board") adopted,
and the stockholders subsequently approved, the Company's 1992 Employee Stock
Purchase Plan (the "Purchase Plan"), authorizing the issuance of 150,000 shares
of the Company's Common Stock. In January 1993 and March 1995, the Board
adopted, and the stockholders subsequently approved, amendments to the Purchase
Plan to increase the number of shares authorized for issuance thereunder to an
aggregate of 350,000 and 650,000 shares respectively. At January 31, 1998, an
aggregate of 599,540 shares had been issued under the Purchase Plan and only
50,460 shares remained available for the grant of future rights under the
Purchase Plan.
In February 1998, the Board adopted an amendment to the Purchase Plan,
subject to stockholder approval, to increase the number of shares authorized for
issuance under the Purchase Plan from a total of 650,000 shares to a total of
950,000 shares. This amendment is intended to afford the Company greater
flexibility in providing employees with stock incentives and ensure that the
Company can continue to provide such incentives at levels determined appropriate
by the Board. The Board anticipates that the increase will provide sufficient
shares to satisfy the Company's needs over a three-year period. During the last
fiscal year, shares were purchased under the Purchase Plan by the executive
officers of the Company in the amounts and at the weighted average prices per
share as follows: Ms. Hubbard, 663 shares ($10.99); all current executive
officers as a group, 663 shares ($10.99); and all employees (excluding executive
officers), 78,692 shares ($10.94).
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The Board also approved an amendment to the Purchase Plan to modify the
requirements related to stockholder approval of amendments to the Purchase Plan
to bring the Purchase Plan into conformity with and take advantage of new
regulations promulgated under Section 16 of the Securities Exchange Act of 1934,
as amended (the "Exchange Act").
Stockholders are requested in this Proposal 2 to approve the Purchase Plan,
as amended. The affirmative vote of the holders of a majority of the shares
present in person or represented by proxy and entitled to vote at the meeting
will be required to approve the Purchase Plan, as amended. Abstentions will be
counted toward the tabulation of votes cast on proposals presented to the
stockholders and will have the same effect as negative votes. Broker non-votes
are counted towards a quorum, but are not counted for any purpose in determining
whether this matter has been approved.
MANAGEMENT RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 2.
The essential features of the Purchase Plan, as amended, are outlined
below:
Purpose
The purpose of the Purchase Plan is to provide a means by which employees
of the Company (and any parent or subsidiary of the Company designated by the
Board of Directors to participate in the Purchase Plan) may be given an
opportunity to purchase Common Stock of the Company through payroll deductions,
to assist the Company in retaining the services of its employees, to secure and
retain the services of new employees, and to provide incentives for such persons
to exert maximum efforts for the success of the Company.
The rights to purchase Common Stock granted under the Purchase Plan are
intended to qualify as options issued under an "employee stock purchase plan" as
that term is defined in Section 423(b) of the Internal Revenue Code of 1986, as
amended (the "Code").
Administration
The Purchase Plan is administered by the Board of Directors, which has the
final power to construe and interpret the Purchase Plan and the rights granted
under it. The Board has the power, subject to the provisions of the Purchase
Plan, to determine when and how rights to purchase Common Stock of the Company
will be granted, the provisions of each offering of such rights (which need not
be identical), and whether any parent or subsidiary of the Company shall be
eligible to participate in such plan. The Board has the power, which it has not
exercised, to delegate administration of such plan to a committee of not less
than two Board members (the "Committee"). The Board may abolish any such
Committee at any time and revest in the Board the administration of the Purchase
Plan.
Stock Subject to Purchase Plan
Subject to approval of this proposal, 950,000 shares are reserved for
issuance under the Purchase Plan. If rights granted under the Purchase Plan
expire, lapse or otherwise terminate without being exercised, the Common Stock
not purchased under such rights again becomes available for issuance under the
Purchase Plan.
Offerings
The Purchase Plan is implemented by offerings of rights to all eligible
employees from time to time by the Board. Generally, each such offering had a 12
month duration. The Board has discretion to change the length of offerings under
the Purchase Plan.
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Eligibility
Any person who customarily is employed at least 20 hours per week and five
months per calendar year by the Company (or by any parent or subsidiary of the
Company designated from time to time by the Board) on the first day of an
offering period is eligible to participate in that offering under the Purchase
Plan, provided such employee has been in the continuous employ of the Company,
preceding the first day of the offering period, for at least the period
designated by the Board. The Board may provide that officers of the Company who
are "highly compensated" as defined in the Code are not eligible to be granted
rights under an offering.
Notwithstanding the foregoing, no employee is eligible for the grant of any
rights under the Purchase Plan if, immediately after such grant, the employee
would own, directly or indirectly, stock possessing 5% or more of the total
combined voting power or value of all classes of stock of the Company or of any
parent or subsidiary of the Company (including any stock which such employee may
purchase under all outstanding rights and options), nor will any employee be
granted rights that would permit him or her to buy stock valued at more than
$25,000 (determined based upon the fair market value of the shares at the time
such rights are granted) under all employee stock purchase plans of the Company
in any calendar year. At February 28, 1998, approximately all of the Company's
approximately 510 employees were eligible to participate in the Purchase Plan.
Participation in the Plan
Eligible employees become participants in the Purchase Plan by delivering
to the Company, prior to the date selected by the Board as the offering date for
the offering, an agreement authorizing payroll deductions of up to 15%, or such
lesser percentage as approved by the Board, of such employees' total
compensation during the purchase period.
Purchase Price
The purchase price per share at which shares are sold in an offering under
the Purchase Plan is the lower of (a) 85% of the fair market value of a share of
Common Stock on the date of commencement of the offering, and (b) 85% of the
fair market value of a share of Common Stock on the date of purchase.
Payment of Purchase Price; Payroll Deductions
The purchase price of the shares is accumulated by payroll deductions over
the offering period. A participant may increase, reduce or commence payroll
deductions after the beginning of any purchase period only as provided for in
the offering. A participant may make additional payments into his or her account
only if specifically provided for in the offering and only if the participant
has not had the maximum amount withheld during the purchase period. All payroll
deductions made for a participant are credited to his or her account under the
Purchase Plan and deposited with the general funds of the Company.
Purchase of Stock
By executing an agreement to participate in the Purchase Plan, the employee
is entitled to purchase shares under the Purchase Plan. In connection with
offerings made under the Purchase Plan, the Board specifies a maximum number of
shares any employee may be granted the right to purchase and the maximum
aggregate number of shares which may be purchased pursuant to such offering by
all participants. If the aggregate number of shares to be purchased upon
exercise of rights granted in the offering would exceed the maximum aggregate
number, the Board would make a pro rata allocation of shares available in a
uniform and equitable manner. Unless the employee's participation is
discontinued, his or her right to purchase shares is exercised automatically at
the end of the purchase period at the applicable price. See "Withdrawal" below.
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Withdrawal
While each participant in the Purchase Plan is required to sign an
agreement authorizing payroll deductions, the participant may withdraw from a
given offering by terminating his or her payroll deductions and by delivering to
the Company a notice of withdrawal from the Purchase Plan. Such withdrawal may
be elected at any time prior to the end of the applicable offering period,
except as provided by the Board or the Committee in the offering.
Upon any withdrawal from an offering by the employee, the Company will
distribute to the employee his or her accumulated payroll deductions without
interest, less any accumulated deductions previously applied to the purchase of
stock on the employee's behalf during such offering, and such employee's
interest in the offering automatically will be terminated. The employee is not
entitled to again participate in such offering. An employee's withdrawal from an
offering will not have any effect upon such employee's eligibility to
participate in subsequent offerings under the Purchase Plan.
Termination of Employment
Rights granted pursuant to any offering under the Purchase Plan terminate
immediately upon cessation of an employee's employment for any reason, and the
Company will distribute to such employee all of his or her accumulated payroll
deductions, without interest.
Restrictions on Transfer
Rights granted under the Purchase Plan are not transferable and may be
exercised only by the person to whom such rights are granted.
Adjustment Provisions
If any change is made in the stock subject to the Purchase Plan, or subject
to any rights granted under the Purchase Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or otherwise), the Purchase Plan and
outstanding rights will be appropriately adjusted in the class and maximum
number of shares subject to the Purchase Plan and the class, number of shares
and price per share of stock subject to outstanding rights.
Effect of Certain Corporate Events
In the event of a dissolution, liquidation or specified type of merger of
the Company, the surviving corporation either will assume the rights under the
Purchase Plan or substitute similar rights, such rights will continue in full
force and effect, or the exercise date of any ongoing offering will be
accelerated such that the outstanding rights may be exercised immediately prior
to, or concurrent with, any such event.
Duration, Amendment and Termination
The Board may suspend or terminate the Purchase Plan at any time. Unless
terminated earlier, the plan will terminate in January 2002.
The Board may amend the Purchase Plan at any time. Any amendment of the
Purchase Plan must be approved by the stockholders within 12 months of its
adoption by the Board if such amendment requires stockholder approval in order
for the Purchase Plan to obtain employee stock purchase plan treatment under
Section 423 of the Code or to comply with the requirements of Rule 16b-3
promulgated under the Exchange Act or with any Nasdaq or securities exchange
listing requirements.
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Rights granted before amendment or termination of the Purchase Plan will
not be altered or impaired by any amendment or termination of such plan without
consent of the person to whom such rights were granted.
Federal Income Tax Information
Rights granted under the Purchase Plan are intended to qualify for
favorable federal income tax treatment associated with rights granted under an
employee stock purchase plan which qualifies under provisions of Section 423 of
the Code.
A participant will be taxed on amounts withheld for the purchase of shares
as if such amounts actually were received. Other than this, no income will be
taxable to a participant until disposition of the shares acquired, and the
method of taxation will depend upon the holding period of the purchase shares.
If the stock is sold or disposed of at least two years after the beginning
of the offering period and at least one year after the stock is transferred to
the participant, then the lesser of (a) the excess of the fair market value of
the stock at the time of such disposition over the exercise price or (b) the
excess of the fair market value of the stock as of the beginning of the offering
period over the exercise price (determined as of the beginning of the offering
period) will be treated as ordinary income. Any further gain or any loss will be
taxed as capital gain or loss.
If the stock is sold or disposed of before the expiration of either of the
holding periods described above, then the excess of the fair market value of the
stock on the exercise date over the exercise price will be treated as ordinary
income at the time of such disposition, and the Company may, in the future, be
required to withhold income taxes relating to such ordinary income from other
payments made to the participant. The balance of any gain or loss will be
treated as capital gain or loss. Even if the stock is later disposed of for less
than its fair market value on the exercise date, the same amount of ordinary
income is attributed to the participant, and a capital loss is recognized equal
to the difference between the sales price and the fair market value of the stock
on such exercise date.
There are no federal income tax consequences to the Company by reason of
the grant or exercise of rights under the Purchase Plan. The Company is entitled
to a deduction to the extent amounts are taxed as ordinary income to a
participant by reason of a disposition before the expiration of the holding
periods described above (subject to the requirement of reasonableness, the
provisions of Section 162(m) of the Code and the satisfaction of a tax reporting
obligation).
The foregoing discussion is intended to be a general summary only of the
federal income tax aspects of rights granted under the Purchase Plan; tax
consequences may vary depending on the particular circumstances at hand. In
addition, administrative and judicial interpretations of the application of the
federal income tax laws are subject to change. Furthermore, no information is
given with respect to state or local taxes that may be applicable. Participants
in the Purchase Plan who are residents of or are employed in a country other
than the United States may be subject to taxation in accordance with the tax
laws of that particular country in addition to or in lieu of United States
federal income taxes.
PROPOSAL 3
APPROVAL OF 1994 EQUITY INCENTIVE PLAN, AS AMENDED
In February 1994, the Board adopted the Company's 1994 Equity Incentive
Plan (the "Equity Plan"). In May 1994, the Board approved an amendment to the
Equity Plan to (i) eliminate the Company's ability to grant stock appreciation
rights; (ii) eliminate the ability of optionees to purchase stock through a
deferred payment arrangement; (iii) eliminate the Company's ability to reprice
options; and (iv) establish the minimum exercise price
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<PAGE>
for a nonstatutory stock option at 85% of the fair market value of the Common
Stock subject to the option on the date of the option grant. The stockholders of
the Company subsequently approved the Equity Plan, as amended. Under the Equity
Plan, 1,200,000 shares of the Company's Common Stock are authorized for
issuance.
At March 10, 1998, options (net of canceled or expired options) covering an
aggregate of 1,009,000 shares of the Company's Common Stock had been granted
under the Equity Plan, and 191,000 shares (other than shares that might in the
future be returned to the plan as a result of cancellation or expiration of
options) remained available for future grant under the Equity Plan.
In February 1998, the Board approved an amendment to the Equity Plan,
subject to stockholder approval, increasing the number of shares authorized for
issuance under the Equity Plan from a total of 1,200,000 shares to 2,400,000
shares. The Board adopted this amendment to ensure that the Company can continue
to grant stock options to current and prospective employees of the Company at
appropriate levels and to provide for grants within the framework of prospective
acquisitions. In addition to approving an amendment to increase the number of
shares, the Board also made certain minor amendments to the Equity Plan which
are designed to conform the Equity Plan to the requirements of Rule 16b-3
promulgated under the Exchange Act and to clarify the impact of changes in the
Company's capital structure on the terms of the Equity Plan.
Stockholders are requested in this Proposal 3 to approve the Equity Plan,
as amended. The affirmative vote of the holders of a majority of the shares
present in person or represented by proxy and entitled to vote at the meeting
will be required to approve the Equity Plan, as amended. Abstentions will be
counted toward the tabulation of votes cast on proposals presented to the
stockholders and will have the same effect as negative votes. Broker non-votes
are counted towards a quorum, but are not counted for any purpose in determining
whether this matter has been approved.
MANAGEMENT RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 3.
The essential features of the Equity Plan, as amended, are outlined below.
General
The Equity Plan provides for the grant of "Stock Awards" which may be
either (i) incentive stock options, (ii) nonstatutory stock options, (iii) stock
bonuses, or (iv) rights to purchase restricted stock. Incentive stock options
granted under the Equity Plan are intended to qualify as "incentive stock
options" within the meaning of Section 422 of the Code. Nonstatutory stock
options granted under the Equity Plan are intended not to qualify as incentive
stock options under the Code. See "Federal Income Tax Information" for a
discussion of the tax treatment of incentive and nonstatutory stock options.
Purpose
The Equity Plan was adopted (i) to provide a means by which selected
employees and directors of and consultants to the Company and its affiliates
(defined in the Equity Plan to mean any parent or subsidiary of the Company)
could be given an opportunity to benefit from increases in value of the stock of
the Company, (ii) to secure and retain the services of persons capable of
filling such positions, and (iii) to provide incentives for such persons to
exert maximum efforts for the success of the Company.
Administration
The Equity Plan is administered by the Board. The Board has the power to
construe and interpret the Equity Plan and, subject to the provisions of the
Equity Plan, to determine the persons to whom and the dates on which
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<PAGE>
Stock Awards will be granted, whether a Stock Award will be an incentive stock
option, a nonstatutory stock option, a stock bonus, a right to purchase
restricted stock, or a combination of the foregoing, the number of shares to be
subject to each Stock Award, the time or times when a person shall be permitted
to purchase or receive stock pursuant to a Stock Award, the exercise or purchase
price, the type of consideration and other terms of Stock Awards. Under the
Equity Plan, the Board is authorized to delegate administration of the Equity
Plan to a committee composed of not fewer than two members of the Board. (As
used herein with respect to the Equity Plan, the "Board" refers to any committee
to which the Board delegates such administrative authority with respect to the
Equity Plan, as well as to the Board itself.) In addition, the Board may
delegate to a committee of one or more members of the Board the authority to
grant options to eligible persons who are not then subject to Section 16 of the
Exchange Act and to eligible persons with respect to whom the Company does not
wish to comply with Section 162(m) of the Code.
Eligibility
Employees (including officers) of the Company and its affiliates may be
granted incentive stock options and other Stock Awards under the Equity Plan.
Consultants and directors are eligible to receive Stock Awards other than
incentive stock options under the Equity Plan. At February 28, 1998,
approximately 586 employees and consultants were eligible to participate in the
Equity Plan.
No incentive stock option may be granted under the Equity Plan to any
person who, at the time of the grant, owns (or is deemed to own) stock
possessing more than 10% of the total combined voting power of the Company or
any affiliate of the Company, unless the option exercise price is at least 110%
of the fair market value of the stock subject to the option on the date of
grant, and the term of the option does not exceed five years from the date of
grant. In addition, the aggregate fair market value, determined at the time of
grant, of the shares of Common Stock with respect to which such incentive stock
options are exercisable for the first time by an optionee during any calendar
year (under all such plans of the Company and its affiliates) may not exceed
$100,000.
No employee shall be eligible to be granted Stock Awards covering more than
500,000 shares of Common Stock in any 12 month period. This limitation is to
ensure that the Company generally will continue to be able to deduct for tax
purposes the compensation attributable to Stock Awards granted under the Equity
Plan.
Stock Subject to the Equity Plan
Subject to approval of this proposal, 2,400,000 shares are reserved for
issuance under the Equity Plan. If Stock Awards granted under the Equity Plan
expire or otherwise terminate without being exercised, the shares of Common
Stock not purchased pursuant to such award again become available for issuance
under the Equity Plan.
Terms of Options
The following is a description of the permissible terms of options under
the Equity Plan. Individual option grants may be more restrictive as to any or
all of the permissible terms described below.
Exercise Price; Payment. The exercise price of incentive stock options
under the Equity Plan may not be less than the fair market value of the Common
Stock subject to the option on the date of the option grant, and in some cases
(see "Eligibility" above), may not be less than 110% of such fair market value.
The exercise price of nonstatutory stock options under the Equity Plan may not
be less than 85% of the fair market value of the Common Stock subject to the
option on the date of the option grant. At March 16, 1998, the closing sales
price of a share of the Company's Common Stock as reported on the Nasdaq
National Market was $19.00 per share.
The exercise price of options granted under the Equity Plan must be paid
either: (i) in cash at the time the option is exercised; or (ii) at the
discretion of the Board, (a) by delivery of other shares of Common Stock of the
Company, or (b) in any other form of legal consideration acceptable to the
Board.
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<PAGE>
Option Exercise. Options granted under the Equity Plan may become
exercisable ("vest") in cumulative increments as determined by the Board. The
Board has the power to accelerate the time during which an option may be
exercised. The Equity Plan authorizes the grant of options that may be exercised
prior to full vesting subject to a right of repurchase in favor of the Company.
To the extent provided by the terms of an option, an optionee may satisfy any
federal, state or local tax withholding obligations relating to the exercise of
such option by a cash payment upon exercise, by authorizing the Company to
withhold a portion of the stock otherwise issuable to the optionee, by
delivering already-owned stock of the Company or by a combination of these
means.
Term. The maximum term of options under the Equity Plan is ten years,
except that in certain cases (see "Eligibility") the maximum term is five years.
Options under the Equity Plan terminate three months after the optionee ceases
to be employed by (or serve as a consultant to) the Company or any affiliate of
the Company, unless (a) the termination of employment is due to such person's
permanent and total disability (as defined in the Code), in which case the
option may, but need not, provide that it may be exercised at any time within
twelve months of such termination; (b) the optionee dies while employed by the
Company or any affiliate of the Company, or within three months after
termination of such employment, in which case the option may, but need not,
provide that it may be exercised (to the extent the option was exercisable at
the time of the optionee's death) within eighteen months of the optionee's death
by the person or persons to whom the rights to such option pass by will or by
the laws of descent and distribution; or (c) the option by its terms
specifically provides otherwise. Individual options by their terms may provide
for exercise within a longer or shorter period of time following termination of
employment or the consulting relationship. The option term may also be extended
in the event that exercise of the option within these periods is prevented for
specified reasons.
Terms of Stock Bonuses and Purchases of Restricted Stock
Purchase Price; Payment. The purchase price under each stock purchase
agreement will be determined by the Board. The purchase price of stock acquired
pursuant to a stock purchase agreement must be paid either: (i) in cash at the
time of purchase, or (ii) in any other form of legal consideration that may be
acceptable to the Board in its discretion. Eligible participants may be awarded
stock pursuant to a stock bonus agreement in consideration of past services
actually rendered to the Company or for its benefit.
Repurchase. Shares of Common Stock sold or awarded under the Equity Plan
may, but need not, be subject to a repurchase option in favor of the Company in
accordance with a vesting schedule determined by the Board. In the event a
person ceases to be an employee of or ceases to serve as a director of or
consultant to the Company or an affiliate of the Company, the Company may
repurchase or otherwise reacquire any or all of the shares of Common Stock held
by that person that have not vested as of the date of termination under the
terms of the stock bonus or restricted stock purchase agreement between the
Company and such person.
Adjustment Provisions
If any change is made in the stock subject to the Equity Plan, or subject
to any Stock Award, without the receipt of consideration by the Company (through
merger, consolidation, reorganization, recapitalization, reincorporation, stock
dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of consideration by the
Company), the Equity Plan will be appropriately adjusted in the class(es) and
maximum number of securities subject to the Equity Plan and the maximum number
of securities subject to award to any person in a calendar year, and the
outstanding Stock Awards will be appropriately adjusted in the class(es) and
number of securities and price per share of stock subject to such outstanding
Stock Awards. Such adjustments shall be made by the Board, the determination of
which shall be final.
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<PAGE>
Effect of Certain Corporate Events
The Equity Plan provides that, in the event of a "change of control," which
term includes the dissolution or liquidation of the Company and specified types
of merger, acquisition or other corporate reorganization, then, at the sole
discretion of the Board and to the extent permitted by law: (i) any surviving
corporation will be required to either assume Stock Awards outstanding under the
Equity Plan or substitute similar Stock Awards for those outstanding under the
Equity Plan, (ii) the time during which such Stock Awards become vested or may
be exercised will be accelerated and any outstanding unexercised rights under
any Stock Awards will be terminated if not exercised prior to such event or
(iii) such Stock Awards will continue in full force and effect.
Duration, Amendment and Termination
The Board may suspend or terminate the Equity Plan without stockholder
approval or ratification at any time or from time to time. Unless sooner
terminated, the Equity Plan will terminate on February 16, 2004.
The Board also may amend the Equity Plan at any time or from time to time.
No amendment will be effective, however, unless approved by the stockholders of
the Company within 12 months before or after its adoption by the Board to the
extent stockholder approval is necessary to satisfy the requirements of Section
422 of the Code, Rule 16b-3 promulgated under the Exchange Act, or any Nasdaq or
securities exchange listing requirements.
Restrictions on Transfer
Under the Equity Plan, an incentive stock option may not be transferred by
the optionee otherwise than by will or by the laws of descent and distribution.
During the lifetime of an optionee, an incentive stock option may be exercised
only by the optionee. A nonstatutory stock option is transferable to the extent
provided in the option agreement. If the option agreement for a nonstatutory
stock option does not provide for transferability, then the nonstatutory stock
option is not transferable except by will or by the laws of descent and
distribution and is exercisable during the lifetime of the optionee only by the
optionee. Under the Equity Plan, no rights under a stock bonus or restricted
stock purchase agreement shall be transferable except where such assignment is
required by law or expressly authorized by the terms of the applicable stock
bonus or restricted stock purchase agreement.
Federal Income Tax Information
Incentive Stock Options. Incentive stock options under the Equity Plan are
intended to be eligible for the favorable federal income tax treatment accorded
"incentive stock options" under the Code.
There generally are no federal income tax consequences to the optionee or
the Company by reason of the grant or exercise of an incentive stock option.
However, the exercise of an incentive stock option may increase the optionee's
alternative minimum tax liability, if any.
If an optionee holds stock acquired through exercise of an incentive stock
option for more than two years from the date on which the option is granted and
more than one year from the date on which the shares are transferred to the
optionee upon exercise of the option, any gain or loss on a disposition of such
stock will be capital gain or loss. Generally, if the optionee disposes of the
stock before the expiration of either of these holding periods (a "disqualifying
disposition"), at the time of disposition the optionee will recognize taxable
ordinary income equal to the lesser of (i) the excess of the stock's fair market
value on the date of exercise over the exercise price or (ii) the optionee's
actual gain, if any, on the purchase and sale. The optionee's additional gain,
or any loss upon the disqualifying disposition, will be a capital gain or loss
which will be long-term, mid-term or short-term depending on how long the
optionee holds the stock. Slightly different rules may apply to optionees who
acquire stock subject to certain repurchase options or who are subject to
Section 16 of the Exchange Act.
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To the extent the optionee recognizes ordinary income by reason of a
disqualifying disposition, the Company will generally be entitled (subject to
the requirement of reasonableness, the application of certain provisions of
Section 162(m) of the Code and the satisfaction of a tax reporting obligation)
to a corresponding business expense deduction in the tax year in which the
disqualifying disposition occurs.
Nonstatutory Stock Options. Nonstatutory stock options granted under the
Equity Plan generally have the following federal income tax consequences:
There are no tax consequences to the optionee or the Company by reason of
the grant of a nonstatutory stock option. Upon exercise of a nonstatutory stock
option, the optionee normally will recognize taxable ordinary income equal to
the excess of the stock's fair market value on the date of exercise over the
option exercise price. Generally, with respect to employees, the Company is
required to withhold from regular wages or supplemental wage payments an amount
based on the ordinary income recognized. Subject to the requirement of
reasonableness, the application of certain provisions of Section 162(m) of the
Code and the satisfaction of any tax reporting obligation, the Company will
generally be entitled to a business expense deduction equal to the taxable
ordinary income recognized by the optionee. Upon disposition of the stock, the
optionee will recognize a capital gain or loss equal to the difference between
the selling price and the sum of the amount paid for such stock plus any amount
recognized as ordinary income upon exercise of the option. Such gain or loss
will be long-term, mid-term or short-term depending on how long the optionee
holds the stock. Slightly different rules may apply to optionees who acquire
stock subject to certain repurchase options or who are subject to Section 16 of
the Exchange Act.
Restricted Stock and Stock Bonuses. Restricted stock and stock bonuses
granted under the Equity Plan generally have the following federal income tax
consequences:
Upon acquisition of stock under a restricted stock or stock bonus award,
the recipient normally will recognize taxable ordinary income equal to the
excess of the stock's fair market value over the purchase price, if any.
However, to the extent the stock is subject to certain types of vesting
restrictions, the taxable event will be delayed until the vesting restrictions
lapse unless the recipient elects to be taxed on receipt of the stock.
Generally, with respect to employees, the Company is required to withhold from
regular wages or supplemental wage payments an amount based on the ordinary
income recognized. Subject to the requirement of reasonableness, the application
of Section 162(m) of the Code and the satisfaction of any withholding
obligation, the Company will be entitled to a business expense deduction equal
to the taxable ordinary income realized by the recipient. Upon disposition of
the stock, the recipient will recognize a capital gain or loss equal to the
difference between the selling price and the sum of the amount paid for such
stock, if any, plus any amount recognized as ordinary income upon acquisition
(or vesting) of the stock. Such gain or loss will be long-term, mid-term or
short-term depending on how long the stock was held from the date ordinary
income is measured. Slightly different rules may apply to persons who are
subject to Section 16 of the Exchange Act.
Potential Limitation on Company Deductions. Code Section 162(m) denies a
deduction to any publicly held corporation for compensation paid to certain
employees in a taxable year to the extent that compensation exceeds $1,000,000
for a covered employee. Although not anticipated, it is possible that
compensation attributable to Stock Awards, when combined with all other types of
compensation received by a covered employee from the Company, may cause this
limitation in any particular year.
Certain kinds of compensation, including qualified "performance-based
compensation," are disregarded for purposes of the deduction limitation. In
accordance with Treasury regulations issued under Section 162(m), compensation
attributable to stock options will qualify as performance-based compensation,
provided that the option is granted by a compensation committee comprised solely
of "outside directors" and either: (i) the option plan contains a per-employee
limitation on the number of shares for which options may be granted during a
specified period, the per-employee limitation is approved by the stockholders,
and the exercise price of the option is no less than the fair market value of
the stock on the date of grant; or (ii) the option is granted (or exercisable)
only upon the achievement (as certified in writing by the compensation
committee) of an objective performance goal
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established in writing by the compensation committee while the outcome is
substantially uncertain, and the option is approved by stockholders.
Compensation attributable to restricted stock will qualify as
performance-based compensation, provided that: (i) the award is granted by a
compensation committee comprised solely of "outside directors;" and (ii) the
purchase price of the award is no less than the fair market value of the stock
on the date of grant. Stock bonuses qualify as performance-based compensation
under the Treasury regulations only if: (i) the award is granted by a
compensation committee comprised solely of "outside directors;" (ii) the award
is granted (or exercisable) only upon the achievement of an objective
performance goal established in writing by the compensation committee while the
outcome is substantially uncertain; (iii) the compensation committee certifies
in writing prior to the granting (or exercisability) of the award that the
performance goal has been satisfied; and (iv) prior to the granting (or
exercisability) of the award, stockholders have approved the material terms of
the award (including the class of employees eligible for such award, the
business criteria on which the performance goal is based, and the maximum amount
(or formula used to calculate the amount) payable upon attainment of the
performance goal).
The foregoing discussion is intended to be a general summary only of the
federal income tax aspects of Stock Awards granted under the Equity Plan; tax
consequences may vary depending on the particular circumstances at hand. In
addition, administrative and judicial interpretations of the application of
federal income tax laws are subject to change. Furthermore, no information is
given with respect to state or local taxes that may be applicable. Participants
in the Equity Plan who are residents of or are employed in a country other than
the United States may be subject to taxation in accordance with the tax laws of
that particular country in addition to or in lieu of United States federal
income taxes.
PROPOSAL 4
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected Deloitte & Touche LLP as the Company's
independent auditors for the fiscal year ending December 31, 1998 and has
further directed that management submit the selection of independent auditors
for ratification by the stockholders at the Annual Meeting. Deloitte & Touche
LLP has audited the Company's financial statements since 1988. Representatives
of Deloitte & Touche LLP are expected to be present at the Annual Meeting, will
have an opportunity to make a statement if they so desire and will be available
to respond to questions.
Stockholder ratification of the selection of Deloitte & Touche LLP as the
Company's independent auditors is not required by the Company's Bylaws or
otherwise. However, the Board is submitting the selection of Deloitte & Touche
LLP to the stockholders for ratification as a matter of good corporate practice.
If the stockholders fail to ratify the selection, the Audit Committee and the
Board will reconsider whether or not to retain that firm. Even if the selection
is ratified, the Audit Committee and the Board in their discretion may direct
the appointment of different independent auditors at any time during the year if
they determine that such a change would be in the best interests of the Company
and its stockholders.
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy and entitled to vote at the Annual Meeting will
be required to ratify the selection of Deloitte & Touche LLP.
MANAGEMENT RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 4.
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ADDITIONAL INFORMATION
MANAGEMENT
Officers are appointed annually by the Board and serve at the discretion of
the Board. Set forth below is information regarding executive officers of the
Company.
Name Age Position
Leonard Y. Liu 56 Chairman, President and Chief Executive Officer
Bruce C. Pollock 54 Senior Vice President, Chief Financial Officer,
Treasurer and Assistant Secretary
Barbara M. Hubbard 46 Vice President, Corporate Controller, Chief
Accounting Officer, Assistant Treasurer and
Assistant Secretary
Mr. Pollock has served as Senior Vice President, Chief Financial Officer
and Assistant Secretary of the Company since October 1994. From November 1989 to
August 1994, Mr. Pollock was Executive Vice President and Chief Financial
Officer of VMX, Inc., a voice processing systems company acquired by Octel
Communications Corporation in March 1994.
Ms. Hubbard has served as the Company's Vice President and Corporate
Controller since April 1996 and Chief Accounting Officer, Assistant Treasurer
and Assistant Secretary since May 1996. From May 1994 to July 1995, she was
Corporate Controller and Chief Accounting Officer of Intuit, Inc. From October
1991 to April 1994, she was Corporate Controller and Principal Accounting
Officer of Software Publishing Corporation. Ms. Hubbard is a Certified Public
Accountant in California and Illinois.
15
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SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of January 31, 1998 by (i) all those known by
the Company to be beneficial owners of more than five percent of its Common
Stock, (ii) each director and nominee for director, (iii) each of the executive
officers named in the Summary Compensation Table and (iv) all executive officers
and directors of the Company as a group.
<TABLE>
<CAPTION>
Beneficial Ownership(1)
-------------------------------------
Number of Percent of
Beneficial Owner Shares Total (%)
- ------------------------------------------------------------ ------------- ----------
<S> <C> <C>
BKP Partners, LP ........................................... 1,605,300 (2) 11.5
One Sansome Street, Suite 3900
San Francisco, CA 94104
Dawson-Samberg Capital Management, Inc...................... 1,010,200 (3) 7.2
354 Pequot Avenue
Southport, CT 06490-0760
Thomson Horstmann & Bryant, Inc. 887,500 (4) 6.3
Park 80 West, Plaza Two
Saddlebrook, NJ 07663
Leonard Y. Liu.............................................. 587,501 (5)(6) 4.1
J. David Parrish............................................ 250,066 (5) 1.8
Bruce C. Pollock............................................ 84,000 (5)(7) *
Barbara M. Hubbard.......................................... 20,663 (5)(8) *
Richard C. Alberding........................................ 24,000 (5) *
Tania Amochaev.............................................. 24,000 (5) *
William A. Hasler........................................... 18,000 (5) *
John M. Lillie.............................................. 16,000 (5) *
David C. Wetmore ........................................... 34,000 (5) *
All directors and executive officers 1,058,230 7.2
as a group (9 persons).............................
</TABLE>
- ----------
* Less than one percent.
(1) This table is based upon information supplied by officers, directors and
principal stockholders and Schedules 13D and 13G filed with the Securities
and Exchange Commission (the "SEC"). Unless otherwise indicated in the
footnotes to this table and subject to community property laws where
applicable, the Company believes that each of the stockholders named in
this table has sole voting and investment power with respect to the shares
indicated as beneficially owned. Applicable percentages are based on
13,981,207 shares outstanding on January 31, 1998, adjusted as required by
rules promulgated by the SEC.
(2) BKP Partners, LP is an investment partnership, of which BKP Capital
Management and Bob K. Pryt are the general partners.
(3) Dawson-Samberg Capital Management, Inc., is an investment adviser
registered under Section 203 of the Investment Advisers Act of 1940.
(4) Thomson Horstmann & Bryant, Inc., is an investment adviser registered under
Section 203 of the Investment Advisers Act of 1940.
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(5) Includes shares which certain directors and executive officers of the
Company have the right to acquire within 60 days after the date of this
table pursuant to outstanding options as follows: Leonard Y. Liu, 317,501
shares; J. David Parrish, 161,428 shares; Bruce C. Pollock, 75,000 shares;
Barbara M. Hubbard, 20,000 shares; Richard C. Alberding, 18,000 shares;
Tania Amochaev, 24,000 shares; William A. Hasler, 15,500 shares; John M.
Lillie, 11,000 shares; David C. Wetmore, 27,000 shares; and all directors
and executive officers as a group, 669,429 shares.
(6) Does not include 950 shares held by Mr. Liu's son, Jesse Liu, and 1,600
shares held by Mr. Liu's grandson, Brandon Liu, as to which shares Mr. Liu
disclaims beneficial ownership.
(7) Includes 2,000 shares held in spouse's retirement plan.
(8) Includes 663 shares acquired through the 1992 Employee Stock Purchase Plan.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "1934 Act")
requires the Company's directors and executive officers, and persons who own
more than ten percent of a registered class of the Company's equity securities,
to file with the SEC initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. Officers,
directors and greater than ten percent stockholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 1997, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten-percent beneficial owners were complied with.
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EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
Each non-employee director of the Company receives a quarterly retainer of
$2,500 and a per meeting fee of $1,000 (plus $1,500 per year for serving as a
committee chairman and $1,000 per year for serving as a committee member). In
the fiscal year ended December 31, 1997, the total cash compensation earned by
non-employee directors was $94,500. The members of the Board of Directors are
also eligible for reimbursement for their expenses incurred in connection with
attendance at Board meetings in accordance with Company policy.
Each non-employee director of the Company also receives stock option grants
under the 1993 Non-Employee Directors' Stock Option Plan (the "Directors'
Plan"). Only non-employee directors of the Company or an affiliate of such
directors (as defined in the Code) are eligible to receive options under the
Directors' Plan. Options granted under the Directors' Plan are not intended by
the Company to qualify as incentive stock options under the Code.
Option grants under the Directors' Plan are non-discretionary. On January 2
of each year (or the next business day should such date be a legal holiday or a
weekend), each member of the Company's Board of Directors who is not an employee
of the Company or, where specified by the non-employee director, an affiliate of
such director, currently is automatically granted under the Directors' Plan,
without further action by the Company, the Board of Directors or the
stockholders of the Company, an option to purchase 6,000 shares of Common Stock
of the Company. In 1996, the Board of Directors and stockholders of the Company
approved an amendment to the Director's Plan to increase the annual stock option
grant to non-employee directors from 3,000 to 6,000 shares. The initial stock
option grant to new non-employee directors is 15,000 shares. No other options
may be granted at any time under the Directors' Plan. The exercise price of
options granted under the Directors' Plan is 100% of the fair market value of
the Common Stock subject to the option on the date of the option grant. Options
granted under the Directors' Plan upon initial election as a director become
exercisable ("vest") in three equal installments commencing on the first
anniversary following the option grant. Other options granted under the
Directors' Plan vest in four quarterly installments commencing on the date three
months after the date of the option grant. The terms of options granted under
the Directors' Plan is ten years. In the event of a merger of the Company with
or into another corporation or a consolidation, acquisition of assets or other
change-in-control transaction involving the Company, the vesting of each option
will accelerate and the option will terminate if not exercised prior to the
consummation of the transaction.
During 1997, the Company granted options covering 6,000 shares to each of
Messrs. Alberding, Hasler, Lillie and Wetmore and Ms. Amochaev, as well as David
C. Hodgson and David M. Saykally, former directors of the Company, at an
exercise price of $12.88 per share. The fair market value of such Common Stock
on the date of such grant was $12.88 per share (based on the closing sales price
reported in the Nasdaq National Market for the date of grant). As of February
27, 1998, Mr. Hasler had exercised options for 2,500 shares under the Directors'
Plan; no other options had been exercised under the Directors' Plan.
18
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
Summary of Compensation
The following table shows for the fiscal years ended December 31, 1997,
1996 and 1995, compensation awarded, paid to, or earned by the Company's Chief
Executive Officer, its other two most highly compensated executive officers at
December 31, 1997 and one former executive officer who departed from the Company
during fiscal year 1997 (the "Named Executive Officers"):
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Annual Compensation
Compensation Awards
------------------ ------------ All Other
Securities Compen-
Name and Principal Salary Bonus Underlying sation
Position Year ($) ($) Options (#) ($)
------------------ ---- ------- ------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Leonard Y. Liu (1) 1997 375,000 170,894 7,070 (2)
Chairman, President and 1996 375,000 283,190 75,000 4,555 (2)
Chief Executive Officer 1995 194,602 192,188 600,000 --
J. David Parrish (4) 1997 141,731 94,888 26,677 (6)
Senior Vice President, 1996 220,000 180,612 -- 5,538 (2)
North American Operations 1995 220,000 65,574 -- 7,500 (2)
Bruce C. Pollock 1997 200,000 36,472 6,325 (2)
Senior Vice President and 1996 200,000 70,287 -- 5,538 (2)
Chief Financial Officer 1995 200,000 24,779 -- 2,500 (2)
Barbara M. Hubbard (5) 1997 145,000 16,785 10,000 5,585 (2)
Vice President, 1996 105,000 29,825 40,000 328 (3)
Corporate Controller and
Chief Accounting Officer
</TABLE>
- ----------
(1) Mr. Liu joined the Company as its Chairman, President and Chief Executive
Officer in June 1995.
(2) Consists of matching contributions pursuant to the Company's 401(k) Plan
and, in some cases, term life insurance premiums paid by the Company.
(3) Consists of term life insurance premiums paid by the Company.
(4) Mr. Parrish left the Company on August 22, 1997.
(5) Ms. Hubbard joined the Company as its Vice President and Corporate
Controller in April 1996 and was named the Company's Chief Accounting
Officer, Assistant Treasurer and Assistant Secretary in May 1996.
(6) Consists of term life insurance premiums paid by the Company and payment
for accrued vacation time.
19
<PAGE>
Stock Option Grants And Exercises
The Company grants options to its executive officers under its 1989 Stock
Option Plan and its 1994 Equity Incentive Plan (collectively, the "Plans"). As
of February 27, 1998, options to purchase a total of 1,491,299 shares were
outstanding under the Plans and options to purchase 272,278 shares remained
available for grant thereunder.
The Company also may grant stock options to non-officer employees under its
1995 nonstatutory Stock Option Plan for Non-Officer Employees (the "Nonstatutory
Plan"). The Nonstatutory Plan authorizes the issuance of 1,600,000 shares of the
Company's Common Stock. Only employees of the Company who hold positions below
the level of Officer (within the meaning of Section 16 of the Exchange Act and
the rules and regulations promulgated thereunder) and are not subject to Section
16 of the Exchange Act are eligible to receive option under the Nonstatutory
Plan. Options granted under the Nonstatutory Plan are not intended by the
Company to qualify as incentive stock options under the Code. As of March 15,
1998, options to purchase a total of 1,508,875 shares were outstanding under the
Nonstatutory Plan and options to purchase 31,687 shares remained available for
grant thereunder.
The following tables show for the fiscal year ended December 31, 1997,
certain information regarding options granted to, exercised by and held at
year-end by the Named Executive Officers:
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Individual Grants
------------------------------------------------------- Potential Realizable
Number of % of Total Value at Assumed
Securities Options Annual Rates of
Underlying Granted to Stock Price
Options Employees in Exercise or Appreciation for
Granted Fiscal Base Price Expiration Option Term(1)
Name (#) Year(2) ($/Sh)(3) Date 5% ($) 10% ($)
---- ---------- ------------ ----------- ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Leonard Y. Liu
J. David Parrish -- -- -- -- -- --
Bruce C. Pollock -- -- -- -- -- --
Barbara M. Hubbard 10,000(4) 1.3% 13.50 11/12/07 84,901 215,155
</TABLE>
- ----------
(1) Reflects the value of the stock option on the date of grant assuming (i)
for the 5% column, a five-percent annual rate of appreciation in the
Company's Common Stock over the ten-year term of the option and (ii) for
the 10% column, a ten-percent annual rate of appreciation in the Company's
Common Stock over the ten-year term of the option, in each case without any
discounting to net present value and before income taxes associated with
the exercise. Actual gains, if any, on stock option exercises depend on the
future performance of the Company's Common Stock and the continued
employment of the Named Executive Officer through the vesting period and
exercise period. These amounts represent assumed rates of appreciation
only, based on SEC Rules, and may not necessarily be indicative of results
obtained.
(2) Based on options to purchase 742,000 shares of the Company's Common Stock
granted in 1997.
(3) All options were granted at the fair market value at the date of grant.
(4) Options vest over a four-year period at the rate of 25% per year. The
options will fully vest upon a change of control, as defined in the Plans,
unless the acquiring company assumes the options or substitutes similar
options.
20
<PAGE>
<TABLE>
Aggregated Option Exercises in Last Fiscal Year, and Fiscal Year-End Option Values
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-The-Money
Shares Options at FY-End (#) Options at FY-End ($)(2)
Acquired On Value ------------------------- -------------------------
Name Exercise(#) Realized ($)(1) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- --------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Leonard Y. Liu 45,000 371,250 286,250 343,750 2,240,313 2,407,813
J. David Parrish 121,357 1,342,445 161,428 20,000 635,000 130,000
Bruce C. Pollock -- -- 75,000 50,000 487,500 325,000
Barbara M. Hubbard -- -- 10,000 40,000 38,125 116,875
</TABLE>
- ----------
(1) Fair market value of the Company's Common Stock on the date of exercise
minus the exercise price.
(2) Fair market value of the Company's Common Stock at December 31, 1997
($13.75) minus the exercise price of the options.
EMPLOYMENT AGREEMENTS
Mr. Pollock has entered into an employment agreement that, as amended,
provides, in the event he is terminated without cause, he will be entitled to
receive severance payments equal to twelve months of base salary, accelerated
vesting of options that otherwise would have vested through the later of
December 31, 1997 or six months after the date of such termination and twelve
months after termination to exercise certain vested stock options. In addition,
the agreement provides that if Mr. Pollock is terminated or his responsibilities
are reduced substantially as a result of an acquisition of the Company or a
similar corporate event, all remaining unvested options will accelerate and
become fully vested.
Mr. Liu entered into an employment agreement with the Company that provided
for a one-time signing bonus in the amount of $187,500, the grant of options to
purchase 600,000 shares of common stock and a $250,000 line of credit to be used
for the purchase of shares of the Company's common stock in the open market. As
of March 15, 1998, Mr. Liu had not drawn upon the line of credit. In addition,
the employment agreement, as amended, provides, in the event he is terminated
without cause or he terminates his employment because the Company has reduced
his responsibilities, functions, titles or overall compensation package, he will
be entitled to receive severance payments equal to twelve months of base salary,
accelerated vesting of all options that otherwise would have vested over the
six-month period immediately following such termination and six months after
termination to exercise any and all vested stock options. With respect to
options granted subsequent to March 4, 1998, the agreement provides that Mr. Liu
will receive accelerated vesting of all options that otherwise would have vested
over the twelve-month period immediately following termination and twelve months
after termination to exercise vested options. The agreement also provides that
if Mr. Liu is terminated or his responsibilities reduced substantially, as the
result of an acquisition of the Company or a similar corporate event, Mr. Liu
will be entitled to receive severance payments in the amount of twenty-four
months of base salary, accelerated vesting of all remaining unvested options and
twelve months after termination to exercise any and all vested stock options.
With respect to options granted subsequent to March 4, 1998, the agreement
provides that Mr. Liu shall have twenty-four months after termination to
exercise vested options.
21
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION(1)
The Compensation Committee of the Board of Directors (the "Committee") is
composed of the non-employee directors identified at the end of this report.
None of these non-employee directors has any interlocking or other type of
relationship that would call into question his independence as a committee
member. The Committee is responsible for setting and administering the policies
which govern annual performance, and determines the compensation of the Chief
Executive Officer ("CEO") and other executive officers of the Company.
COMPENSATION PHILOSOPHY
The objectives of the Company's executive compensation policies are to
attract, retain and reward executive officers who contribute to the Company's
success, to align the financial interests of executive officers with the
performance of the Company, to ensure a direct relationship between executive
pay and shareholder value, to motivate executive officers to achieve the
Company's business objectives and to reward individual performance. During
fiscal year 1997, the Company used base salary, annual incentives and long-term
incentives under the Plans to achieve these objectives. In carrying out these
objectives, the Committee considers the following:
o The level of compensation paid to executive officers in positions of
companies similarly situated in size and products. To ensure that pay is
competitive, the Committee, from time to time, compares the Company's
executive compensation packages with those offered by other companies in
the same or similar industries or with other similar attributes.
Compensation surveys used by the Company typically include public and
private companies comparable in size, products or industry to the Company.
o The individual performance of each executive officer. Individual
performance includes meeting individual performance objectives,
demonstration of job knowledge, skills, teamwork and acceptance of the
Company's core values.
o Corporate performance. Corporate performance is evaluated by factors such
as performance relative to competitors, performance relative to business
conditions and progress in meeting the Company's objectives and goals as
typically reflected in the annual operating plan.
o The responsibility and authority of each position relative to other
positions within the Company.
The Committee does not quantitatively weight these factors but considers
all of these factors as a whole in establishing executive compensation. The
application given each of these factors in establishing the components of
executive compensation follows.
- ----------
(1) This Section is not "soliciting material," is not deemed "filed" with the
SEC and is not to be incorporated by reference in any filing of the Company
under the Securities Act of 1933, as amended, or the 1934 Act whether made
before or after the date hereof and irrespective of any general
incorporation language in any such filing.
22
<PAGE>
BASE SALARY
Base salaries are established for each executive officer at levels that are
intended to be competitive with salaries for comparable positions at other
software and computer industry companies of similar size and products. The
Company seeks to pay salaries to executive officers that are commensurate with
their qualifications, duties and responsibilities and that are competitive in
the marketplace. In conducting periodic compensation reviews, the Committee
considers each individual executive officer's achievements in meeting Company
financial and business objectives during the prior fiscal year, as well as the
executive officer's performance of individual responsibilities and the Company's
financial position and overall performance. The Committee periodically considers
the low, midpoint and upper ranges of base salaries published by compensation
surveys in establishing base salaries of each executive officer.
ANNUAL INCENTIVE
Annual bonus incentives for executives are intended to reflect the
Company's belief that management's contribution to stockholder returns comes
from achieving operating results that maximize the Company's earnings and cash
flow over a multi-year time horizon. The Company believes that the achievement
of its performance objectives depends on (i) its ability to deliver outstanding
products and services to its customers, (ii) its success in establishing and
maintaining a position of strength in its chosen markets and (iii) its short-
and long-term profitability, as well as the quality of that profitability. For
purposes of annual incentive compensation, progress toward these performance
objectives is measured against the results anticipated in the Company's annual
operating plan, which is approved by the Board of Directors.
The 1997 incentive compensation for executive officers other than the Chief
Executive Officer was based in part on the achievement of total Company results
consistent with the Company's 1997 operating plan, as well as achievement of
other objectives in the 1997 operating plan specific to such officers'
individual areas of management responsibility.
The Company believes that this incentive compensation structure closely
links the incentives paid to its executives with the results necessary to create
long-term value for stockholders.
LONG-TERM INCENTIVE
The Compensation Committee also endorses the position that stock ownership
by management is beneficial in aligning management and stockholder interests in
enhancing stockholder value. In that regard, stock options also are used to
retain executives and motivate results to improve long-term stock market
performance. Stock options are granted at the prevailing market value and will
have value only if the Company's stock price increases. As part of its periodic
review of compensation, the Compensation Committee reviews the stock option
holdings of the Company's officers and senior executives, and recommends
additional stock option grants as appropriate.
The Compensation Committee determines the number of options to be granted
to executive management based on (i) competitive practice within the comparison
group used in determining base salary, (ii) historical performance of the
executive and (iii) the amount of prior grants held by the executives, as well
as the number of vested versus unvested options. When using comparative data,
the Company targets its option grants in the mid to high range of comparable
companies.
Section 162(m) of the Code limits the Company to a deduction for federal
income tax purposes of no more than $1.0 million of compensation paid to certain
Named Executive Officers in a taxable year. Compensation above $1.0 million may
be deducted it if is "performance-based compensation" within the meaning of the
Code. Stock options granted under the Company's 1994 Equity Incentive Plan with
an exercise price at least equal to the fair market value of the Company's
common stock on the date of grant are considered to be "performance-based
compensation."
23
<PAGE>
CEO COMPENSATION
During the fiscal year ended December 31, 1997, Mr. Liu served as Chairman,
President and Chief Executive Officer throughout the year and continues to hold
such offices.
Mr. Liu's base salary, annual incentives and long-term incentives were
determined in accordance with the criteria described in the "Base Salary,"
"Annual Incentive" and "Long-Term Incentive" sections of this report. Mr. Liu's
base salary in 1997 was $375,000; see "Summary Compensation Table." This amount,
together with a potential annual incentive tied to the achievement of 1997
revenue and net income targets, was estimated to provide an annual cash
compensation level which would be competitive with the mid to high range of
compensation paid by comparable software companies. Based on Mr. Liu's and the
Company's operating performance in 1997, Mr. Liu earned an incentive bonus of
$170,894. Mr. Liu's total cash compensation in 1997 was $545,894. As part of its
annual review of senior executive compensation, the Compensation Committee, at
its meeting on March 5, 1998, granted Mr. Liu an option to purchase an
additional 75,000 shares of the Company's common stock at a price of $16.00 per
share.
CONCLUSION
Through the plans described above, a significant portion of the Company's
executive compensation programs and Mr. Liu's compensation are contingent on
Company performance and realization of benefits closely linked to increases in
long-term stockholder value. The Company remains committed to this philosophy of
pay for performance, recognizing that the competitive market for talented
executives and the volatility of the Company's business may result in highly
variable compensation for a particular time period.
COMPENSATION COMMITTEE
William A. Hasler, Chairman
Richard C. Alberding
John M. Lillie
24
<PAGE>
PERFORMANCE MEASUREMENT COMPARISON(1)
Set forth below is a line graph comparing the cumulative total stockholder
return on the Company's Common Stock, based on its market price, with the
cumulative total return of companies on Standard & Poor's 500 Index (the "S&P
500") and the Nasdaq Computer and Data Processing Stocks Index, assuming
reinvestment of dividends, for the period beginning March 25, 1992, the date of
the initial public offering of the Company's Common Stock, through the Company's
fiscal year ended December 31, 1997. This graph assumes that the value of the
investment in the Company's Common Stock and each of the comparison groups was
$100 on March 25, 1992.
COMPARISON OF CUMULATIVE
TOTAL RETURN ON INVESTMENT
[GRAPHIC OMITTED]
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATTER]
[PLOT POINTS TO COME]
- ----------
(1) This Section is not "soliciting material," is not deemed "filed" with the
SEC and is not to be incorporated by reference in any filing of the Company
under the Securities Act of 1933, as amended, or the 1934 Act whether made
before or after the date hereof and irrespective of any general
incorporation language in any such filing.
25
<PAGE>
CERTAIN TRANSACTIONS
Pursuant to the Agreement and Plan of Reorganization among the Company,
Copper Acquisition Corporation, a Delaware corporation and subsidiary of the
Company ("Copper") and Revere, Inc., a Delaware corporation ("Revere") dated as
of October 29, 1997 (the "Reorganization Agreement"), the Company agreed at the
closing of the merger between Copper and Revere to issue a certain number of
shares of the Company's common stock to Updata Capital, Inc. ("Updata"), in full
satisfaction of all obligations of Revere and its stockholders to Updata
incurred in connection with the merger. Pursuant to the Reorganization
Agreement, the Company issued 16,037 shares of its common stock to Updata. Mr.
Wetmore, a director of the Company, holds an equity interest in Updata and
serves as its Managing Director.
The Company has entered into indemnity agreements with certain officers and
directors which provide, among other things, that the Company will indemnify
such officer or director, under the circumstances and to the extent provided for
therein, for expenses, damages, judgments, fines and settlements he or she may
be required to pay in actions or proceedings to which he or she is or may be
made a party by reason of his or her position as a director, officer or other
agent of the Company, and otherwise to the full extent permitted under Delaware
law and the Company's Bylaws.
OTHER MATTERS
The Board of Directors knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters are properly brought
before the meeting, it is the intention of the persons named in the accompanying
proxy to vote on such matters in accordance with their best judgment.
By Order of the Board of Directors,
/s/ Bruce C. Pollock
BRUCE C. POLLOCK
Senior Vice President,
Chief Financial Officer
and Assistant Secretary
April 17, 1998
26
<PAGE>
WIS40 3 DETACH HERE
PROXY
P WALKER INTERACTIVE SYSTEMS, INC. P
R R
O PROXY SOLICITED BY THE BOARD OF DIRECTORS O
X FOR THE ANNUAL MEETING OF STOCKHOLDERS X
Y TO BE HELD ON MAY 21, 1998 Y
The undersigned hereby appoints Leonard Y. Liu and Bruce C. Pollock, and
each of them, as attorneys and proxies of the undersigned, with full power of
substitution, to vote all of the shares of stock of Walker Interactive Systems,
Inc., which the undersigned may be entitled to vote at the Annual Meeting of
Stockholders of Walker Interactive Systems, Inc. to be held at the Company's
headquarters, 303 Second Street, San Farancisco, California on Thursday May 21,
1998 at 2:00 p.m., local time, and at any and all postponements, continuations
and adjournments thereof, with all powers that the undersigned would possess if
personally present, upon and in respect of the following matters and in
accordance with the following instructions, with discretionary authority as to
any and all other matters that may properly come before the meeting.
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR THE
NOMINEE LISTED IN PROPOSAL 1 AND FOR PROPOSALS 2, 3 AND 4, AS MORE SPECIFICALLY
DESCRIBED IN THE PROXY STATEMENT. IF SPECIFIC INSTRUCTIONS ARE INDICATED, THIS
PROXY WILL BE VOTED IN ACCORDANCE THEREWITH.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
- ------------- -------------
SEE REVERSE SEE REVERSE
SIDE SIDE
- ------------- -------------
<PAGE>
[GRAPHIC OMITTED]
Walker Interactive Systems, Inc.
303 Second Street, Three North
San Francisco, California 94107
April 17, 1998
You are cordially invited to attend the 1998 Annual Meeting of Stockholders of
Walker Interactive Systems, Inc., which will be held on Thursday, May 21, 1998
at 2:00 p.m., local time, at the Company's headquarters, 303 Second Street, San
Francisco, California.
At the meeting, we will vote on the proposals described in the accompanying
Notice and Proxy Statement and report to you on the operations of the Company.
You will have the opportunity to ask questions about the business that may be of
general interest to you and other stockholders.
Your vote is important regardless of how many shares you own and whether or not
you plan to attend the Annual Meeting of Stockholders. Please take a few minutes
now to review the proxy statement and to sign and date your proxy and return it
in the postage-paid envelope provided.
Sincerely,
/s/ LEONARD Y. LIU
LEONARD Y. LIU
Chairman, President and
Chief Executive Officer
WIS40 3 DETACH HERE
- --- Please mark
X votes as in
- --- this example.
---
|
|
MANAGEMENT RECOMMENDS A VOTE FOR THE NOMINEE FOR DIRECTOR LISTED BELOW AND FOR
PROPOSALS 2, 3 AND 4.
1. To elect on director to hold office until the 2001 Annual Meeting of
Stockholders.
Nominee: Richard C. Alberding
FOR WITHHELD
----- ----- MARK HERE -----
| | | | FOR ADDRESS | |
| | | | CHANGE AND | |
----- ----- NOTE BELOW -----
2. To approve the Company's 1992 Employee Stock Purchase Plan, as amended, to
increase the aggregate number of shares of Common Stock authorized for
issuance under such plan from 650,000 shares to 950,000, An increase of
300,000 shares.
FOR AGAINST ABSTAIN
----- ----- -----
| | | | | |
| | | | | |
----- ----- -----
3. To approve the Company's 1994 Equity Incentive Plan, as amended, to
increase the aggregate number of shares of Common Stock authorized for
issuance under such plan from 1,200,000 shares to 2,400,000, an increase of
1,200,000 shares.
FOR AGAINST ABSTAIN
----- ----- -----
| | | | | |
| | | | | |
----- ----- -----
4. To ratify the selection of Deloitte & Touche LLP as independent auditors of
the Company for its fiscal year ending December 31, 1998.
FOR AGAINST ABSTAIN
----- ----- -----
| | | | | |
| | | | | |
----- ----- -----
Please vote, date and promptly return this proxy in the enclosed return envelope
which is postage prepaid if mailed in the United States.
Please sign exactly as your name appears hereon. If the stock is registered in
the names of two or more persons, each should sign. Executors, administrators,
trustees, guardians and attorneys-in-fact should add their titles. If signer is
a corporation, please give full corporate name and have a duly authorized
officer sign, stating title. If signer is a partnership, pleasse sign in
partnership name by authorized person.
Signature: ___________________________________________Date: ____________________
Signature: ___________________________________________Date: ____________________
<PAGE>
WALKER INTERACTIVE SYSTEMS, INC.
EMPLOYEE STOCK PURCHASE PLAN
Adopted January 15, 1992
Approved by the Stockholders on March 6, 1992
Amended on January 28, 1993
Approved by the Stockholders on April 23, 1993
Amended on March 3, 1995
Approved by the Stockholders on May 25, 1995
Amended on February 11, 1998
Approved by the Stockholders on ____________.
1. PURPOSE.
(a) The purpose of the Employee Stock Purchase Plan (the "Plan") is to
provide a means by which employees of Walker Interactive Systems, a
Delaware corporation (the "Company"), and its Affiliates, as defined
in subparagraph 1(b), which are designated as provided in subparagraph
2(b), may be given an opportunity to purchase stock of the Company.
(b) The word "Affiliate" as used in the Plan means any parent corporation
or subsidiary corporation of the Company, as those terms are defined
in Sections 424(e) and (f), respectively, of the Internal Revenue Code
of 1986, as amended (the "Code").
(c) The Company, by means of the Plan, seeks to retain the services of its
employees, to secure and retain the services of new employees, and to
provide incentives for such persons to exert maximum efforts for the
success of the Company.
(d) The Company intends that the rights to purchase stock of the Company
granted under the Plan be considered options issued under an "employee
stock purchase plan" as that term is defined in Section 423(b) of the
Code.
2. ADMINISTRATION.
(a) The Plan shall be administered by the Board of Directors (the "Board")
of the Company unless and until the Board delegates administration to
a Committee, as provided in subparagraph 2(c). Whether or not the
Board has delegated administration, the Board shall have the final
power to determine all questions of policy and expediency that may
arise in the administration of the Plan.
(b) The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:
<PAGE>
(i) To determine when and how rights to purchase stock of the Company
shall be granted and the provisions of each offering of such
rights (which need not be identical).
(ii) To designate from time to time which Affiliates of the Company
shall be eligible to participate in the Plan.
(iii)To construe and interpret the Plan and rights granted under it,
and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may
correct any defect, omission or inconsistency in the Plan, in a
manner and to the extent it shall deem necessary or expedient to
make the Plan fully effective.
(iv) To amend the Plan as provided in paragraph 13.
(v) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best
interests of the Company.
(c) The Board may delegate administration of the Plan to a Committee
composed of not fewer than two (2) members of the Board (the
"Committee"). If administration is delegated to a Committee, the
Committee shall have, in connection with the administration of the
Plan, the powers theretofore possessed by the Board, subject, however,
to such resolutions, not inconsistent with the provisions of the Plan,
as may be adopted from time to time by the Board. The Board may
abolish the Committee at any time and revest in the Board the
administration of the Plan.
3. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of paragraph 12 relating to adjustments upon
changes in stock, the stock that may be sold pursuant to rights
granted under the Plan shall not exceed in the aggregate Nine Hundred
Fifty Thousand (950,000) shares of the Company's common stock (the
"Common Stock"). If any right granted under the Plan shall for any
reason terminate without having been exercised, the Common Stock not
purchased under such right shall again become available for the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
4. GRANT OF RIGHTS; OFFERING.
The Board or the Committee may from time to time grant or provide for the
grant of rights to purchase Common Stock of the Company under the Plan to
eligible employees (an "Offering") on a date or dates (the "Offering Date(s)")
selected by the Board or the Committee. Each Offering shall be in such form and
shall contain such terms and conditions as the Board or the Committee shall deem
appropriate. If an employee has more than one right outstanding
2
<PAGE>
under the Plan, unless he or she otherwise indicates in agreements or notices
delivered hereunder: (1) each agreement or notice delivered by that employee
will be deemed to apply to all of his or her rights under the Plan, and (2) a
right with a lower exercise price (or an earlier-granted right, if two rights
have identical exercise prices), will be exercised to the fullest possible
extent before a right with a higher exercise price (or a later-granted right, if
two rights have identical exercise prices) will be exercised. The provisions of
separate Offerings need not be identical, but each Offering shall include
(through incorporation of the provisions of this Plan by reference in the
Offering or otherwise) the substance of the provisions contained in paragraphs 5
through 8, inclusive.
5. ELIGIBILITY.
(a) Rights may be granted only to employees of the Company or, as the
Board or the Committee may designate as provided in subparagraph 2(b),
to employees of any Affiliate of the Company. Except as provided in
subparagraph 5(b), an employee of the Company or any Affiliate shall
not be eligible to be granted rights under the Plan, unless, on the
Offering Date, such employee has been in the employ of the Company or
any Affiliate for such continuous period preceding such grant as the
Board or the Committee may require, but in no event shall the required
period of continuous employment be equal to or greater than two (2)
years. In addition, unless otherwise determined by the Board or the
Committee and set forth in the terms of the applicable Offering, no
employee of the Company or any Affiliate shall be eligible to be
granted rights under the Plan, unless, on the Offering Date, such
employee's customary employment with the Company or such Affiliate is
at least twenty (20) hours per week and at least five (5) months per
calendar year.
(b) The Board or the Committee may provide that, each person who, during
the course of an Offering, first becomes an eligible employee of the
Company or designated Affiliate will, on a date or dates specified in
the Offering which coincides with the day on which such person becomes
an eligible employee or occurs thereafter, receive a right under that
Offering, which right shall thereafter be deemed to be a part of that
Offering. Such right shall have the same characteristics as any rights
originally granted under that Offering, as described herein, except
that:
(i) the date on which such right is granted shall be the "Offering
Date" of such right for all purposes, including determination of
the exercise price of such right;
(ii) the Purchase Period (as defined below) for such right shall begin
on its Offering Date and end coincident with the end of such
Offering; and
(iii)the Board or the Committee may provide that if such person first
becomes an eligible employee within a specified period of time
before the end of the Purchase Period (as defined below) for such
Offering, he or she will not receive any right under that
Offering.
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(c) No employee shall be eligible for the grant of any rights under the
Plan if, immediately after any such rights are granted, such employee
owns stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of stock of the Company or of any
Affiliate. For purposes of this subparagraph 5(c), the rules of
Section 424(d) of the Code shall apply in determining the stock
ownership of any employee, and stock which such employee may purchase
under all outstanding rights and options shall be treated as stock
owned by such employee.
(d) An eligible employee may be granted rights under the Plan only if such
rights, together with any other rights granted under "employee stock
purchase plans" of the Company and any Affiliates, as specified by
Section 423(b)(8) of the Code, do not permit such employee's rights to
purchase stock of the Company or any Affiliate to accrue at a rate
which exceeds twenty-five thousand dollars ($25,000) of fair market
value of such stock (determined at the time such rights are granted)
for each calendar year in which such rights are outstanding at any
time.
(e) Officers of the Company and any designated Affiliate shall be eligible
to participate in Offerings under the Plan, provided, however, that
the Board may provide in an Offering that certain employees who are
highly compensated employees within the meaning of Section
423(b)(4)(D) of the Code shall not be eligible to participate.
6. RIGHTS; PURCHASE PRICE.
(a) On each Offering Date, each eligible employee, pursuant to an Offering
made under the Plan, shall be granted the right to purchase up to the
number of shares of Common Stock of the Company purchasable with a
percentage designated by the Board or the Committee not exceeding
fifteen percent (15%) of such employee's Earnings (as defined in
Section 7(a)) during the period which begins on the Offering Date (or
such later date as the Board or the Committee determines for a
particular Offering) and ends on the date stated in the Offering,
which date shall be no more than twenty-seven (27) months after the
Offering Date (the "Purchase Period"). In connection with each
Offering made under this Plan, the Board or the Committee shall
specify a maximum number of shares which may be purchased by any
employee as well as a maximum aggregate number of shares which may be
purchased by all eligible employees pursuant to such Offering. In
addition, in connection with each Offering which contains more than
one Exercise Date (as defined in the Offering), the Board or the
Committee may specify a maximum aggregate number of shares which may
be purchased by all eligible employees on any given Exercise Date
under the Offering. If the aggregate purchase of shares upon exercise
of rights granted under the Offering would exceed any such maximum
aggregate number, the Board or the Committee shall make a pro rata
allocation of the shares available in as nearly a uniform manner as
shall be practicable and as it shall deem to be equitable.
4
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(b) The purchase price of stock acquired pursuant to rights granted under
the Plan shall be not less than the lesser of:
(i) an amount equal to eighty-five percent (85%) of the fair market
value of the stock on the Offering Date; or
(ii) an amount equal to eighty-five percent (85%) of the fair market
value of the stock on the Exercise Date. PARTICIPATION;
WITHDRAWAL; TERMINATION.
7. PARTICIPATION; WITHDRAWAL; TERMINATION.
(a) An eligible employee may become a participant in an Offering by
delivering a participation agreement to the Company within the time
specified in the Offering, in such form as the Company provides. Each
such agreement shall authorize payroll deductions of up to the maximum
percentage specified by the Board or the Committee of such employee's
Earnings during the Purchase Period. "Earnings" is defined as the
total compensation paid to an employee, including all salary, wages
(including amounts elected to be deferred by the employee, that would
otherwise have been paid, under any cash or deferred arrangement
established by the Company), overtime pay, commissions, bonuses, and
other remuneration paid directly to the employee, but excluding profit
sharing, the cost of employee benefits paid for by the Company,
education or tuition reimbursements, imputed income arising under any
Company group insurance or benefit program, traveling expenses,
business and moving expense reimbursements, income received in
connection with stock options, contributions made by the Company under
any employee benefit plan, and similar items of compensation. The
payroll deductions made for each participant shall be credited to an
account for such participant under the Plan and shall be deposited
with the general funds of the Company. A participant may reduce
(including to zero), increase or begin such payroll deductions after
the beginning of any Purchase Period only as provided for in the
Offering. A participant may make additional payments into his or her
account only if specifically provided for in the Offering and only if
the participant has not had the maximum amount withheld during the
Purchase Period.
(b) At any time during a Purchase Period a participant may terminate his
or her payroll deductions under the Plan and withdraw from the
Offering by delivering to the Company a notice of withdrawal in such
form as the Company provides. Such withdrawal may be elected at any
time prior to the end of the Purchase Period except as provided by the
Board or the Committee in the Offering. Upon such withdrawal from the
Offering by a participant, the Company shall distribute to such
participant all of his or her accumulated payroll deductions (reduced
to the extent, if any, such deductions have been used to acquire stock
for the participant) under the Offering, without interest, and such
participant's interest in that Offering shall be automatically
terminated. A participant's withdrawal from an Offering will have no
effect upon such participant's eligibility to participate in any other
Offerings under the Plan but such participant will be required to
deliver
5
<PAGE>
a new participation agreement in order to participate in subsequent
Offerings under the Plan.
(c) Rights granted pursuant to any Offering under the Plan shall terminate
immediately upon cessation of any participating employee's employment
with the Company and any designated Affiliate, for any reason, and the
Company shall distribute to such terminated employee all of his or her
accumulated payroll deductions (reduced to the extent, if any, such
deductions have been used to acquire stock for the terminated
employee), under the Offering, without interest.
(d) Rights granted under the Plan shall not be transferable, and shall be
exercisable only by the person to whom such rights are granted.
8. EXERCISE.
(a) On each exercise date, as defined in the relevant Offering (an
"Exercise Date"), each participant's accumulated payroll deductions
and other additional payments specifically provided for in the
Offering (without any increase for interest) will be applied to the
purchase of whole shares of stock of the Company, up to the maximum
number of shares permitted pursuant to the terms of the Plan and the
applicable Offering, at the purchase price specified in the Offering.
No fractional shares shall be issued upon the exercise of rights
granted under the Plan. The amount, if any, of accumulated payroll
deductions remaining in each participant's account after the purchase
of shares which is less than the amount required to purchase one share
of stock on the final Exercise Date of an Offering shall be held in
each such participant's account for the purchase of shares under the
next Offering under the Plan, unless such participant withdraws from
such next Offering, as provided in subparagraph 7(b), or is no longer
eligible to be granted rights under the Plan, as provided in paragraph
5, in which case such amount shall be distributed to the participant
after said final Exercise Date, without interest. The amount, if any,
of accumulated payroll deductions remaining in any participant's
account after the purchase of shares which is equal to the amount
required to purchase whole shares of stock on the final Exercise Date
of an Offering shall be distributed in full to the participant after
such Exercise Date, without interest.
(b) No rights granted under the Plan may be exercised to any extent unless
the Plan (including rights granted thereunder) is covered by an
effective registration statement pursuant to the Securities Act of
1933, as amended (the "Securities Act"). If on an Exercise Date of any
Offering hereunder the Plan is not so registered, no rights granted
under the Plan or any Offering shall be exercised on said Exercise
Date and the Exercise Date shall be delayed until the Plan is subject
to such an effective registration statement, except that the Exercise
Date shall not be delayed more than two (2) months and the Exercise
Date shall in no event be more than twenty-seven (27) months from the
Offering Date. If on the Exercise Date of any Offering hereunder, as
delayed to the maximum extent permissible, the Plan is not registered,
no rights granted under the Plan or any Offering shall be
6
<PAGE>
exercised and all payroll deductions accumulated during the purchase
period (reduced to the extent, if any, such deductions have been used
to acquire stock) shall be distributed to the participants, without
interest.
9. COVENANTS OF THE COMPANY.
(a) During the terms of the rights granted under the Plan, the Company
shall keep available at all times the number of shares of stock
required to satisfy such rights.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be
required to issue and sell shares of stock upon exercise of the rights
granted under the Plan. If, after reasonable efforts, the Company is
unable to obtain from any such regulatory commission or agency the
authority which counsel for the Company deems necessary for the lawful
issuance and sale of stock under the Plan, the Company shall be
relieved from any liability for failure to issue and sell stock upon
exercise of such rights unless and until such authority is obtained.
10. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to rights granted under the Plan
shall constitute general funds of the Company.
11. RIGHTS AS A STOCKHOLDER.
A participant shall not be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to rights granted
under the Plan unless and until certificates representing such shares shall have
been issued.
12. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject to
any rights granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property
other than cash, stock split, liquidating dividend, combination of
shares, exchange of shares, change in corporate structure or
otherwise), the Plan and outstanding rights will be appropriately
adjusted in the class(es) and maximum number of shares subject to the
Plan and the class(es) and number of shares and price per share of
stock subject to outstanding rights.
(b) In the event of: (1) a dissolution or liquidation of the Company; (2)
a merger or consolidation in which the Company is not the surviving
corporation; (3) a reverse merger in which the Company is the
surviving corporation but the shares of the Company's Common Stock
outstanding immediately preceding the merger are converted by virtue
of the merger into other property, whether in the form of securities,
cash or otherwise; or (4) any other capital reorganization in which
more than fifty percent (50%) of the shares of the Company entitled to
vote are
7
<PAGE>
exchanged, then, as determined by the Board in its sole discretion (i)
any surviving corporation may assume outstanding rights or substitute
similar rights for those under the Plan, (ii) such rights may continue
in full force and effect, or (iii) participants' accumulated payroll
deductions may be used to purchase Common Stock immediately prior to
the transaction described above and the participants' rights under the
ongoing Offering terminated.
13. AMENDMENT OF THE PLAN.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in paragraph 12 relating to adjustments
upon changes in stock, no amendment shall be effective unless approved
by the stockholders of the Company within twelve (12) months before or
after the adoption of the amendment to the extent stockholder approval
is necessary to satisfy the requirements of Section 423 of the Code,
Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as
amended, or any Nasdaq or securities exchange listing requirements.
It is expressly contemplated that the Board may amend the Plan in any respect
the Board deems necessary or advisable to provide eligible employees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to employee stock purchase plans
and/or to bring the Plan and/or rights granted under it into compliance
therewith.
(b) Rights and obligations under any rights granted before amendment of
the Plan shall not be altered or impaired by any amendment of the
Plan, except with the consent of the person to whom such rights were
granted or except as necessary to comply with any laws or governmental
regulation.
14. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless sooner
terminated, the Plan shall terminate on January 15, 2002. No rights
may be granted under the Plan while the Plan is suspended or after it
is terminated.
(b) Rights and obligations under any rights granted while the Plan is in
effect shall not be altered or impaired by suspension or termination
of the Plan, except with the consent of the person to whom such rights
were granted or except as necessary to comply with any laws or
governmental regulation.
15. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board, but no rights
granted under the Plan shall be exercised unless and until the Plan has been
approved by the stockholders of the Company.
8
<PAGE>
WALKER INTERACTIVE SYSTEMS, INC.
1994 EQUITY INCENTIVE PLAN
ADOPTED FEBRUARY 17, 1994
AS AMENDED MAY 11, 1994
APPROVED BY THE STOCKHOLDERS MAY 23, 1994
AS AMENDED FEBRUARY 11, 1998
AS APPROVED BY THE STOCKHOLDERS
_____________________, 1998
1. PURPOSES.
(a) The purpose of the 1994 Equity Incentive Plan (the "Plan") is to
provide a means by which employees of and consultants to the Company, and its
Affiliates, may be given an opportunity to benefit from increases in value of
the stock of the Company through the granting of (i) Incentive Stock Options,
(ii) Nonstatutory Stock Options, (iii) stock bonuses, and (iv) rights to
purchase restricted stock, all as defined below.
(b) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees or Directors of or Consultants to the Company, to
secure and retain the services of new Employees, Directors and Consultants, and
to provide incentives for such persons to exert maximum efforts for the success
of the Company.
(c) The Company intends that the Stock Awards issued under the Plan shall,
in the discretion of the Board or any Committee to which responsibility for
administration of the Plan has been delegated pursuant to subsection 3(c), be
either (i) Options granted pursuant to paragraph 6 hereof, including Incentive
Stock Options and Nonstatutory Stock Options, or (ii) stock bonuses or rights to
purchase restricted stock granted pursuant to paragraph 7 hereof. All Options
shall be separately designated Incentive Stock Options or Nonstatutory Stock
Options at the time of grant, and in such form as issued pursuant to section 6,
and a separate certificate or certificates will be issued for shares purchased
on exercise of each type of Option.
2. DEFINITIONS.
(a) "Affiliate" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections 424(e)
and (f) respectively, of the Code.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means a Committee appointed by the Board in accordance with
subsection 3(c) of the Plan.
(e) "Company" means Walker Interactive Systems, Inc., a Delaware
corporation.
<PAGE>
(f) "Consultant" means any person, including an advisor, engaged by the
Company or an Affiliate to render consulting services and who is compensated for
such services, provided that the term "Consultant" shall not include Directors
who are paid only a director's fee by the Company or who are not compensated by
the Company for their services as Directors.
(g) "Continuous Status as an Employee, Director or Consultant" means the
employment or relationship as a Director or Consultant is not interrupted or
terminated by the Company or any Affiliate. The Board, in its sole discretion,
may determine whether Continuous Status as an Employee, Director or Consultant
shall be considered interrupted in the case of: (i) any leave of absence
approved by the Board, including sick leave, military leave, or any other
personal leave; provided, however, that for purposes of Incentive Stock Options,
any such leave may not exceed ninety (90) days, unless reemployment upon the
expiration of such leave is guaranteed by contract (including certain Company
policies) or statute; or (ii) transfers between locations of the Company or
between the Company, Affiliates or its successor.
(h) "Director" means a member of the Board.
(i) "Disability" means total and permanent disability as defined in Section
22(e)(3) of the Code.
(j) "Employee" means any person, including Officers and Directors, employed
by the Company or any Affiliate of the Company. Neither service as a Director
nor payment of a director's fee by the Company shall be sufficient to constitute
"employment" by the Company.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(l) "Fair Market Value" means, as of any date, the value of the common
stock of the Company as determined as follows:
(i) If the common stock is listed on any established stock exchange or
a national market system, including without limitation the National Market
System of the National Association of Securities Dealers, Inc. Automated
Quotation ("Nasdaq") System, the Fair Market Value of a share of common
stock shall be the closing sales price for such stock (or the closing bid,
if no sales were reported) as quoted on such system or exchange (or the
exchange with the greatest volume of trading in common stock) on the last
market trading day prior to the day of determination, as reported in the
Wall Street Journal or such other source as the Board deems reliable;
(ii) If the common stock is quoted on the Nasdaq System (but not on
the National Market System thereof) or is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market
Value of a share of common stock shall be the mean between the bid and
asked prices for the common stock on the last market trading day prior to
the day of determination, as reported in the Wall Street Journal or such
other source as the Board deems reliable;
10
<PAGE>
(iii) In the absence of an established market for the common stock,
the Fair Market Value shall be determined in good faith by the Board.
(m) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(n) "Non-Employee Director" means a Director of the Company who either (i)
is not a current Employee or Officer of the Company or its parent or a
subsidiary, does not receive compensation (directly or indirectly) from the
Company or its parent or a subsidiary for services rendered as a consultant or
in any capacity other than as a Director (except for an amount as to which
disclosure would not be required under Item 404(a) of Regulation S-K promulgated
pursuant to the Securities Act ("Regulation S-K")), does not possess an interest
in any other transaction as to which disclosure would be required under Item
404(a) of Regulation S-K and is not engaged in a business relationship as to
which disclosure would be required under Item 404(b) of Regulation S-K; or (ii)
is otherwise considered a "non-employee director" for purposes of Rule 16b-3.
(o) "Nonstatutory Stock Option" means an Option not intended to qualify as
an Incentive Stock Option.
(p) "Officer" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(q) "Option" means a stock option granted pursuant to the Plan.
(r) "Option Agreement" means a written agreement between the Company and an
Optionee evidencing the terms and conditions of an individual Option grant. The
Option Agreement is subject to the terms and conditions of the Plan.
(s) "Optionee" means an Employee, Director or Consultant who holds an
outstanding Option.
(t) "Outside Director" means a Director who either (A) is not a current
employee of the Company or an affiliated corporation, is not a former employee
of the Company or an affiliated corporation receiving compensation for prior
services (other than benefits under a tax qualified pension plan), was not an
officer of the Company or an affiliated corporation at any time, and is not
currently receiving compensation for personal services in any capacity other
than as a Director, or (B) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.
(u) "Plan" means
this 1994 Equity Incentive Plan.
(v) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any successor to
Rule 16b-3, as in effect when discretion is being exercised with respect to the
Plan.
(w) "Securities Act" means the Securities Act of 1933, as amended.
<PAGE>
(x) "Stock Award" means any right granted under the Plan, including any
Option, any stock bonus and any right to purchase restricted stock.
(y) "Stock Award Agreement" means a written agreement between the Company
and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. The Stock Award Agreement is subject to the terms
and conditions of the Plan.
3. ADMINISTRATION.
(a) The Plan shall be administered by the Board unless and until the Board
delegates administration to a committee, including the Committee, as provided in
subsection 3(c).
(b) The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:
(i) To determine from time to time which of the persons eligible under
the Plan shall be granted Stock Awards; when and how Stock Awards shall be
granted; whether a Stock Award will be an Incentive Stock Option, a
Nonstatutory Stock Option, a stock bonus, a right to purchase restricted
stock, or a combination of the foregoing; the provisions of each Stock
Award granted (which need not be identical), including the time or times
when a person shall be permitted to receive stock pursuant to a Stock
Award; and the number of shares with respect to which Stock Awards shall be
granted to each such person.
(ii) To construe and interpret the Plan and Stock Awards granted under
it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award
Agreement, in a manner and to the extent it shall deem necessary or
expedient to make the Plan fully effective.
(iii) To amend the Plan as provided in Section 12.
(iv) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company.
(c) The Board may delegate administration of the Plan to a committee
composed of not fewer than two (2) members (the "Committee"). All of the members
of such Committee may be Non-Employee Directors and/or Outside Directors. If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board (and references in this Plan to the Board shall thereafter be to
the Committee), subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan. Notwithstanding anything in this Section 3 to the
contrary, the Board may delegate to a committee of one or more members of the
Board the authority to grant options to eligible persons who are not then
subject to Section 16 of the Exchange Act and to eligible persons with respect
to whom the Company does not wish to comply with Section 162(m) of the Code.
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<PAGE>
4. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of Section 11 relating to adjustments upon
changes in stock, the stock that may be issued pursuant to Stock Awards shall
not exceed in the aggregate two million four hundred thousand (2,400,000) shares
of the Company's common stock. If any Stock Award shall for any reason expire or
otherwise terminate without having been exercised in full, the stock not
purchased under such Stock Award shall again become available for the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
5. ELIGIBILITY.
(a) Incentive Stock Options may be granted only to Employees. Stock Awards
other than Incentive Stock Options may be granted only to Employees, Directors
or Consultants.
(b) No person shall be eligible for the grant of an Incentive Stock Option
if, at the time of grant, such person owns (or is deemed to own pursuant to
Section 424(d) of the Code) stock possessing more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company or of any of
its Affiliates unless the exercise price of such Incentive Stock Option is at
least one hundred ten percent (110%) of the Fair Market Value of such stock at
the date of grant and the Incentive Stock Option is not exercisable after the
expiration of five (5) years from the date of grant.
(c) No employee shall be eligible to be granted Options covering more than
five hundred thousand (500,000) shares of the Company's common stock in any
twelve (12) month period.
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:
(a) Term. No Option shall be exercisable after the expiration of ten (10)
years from the date it was granted.
(b) Price. The exercise price of each Incentive Stock Option shall be not
less than one hundred percent (100%) of the Fair Market Value of the stock
subject to the Option on the date the Option is granted. The exercise price of
each Nonstatutory Stock Option shall be not less than eighty-five percent (85%)
of the Fair Market Value of the stock subject to the Option on the date the
Option is granted.
(c) Consideration. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in
<PAGE>
cash at the time the option is exercised, or (ii) at
the discretion of the Board or the duly authorized Committee, either at the time
of the grant or exercise of the Option, (A) by delivery to the Company of other
common stock of the Company, or (B) in any other form of legal consideration
that may be acceptable to the Board.
(d) Transferability. An Incentive Stock Option shall not be transfe able
except by will or by the laws of descent and distribution, and shall be
exercisable during the lifetime of the person to whom the Incentive Stock Option
is granted only by such person. A Nonstatutory Stock Option shall be
tran=sferable to t he extent provided in the Option Agreement. If the Option
Agreement for the Nonstatutory Stock Option does not provide for
transferability, then the Nonstatutory Stock Option shall not be transferable
except by will or by the laws of descent and distribution and shall be
exercisable during the lifetime of the person to whom the Nonstatutory Stock
Option is granted only by such person.
(e) Vesting. The total number of shares of stock subject to an Opt=ion may,
but need not, be allotted in periodic installments (which may, but need not, be
equal). The Option Agreement may provide that from time to time during each of
such installment periods, the Option may become exercisable ("vest") with
respect to some or all of the shares allotted to that period, and may be
exercised with respect to some or all of the shares allotted to such period
and/or any prior period as to which the Option became vested but was not fully
exercised. During the remainder of the term of the Option (if its term extends
beyond the end of the installment periods) the Option may be exercised from time
to time with respect to any shares then remaining subject to the Option. The
Option may be subject to such other terms and conditions on the time or times
when it may be exercised (which may be based on performance criteria) as the
Board may deem appropriate. The provisions of this subsection 6(e) are subject
to any Option provisions governing the minimum number of shares as to which an
Option may be exercised.
(f) Securities Law Compliance. The Company may require any Optionee, or any
person to whom an Option is transferred under subsection 6(d), as a condition of
exercising any such Option, (1) to give written assurances satisfactory to the
Company as to the Optionee's knowledge and experience in financial and business
matters and/or to employ a purchaser representative reasonably satisfactory to
the Company who is knowledgeable and experienced in financial and business
matters, and that he or she is capable of evaluating, alone or together with the
purchaser representative, the merits and risks of exercising the Option; and (2)
to give written assurances satisfactory to the Company stating that such person
is acquiring the stock subject to the Option for such person's own account and
not with any present intention of selling or otherwise distributing the stock.
These requirements, and any assurances given pursuant to such requirements,
shall be inoperative if (i) the issuance of the shares upon the exercise of the
Option has been registered under a then currently effective registration
statement under the Securities Act, or (ii) as to any particular requirement, a
determination is made by counsel for the Company that such requirement need not
be met in the circumstances under the then applicable securities laws.
(g) Termination of Employment or Relationship as a Director or Consultant.
In the event an Optionee's Continuous Status as an Employee, Director or
Consultant terminates (other than upon the Optionee's death or Disability), the
Optionee may
<PAGE>
exercise his or her Option, but only within such period of time as is determined
by the Board, and only to the extent that the Optionee was entitled to exercise
it at the date of termination (but in no event later than the expiration of the
term of such Option as set forth in the Option Agreement). In the case of an
Incentive Stock Option, the Board shall determine such period of time (in no
event to exceed three (3) months from the date of termination) when the Option
is granted. If, at the date of termination, the Optionee is not entitled to
exercise his or her entire Option, the shares covered by the unexercisable
portion of the Option shall revert to the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time specified in the
Option Agreement, the Option shall terminate, and the shares covered by such
Option shall revert to the Plan.
(h) Disability of Optionee. In the event an Optionee's Continuous Status as an
Employee, Director or Consultant terminates as a result of the Optionee's
Disability, the Optionee may exercise his or her Option, but only within twelve
(12) months from the date of such termination (or such shorter period specified
in the Option Agreement), and only to the extent that the Optionee was entitled
to exercise it at the date of such termination (but in no event later than the
expiration of the term of such Option as set forth in the Option Agreement). If,
at the date of termination, the Optionee is not entitled to exercise his or her
entire Option, the shares covered by the unexercisable portion of the Option
shall revert to the Plan. If, after termination, the Optionee does not exercise
his or her Option within the time specified herein, the Option shall terminate,
and the shares covered by such Option shall revert to the Plan.
(i) Death of Optionee. In the event of the death of an Optionee, the Option
may be exercised, at any time within eighteen (18) months following the date of
death (or such shorter period specified in the Option Agreement) (but in no
event later than the expiration of the term of such Option as set forth in the
Option Agreement), by the Optionee's estate or by a person who acquired the
right to exercise the Option by bequest or inheritance, but only to the extent
the Optionee was entitled to exercise the Option at the date of death. If, at
the time of death, the Optionee was not entitled to exercise his or her entire
Option, the shares covered by the unexercisable portion of the Option shall
revert to the Plan. If, after death, the Optionee's estate or a person who
acquired the right to exercise the Option by bequest or inheritance does not
exercise the Option within the time specified herein, the Option shall
terminate, and the shares covered by such Option shall revert to the Plan.
(j) Early Exercise. The Option may, but need not, include a provision
whereby the Optionee may elect at any time while an Employee, Director or
Consultant to exercise the Option as to any part or all of the shares subject to
the Option prior to the full vesting of the Option. Any unvested shares so
purchased may be subject to a repurchase right in favor of the Company or to any
other restriction the Board determines to be appropriate.
(k) Withholding. To the extent provided by the terms of an Option
Agreement, the Optionee may satisfy any federal, state or local tax withholding
obligation relating to the exercise of such Option by any of the following means
or by a combination of such means: (1) tendering a cash payment; (2) authorizing
the Company to withhold shares from the shares of the common stock otherwise
issuable to the participant as a result of the exercise of the Option; or (3)
delivering to the Company owned and unencumbered shares of the common stock of
the Company.
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(l) Re-Load Options. Without in any way limiting the authority of the Board
or duly authorized Committee to make or not to make grants of Options hereunder,
the Board or duly authorized Committee shall have the authority (but not an
obligation) to include as part of any Option Agreement a provision entitling the
Optionee to a further Option (a "Re-Load Option") in the event the Optionee
exercises the Option evidenced by the Option agreement, in whole or in part, by
surrendering other shares of common stock in accordance with this Plan and the
terms and conditions of the Option Agreement. Any such Re-Load Option (i) shall
be for a number of shares equal to the number of shares surrendered as part or
all of the exercise price of such Option; (ii) shall have an expiration date
which is the same as the expiration date of the Option the exercise of which
gave rise to such Re-Load Option; and (iii) shall have an exercise price which
is equal to one hundred percent (100%) of the Fair Market Value of the common
stock subject to the Re-Load Option on the date of exercise of the original
Option or, in the case of a Re-Load Option which is an Incentive Stock Option
and which is granted to a 10% stockholder (as described in subparagraph 5(b)),
shall have an exercise price which is equal to one hundred ten percent (110%) of
the Fair Market Value of the stock subject to the Re-Load Option on the date of
exercise of the original Option.
Any such Re-Load Option may be an Incentive Stock Option or a Nonqualified
Stock Option, as the Board or duly authorized Committee may designate at the
time of the grant of the original Option, provided, however, that the
designation of any Re-Load Option as an Incentive Stock Option shall be subject
to the one hundred thousand dollars ($100,000) annual limitation on
exercisability of Incentive Stock Options described in subparagraph 10(d) of the
Plan and in Section 422(d) of the Code. There shall be no Re-Load Options on a
Re-Load Option. Any such Re-Load Option shall be subject to the availability of
sufficient shares under subparagraph 4(a) and shall be subject to such other
terms and conditions as the Board or duly authorized Committee may determine.
7. TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK.
Each stock bonus or restricted stock purchase agreement shall be in such
form and shall contain such terms and conditions as the Board or the duly
authorized Committee shall deem appropriate. The terms and conditions of stock
bonus or restricted stock purchase agreements may change from time to time, and
the terms and conditions of separate agreements need not be identical, but each
stock bonus or restricted stock purchase agreement shall include (through
incorporation of provisions hereof by reference in the agreement or otherwise)
the substance of each of the following provisions as appropriate:
(a) Purchase Price. The purchase price under each stock purchase agreement
shall be such amount as the Board or Committee shall determine and designate in
such agreement. Notwithstanding the foregoing, the Board or the Committee may
determine that eligible participants in the Plan may be awarded stock pursuant
to a stock bonus agreement in consideration for past services actually rendered
to the Company or for its benefit.
(b) Transferability. No rights under a stock bonus or restricted stock
purchase agreement shall be assignable by any participant under the Plan, either
voluntarily or by operation of law, except where such assignment is required by
law or expressly authorized by the terms of the applicable stock bonus or
restricted stock purchase agreement.
<PAGE>
(c) Consideration. The purchase price of stock acquired pursuant to a stock
purchase agreement shall be paid either: (i) in cash at the time of purchase; or
(ii) in any other form of legal consideration that may be acceptable to the
Board or the Committee in their discretion. Notwithstanding the foregoing, the
Board or the Committee to which administration of the Plan has been delegated
may award stock pursuant to a stock bonus agreement in consideration for past
services actually rendered to the Company or for its benefit.
(d) Vesting. Shares of stock sold or awarded under the Plan may, but need
not, be subject to a repurchase option in favor of the Company in accordance
with a vesting schedule to be determined by the Board or the Committee.
(e) Termination of Employment or Relationship as a Director or Consultant.
In the event a Participant's Continuous Status as an Employee, Director or
Consultant terminates, the Company may repurchase or otherwise reacquire any or
all of the shares of stock held by that person which have not vested as of the
date of termination under the terms of the stock bonus or restricted stock
purchase agreement between the Company and such person.
8. COVENANTS OF THE COMPANY.
(a) During the terms of the Stock Awards, the Company shall keep available
at all times the number of shares of stock required to satisfy such Stock Awards
up to the number of shares of stock authorized under the Plan.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock under the Stock Awards; provided, however, that
this undertaking shall not require the Company to register under the Securities
Act either the Plan, any Stock Award or any stock issued or issuable pursuant to
any such Stock Award. If, after reasonable efforts, the Company is unable to
obtain from any such regulatory commission or agency the authority which counsel
for the Company deems necessary for the lawful issuance and sale of stock under
the Plan, the Company shall be relieved from any liability for failure to issue
and sell stock under such Stock Awards unless and until such authority is
obtained.
9. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Stock Awards shall constitute
general funds of the Company.
10. MISCELLANEOUS.
(a) The Board shall have the power to accelerate the time at which a Stock
Award may first be exercised or the time during which a Stock Award or any part
thereof will vest, notwithstanding the provisions in the Stock Award stating the
time at which it may first be exercised or the time during which it will vest.
(b) Neither an Optionee nor any person to whom an Option is transferred
under subsection 6(d) shall be deemed to be the holder of, or to have any of the
rights of a holder
<PAGE>
with respect to, any shares subject to such Option unless and until such person
has satisfied all requirements for exercise of the Option pursuant to its terms.
(c) Nothing in the Plan or any instrument executed or
Stock Award granted pursuant thereto shall confer upon any Employee, Director,
Consultant, Optionee, or other holder of Stock Awards any right to continue in
the employ of the Company or any Affiliate (or to continue acting as a Director
or Consultant) or shall affect the right of the Company or any Affiliate to
terminate the employment or relationship as a Director or Consultant of any
Employee, Director, Consultant or Optionee with or without cause.
(d) To the extent that the aggregate Fair Market Value (determined at the
time of grant) of stock with respect to which Incentive Stock Options are
exercisable for the first time by any Optionee during any calendar year under
all plans of the Company and its Affiliates exceeds one hundred thousand dollars
($100,000), the Options or portions thereof which exceed such limit (according
to the order in which they were granted) shall be treated as Nonstatutory Stock
Options.
11. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject to
any Stock Award, without the receipt of any consideration by the Company
(through merger, consolidation, reorganization, recapitalization,
reincorporation, stock dividend, dividend in property other than cash, stock
split, liquidating dividend, combination of shares, exchange of shares, change
in corporate structure or other transaction not involving the receipt of
consideration by the Company), the Plan will be appropriately adjusted in the
class(es) and maximum number of securities subject to the Plan pursuant to
subsection 4(a) and the maximum number of securities subject to award to any
person pursuant to subsection 5(c), and the outstanding Stock Awards will be
appropriately adjusted in the class(es) and number of securities and price per
share of stock subject to such outstanding Stock Awards. Such adjustments shall
be made by the Board, the determination of which shall be final, binding and
conclusive. (The conversion of any convertible securities of the Company shall
not be treated as a transaction "without receipt of consideration" by the
Company.)
(b) In the event of: (i) a dissolution or liquidation or sale of all or
substantially all of the assets of the Company; (ii) a merger or consolidation
in which the Company is not the surviving corporation; or (iii) a reverse merger
in which the Company is the surviving corporation but the shares of the
Company's common stock outstanding immediately preceding the merger are
converted by virtue of the merger into other property, whether in the form of
securities, cash or otherwise, then, at the sole discretion of the Board and to
the extent permitted by applicable law: (A) any surviving corporation shall
assume any Stock Awards outstanding under the Plan or shall substitute similar
Stock Awards for those outstanding under the Plan, (B) such Stock Awards shall
continue in full force and effect, or (C) the time during which such Stock
Awards become vested or may be exercised shall be accelerated and any
outstanding unexercised rights under any Stock Awards terminated if not
exercised prior to such event.
<PAGE>
12. AMENDMENT OF THE PLAN.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 11 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company within twelve (12) months before or after the adoption of the
amendment, to the extent stockholder approval is necessary to satisfy the
requirements of Section 422 of the Code, Rule 16b-3 or any Nasdaq or securities
exchange listing requirements.
(b) The Board may in its sole discretion submit any other amendment to the
Plan for stockholder approval, including, but not limited to, amendments to the
Plan intended to satisfy the requirements of Section 162(m) of the Code and the
regulations promulgated thereunder regarding the exclusion of performance-based
compensation from the limit on corporate deductibility of compensation paid to
certain executive officers.
(c) It is expressly contemplated that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide Optionees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to Incentive Stock Options
and/or to bring the Plan and/or Incentive Stock Options granted under it into
compliance therewith.
(d) Rights and obligations under any Stock Award granted before amendment
of the Plan shall not be altered or impaired by any amendment of the Plan unless
(i) the Company requests the consent of the person to whom the Stock Award was
granted and (ii) such person consents in writing.
13. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless sooner
terminated, the Plan shall terminate on February 16, 2004. No Stock Awards may
be granted under the Plan while the Plan is suspended or after it is terminated.
(b) Rights and obligations under any Stock Award granted while the Plan is
in effect shall not be altered or impaired by suspension or termination of the
Plan, except with the consent of the person to whom the Stock Award was granted.
14. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board, but no Stock
Awards granted under the Plan shall be exercisable unless and until the Plan has
been approved by the stockholders of the Company.
